Why Users Should Be in Charge of Air Traffic Control

Tax-funded bureaucracy or user-funded/controlled corporation?

In recent years the air traffic control system in the US has come under much scrutiny and increasing criticism. What separates the various critics is their opinion of whether the system is now in partial breakdown or terminal crisis. No such division exists when they declare that a remedy needs to be found.

Naturally, at that one point of consensus another split develops–in fact, a whole series of splits–and we are faced with almost as many suggestions and proposals for fixing the ATC system as there are theories concerning what is wrong with it.

On May 2, 2001, in a breakfast meeting that took place during the AS3 Convention in Long Beach CA, Robert Poole of Reason gave his views on revamping ATC and FAA. Pro Pilot Publisher Murray Smith, who was in attendance, invited Poole to write this editorial. We welcome other opinions on the subject and are polling readers in a Pro Pilot Watchdog Survey whose results will be published in our Sep 2001 NBAA Convention issue.

General aviation isn’t what it used to be. The business jet market is booming, thanks to the soaring growth of fractional ownership. Recent announcements by Delta and United of their planned moves into fractional ownership suggest that the line between high-end GA and airlines is starting to blur. Indeed, with regional jets offering a new level of airline service to small communities, the future may witness a continuum of scheduled, semischeduled and on-demand jet service with aircraft ranging in size from 8­10 passengers up to 90­100.

This proliferation of jet activity throws into relief the limitations of America’s air traffic control system. Already suffering from serious enroute and terminal-area congestion in the Northeast and Midwest, FAA’s bureaucratic, tax-funded system seems unlikely to keep pace with the boom in small-jet service. Indeed, should the new personal jets like Eclipse and Safire actually come to market at their target prices of under $1 million, the potential for overloading the airways above FL290 and around major airports appears all too real. If push comes to shove under today’s ATC constraints, the political clout of airlines could well outweigh that of GA in fighting for limited slots and airway allocations.

Contrast this dismal picture with a future in which ATC capacity expands rapidly thanks to speedy implementation of advanced free flight technologies. Airspace is redesigned, with the number of altitudes above FL290 doubled. Curved approaches are implemented at major airports thanks to LAAS, increasing effective runway capacity. Controller-to-pilot datalink automates routine ATC communications, again increasing terminal-area capacity. And enhanced-GPS landing systems provide precision approaches at thousands of smaller airports–all within the span of a few years.

That kind of future is possible if ATC is transformed from a tax-funded government bureaucracy into a nonprofit commercial enterprise, directly controlled by and accountable to its users. Over the past decade a growing consensus has emerged about the nature of ATC. While air safety regulation is rightly viewed as inherently governmental, the provision of ATC services is more accurately viewed as a 24/7 high-tech service business. But that’s not how it’s run by FAA. Consider the following contrasts.

FAA air traffic controllers on duty at IAD (Dulles, Washington DC). If Reason’s propsal is accepted, they could one day work for a nonprofit corporation.

When a telecommunications company needs to expand or modernize its network, it goes to the capital markets (to make a stock offering or bond issue) and raises the needed funds, repaying the investors out of the future revenue stream created by its expanded business. FAA can only modernize one year at a time, based on the annual appropriation it can squeeze out of Congress.

When a high-tech firm buys new technology, it gets bids, selects the best value and implements its choice. But FAA procurements are subject to a morass of government procurement regulations–and a statutory right of appeal by losing bidders. No wonder FAA takes 6 to 8 years for system upgrades–at a time when new-generation technology comes along every 18 months.

Managers in a high-tech firm are held accountable for performance. They can be handsomely rewarded for achievement–and they can be fired for not performing. Neither is true of FAA. Even very good people find it hard to excel in that kind of framework.

Factors similar to these have led nearly 2 dozen countries to shift ATC from a government agency to some kind of corporate structure over the past decade. Leading examples include Australia, Belgium, Britain, Canada, Germany, the Netherlands, New Zealand, South Africa and Switzerland. Most of these are government corporations–but completely outside the government budget, personnel, and procurement systems. Instead of being funded by taxes, these ATC corporations receive direct payments for their services from those who operate aircraft in controlled airspace. That commercial revenue stream makes it possible for these companies to issue long-term revenue bonds to pay for large modernization programs. So far, the track record of these corporations is excellent–increased productivity, faster modernization and a downward trend in fees and charges.

