July 24, 2002 Why GA Should Support Corporatized ATC

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by	Robert Poole

About the Author ... Robert Poole is Director of Transportation Studies at the Reason Foundation in Los Angeles. He received B.S. and M.S. degrees in engineering from MIT and worked in aerospace before launching the Reason Foundation in 1978. He has testified before House and Senate committees on transportation issues, and has been an advisor to the Reagan, Bush, Clinton, and Bush White Houses. His 2001 policy study on an air traffic control corporation is available online. BobP@reason.org The Reason Foundation

On Saturday, July 13, 2002, a crowd of more than 1,500 people witnessed the rollout of the first Eclipse 500 in Albuquerque. By the time you read this, the revolutionary six-place, twin-engine mini-jet may well have made its first flight. With its high-tech avionics, 355-knot cruising speed, 1,300-nm range, and 41,000-ft ceiling — all for a price tag well under $1 million — the Eclipse stands a good chance of revolutionizing general aviation.

Company founder Vern Raburn points to the Elipse's breakthrough Williams jet engines, advanced digital electronics, and revolutionary manufacturing techniques (e.g., friction-stir welding) as ushering in a new era of the mass-market private jet. The company's fundraising presentations have talked about the Eclipse creating a whole new air-taxi market, potentially as large as 30 million trips per year, within a decade. That size market would require some 35,000 small jets like Eclipse and possible competitors.

It's a breathtaking vision, and one that looks quite plausible, assuming the Eclipse delivers on its cost and performance targets. Except for one thing: There's no way the present air traffic control system could possibly handle 35,000 more jet planes between FLs 290 and 410.

ATC Is Broken and Does Need Fixing

Contrary to those, like AVweb's Rick Durden, who maintain that we don't need dramatic ATC reform ("Why change a system that works pretty well?" Durden wrote here in June), a growing consensus among aviation leaders says the ATC system is broken and needs major repair. Foremost among those experts are the members of the National Civil Aviation Review Commission (NCARC), headed by Norm Mineta.. In its 1997 report, the NCARC accurately forecast the gridlock that beset the airways in the summers of 1999 and 2000. The recession and the aftermath of 9/11 have given us a few years' breathing space, but most knowledgeable observers have concluded that the FAA's current modernization plan (the Operational Evolution Plan, or OEP) is too little, too late. The NCARC's knowledgeable members called for fundamental structural and funding reform of ATC. Unfortunately, little of what the NCARC recommended has actually been implemented, five years later.

As James Fallows lucidly describes in his book Free Flight, the technology exists for major leaps forward for GA, for both recreational and commercial purposes. Thanks in part to R&D investments by NASA in propulsion, structures, avionics, and ATC, the next decade or two could give us the means for precision approaches to thousands of GA airports. Affordable versions of business-jet flight management systems for small planes are also in prospect, as are more breakthroughs in engines and structures that should give us more planes like the Eclipse at one end of the scale and the Cirrus SR20 on the other.

But the real constraint on realizing this new world of advanced GA is the airspace in which these planes can operate, managed by the bureaucratic, under-funded, micromanaged FAA. To provide an ATC system that is dynamic, high-tech, user-friendly, and well-funded is the goal of those of us who have been developing proposals for an ATC Corporation over the past decade. Our vision is a high-tech, 24/7 service business, controlled by, and accountable to, its users.

An ATC Corporation? — Let's Get Real

Rick Durden's well-written AVweb piece, "How Many Are Going to Die, Mr. President?" attacks something he calls "ATC privatization." But what he's attacking bears no resemblance to the kind of plan proposed, in several variations, by the Clinton administration and the Reason Foundation. Durden's straw-man version goes like this:

The federal government sells or contracts out the ATC system to a large aerospace firm, which proceeds to run ATC as a for-profit business. It charges fees for every single ATC contact, to every single plane. It suffers from an inherent conflict between safety and profits. And by charging GA pilots for weather briefings and flight following, it tempts cheapskates and rogue pilots to avoid these services, endangering their own lives and possibly those of others.

If anyone were seriously proposing that, I'd be writing articles against it, too.

The Reason Foundation's actual plan, which has won widespread support from aviation professionals, is fundamentally different. First of all, it's set up as a nonprofit corporation, with a federal charter spelling out a board of directors composed of aviation stakeholders. In effect, it's a user co-op, designed to let the users decide the future of ATC, not politicians and bureaucrats. Our current proposal is for a 15-member stakeholder board, on which airlines would have four seats and GA would have three. (Other stakeholders include controllers, airports, government airspace users, and the traveling public.)

