FAA, Controllers Mistaken on Privatization

Holiday travelers can expect to be greeted at many airports by off-duty air traffic controllers protesting an alleged Bush Administration plan to “farm out to the lowest bidder” their vitally important jobs. In response, the Federal Aviation Administration has managed to muddy the waters, rather than defending the validity of what the Bush folks are actually doing.

First, let’s clarify the specific change in federal policy which the President announced last June. He signed a one-sentence executive order re-affirming that air traffic control (ATC) is not “inherently governmental.” That order overturned a last-minute executive order issued by President Clinton, which slipped the inherently governmental” language into a broader directive on reforming ATC. Most aviation experts agree that ATC is a high-tech service business, which can be provided either by government or by commercial entities-always operating under stringent governmental safety regulation. It’s the safety regulation that most would agree is inherently governmental.

One of the reasons President Bush issued his June order was to protect the legal status of the FAA’s long-standing program of contracting out the operation of over 200 control towers at smaller airports. Both the General Accounting Office and the Transportation Department’s Inspector General have found that these contract towers are just as safe and just as effective as FAA-run towers—but cost less than half as much to operate. No wonder the controllers’ union hates the idea and tried to get Clinton to make them illegal by stealth.

In responding to controller leafleting against privatization, FAA spokesman Greg Martin muddied the waters by claiming that tower operations have been contracted out only at non-commercial airports—those without scheduled passenger service. That’s simply incorrect, as Martin should know. When you fly to Charlottesville, Macon, Key West, New Haven, Laredo, Cheyenne, Missoula, Bellingham, Modesto, or San Luis Obispo, your regional jet or turboprop is guided safely to its landing by a contract tower. And it’s not just small airliners that are handled by such towers. Nonstop 757s from Los Angeles are controlled at Kona and Lihue, Hawaii by contract towers.

The Bush Administration recently launched a major effort to subject some 850,000 not-inherently-governmental positions to competition from private bidders, including some additional FAA functions. FAA Administrator Marion Blakey has assured controllers that their positions are not included in that program. But that doesn’t mean ATC is being exempted from reform. It’s just that outsourcing this function’s 15,000 jobs is not on the list.

In any case, outsourcing is not the form of privatization being used in other countries that have accomplished major ATC reform. Australia, Germany, New Zealand, South Africa and more than a dozen other countries have transformed their ATC agencies into government-owned ATC corporations. Instead of being embedded in transportation bureaucracies, these corporations are independent, paid directly by airlines to provide cost-effective ATC services. And they are regulated at arm’s length by the government’s air-safety regulator. These ATC corporations have modernized more quickly than the FAA and have come to resemble commercial enterprises.

Canada and the U.K. have gone one step further. They have created quasi-private ATC corporations-Nav Canada and NATS. The former is a non-profit, with a board composed of aviation stakeholders, including controllers. The latter is part-private, part-government. Since both depend heavily on North Atlantic traffic, both took serious hits from the big declines in that market after 9/11. To survive, year-old NATS is getting an additional capital injection from both government and private owners. By contrast, since Nav Canada had already built up financial reserves over its six-year history, it’s come through the post-9/11 in pretty good shape.

These two dozen ATC corporations are what the leafleting controllers point to when they claim that “privatization has not worked in Great Britain, Canada, and Australia, and it won’t work here.” On the contrary, privatization via outsourcing of small control towers is working here. And quasi-privatization via creation of government-regulated ATC corporations has worked quite well overseas. It’s too bad the FAA is so tongue-tied when it comes to explaining these things to air travelers.

Robert W. Poole, Jr. is Director of Transportation Studies at Reason Foundation. A version of his air traffic control corporation concept was implemented in Canada in 1996. He has advised the Office of the Secretary of Transportation the White House Office of Policy Development, the National Performance Review, the National Economic Council, and the National Civil Aviation Review Commission on air traffic control.