Three years ago the National Civil Aviation Review Commission (NCARC) accurately forecast aviation gridlock unless there was fundamental reform–both organizational and financial–of air traffic control. NCARC recommended the replacement of today’s aviation excise taxes with direct ATC user fees to make possible long-term bond financing of modernization–a proposal which Congress has ignored. And NCARC recommended management changes within FAA in an attempt to make ATC more businesslike. Congress adopted most of those changes in last year’s AIR21 legislation. But, like the previous streamlining of FAA personnel and procurement regulations, these new management changes are unlikely to change FAA’s bureaucratic corporate culture.

The 2 key changes now being implemented are the addition of a chief operating officer (COO) and the creation of an advisory board for ATC (dubbed the mini-MAC). But the COO would have nothing like the power of a corporate CEO–instead of being accountable for performance, he or she would be locked in place for a 5-year term. Reporting directly to the Administrator, he or she would need approval for all major decisions. And the mini-MAC, far from having the powers and duties of a corporate board of directors, has only advisory responsibilities. Moreover, none of its members has an aviation background.

Tribune Dassault Falcon 2000 ready to land at TEB (Teterboro NJ). Under the Reason proposal, revenue-bond funding would permit speedy provision of GPS-based precision landing systems at thousands of smaller airports–not just major GA airports such as TEB.

A different approach: the ATC corporation

In February of this year, the Reason Public Policy Institute (Reason) released a detailed proposal for a nonprofit ATC corporation to take over the operation and management of FAA’s ATC system, including all its personnel and facilities. The basic model is that of a nonprofit user cooperative, similar to ARINC. It would be governed by a real board of directors, made up of aviation stakeholders, and led by a CEO hired from the private sector and accountable for performance to the stakeholder board. The Reason proposal draws on Nav Canada for the basic model, but has tailored both the board structure and the proposed fee system to the far more complex US aviation system.

Reason’s proposal has come under attack from 2 main quarters–the controllers union (NATCA) and the largest GA group (AOPA). Both have misrepresented what Reason proposed, attacking the plan for creating a conflict between safety and profits–when the proposed ATC corporation is deliberately set up as a nonprofit. AOPA has also implied that it would be airline-dominated, and that there would be charges for individual services such as flightplan filings and weather briefings–neither of which is the case.

Let’s first look at how the ATC corporation would be governed. The guiding principle for the proposed stakeholder board is the need to represent fairly all the principal components (stakeholders) in our complex aviation system–and to avoid politicization. (It is widely believed that Phil Boyer, the head of AOPA, was kept from being appointed to FAA’s new Management Advisory Council (MAC) by the opposition of a powerful US Senator.) Under Reason’s proposal, stakeholder organizations themselves would select the board members of the corporation–none would be appointed by politicians. The proposed set of stakeholders is as follows:

  • 4 airline seats (representing majors, regionals, budget and cargo)
  • 3 GA seats (representing small/recreational, larger/ business, and air taxi/fractional operators)
  • 1 airport seat
  • 1 employee seat
  • 2 federal government seats (Dept of Defense and Dept of Transportation DOT, as users of the system).

These 11 stakeholder board members would select 3 at-large members to represent the traveling public. And those 14 members would select the CEO, who would become the 15th board member.

No conceivable interpretation could call this an “airline-dominated” board. The whole idea of the structure is to balance the often different interests of the many different components of aviation, so that decisions on important issues such as airspace redesign and fees and charges are made in the broad interests of aviation, rather than to give one group an advantage over others. Moreover, there is an appeal provision under which any stakeholder group which believes a decision on service levels or fee structure imposes serious harm on its members can appeal to the DOT Secretary.

Sen John McCain (R-AZ) takes questions from transportation press during monthly press meeting. In May 2001 McCain endorsed the principals of an ATC corporation and announced that he would hold a hearing soon to explore the issue.

