Commentary

Is Privatization of Air Traffic Control on the Horizon?

How the sequester is shaping ATC reform

What British lexicographer Samuel Johnson said about impending hanging – that it concentrates a man’s mind – applies perfectly to the US aviation community and the mandatory federal budget cuts known as the sequester.

That measure required all agencies in the ‘discretionary’ part of the federal budget to cut about five per cent of their 2013 budget across the board. But since Congress didn’t get around to making this take effect until half-way through the 2013 fiscal year, agencies such as the Federal Aviation Administration (FAA) had to cut nearly 10 per cent from their budgets for the second half of the year – April through September.

And that led to the FAA’s plan to shut down 149 visual flight rules (VFR) control towers operated by contractors and to furlough – or temporarily lay-off – nearly all employees including controllers for one day out of every 10. Only after the furloughs had been in effect for a week did Congress enact emergency legislation to give FAA the budget flexibility to shift funds from its airport grants programs into its operating budget, reversing both the furloughs and the contract tower closures.

That traumatic event was bad enough for the air traffic control (ATC) system, but the aviation community soon realized that they had won only temporary relief. The sequester is a ten-year cost-cutting measure, enacted in 2011 by Congress – with the support of President Obama – as an incentive for negotiation of a grand bargain on taxing and spending to address the longer-term fiscal crunch caused by ever-expanding entitlement spending.

As long as no such grand bargain is reached – and it is nowhere in sight – the next nine years will see continued annual sequester cuts. And that prospect threatens not only the ongoing operations of the ATC system; it is a potential death sentence for the FAA’s $20 billion NextGen modernization effort.

The first serious cry of alarm was issued late in February by the FAA’s own Management Advisory Council. On February 27, it sent a strongly worded letter to the chairs and ranking members of the House and Senate committees that deal with aviation saying that the funding and governance system for the FAA is broken and needs to be replaced. Specifically, the letter called for replacement of the current hodge-podge of aviation excise taxes with sustainable funding sources and the creation of a governing board for the FAA that could work out the specifics of the funding sources – and presumably make other policy decisions.

Discussion

If you think that sounds like an opening for creating a self-supporting air navigation service provider (ANSP), you’re right. In the months since then, both before and after the short-term FAA rescue by Congress, there has been extensive private discussion among aviation stakeholders about how the United States is the only developed nation whose ATC system can become a political football, held hostage to overall national government budget problems. Self-funded ANSP models such as Airservices Australia, DFS Deutsche Flugsicherung, NATS, and Nav Canada are being discussed by a surprising set of people, given the history of prior debates over “privatizing” US air traffic control.

For non-US readers, a brief recap of that history is in order. Back in 1985, the Air Transport Association (ATA), recently rebadged as Airlines for America, released a study calling for a self-supporting federal ATC corporation. There was no support for the idea in Congress, and the general aviation community was leery for fear that ATC user fees would be unaffordable.

The idea was revived by Vice President Al Gore’s reinventing government policy shop, which led to a detailed 1994 proposal from the office of Transportation Secretary Federico Pena. Its two-volume study called for shifting ATC out of the FAA into a US Air Traffic Services (USATS) corporation. Rep. Norm Mineta (D, CA) introduced the enabling legislation, and this time, supporters included ATA and the relatively new controllers union, National Air Traffic Controllers Association (NATCA). But the general aviation groups once again were in opposition, and the chairman of the House Aviation Subcommittee, Rep. James Oberstar (D, MN), kept the bill bottled up, where it died.

A subsequent national commission headed by the then recently retired Mineta proposed a somewhat watered-down version of USATS, which would create a separate Air Traffic Organization (ATO) within the Department of Transportation (DOT), funded mostly by transaction fees and able to issue revenue bonds. Congress eventually approved an FAA reorganization that created the ATO within the FAA but gave it neither the user fees nor bonding authority.

During the George W. Bush administration, a newly militant NATCA fiercely opposed any move toward ATC privatization, trying unsuccessfully to eliminate the contract tower program and to prevent the outsourcing to Lockheed Martin of the Flight Service Station program. Under then-FAA Adminstrator Marion Blake, the FAA sought ATC user fees and bonding authority for the ATO, but NATCA and the general aviation community joined forces in opposition. And the ATA made things worse by running a media campaign demonizing business jet users as fat-cats that ought to pay the same user fees as jet airliners, on the grounds that “a blip is a blip.”

