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WAA Reacts to BCA Article on ATC Privatization

Wednesday, March 15, 2017 5:16 PM | Deleted user

Fellow WAA Member,

The ATC Privatization issue will be back on the front burner over the next few weeks. If the airlines are successful in their attempt to take over control of the ATC system for their benefit, the impact to our membership would be swift and severe. Essentially, this effort is trying to take a monopoly (the air traffic control system of the US) and give it (for free) to a corporate board controlled by the airlines. This may look like an issue for just large business aviation interests but make sure to understand it will have a severe impact to all of us in general aviation. Take a look at the lack of general aviation in the UK to see where the story ends.

I would be happy to discuss further with any of you but would ask that you become an educated consumer of this issue and to pay close attention to this issue in Washington. The WAA will continue to keep the membership informed on this issue as well as the more local issue here at KHPN.

Safe flying,

Milt

Business & Commercial Aviation

ATC Privatization — Pro & Con

Will the airlines take control of ATC in the U.S.?

Jan 25, 2017David Esler Business & Commercial Aviation

Ed Bolen believes that total control of the ATC system is the force majeure behind the airlines’ long-held wish to create and dominate an air traffic control corporation supported by user fees.

“For several decades now, some of the big airlines have tried to seize control of the ATC system and the revenues that fund it,” the NBAA president and CEO told BCA. “We believe that they want to use that control for their exclusive benefit.”

Rex Wholster/iStockPhoto

This compulsion to control the infrastructure of the National Airspace System (NAS) came into the public eye as far back as 1997 during testimony in a U.S. House of Representatives Transportation Committee hearing. When the major airlines claim ATC privatization is “modernization,” the CEO of a struggling startup carrier said then to think “economic domination,” because the airlines want to run the ATC system for their exclusive benefit.

Twenty years later Bolen, recalled that surprisingly candid admission: “We are very concerned that they would use that control to increase their access to airports and airspace and decrease ours,” he said. “This will impact small towns and rural communities that depend on business and general aviation for access to the marketplace.”

Efforts to rend the air traffic control function from the FAA seem to track with those who hold that anything which cannot be provided exclusively by the government belongs in the private sector. There exist many examples of Air Navigation Service Providers (ANSPs) operating in the private sector across the globe.

Previous attempts to float ATC privatization as riders to FAA reauthorization bills have failed — as have user fee proposals — primarily due to the effectiveness of lobbying efforts by general aviation advocacy groups and supporters in Congress. But as the debate ramps up toward the Sept. 30, 2017, expiration of the current FAA operational authorization amid a new political climate tilted in favor of unrestrained free market economics and smaller government, the fate of an FAA-operated NAS appears ever-more doubtful. It would seem that the separation of air traffic — and who will pay for it — has become red meat for congressional budget battles.

Main Course

Meanwhile, 2016 was a nexus for studying the structure and funding of U.S. ATC. During the year past, reports from the Government Accountability Office (GAO) and the Department of Transportation’s Office of Inspector General (OIG) highlighting the pros and cons of ATC privatization joined audits and studies commissioned by members of Congress.

Among the issues raised were cost overruns and schedule drift in the NextGen ATC infrastructure modernization plan. As of last fall, the FAA had spent $7.4 billion on NextGen since the program’s implementation in 2004 and yet claims it needs an additional $14.8 billion to complete the six-phase system modernization — that’s a $2.6 billion increase from the agency’s last estimate in 2012. Further, completion has slipped from 2020 to an undetermined date in the 2030s. (See “Business Aviation and PBN” [BCA, December 2016, page 51] for a discussion of the FAA’s latest strategy for completing NextGen.) Then, too, questions have arisen about the reliability of the ADS-B system and lagging operator equipage numbers.

Perhaps it shouldn’t be surprising. NextGen is essentially a huge public works project, and those often fail to track to promised schedules or budgets. And, too, political partisanship, sequestration and government shutdowns have had their deleterious effects on the ATC modernization program, pushing progress deadlines ahead and wasting money.

So in the midst of all this interest in whether or not to privatize ATC, in February 2016, Rep. Bill Shuster (R-Pa.) and Frank LoBiondo (R-N.J.), House Transportation and Infrastructure Committee chairman and Aviation Subcommittee chairman, respectively, co-introduced H.R. 4441, the “Aviation Innovation, Reform and Reauthorization Act.” A six-year FAA reauthorization bill, it called for the creation of a nonprofit, self-financed, non-share air traffic control and modernization corporation modeled after Nav Canada. Ultimately, H.R. 4441 was blocked from reaching the House floor for vote, but it is generally accepted as a template for ATC reform that meets the conservative litmus test. Expect it to reemerge in some form in 2017.