Funding issues

Now we come to the always contentious issue of fees and charges. First, let me reiterate why the ATC corporation must be funded by direct payments from users to the corporation. The number 1 goal of this reform is to create a user-focused corporate culture in the ATC provider. Today, FAA receives all of its funding from Congress. It takes its direction from Congress. Its top officials are always on call to members of Congress. In other words, Congress is, de facto, FAA’s “customer”–the group it must satisfy and be accountable to. But when users pay fees directly to the corporation, and control key seats on its board of directors, the users will become the real customers of the system. As the coalition of business aviation and airlines that created Nav Canada put it, “User pay means user say.”

Moreover, a tax (like the traditional GA fuel tax) is something one pays to a government, not to a corporation. Thus, although it might seem simpler to keep the GA fuel tax in place, it’s the wrong vehicle to use. There is no way that Congress (or the US Treasury) would keep its hands off a fuel tax, even if it were theoretically dedicated to paying for the ATC corporation.

Replacing the existing GA fuel tax

Reason’s overall objective was to propose GA fees whose cost burden would be approximately the same as the current GA fuel tax–which would be abolished. For piston and turboprop aircraft, the fuel tax would be replaced by an annual membership fee, assessed on a sliding scale based on the weight of the aircraft. As noted previously, there would be no other fees or charges–no fees for flight following, or weather briefs or flightplan filing. The fee would be charged per aircraft, not per pilot. Owners of aircraft that don’t use the ATC system would not pay the membership fee.

Jet aircraft pose a different problem. Unlike pistons and turboprops, jets fly mostly IFR and they fly mostly at the same altitudes–and often in the same congested terminal airspace–as commercial jets. Thus, in a very real sense, they are using all the same ATC resources as commercial jets and, at times of limited capacity (such as now), they are competing for that scarce resource. Thus, there are good reasons for having all jets pay for ATC services on the same fee schedule. Reason follows the ICAO charging principles of basing enroute charges on aircraft gross weight and distance flown, and terminal charges on gross weight. But to take into account the very real costs of using the most highly congested terminal airspace around the dozen largest US airports, there is also a congestion component added to terminal charges for those few airports only, and only during their most congested hours of the day.

What would this mean for a typical business jet? Reason used the example of a Lear 35 flying 550 hrs per year. Paying ATC fees instead of the current fuel tax would increase that aircraft’s direct operating costs by $32/hr–a 4.5% increase. Obviously, nobody would prefer to pay more to fly. But consider the very real potential for recouping that increase via better ATC service. If the shift to an ATC corporation reduces delays and diversions by just 4.5% (saving 25.6 hrs of annual flying time), the Lear’s annual cost of flying will not have increased at all. And any time savings greater than that would mean a net cost decrease. Moreover, this calculation assumes that the ATC corporation is just as costly to operate as FAA’s ATC operation. Countries which have corporatized, such as Australia, Canada and New Zealand, have achieved large productivity gains after the first 3 to 5 years, leading to user-fee reductions of 25­30%. Thus, cost savings are more likely than cost increases.

With ATC divested to the new corporation, FAA would have 2 remaining missions–safety regulation and running the airport grant program (AIP). Separating safety regulation from ATC service provision is considered 1 of the important benefits of ATC commercialization in other countries. Both ICAO and IATA endorse this change as removing an inherent conflict of interest and strengthening air safety. And grant-making is a quintessential government function, which should remain with FAA under congressional oversight.

How would this “new” FAA be paid for? Reason proposes funding FAA’s safety and security functions, including flight service stations (FSSs), out of general revenues, consistent with general-revenue funding of most other federal safety regulation (CPSC, OSHA etc). There’s no reason why FAA safety regulation should be singled out to be paid for only by the group being protected by it, since nearly all Americans fly these days. As for AIP, the Reason proposal calls for retaining a small 3% ticket tax, which would be sufficient to fund the new, higher levels of AIP called for by AIR21.

Former DOT Secretary Jim Burnley has supported the idea of an ATC corporation since the Reagan years. He appeared at Reason’s Feb 22 news conference to endorse its nonprofit, stakeholder-board corporation proposal.

