Privatization of FAA ATC back in the Washington Debate Agenda—some critical questions

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Privatization of the Air Traffic Control is a concept which everyone agrees with on a theoretical basis, but when the specifics begin to be addressed the support quickly dissipates. The below Wall Street Journal article signals the debate is being resurrected.

ATC privatization was first suggested in 1984 at an FAA sponsored Think Tank in which representatives from the airlines, ALPA, FAA staff and controllers were tasked with addressing the inordinate delays experienced that summer. There was a session designed to devise out-of-the-box ideas; the keynote speaker was then Rep. Newt Gingrich who used the “nine dot” puzzle to inspire innovative ideas. A group, composed entirely of working controllers, t suggested that removing this function from the federal government would be a great idea. They explained their startling idea and listed first among the reasons supporting their creative solution—that a private employer would be able to pay them more.

Back in 1984 and again today, increasing controllers’ compensation is one of divisive issues which make any real movement towards privatization unlikely. Here are but a few of a long list problems intrinsic in such a transformation:

1. The federal government has invested Billions of Dollars in the ATC system. Should the private entity which becomes the operator of it pay for the capital invested in the existing facilities?

a. Individual airports may be privatized, under a statute, and Congress found that the company “buying” a specific airfield would not have to repay the federal government. Would that “precedent” apply here?

b. The airlines and NATCA would presumably favor a $0 payment. Any cost of acquisition would become a heavy burden on the user fees and pay increases.

c. Congressional budget hawks would fight for a Fair Market Valuation.

2. The unions would fight a “no strike” rule as presently is part of their employment. The private employer would have heavy leverage against a union which could shut down the ATC system.

3. Governance is a huge issue for the users. They would insist that such a monopoly must be subject to significant stakeholder control over capital investments and user fees. The unions would want significant representation on such a Board, too.

4. One of the largest users of the ATC system is the US military.

a. Would the Pentagon have representation on such a Users’ Governance body?

b. Would the Military have to pay its pro rata cost of the system?

c. If it must bear its portion of the ATC expenses, then the formula must be permanently set in the legislation (see 6 below).

5. USER FEES were the biggest point of contention in the last privatization discussion. The A4A/ Administration proposal there treated every user as generating the same cost without regard to whether the flight operated from high use (i.e. high staff/heavy equipment) facilities. The opponents differed on this cost allocation and also asserted that the fuel tax is a better tax mechanism in both collection ease and cost distribution. Some consensus is a predicate to any Congressional action even with Chairman Shuster’s early examination of FAA Reauthorization.

6. Privatization must mean complete loss of Congressional control. Congress has been reluctant to give up such control, witness the debate on the mere transfer of Dulles and National to an independent authority. Any remaining legislative leverage will translate to continued political influence. While considerable blame for the delays and cost overruns of the NextGen is attributable to the FAA and several Administrations, the oversight by the House and Senate is also culpable for some of those problems.

7. Other countries have successfully privatized their ATC systems, but the critics of the application of those track records to the US assert that the American system is several orders of magnitude different in volume of flights, geographical coverage and complexity of airspace.

8. What would privatization mean in the critical small details-

a. When a private ATC implements a new flight pattern, would it be a “federal action” and subject to NEPA?

b. As a private entity, would it be subject to FAA safety surveillance? Could the FAA Flight Standards organization oppose a new procedure or find overnight staffing at towers to be inadequate? Would such an option create an opportunity backdoor influence for a disgruntled union?

c. In an accident would a private ATC be a separate non-governmental defendant and would its liabilities have to be insured. That would be a huge risk policy; is there private capacity to cover such damages?

d. Today’s FAA ATC contractors have to meet a host of federal rules (i.e. the Executive Order on Living Wages); would those requirements transfer to the new organization?

e. Would the Freedom of Information Act, Administrative Procedure Act and other requirements continue?

f. The point of all of these above questions is that there are significant players in Washington who would oppose any change to these existing rules through privatization!

This is not to say that all of these negative considerations should block privatization. It is but a starting list for the debate. In the past, there has been little consensus among the users; if there is division among the stakeholders, it is unlikely that Congress will move.

Further, privatization may have many forms. The services, which are moved to the private sector by any such legislation, may be adjusted; for example, the management of the controllers remains in the federal government. There may be some acceptable redefinition which would create some funding stability without the seismic change of complete transfer out of government.

A private company benefits from consistent strategic guidance from its board, its ability to obtain a stable, long term stream of earnings and other positives not within the grasp of a federal agency. It still will face the risks of running the ATC system for a business which historically has had significant swings in earnings. The underlying business is subject to a number of exogenous variables, but the advantages may outweigh the current negatives.

Let the debate begin. Hopefully, the aviation community is ready, willing and able to provide an united front.

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1 Comment on "Privatization of FAA ATC back in the Washington Debate Agenda—some critical questions"

  1. Awesome video Chris! Went back and fixed up some confusion for my AI airracft based on the screencast. Can’t wait for the ATC Airport Flow video! Hmmm maybe that export for submission button mentioned in the May ’12 blog entry will be in your next WED beta and we can start flooding Robin with taxi flows!Keep up the great work!

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