Fees and Costs

In its powerful 1997 report, the NCARC called for a restructured ATC organization to be paid for by fees, and charges to be paid by users, rather than taxes. The reason for this change is to liberate ATC from the federal budget process. A reliable stream of user-fee revenue would permit the ATC organization to issue long-term revenue bonds, backed by that revenue stream. And that, in turn, would permit large-scale technology modernization to be done far more effectively. For example, instead of the FAA going hat-in-hand to Congress each year for funds to add terminal radar displays to a few more VFR towers, this safety-related improvement could be done all at once. The unit cost of an 87-display order would be much lower, and this badly needed system would be in place many years sooner.

Over the years, people like AOPA's Phil Boyer has made the term "user fees" a swear word within GA circles. And Durden rightly points out the potential safety hazards of charging fees for individual GA services. That's why our plan studiously avoids doing so. Our proposal calls for all jet aircraft, which fly in controlled airspace, to pay ATC fees based on weight and distance — the standard ICAO formula for air navigation charges, used in nearly all countries except the United States. For non-jet GA planes, the fuel tax would be abolished and would be replaced by an annual membership fee. That fee would be proportional to aircraft gross weight, and would be paid only by the plane's owner. (The fee would be applicable only to owners who want their planes to make use of ATC services.) The fee schedule would be designed to bring in about as much money as the current GA fuel tax does now. Thus, the change to the new system would be revenue-neutral for the vast majority of GA plane owners.

Durden expresses concern about higher costs, due to a "privatized" ATC system. But the three reasons he cites are all off-base:

• Higher costs due to the addition of a profit margin: Since the corporation would be set up as a nonprofit user co-op, there would be no profits.
• Higher costs, by analogy with overseas ATC corporations: Documented evidence from Australia, New Zealand, and Canada reveals both costs and user fees going down, not up, following corporatization.
• Higher costs due to users having to pay for FAA regulatory oversight of the ATC corporation: Our proposal calls for the remaining FAA to be paid for out of general federal revenues, like all other safety regulatory agencies (CPSC, FDA, OSHA, etc.)

The Difference Corporatization Would Make

With that as a background, let's consider how the new ATC Corporation would differ from the FAA in dealing with the challenges of modernizing our ailing ATC system. As noted earlier, when it comes to paying for modernization, the corporation would do what other high-tech businesses do: Go to the capital markets. The FAA can only modernize in fits and starts, one year at a time, based on the annual Facilities & Equipment appropriation it can squeeze out of Congress. Somehow, Congress always seems to have other, more pressing, spending priorities, especially when the federal budget is in deficit.

When a high-tech firm buys new technology, it doesn't spend years on "Beltway Bandits" defining its requirements in endless detail. It spells out performance requirements, gets bids, selects the best value, and implements its choice. But FAA procurements are subject to a morass of federal procurement regulations — including a statutory right of appeal by losing bidders. No wonder it takes six to eight years for system upgrades — at a time when new-generation electronics 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 the FAA. Even very good people find it hard to excel in that kind of environment.

It is these kinds of differences that have led more than two dozen countries to shift ATC from being a government department, funded out of the government budget, to some kind of self-supporting corporate entity. Countries making this shift include: Australia and New Zealand, Canada, Belgium, Britain, Germany, the Netherlands, and South Africa. Nearly all of these are government corporations. The two exceptions are Canada (a nonprofit, stakeholder-board company, similar to the Reason proposal), and Britain (a public/private partnership, in which the private sector owns 46 percent). While all ATC corporations have struggled with reduced revenues post-9/11 (as have airports), their track records have been quite good in terms of modernization and efficiency gains.

Who's Pro and Who's Con?

A Statement Concerning the Future of the U.S. Air Traffic Control System May 1, 2001 Each of us has held a senior position within the FAA, and each of us continues to consult on aviation issues. In reviewing the FAA's performance over the past decade — including recent years since the enactment of various reforms by Congress — we have concluded the following: 1. Air traffic control is a 24 hour-a-day, 7 day-a-week high-tech service business. It can and should be operated by a separate corporate entity, paid directly by its customers, and directly accountable to its customers for its performance. This country can no longer afford to provide this 21st-century service using a 1950s-type organizational and funding approach. 2. Attempted reforms of FAA's personnel and procurement systems have failed to materially change the agency's organizational culture, which is necessarily bureaucratic, risk-averse, and not sufficiently customer-focused. Despite the increased funding promised by AIR-21, the FAA's revenue stream is still uncertain, dependent on the ups and downs of the federal budget process. And efforts to convert the FAA's Air Traffic Services into a "performance-based organization" within FAA will not convert it into a sufficiently customer-focused entity. 3. For the FAA to provide both air traffic control services and regulate the safety of ATC operations is a conflict of interest. The ATC service provider should be regulated at arms-length by the FAA, just as it regulates air carriers, aircraft and engine manufacturers, and all other components of the aviation system. Therefore, we support the creation of a not-for-profit air traffic control corporation, along the lines proposed by the Reason Public Policy Institute in its Policy Study No. 278, dated February 2001. Signed, John McLucas Administrator, 1973-77 Langhorne Bond Administrator, 1977-81 Allan McArtor Administrator,1987-89 David Hinson Administrator, 1993-97 Al Blackburn Assoc. Admin. for Policy, 1986-88 Tony Broderick Assoc. Admin. for Reg./Cert., 1985-96 George Donohue Assoc. Admin. for Res./Acq., 1994-98 Robert Donahue Assoc. Admin. for Airports, 1987-90 Michael Goldfarb Chief of Staff, 1987-89 Larry Hecker Dep. Admin, 1987 Sandy Murdock Chief Counsel, 1981-85 Joe DelBalzo Exec. Director for Eng./Dev./Ops., 1989-92