Earthquake

With that as background, you can begin to see why statements open to discussing a self-funded ANSP from leaders of today’s NATCA and several general aviation organizations constitute something of an earthquake. The first such public statement came from Craig Fuller, president of the Aircraft Owners and Pilots Association (AOPA), the huge and politically influential membership organization for general aviation pilots.

In an interview posted on the AOPA Live website on May 5, Fuller talked about the US ATC system as the only major system entirely within government and subject to its budget and political process. He noted that in light of the sequester:
Questions are being asked increasingly around Washington about what the future should look like . . . And I think those questions should be raised. . . . There’s lots of things that go along with [commercialization] that would have to get resolved. But the long-term funding that our ATC system needs, and the continuity of that funding, are very difficult under a political system . . . . Whether we could find a way to do it, with something that’s tied to government but less run by government . . . we’re going to have to address.
The following month saw a blog post by Mac McClellan of the Experimental Aircraft Association and former editor of the general aviation magazine Flying. Titled Time to Privatize ATC? it discussed the success of Nav Canada in improving ATC in Canada without harming general aviation with high transaction fees. Instead, as he explained to private pilots, aircraft up to three metric tons pay only a modest weight-based annual fee to Nav Canada, typically less than $100. He also described his experience flying in both Canada and the United States.

Yet another sign of rethinking was evident at a one-day conference on NextGen, sponsored jointly by pilots’ union ALPA and controllers’ union NATCA, in Washington on June 27. The panel on funding included the heads of five aviation stakeholder groups (and me): Air Line Pilots Association, International (ALPA), NATCA, Airlines for America (A4A), Regional Airline Association (RAA), and National Business Aviation Association (NBAA). NATCA president Paul Rinaldi called the sequester a “game changer” that has sparked serious rethinking about how ATC is funded and governed.

The current system is “broken,” he said, and needs to be replaced with one that is both sustainable and insulated from politics. He mentioned Nav Canada as an entity that is far enough ahead of the FAA technologically to potentially take over the North Atlantic and possibly other areas of oceanic airspace. He added that “NATCA’s not signing up for privatization,” but they are signing up for a conversation on replacing the broken status quo.

Interestingly, although the comments from Captain Lee Moak (ALPA), Nick Calio (A4A), and Roger Cohen (RAA) were less dramatic, all three agreed with Rinaldi that the current funding system is broken and should be replaced. The only dissenter on the panel was Ed Bolen (NBAA). He defended the current FAA funding system as generally reliable and stable over the years and defended the general aviation fuel tax as better than any kind of direct user fee.

What can we make of all this? I’ve been involved in debates over ATC policy for several decades, and the general impression of people who have been following this issue has been that the likelihood of achieving something like US Air Traffic Services or Nav Canada in the United States is very low. Some have said it’s because the controllers’ union would never support it; others have claimed that general aviation will always be able to mobilize opposition over the idea that ATC user fees would make flying unaffordable. Airlines have generally supported commercialization in principle, but are assumed to believe it’s a lost cause because of controllers and general aviation.

But as I see it, the sequester is changing all that. In private conversations with numerous stakeholders last year and this, I’ve been amazed at the change brought about by the first year of the sequester. It seems to me the potential now exists for creating a US adaptation of the Nav Canada model, with a stakeholder board that fairly represents all key aviation stakeholders. I’m distressed that NBAA is not yet ready to engage in this conversation, but the business jet community has far less clout than private pilots. And from a political standpoint, private pilots tend to support Republicans in Congress while unions have influence with Democrats. If an ATC corporation coalition emerged among airlines, controllers, and private pilots, it might well have the critical mass to get Congress to take such a proposal seriously.
Robert Poole is the Searle Freedom Trust Transportation Fellow and Director of Transportation Policy at Reason Foundation. This article first appeared at AirTrafficManagement.net.

