Policy Study

How to Spin Off Air Traffic Control

Executive Summary

Aviation experts are nearing consensus that the air traffic control (ATC) system needs to be removed from operation by the Federal Aviation Administration (FAA) and spun off as a userfunded corporation. This change would free the ATC system of federal budget constraints, micromanagement by the administration and Congress, civil service constraints, procurementsystem problems, and conflict of interest between safety regulation and operations.

Valuable lessons on how to go about this restructuring can be gained by reviewing similar spinoffs already accomplished or under way in New Zealand, Germany, Switzerland, and South Africa (and under study in Canada and many other countries). Key success factors appear to include: 1) shifting to 100 percent user fees rather than tax support; and 2) separating safety regulation from ATC operations, by leaving regulation within government, at arms-length from the ATC corporation. Overseas ATC corporations are able to obtain liability insurance from private carriers. In addition, military and government users now pay for ATC services, just like private-sector users.

A major problem in devising a user-fee system is the degree to which “general aviation” (GA) is subsidized in the current excise-tax regime. Resolving this problem involves distinguishing between business and commercial GA users-who typically fly turboprops and turbojets on cross-country flights-and noncommercial GA users-who typically fly single-engine piston aircraft on local flights. The latter seldom use ATC services; they should only be charged when they do file a flight plan or land at an airport with a control tower, and they should be charged only the marginal costs of serving them. Commercial GA users should pay commercial rates, based on their fair share of overall system costs.

A U.S. Airways Corporation based on these principles would permit rapid modernization of the ATC system, with significant increases in safety levels. Another benefit would be a significant reduction in airline delays, which cost airlines and travelers some $5 billion per year. The transition to an Airways Corporation could take place within one year.