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Privatizing Air Traffic Control (ATC)

By Susan Carey & Andy Pasztor
The Wall Street Journal | Aug. 24, 2014

Privatizing Air Traffic Control

As the U.S. air-traffic control system grows creaky with age and struggles with budgetary constraints that limit modernization, debate is mounting in Washington over whether the system would function more efficiently as a commercial entity.

Advocates of full privatization or a hybrid public-private corporation believe a new structure would bring more reliable funding than the current mix of unstable congressional appropriations and a hodgepodge of taxes that go into a fund that supports air navigation as well as airport infrastructure and other functions.

Critics say such a move would incur costly new fees on airlines and private pilots alike.

Other nations, including Australia, the UK, Germany and Canada, have made the transition in the past two decades, giving them access to capital markets and the ability to sell bonds based on the user fees they charge airspace users.

Now, nearly 20 years after the last major push for the concept in the U.S. was spurned, experts and aviation trade groups again are revving up efforts to uncouple air-traffic control from the Federal Aviation Administration. Rising impatience with the agency's fiscal situation and slow, troubled rollout of modernization initiatives have sparked the latest activity, much it focused on analyzing the Canadian system.

"Many have asked whether it makes sense to privatize" air-traffic control, FAA Administrator Michael Huerta said this year, noting that supporters believe such a move would provide "a funding structure that is more stable."

Mr. Huerta on Thursday said the agency is sounding out the aviation community to "fully understand what problems need to be solved before any decisions are made about possible structural and governance changes."

Transportation Secretary Anthony Foxx this year said there is "a lot of frustration that the political underpinnings for our aviation system may be frayed, and folks are looking for some alternatives." He said the government would want the industry "to be as united as possible" on the approach.

To that end, corporate groups such as the Business Roundtable, the nonpartisan Eno Center for Transportation and airline trade group Airlines for America are evaluating the options. Some hope they can reach a consensus before the FAA's next reauthorization bill goes before Congress in September of next year, although others concede it is bound to take longer.

Bill Shuster (R., Pa.), chairman of the House transportation committee, and Frank LoBiondo (R., N.J.), chairman of the subcommittee on aviation, a year ago asked the Transportation Department's inspector general to examine how the FAA's structure and funding compare with other nations' air-traffic systems and what overhauls, if any, would be beneficial.

The system, run by the FAA since 1958, has an annual budget of more than US$11.5 billion. It handles about 75,000 daily airline, military and general aviation flights, according to FlightAware.com, a tracking service. The FAA's air-traffic operation derives the bulk of its funding from taxes on passenger tickets, cargo, aviation fuel and use of airport facilities. Such collections vary widely from year to year, and the trend is pointed down because the FAA doesn't collect fees for airline add-ons such as checked luggage and better seats. Moreover, partisan fights on Capitol Hill also can produce roller-coaster appropriations.

"I believe the status quo won't continue to serve us," said Craig Fuller, a former lobbyist for private pilots who now serves as vice chairman of the FAA's Management Advisory Council, a group of outsiders who provide guidance to the agency.

The departing council in January issued recommendations to the current members, saying that the FAA should separate its air-traffic organization, quit taking financial support from the general fund and replace the complex system of air-traffic taxes and fees with a simpler user-fee structure.

Such ideas underscore the altered political dynamic, brought on by years of battles in Congress over FAA funding that made it difficult for the agency to plan and temporarily shut down some FAA offices in 2011. Two years later, overall federal spending cuts -- known as the sequester -- led to furloughs of air-traffic controllers, causing flight delays that infuriated travelers and members of Congress.

"We'd like to see a model that enables the FAA to make decisions more like a business," said Sharon Pinkerton, vice president of legislative and regulatory policy for Airlines for America.

Unlike in previous debates, some boosters of private planes, known as general aviation, are joining with labor leaders, including those representing the country's 14,000 civilian FAA controllers, to show they are at least willing to consider proposals for dramatic changes.

"I am certainly open for the discussion," Paul Rinaldi, the controllers' union president said this summer. "I do not support privatization," he said through a spokesman on Thursday. He said, however, that there is broad agreement "something needs to change" and "there is real urgency, and that is encouraging."

The Aircraft Owners and Pilots Association, which represents 350,000 general-aviation pilots, "is open to all ideas...that would lower the cost of flying for general-aviation users and bring efficiencies to the FAA bureaucracy," association President Mark Baker said in a written statement.

Their support is far from assured, however. The association and the National Business Aviation Association, representing 10,000 companies that use private aircraft for business, both prefer the existing system, in which members pay taxes on fuel to defray the cost of controllers' services. Some of the union's members are skeptical and not all airlines are entirely persuaded that privatization would be an improvement.

"That they're willing to talk is a huge step forward," said James Burnley, a former Transportation Secretary who informally broached privatization in the 1980s. "If you want stable, long-term funding, you can't do it if you're locked into a federal agency." In the past 15 years, nations including France, the Netherlands and New Zealand have formed separate government corporations or public-private partnerships to handle air-navigation functions. Canada has gone the furthest, in 1996 creating a private, nonprofit corporation that takes no funding from the government. Any profit at Nav Canada, as the company is called, is used to pay down debt, finance capital expenditures or reduce user fees.

The transition was made after Canada suffered many of the same problems now plaguing the FAA: air-traffic control infrastructure in need of renewal, major projects falling behind schedule and going over budget, shortages of controllers and costs increasing at a faster rate than revenue from ticket taxes.

Some critics in the U.S. say Nav Canada isn't applicable because the U.S. has much busier, more complex airspace. FlightAware.com estimates that more than 9,000 flights a day operate in Canada.

By Susan Carey & Andy Pasztor
The Wall Street Journal |
Mar 26, 2015
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