The federally chartered ATC corporation H.R. 4441 proposed would be governed by a board “representing the aviation system’s users and the public interest.” As a possible prototype for a U.S. privatized system, it is revealing to look at Nav Canada’s governing board, which is composed of four directors representing the nation’s airlines; one director representing business and general aviation, elected through the Canadian Business Aviation Association; three directors representing the Canadian government; two directors elected by employee unions; and four independent directors elected by the overall board. The Nav Canada board hires a president/CEO to manage the corporation, and that person then also serves on the board.

H.R. 4441 was to preserve the FAA’s regulatory and enforcement functions under the federal umbrella but would have, among other reforms, “streamlined” the agency’s aircraft and equipment certification process. The ATC corporation was to be set up on debt financing (Nav Canada was required to purchase all of the country’s ATC infrastructure as a stipulation of its charter) and operated on user fees. But most significantly, the Shuster/LoBiondo legislation would have, in one fell swoop, removed 30,000 civil service employees from the federal payroll, contributing significantly to conservatives’ goals of reducing the size of government and the federal deficit.

But considering its service to the public, much like a public utility, should ATC be removed from federal control at all? Should such a service provider be tossed to the vicissitudes of the free market where it could be exposed to labor actions, economic downturns, bankruptcies and such? How do you guarantee continued service during bad times no matter what? These and other questions frame the privatization debate.

“The public airspace should be operated in the public’s best interest,” Bolen insists. “So we think the best way to ensure that is to have final authority resting with the public’s representatives, not special-interest groups. Our concern is that we could turn the system over to this combination of special interest groups dominated by the airlines.”

Citing what he characterized as “the world’s largest and best system of airports, the best ATC system,” Bolen maintains that the challenge to the U.S. “is how to continuously improve and enhance our air traffic system and still ensure it operates for the public’s best interest. So, we’ve been offering targeted solutions to immediate problems whereas the airlines are saying, ‘Just turn everything over to us, and trust that it will be OK.’”

Airline Angst

The most powerful advocate for ATC privatization is Airlines for America, or A4A, the principal lobbying group for commercial aviation in the U.S. since 1936. Formerly called the Air Transport Association of America, its nine members and their affiliate carriers account for 90% of U.S. passenger and cargo traffic. At a National Press Club event last fall, A4A announced its intention to fully support ATC privatization during the current reauthorization debate.

A4A’s current airline membership roster includes Alaska, American, Atlas Air, FedEx, Hawaiian, JetBlue, Southwest, United and UPS, with Air Canada as an associate member. Notably absent is Delta Airlines, which as of 2013 was the U.S.’s largest carrier by passenger count; it left A4A in October 2015.

“In recent years, Delta and the trade group had not been aligned on several key issues, including the growing harm of government-subsidized carriers in the Middle East and the effects of the Export-Import Bank on U.S. airlines,” Delta spokeswoman Elizabeth Wolf explained to BCA.

“A4A also has advocated for the nation’s air traffic control to be separated from the FAA and put into a private organization — a move long opposed by Delta,” Wolf continued. “The main reason is essentially that we haven’t seen compelling data to show that spinning off ATC would result in any improvements or efficiencies in the system, and we are concerned that the transition would be a distraction that could slow down progress on NextGen implementation.”

So, do the airlines united in A4A really want to control ATC and, thus, access to the NAS? “This is a red herring,” an exasperated Sharon Pinkerton exclaimed. She is senior vice president, legislative and regulatory policy, at A4A. “The rhetoric doesn’t match any reality,” Pinkerton continued. “If we did want to take control of the system, we wouldn’t have supported Shuster’s proposal.”

According to Pinkerton, A4A believes “the real issues with business aviation are around funding, but we really don’t understand their [the NBAA’s] strident opposition. When you look at the rest of the world, their concerns are misplaced, as there is no evidence that reformed systems limit access.”

Instead, Pinkerton maintains, it is the status quo that limits access, “that and policymakers who want to come in and try the latest ideas. I think the status quo is the biggest threat to business aviation in that we’re not making progress in increasing capacity in the system and the way it’s funded. The opportunities for improvement are legion.”

