NextGen Fund: Maybe Just in Time For a Little Pump Priming
Looking over the glareshield at the future of GA, I don’t get a good feeling about the FAA’s NextGen program and the 2020 ADS-B mandate. It’s not that I think the concept is flawed, although the agency seems to have done its best to complicate the deployment of this technology, which will eventually replace radar. And it’s not that I think it won’t work, even if the FAA is almost certainly oversold and overstated NextGen’s performance and benefits.
Based on questions I hear from readers, my worry is that the 2020 ADS-B mandate will be, for many owners, like the last exit before the toll booths on the GWB. It will catch many at just the right time in their flying lives to use it as an excuse to bolt from flying, resulting in two things we desperately don’t need: ever fewer active pilots and a glut of marginally equipped used airplanes driving down market values, but not far enough for them to find buyers.
One bright spot has just come into view in the form of a private industry/ government cooperative program to help finance aircraft NextGen upgrades. It’s called the NextGen Fund and we reported on it last week.
Normally, I’m skeptical of government programs that do what private industry really ought to be doing. Such initiatives tend to balloon into bloated, inefficient and expensive bureaucracies that are impossible to get rid of once they’ve shown how inept they really are. But the NexGen Fund is different.
First of all, it’s not a government program, nor does the government have much to do with it, other than providing treasury loan guarantees. I spoke with NextGen Fund’s Michael Dyment about the program earlier this week. Basically, the fund will seek capital in commercial markets which it will then loan to owners wishing to make NextGen-related upgrades including ADS-B, WAAS navigators, glass panels and so forth. Because the fund has made an agreement with the treasury to back the loans, it can offer them at a lower rate than an owner might get from commercial banks. How much lower and on what terms will be announced in the spring when the fund announces the structural details. My guess is the rates will knock a couple of points off commercial paper and since they’ll be unsecured, they may be easier to get.
I see this as win-win for owners and for the government. After all, in funding what is essentially the 21st-century aviation infrastructure, the FAA had no compunctions whatsoever in having users pay a substantial portion of the bill out of their own pockets. The same was true of GPS, so what’s the difference, you might ask? GPS had no mandate; you could take it or leave it. With ADS-B, you buy it or you don’t fly. So it’s perfectly appropriate for the government to protect its own interests—the $40 billion NextGen will cost—while helping owners shoulder what will be for many an investment they can just barely afford. Or perhaps one they don’t think is a good value. And really, those two are the same thing, so it doesn’t matter why you prime the pump as long as you get the water—equipage—flowing.
If this sounds like government competing with private enterprise, there’s a whiff of that. On the other hand, there’s nothing wrong with a little competition and I suspect the commercial banks will find plenty of profitable business as the NextGen equipage wave builds to a crescendo in a couple of years, or a little longer. Given the safety aspects of ADS-B and the efficiency claims the FAA is making, I think there’s a compelling public interest to jolly owners along with this kind of pot sweetener and I’m happy to see it. We all know that government regs are at least one reason GA is foundering. What’s wrong with a little support for the industry for a change?