Political outlook

As of mid-2001, the Reason approach has been endorsed by a dozen former FAA officials (including 4 previous Administrators), by former DOT Secretary Jim Burnley, and by former CAB Chairman Alfred Kahn. A number of airline CEOs have spoken out in favor of corporatization, as has the Air Carrier Association of America, which represents new-entrant airlines. The Bush White House has included a study of ATC corporatization in its budget proposal, and Sen John McCain (R-AZ) has proposed holding hearings on this subject. On the other hand, DOT Secretary Norm Mineta has opposed this approach, considering it to have insufficient support in Congress.

As noted earlier, the 2 organizations which have begun organized campaigns against what they call “privatization” of ATC–AOPA and NATCA–are portraying it as threatening safety and as an anti-GA plot by the major airlines. But would the shift of ATC responsibilities to a user-run, nonprofit corporation advance or retard the interests of GA? In my view, corporatization offers a much better future for GA than continuation of the status quo.

First, a stakeholder-board corporation offers GA a real stake in governance, with 3 seats on the actual board of directors, selected by GA organizations themselves. That’s far more influence than lobbying Congress to exert some degree of influence over the FAA bureaucracy. Second, for the vast majority of GA users, the annual weight-based fee will cost about the same as the average amount paid today via the fuel tax, so their cost of flying will not increase. And they will continue to have access to all FSS services at no charge. Jets would face an initial small (less than 5%) increase in DOCs, which will likely be offset by a reduction in time wasted by delays and diversions. And all users will likely experience lower fees after the new corporation achieves productivity gains and passes them along to users, thanks to its nonprofit status.

Former CAB Chairman Alfred Kahn, best known as the father of airline deregulation, has endorsed ATC corporatization to permit aviation infrastructure to catch up with and keep pace with the growth of aviation.

Achieving modernization

But most important of all, the shift of air traffic control to a user-driven organization will ensure both the expansion and modernization of the ATC system, making room for all players via advanced technology. For the past 20 years the FAA has been trying to modernize its mainframe-and-vacuum-tube system. Billions of aviation user tax dollars have been spent, many of them wasted in things which did not work or were not wanted by the users (such as the unlamented microwave landing system). But even as FAA finally succeeds in implementing things like display system replacement (DSR), all it will be doing is component replacement. Very little of FAA’s current test-a-little, build-a-little modernization adds any new capacity to the ATC system. What’s needed, as Boeing and others have pointed out, is a revamped system architecture that takes full advantage of technologies like GPS, ADS-B, CPDL and cockpit weather/traffic displays. And not spread out over 20 years, as annual appropriations permit, but over as short a timespan as possible, thanks to large-scale bond issues and true business procurement methods. This kind of approach, including GPS-based precision approaches at thousands of airports, will expand the capacity of America’s entire airspace for all users.

Why an ATC corporation would modernize faster For years the National Transportation Safety Board (NTSB) has been urging FAA to install terminal radar displays (TRDs) in 87 VFR towers nationwide. Giving controllers in these towers a display of radar information could help prevent midair collisions in these locations. But, due to annual capital budget constraints, the FAA continues at what NTSB calls a “snail’s pace” with this program. An ATC corporation would raise large sums for capital improvements all at once by issuing long-term revenue bonds. That would permit it to order the entire batch of 87 TRDs in a single year, get them installed and place them in service within a few years. The same principle would apply to all sorts of other modernization efforts.

To be sure, there is nothing magic about a user-funded corporation–no arcane knowledge known only to the private sector. It’s simply a matter of having an organizational structure that creates incentives for peak performance, while providing the financial means to get the job done. The bureaucratic structure and civil service organizational culture are simply not that kind of environment. What corporatized ATC providers like Airservices Australia, Nav Canada and Germany’s DFS are demonstrating is that a user-funded corporation does provide that kind of environment.

As a professional pilot, you should look beyond the rhetoric coming out of NATCA and AOPA and ask yourself these questions. Under which kind of environment do you really think you’ll have the kind of ATC system you want 10 years from now? A tax-funded bureaucracy or a user-funded/user-controlled corporation?

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.