A war is about to break out over the future of aviation infrastructure—and you will soon be urged to choose sides. At stake is the future of our aviation system, which currently faces a crisis of capacity. And at issue is a controversial proposal to fund the cost of using airports and air traffic control (ATC) with user fees rather than the traditional fuel taxes. The Federal Aviation Administration (FAA) owns and operates the air traffic control system; it also makes grants to locally owned airports to upgrade their capacity. For years, the FAA has warned that the aviation infrastructure is running out of capacity. In response, the administration created an industry/government task force called the Joint Planning & Development Office (JPDO) to plan a completely new approach to managing air traffic. Some of the best minds at NASA, the Departments of Defense and Transportation, and aerospace firms like Boeing and Lockheed Martin have worked on this effort.
One of the JPDO’s first tasks was to run simulations of the present system. What they found is frightening. By 2017, the projected 85 percent growth in total jet aircraft will completely overwhelm the airspace system. The current system, they concluded, will lead to “untenable and unrealistic service quality” within a decade and continue to deteriorate thereafter.
Without greatly expanding airspace capacity, the only way to cope would be to impose some form of rationing, reducing the number of flights during peak periods to what the system can handle. That’s already happened at Chicago O’Hare Airport, where you can’t land a business jet without getting one of a limited number of reservations. But widespread rationing would force airfares up, play havoc with the convenience of business jets, and destroy the business model of the new breed of on-demand air taxi services.
To address the issue, the JPDO developed a Next Generation Air Transportation System (NextGen) based on a complete rethink of how to manage air traffic. Traditional air traffic control is essentially the same as it was in the 1950s—a labor-intensive model in which planes are monitored and controlled by individual air traffic controllers. This system does not scale well; doubling its capacity means doubling the number of costly controllers and subdividing controlled airspace into ever-denser units.
The NextGen approach builds on DoD’s “network-centric” concepts ofusing real-time information and automated routines to safely keep track of far more planes than is possible for individual controllers. With more precise information about flight tracks and weather, it is entirely feasible to reduce the huge buffer zones that the present system needs to keep planes far enough apart to be safe. The JPDO has made a credible case that this approach can double or triple the capacity of the system— and can be phased in over the next 20 years, in time to prevent a serious capacity crunch.
But implementing this system faces three major obstacles. First, the cost is estimated at $25 billion over 20 years. Second, the FAA bureaucracy’s poor track record of implementing less complex technology projects suggests a high risk of failure should it take on this task. Third, for its long-term cost savings, the NextGen system depends on making ATC far less labor-intensive and on consolidating the hundreds of far-flung centers into a few dozen. One bold solution addresses all three problems: Spin off the ATC operation from the FAA and set it up as a self-supporting commercial entity. This ATC “company” could issue revenue bonds to pay for the $25 billion transition, which would be repaid from a reliable flow of revenues from user fees from those who use the new system. With a CEO and a board of directors representing aviation users, it could hire the kinds of engineers and high-tech managers capable of implementing NextGen. And because it would no longer be depending on Congress for its budget—thanks to user fees—it would be free to close and consolidate facilities as needed.
User Fees
Thus, user fees are not an end unto themselves, but rather a means to the timely replacement of today’s obsolete ATC system with the NextGen system needed to ensure continued healthy growth of U.S. aviation. During the past 15 years, more than 40 countries—including Australia, Britain, Canada and Germany— have created ATC corporations along these lines, funded by direct user fees.
Critics of the proposal, however, argue that user fees “will greatly increase the cost of owning or using a business jet.” Reason Foundation recently completed a detailed study of this issue, analyzing what a whole array of business jets currently pay in aviation taxes, and what they might pay under several possible user-fee models. (For more information, go to www.reason.org/ps347_businessjets.pdf.)
Our findings? First, the owner of a Citation or Learjet in the U.S. today pays three entirely different amounts to fly from point A to point B—depending on who operates it. If the plane is part of your corporate-owned fleet, a fuel tax of 21.8 cents/gallon must be paid. But if you own a fractional share of the same plane, you pay the company a 7.5 percent tax on the hourly charge; the same applies if you charter the plane.
Using data on typical annual operations of 15 different business jets, we calculated the annual taxes paid by each. For example, the annual tax cost of flying a Learjet 60 as a corporate owned jet is $22,000. Flown the same number of hours under a fractional program, the annual tax cost jumps to$63,000. If chartered, the tax cost soars to $98,000. These aviation “user taxes” are what you pay to the FAA to receive the services of air traffic control. Having the same plane pay three different amounts for identical ATC services is the status quo the business aviation trade associations are defending.
The next step in the research was to see what each of the 15 jets would pay if the current aviation taxes were replaced by one of the possible user-fee regimes, such as:
“Full-cost” user fee: Promoted by the airline industry, this approach would take the total cost of the ATC system and charge everyone who files a flight plan and flies in controlled airspace the same amount per mile (or per hour) and per departure. The fee is based on the argument that the ATC system’s cost to control a jet is pretty much the same, regardless of its size.
“Weight-distance” user fee: A concession to what is seen as the lesser ability to pay of regional airlines and small-jet owners, this formula is based partly on the gross weight of the plane. It is used by most of the countries that have created self-supporting ATC corporations.
The results were surprising. In nearly every case, a weight-distance fee similar to what is now in place in Canada would cost less than the current aviation tax for planes operated as fractionals or as charters. However, for corporate-owned jets, the weight-distance fee ran about twice as much as the current fuel tax. By contrast, the full-cost fee was higher than current taxes for small and medium business jets, but less than current taxes for many of the largest jets in fractional or charter operations.
The takeaway? There is no simple answer to the question of whether business aviation would be better or worse off with user fees rather than aviation taxes. It depends not only on your ownership/operating arrangements, but also on how the user fee is designed.
Finally, the analysis showed that if user fees enable the successful transition to the NextGen system, and that system means you won’t be plagued by air traffic delays 10 or 15 years from now, you will very likely be better off even if you fly in a company-owned plane that today pays the least. In saving as little as 5 percent of flight hours, the hourly cost saving offsets the difference in cost between the fuel tax and a weight-distance fee. Any delay avoidance greater than that is a net cost saving, as is the value of your own time, no longer wasted in ground holds or circuitous routings.
The bottom line? Replacing an obsolete air traffic control system with the NextGen system with double or triple the capacity is in your company’s best interest. That’s true even if you rely 100 percent on airlines, but it’s equally the case if you own or operate business jets. A self-supporting ATC corporation is the key enabler for NextGen—and user fees are the key enabler for the ATC corporation.
America’s continued economic growth depends on affordable, expanding aviation. And that, in turn, requires modern, cost-effective infrastructure. So when the battle over whether to extend existing aviation taxes or to replace them with user fees hits Washington next year, don’t let your chauffeurs—the corporate flight department—speak for you.
Robert Poole is director of transportation studies at the Reason Foundation. He has advised the White House and the FAA and is a member of the Government Accountability Office’s National Aviation Studies advisory panel. An archive of Poole’s work is here and Reason’s air traffic control research and commentary is here.