Robert Poole is director of transportation policy and Searle Freedom Trust Transportation Fellow at Reason Foundation. Poole, an MIT-trained engineer, has advised the Ronald Reagan, the George H.W. Bush, the Clinton, and the George W. Bush administrations.

Surface Transportation

In the field of surface transportation, Poole has advised the Federal Highway Administration, the Federal Transit Administration, the White House Office of Policy Development, National Economic Council, Government Accountability Office, and state DOTs in numerous states.

Poole's 1988 policy paper proposing privately financed toll lanes to relieve congestion directly inspired California's landmark private tollway law (AB 680), which authorized four pilot toll projects including the successful 91 Express Lanes in Orange County. More than 20 other states and the federal government have since enacted similar public-private partnership legislation. In 1993, Poole oversaw a study that coined the term HOT (high-occupancy toll) Lanes, a term which has become widely accepted since.

California Gov. Pete Wilson appointed Poole to the California's Commission on Transportation Investment and he also served on the Caltrans Privatization Advisory Steering Committee, where he helped oversee the implementation of AB 680.

From 2003 to 2005, he was a member of the Transportation Research Board's special committee on the long-term viability of the fuel tax for highway finance. In 2008 he served as a member of the Texas Study Committee on Private Participation in Toll Roads, appointed by Gov. Rick Perry. In 2009, he was a member of an Expert Review Panel for Washington State DOT, advising on a $1.5 billion toll mega-project. In 2010, he was a member of the transportation transition team for Florida's Governor-elect Rick Scott. He is a member of two TRB standing committees: Congestion Pricing and Managed Lanes.

Aviation

Poole is a member of the Government Accountability Office's National Aviation Studies Advisory Panel and he has testified before the House and Senate's aviation subcommittees on numerous occasions. Following the terrorist attacks of Sept. 11, 2001, Poole consulted the White House Domestic Policy Council and the leadership of the House Transportation & Infrastructure Committee.

He has also advised the Federal Aviation Administration, Office of the Secretary of Transportation, White House Office of Policy Development, National Performance Review, National Economic Council, and the National Civil Aviation Review Commission on aviation issues. Poole is a member of the Critical Infrastructure Council of the Los Angeles Economic Development Corporation and of the Air Traffic Control Association.

Poole was among the first to propose the commercialization of the U.S. air traffic control system, and his work in this field has helped shape proposals for a U.S. air traffic control corporation. A version of his corporation concept was implemented in Canada in 1996 and was more recently endorsed by several former top FAA administrators.

Poole's studies also launched a national debate on airport privatization in the United States. He advised both the FAA and local officials during the 1989-90 controversy over the proposed privatization of Albany (NY) Airport. His policy research on this issue helped inspire Congress' 1996 enactment of the Airport Privatization Pilot Program and the privatization of Indianapolis' airport management under Mayor Steve Goldsmith.

General Background

Robert Poole co-founded the Reason Foundation with Manny Klausner and Tibor Machan in 1978, and served as its president and CEO from then until the end of 2000. He was a member of the Bush-Cheney transition team in 2000. Over the years, he has advised the Reagan, George H.W. Bush, Clinton, and George W. Bush administrations on privatization and transportation policy.

Poole is credited as the first person to use the term "privatization" to refer to the contracting-out of public services and is the author of the first-ever book on privatization, Cutting Back City Hall, published by Universe Books in 1980. He is also editor of the books Instead of Regulation: Alternatives to Federal Regulatory Agencies (Lexington Books, 1981), Defending a Free Society (Lexington Books, 1984), and Unnatural Monopolies (Lexington Books, 1985). He also co-edited the book Free Minds & Free Markets: 25 Years of Reason (Pacific Research Institute, 1993).

Poole has written hundreds of articles, papers, and policy studies on privatization and transportation issues. His popular writings have appeared in national newspapers, including The New York Times, The Wall Street Journal, USA Today, Forbes, and numerous other publications. He has also been a guest on network television programs such as Good Morning America, NBC's Nightly News, ABC's World News Tonight, and the CBS Evening News. Poole writes a monthly column on transportation issues for Public Works Financing.

Poole earned his B.S. and M.S. in mechanical engineering at Massachusetts Institute of Technology (MIT) and did graduate work in operations research at New York University.