The Many Reasons to Corporatize Air Traffic Control

The Many Reasons to Corporatize Air Traffic Control

Recent weeks have seen new criticisms of ATC corporatization proposals. This new line of argument maintains that the airlines support this change because it would solve the problem of airline delays. Michel Baiada had a long technical piece on Forbes.com headlined "Air Traffic Control Is Not the Real Cause of Airline Delays," including a pie chart showing that air carrier delays and late arrivals accounted for twice as many delayed flights as delays attributed to the ATC system, as measured in DOT delay reports. And on a similar theme, Robert W. Mann had a Viewpoint in Aviation Week headlined "Airlines Can Fix ATC Problems."

Yes, airlines could do more to focus their own operations on increased on-time performance. My assessment is that airlines have emphasized reduced delays as a benefit of corporatization because that is something their customers can understand. Air traffic control is inherently complex, and the reasons for corporatization and its likely benefits cannot be summed up on a bumper strip or a sound bite. Here are some of the reasons why airlines, controllers, former FAA and DOT officials, and transportation researchers favor corporatization.

First, to increase productivity. As I wrote in the February issue of this newsletter, figures from the 2016 CANSO Global Air Navigation Services Report show that Nav Canada's cost per IFR flight hour, at $335, is 26% lower than that of the FAA Air Traffic Organization. Given our ATO's much larger size, economies of scale should produce the opposite result—i.e., the ATO should be the world's most productive air navigation service provide, but it's not. When ATC customers pay the provider directly, they have every right to demand value for their dollars. But under the FAA status quo, it is mostly passengers who pay taxes to the U.S. Treasury, and Congress every year doles out what FAA is allowed to spend.  And in the process, Congress micromanages which programs to increase and decrease, and often prevents sensible business decisions such as consolidating ATC facilities. So there is no real focus on increasing ATC productivity.

A second aim is to improve aviation safety, in several ways. Separating the safety regulator (FAA) from the ATC provider (the ATO) has been ICAO policy since 2001, and the United States is one of the few developed countries not in compliance with arm's-length safety regulation. De-politicizing the controller selection process to ensure that the best-qualified candidates are hired would be another safety benefit, as would insulating the corporatized ATO from budget cutbacks, such as the 2013 sequester that led to closure of the FAA Academy for nearly a year, from which controller staffing levels are still recovering.

A third goal is to ensure an adequate operating and capital budget for air traffic control, by shifting from annual appropriations to bondable ATC user charges. What the rest of the developed world has recognized over the last 30 years is that ATC is essentially a utility, like electricity, water supply, and telecommunications. Whether investor-owned, government-owned, or set up as a user co-op, a utility charges its customers for the services they receive, and uses that revenue stream both for annual operating costs and for debt service on revenue bonds. This means that large-scale modernization, such as NextGen and facility replacement and consolidation, can be financed rather than being paid for in dribs and drabs via annual appropriations from a political body.

A fourth goal is to replace a hugely complicated and time-consuming procurement process with a high-tech corporate approach that fosters innovation and continual improvement. As I documented at some length in my report for the Hudson Institute ("Organization and Innovation in Air Traffic Control"), the FAA's conservative, status-quo-oriented culture results from it being embedded in a safety regulatory agency, rather than being regulated at arm's length by that agency. Innovations and out-of-the-box thinking are produced by agile, innovative companies—constrained, of course, by arm's-length safety regulation. They are not produced in a large bureaucracy answerable to 535 members of Congress, the Office of Management & Budget, the FAA Administrator, the DOT Secretary, the Government Accountability Office, and the DOT Inspector General. Most of these people are well-meaning most of the time, but you simply cannot run a 24/7 high-tech service business in that kind of structure.

In his Aviation Week piece, Mann demands that an ATC "privatization" proposal "must state and quantify the cost, performance, and logistics improvements it expects to achieve." That kind of central-planning mindset is very premature. The ATC corporation does not yet exist; there is no CEO and no stakeholder board. It will be their responsibility to turn overall goals such as those I've summarized above into action plans with quantitative metrics and time schedules. The last thing we need is for Congress to pre-micromanage something that is intended to free air traffic control from micromanagement.