Summers of Discontent
Former Administrator, NATA chair call for ATC privatization
By Langhorne Bond & Jim Haynes
May 2001
Victory Hugo once said that "Nothing is as powerful as an idea whose time has come." Such was the introduction to a paper, "The Privatization Revolution," by Lawrence W. Reed, President of the Mackinac Center for Publick Policy. For aviation, one of those powerful ideas is the privatization of air traffic control. Its time has come.
The Reason Foundation’s paper, "How
to Commercialize Air Traffic Control," points out that close to 24
countries around the world have corporatized their air traffic control
services. However, the country that leads the world’s market-based
economies and is a hot bed of entrepreneurialism, the United States, is
not one.
In one part of an attempt to solve the problems
of the National Airspace System, our government has reinvented air traffic
control and renamed it the Air Traffic Organization. This is an animal
without teeth, and too fat to move quickly. We think it is going to be
a difficult road to travel.
Some Washington Precedents
For many years we watched as our hometown
commercial airports suffered from lack of funds and the bickering of Congress.
Until the late 1980s Washington National and Washington Dulles were the
only commercial airports in the U.S. owned by the federal government and
operated by the Federal Aviation Administration.
Freed at last by the creation of the Metropolitan
Washington Airports Authority, both of these airports have experienced
a renaissance. New and expanded terminals are just the most obvious examples
of the improvements. The major part of the funding now comes from the
private capital markets. The executive director reports to the board of
directors of the airport authority, the members of which are appointed
by Virginia, Maryland, the District of Columbia, and the President of
the United States. The same government bureaucrats who once worked for
the FAA now operate these airports, but they are now freed from the shackles
of government. They perform admirably and are compensated accordingly.
Ten years ago the first private toll road
in the United States was built in northern Virginia. Construction of the
full 15 miles was finished in one year, and that included an extremely
severe winter. Traffic counts have built to the point that two more lanes
are being added. Private enterprise again built — in record time
— and operates what government could not even start.
An Inability to Respond
The US ATC system is not a failure. It meets
its primary goal — safety — very well. As government programs
go it is a success. The men and women who run it are devoted and hard-working.
But it is not efficient; it can’t bring new technology online; and
so long as it remains in the Executive Branch it will not meet the traffic
demands of the future.
A high-tech business operates at the speed
of light. Government works at the speed of politics, except in time of
war. Air traffic control is a high-tech business. If you don’t believe
air traffic control is a high tech business, just visit any enroute center,
any approach control facility, or ATC tower. A successful business must
have sound and efficient business practices and be governed by a board
of directors that has the power to set policy and hire and fire the Chief
Executive Officer who runs the business. The CEO must be able to purchase
and adopt new technology quickly to meet the needs of the customer.
The Aviation Investment and Reform Act for
the 21st Century, now popularly known as AIR-21, created the Management
Advisory Council (MAC) for the National Air Space System. The MAC in turn
has an Air Traffic Services Subcommittee (aka the Mini-Mac), which is
supposed to be the board of directors for the "new" air traffic
organization (ATO), by which, in addition to being renamed, air traffic
control is now designated a performance based organization (PBO). The
Mini-Mac will "review" the selection of a Chief Operating Officer
for the air traffic control system, who will be selected by the FAA Administrator.
This effectively makes the FAA Administrator the CEO of the air traffic
control system.
The search for the Air Traffic Organization’s
COO has taken on papal proportions and, as of this writing, no white smoke
has arisen from the chimney on Independence Avenue. However, when it does,
this no doubt capable individual will be subject to the same burdens faced
by the FAA Administrator in running the system.
The Mini-Mac is not a board of directors
with the power to hire and fire the CEO and set policy. In fact, no one
can fire the CEO or the COO — both have five-year terms by statute.
With respect to running the ATC system, this is deeply flawed.
A New Blueprint
The Reason Foundation has given us a blueprint
to make commercialization happen. All of the stakeholders are represented
on the board: the users, employees, and the Federal Government. The board
would set the rates and charges which, as proposed, are fair to all users,
especially general aviation.
The FAA would continue to be responsible
for safety regulation, the Department of Transportation would hear appeals
regarding fees and service levels, and congressional committees would
have oversight of FAA and DOT. The employees, the majority of whom are
controllers and technicians, would retain their benefits, would be working
with state-of-the art technology, have market-based compensation, receive
performance-based benefits, and have a seat on the board. Free Flight
would become a reality.
The United Kingdom in March ended its long
search for a better structure for ATC. The outcome is startling. At first,
the U.K. planned an investor-owned, profit making, regulated utility.
Public opinion, concerned about safety versus profits, did not support
this. So the U.K. government selected a group of airlines to buy and operate
the system. At the last moment, in order to nail down the deal, the airlines
agreed to operated the system without seeking a profit. Voila, a stakeholder
board running a non-profit! It’s Nav Canada and the Reason Foundation’s
scheme all over again. The U.S. carriers should emulate their visionary
British counterparts.
The heavy summer travel season is about to begin. Seven hundred million air travelers are making plans. Storm fronts are already marching east. Major airline strikes are threatened. The stage is set for a repeat of the travel hell of the last two years. The prognosis is not good. The Washington trade associations and DOT Secretary Mineta should give the Reason Foundation’s proposal and the Nav Canada/U.K. model a second look. Time is running out.
What Nav Canada Is ... and Is Not
The Reason Foundation’s approach to
commercialization of air traffic control, which we support, is a nonprofit
user co-op. Aeronautical Radio, Inc. (ARINC), organized in 1929, is a
good example of such an organization. Nav Canada’s nonprofit stakeholder
model is a more recent example of the type of privatization proposed for
the U.S. ATC.
In the last two and a half years, Nav Canada
increased productivity by 32 percent, reduced airline costs by 33 percent,
and increased controller compensation by one-third. (Outright privatization
would mean a sale of the equity in the new organization to the highest
bidder — the UK model. This is not what is being proposed for the
U.S. air traffic control system.)
Reason Foundation’s model would have
a board made up of all the stakeholders: the airlines, general aviation,
employees, the federal government, airports, and the public. It would
obtain long-term capital from the private capital markets rather than
the U.S. Treasury. Some have confused the Reason Foundation’s model
with AMTRAK and the U.S. Postal Service. It is very different. A copy
of the Reason Foundation paper can be found at www.rppi.org.
— J.H. & L.B.