The depth of concern about the inability to reform ATC as long as it remains within the FAA is illustrated by the statement signed last year by a dozen former top FAA officials (see sidebar). They reviewed the Reason plan, and while not necessarily agreeing with every detail, signed a statement supporting the creation of a nonprofit ATC corporation along those lines. Speaking in support of the plan at the news conference unveiling the proposal in February 2001 were former DOT Secretary Jim Burnley, former CAB chairman (and father of airline deregulation) Alfred Kahn, and the top aviation policy person in the Clinton White House, Dorothy Robyn.

In the nearly 18 months since the proposal's unveiling, it has also drawn support from a number of airline CEOs, from some prominent GA people, from Sen. John McCain (R., Ariz.), and from a number of individual GA pilots and air traffic controllers. On the other hand, it has been criticized by the leadership of AOPA and NBAA, as well as by the controllers' union, NATCA.

The current Bush administration presents a mixed picture. While the Clinton administration's Reinventing Government office and later the DOT Secretary's office produced ambitious plans for a user-fee/revenue-bond funded government ATC corporation, thus far the Bush White House has produced no plan of its own. Despite having presented the case for structural and funding reform of ATC as NCARC chair, now that Norm Mineta is DOT Secretary he has opposed both user fees and corporatization. The only visible champion of reform in the Bush White House thus far is budget director Mitch Daniels, who has kept the idea in the first two Bush budget messages.

The only tangible action taken by the Bush White House thus far was the issuance of an Executive Order by President Bush on June 4, 2002. That brief order simply deleted the words "inherently governmental" from the December 2000 Clinton Executive Order authorizing the FAA to reorganize ATC internally. That wording was a last-minute addition to the Clinton EO, put there at the strong urging of NATCA president John Carr and FAA Administrator Jane Garvey (over the objections of others in the Clinton White House). Thus, the alarms raised by NATCA and Durden about Bush's removal of those words being an historic change in policy are simply nonsense. All the Bush EO did was to restore the historic status quo as it had always been up till December 2000. The only immediate impact of the Bush EO is to remove a threat to the continued existence of the FAA's long-standing contract tower program, in which over 200 small-airport control towers are operated safely and efficiently by private firms.

Whether the Bush administration will proceed with serious ATC reform is an open question. It will depend in part on who the next FAA Administrator is, on whether Norm Mineta retires as DOT Secretary or has a change of heart on the issue, and on which party controls the House and Senate following this year's elections. Contrary to Durden's fears and speculations, all available evidence suggests that there is no current Bush administration plan to corporatize or privatize air traffic control.

The Stakes for General Aviation

The shift to "free flight" technologies will come about eventually; like GPS's spread from military to civilian uses, the technologies are simply too powerful to remain bottled up forever. But how soon they come within reach of GA remains a very open question. The FAA's track record on modernization gives us good reason for pessimism, absent real reform.

For the past 20 years the FAA has been trying to modernize the system. Billions of aviation-user tax dollars have been spent, many of them wasted on things that did not work or were not wanted by the users (such as the microwave landing system). But even as the FAA finally succeeds (late and over budget) in implementing things like display system replacement (DSR), all it is doing is component replacement. Very little of the agency's test-a-little, build-a-little approach adds any new capacity to the system. What's needed is a revamped system architecture that takes full advantage of GPS, ADS-B, controller-pilot data link (CPDL), and cockpit weather/traffic displays. And not spread out over the next 20 years, as annual appropriations permit, but over as short a span as possible, thanks to large-scale bond issues and business procurement methods.

If airspace capacity is not dramatically expanded, and we try to squeeze thousands of new GA jets into that limited airspace, there will likely be a battle royale over who gets access to that space. If those questions have to be resolved politically, it will be a question of who has more lobbying and campaign-contribution clout in Washington — the airlines or GA. That's not a future private pilots should look forward to.

How much better it would be if ATC were turned over to its users, in a cooperative structure that carefully balanced airline, GA, and other stakeholder needs, and provided the funding basis for high-tech modernization to dramatically expand capacity. That's the kind of future GA's leaders should be helping to bring about.