But Bolen maintains that privatized ANSPs have exposed inherent flaws. “We have seen it in various parts of the world and seen a lot of problems with it,” he said. “For example, in Australia, commercial flights have priority, so we have heard from our members about sitting on tarmacs for up to 5 hr. waiting for departure clearances. In the U.K., their system went bankrupt and [its management] had to turn to the government for a payout.”

Bill Deere, executive vice president at the National Air Transportation Association (NATA), noted that proponents of “corporatizing” air traffic control often hold up the number of such ATC systems around the world as “proof” that privatization is the better solution. However, “if one looks at those countries, the systems and investment are significantly smaller than those of the U.S. system, and in some places corporatization has allowed only for the creation of minimal levels of surveillance where none had previously existed,” he said. “In the case of Canada, Nav Canada was created to address a budgetary crisis in the Canadian government.

“A 2015 DOT Inspector General report clearly demonstrates these international air traffic control systems are much smaller and less complex than our own,” Deere continued. “Also reported by the IG, these air traffic control providers, unlike the FAA, ‘do not embark on large, comprehensive modernization efforts such as NextGen transformational programs or conduct extensive aviation research and development.’ Instead, as the report notes, these air traffic providers, including Nav Canada, rely on small, incremental changes using off-the-shelf technology.”

A4A: FAA’s ATC Is Inefficient

The airline industry’s argument for privatization is built primarily around increasing capacity and efficiency in the system, and the lagging NextGen program especially sticks in its craw.

“We support privatization because of the lack of progress of the nation’s biggest infrastructure project, NextGen,” said A4A’s Pinkerton. “And while it may look fine, the fact is that the FAA has released a report that shows that the inefficiencies of the current system cost the economy — mostly passengers, in terms of lost time — $30 billion a year due to unnecessary delays in the system.”

This could be addressed with quicker progress completing NextGen, A4A believes. “An airline flight between DCA [Reagan Washington National Airport] and any New York airport used to be scheduled for under an hour and now takes anywhere from 15 to 20 min. longer, with a total segment time of 180 min. 20 years later,” Pinkerton noted. “In an age where we supposedly have better technology and faster planes, the ATC system is not keeping pace. The impact on passengers of delays in the system is the number one problem.”

Closely tied to ATC modernization is the funding of the system, which Pinkerton maintains is “completely broken. We have an annual appropriations process that starts with the Office of Management and Budget setting the budget based on FAA proposals. That process is driven by other built-in constraints that have nothing to do with running ATC, everything from concerns about the federal deficit to coming up with the federal budget. Part of what we’re advocating for is an independent system that is not dependent on the federal government for contributions and one in which you can do planning in a long-term manner — NextGen should be planned according to a five-, 10- and 20-year outlook.”

So the essence of the A4A campaign is “governance and funding reform,” Pinkerton explained. “On the governance side, we are advocating for an independent nonprofit organization. Some people call it a co-op, as the board of directors is made up of aviation stakeholders including the government, labor and general aviation community. There are different examples of this across the world. In Germany there is an independent government corporation. And there’s Canada’s model, which we like and which has worked very well — and could work for the U.S. The funding model in the rest of the world is basically user fees.”

There is nothing inherently governmental about ATC and the provision of its services, Pinkerton maintains. “Government shutdowns have nothing to do with ATC either. The idea is to remove ATC from politics and the budget process. In 2013, we had a partial shutdown of ATC with controllers furloughed, not a shortage of funding, as we had $5 billion in the Aviation Trust Fund. At the end of last year, we had $7 billion. Despite having a surplus in the Aviation Trust Fund, we are still subject to an annual appropriation process, which isn’t good for the system, the controllers, NextGen or the traveling public. Or, I will venture, good for business aviation, either.”

Another criticism of the present government-operated system is that sporadic funding has drawn out the NextGen schedule to the point where newer technologies like satellite-based ADS-B are leapfrogging those to which the U.S. program is already committed, such as ground-based ADS-B.

By a two-to-one majority Americans are opposed to privatizing ATC, Bolen claims, based on a 2015 poll. “There are conservative and consumer groups, a lot of people who have expressed concern or opposition to this idea,” he said.

NATA: Privatization Doesn’t ‘Fit’ Here

The NATA’s Deere says his organization disagrees with A4A’s privatization push “because it doesn’t fit the American system. It discourages investment and erodes general aviation’s access to airspace and airports. No country has what we have: a highly complex national system that serves all entities. As a country, we make it a policy that there is national access to highways and broadband, and that also applies to the National Airspace System and airports.”

The NATA also believes that privatization puts that system at risk. “If you’re going to run ATC as a business,” Deere said, “it injects risk into the national system. If you’re going to run it as a business, you will not invest equally in all areas. But in the government-operated system, we’ve made it national policy to invest everywhere, even in rural America.”

Deere said the NATA supports making the FAA a more efficient operation, but its FAR Part 135 members balk at committing to a reformed ATC when its funding structure is so-far unknown. “What will be the cost to operators?” he asked. “Last February, the House Transportation and Infrastructure Committee floated a proposal singling out FAR Part 135 as the only entity that would pay user fees, while other general aviation entities, like Part 91 business aviation operations, would continue to pay the gas tax. Now, while we don’t know what the navigation fees will be, we do know that one segment of GA was singled out to pay them.”

An ATC corporation inserts “significant uncertainty” into the Part 135 community, Deere claimed. “Typical for many small businesses, the overwhelming majority of Part 135 operators have 25 or fewer employees and less than $5 million annual revenue.” In response to Shuster’s H.R. 4441 proposal last year, the NATA released this statement: “The Corporation’s proposed leadership structure provides major airlines the confidence they seek to control a future air traffic control system primarily for their benefit. Absent congressional oversight, this proposed construct risks unconstrained cost increases being passed along to other users of the system.”

Are NATA members paying their way to use the current ATC system? “Yes,” Deere said. “Like other members of the aviation community, NATA members contribute to the Aviation Trust Fund through fuel and excise taxes. In fact, Aviation Trust Fund revenues comprise the overwhelming share of FAA spending, over 97% in fiscal year 2015 alone.”

So, the question is not one of funding, Deere maintains, but rather whether the current budget process should be amended to ensure the revenues are being fully utilized for the intended purpose.

“That does not require the A4A policy prescription, the establishment of a corporatized air traffic control system,” said Deere. “In fact, a recent GAO report requested by the NATA confirmed our long-held belief that not all aviation taxes are being deposited in the Aviation Trust Fund.”

Too Big to Privatize?

Defenders of a federally operated ATC system often claim that the U.S. system is just too large and complex to privatize. Bolen: “In the U.S., we have something unique — the size and magnitude of our ATC system is beyond compare, and we have a collection of airports that is among the largest in the world, too. And we are very concerned about trying to take the largest, most complex and safest ATC system in the world and modeling it after that of a country that may have a tenth of what we have. [An oblique reference to Canada.] Most ATC systems need to break even, so if there is a turndown, they have to raise their rates at a time when operators can least afford fee increases.”

Too big to privatize? “Oh, that’s just not true,” Pinkerton at A4A exclaimed. “[The NAS is] divided up into smaller pieces of airspace — we are not talking about the delivery system but the structural tie to the government and the funding that will enable us getting out of the annual budget cycle [i.e., reauthorization]. It has nothing to do with how complex a TRACON is.”

Could the privatized, Nav Canada-influenced model in H.R. 4441 work in the U.S., given the landmass, sheer size of the operation, and growing demand for all forms of air transport?

“On the topic of privatized ATC in the U.S., I really could not say whether or not it would be a success,” Rudy Toering, president and CEO of the Canadian Business Aviation Association, told BCA. Taxation, rules and regulations, even how airports are run and financed in Canada are quite different from their counterparts in the U.S., Toering explained. “This all goes hand in hand with our privatized Nav Canada that has been extremely successful in Canada for the last 20 years. So in short, it works very well in Canada. Will it work the same way elsewhere? No one knows for sure.”

In the meantime, the NATA’s Deere thinks we’ll see “some good old-fashioned lobbying” this year along with a vigorous debate about whether the country is willing to abandon nearly a century of government-provided ATC in favor of privatization. As this went to press, the Trump administration’s position on privatizing ATC was unknown. Shuster, however, told the Associated Press that he had discussed the subject with President Trump before and after the election and “he generally liked the idea. . . .”

On the other hand, as Deere pointed out, we now have a president who has relied on business aircraft — both fixed- and rotary-wing — to help him succeed in business and, most recently, in politics. 

Message to Business Aviation

BCA asked airline lobbying group A4A’s Sharon Pinkerton if she had a message for business aviation regarding ATC privatization. Her response:

“It is in business aviation’s interest to evaluate and understand that the status quo could be improved through reform and that, when you look around the world, there’s a better way of doing business.”


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