Bloomberg News

Talks on Private U.S. Air-Traffic Control Said to Turn Serious

September 23, 2013

Discussions about removing government management of the U.S. air-traffic control system are the most serious in two decades, prompted by budget cuts and uncertain funding for converting to satellite navigation.

Leaders of the U.S. air-traffic controllers’ union and a private-pilot lobbying group, once fierce opponents of taking control of the system away from the Federal Aviation Administration, have endorsed talks on other ways to manage and pay for aviation safety.

“There are conversations taking place among the stakeholders,” Gerald Dillingham, civil aviation director of the U.S. Government Accountability Office, said in an interview. “All things are on the table, including privatization or corporatization.”

Putting U.S. air-traffic operations under private or semi-private management -- arrangements adopted by more than 30 other industrialized nations -- may have significant impacts for companies like Excelis Inc. (XLS:US), Harris Corp. (HRS:US) and Lockheed Martin Corp. (LMT:US), which have government contracts to build parts of the $42 billion satellite-navigation network known as NextGen.

Insulating air-traffic management from politics would speed technology development while also providing steadier funding for it, said George Donohue, a former FAA associate administrator. Lawmakers in both parties have pressured the agency to back down on closing outdated air-traffic facilities and keep operating towers at times few flights are landing.

“We should have this discussion,” Paul Rinaldi, president of the National Air Traffic Controllers Association, the union representing more than 15,000 FAA-employed controllers, said at a June 27 conference on NextGen. “I don’t have the answers, but I do know the current system is broken.”

Switching Sides

Similar efforts in the past have met strong resistance from lawmakers.

President Bill Clinton’s proposal to turn over air-traffic control to a government corporation was dropped after getting support from only two lawmakers, Donohue said.

Proposals by Presidents George W. Bush and Barack Obama to charge fees for flights -- a funding mechanism used by almost all nations that have at least partly removed air-traffic control from government -- also went nowhere in Congress.

Groups such as the National Business Aviation Association, a Washington-based trade group for corporate flight departments, have opposed any arrangement requiring fees.

As recently as last December, NATCA’s Rinaldi said controllers need to be government employees because they perform public-safety duties like police and firefighters.

‘Game Changer’

At the June conference, Rinaldi said the union had altered its position. It hasn’t endorsed private management of air-traffic operations, only a discussion of it, he said.

“There is a game changer out there and it’s called the sequester,” he said, referring to the automatic budget cuts imposed on U.S. agencies when Congress and Obama couldn’t agree how to close the gap between federal spending and revenue.

The FAA cut $637 million from its $16 billion budget this fiscal year and faces similar cuts in the year beginning Oct. 1.

Rinaldi didn’t respond to an interview request through NATCA spokesman Doug Church. The FAA, in an e-mailed statement, declined to comment.

To meet this year’s budget targets, the FAA in April began furloughing controllers one day every two weeks, leading to flight delays of as much as two hours in major cities. It also sought to close 149 low-activity control towers operated by contractors.

Congress intervened days later, passing an emergency bill that gave the FAA authority to use airport-improvement grant money to pay controllers and operate the towers.

NextGen Threatened

Similar furloughs and flight delays may recur in the new fiscal year, FAA officials have told industry groups. Administrator Michael Huerta told House lawmakers July 17 that NextGen would be slowed under new cuts.

Those funding issues, which followed a two-week partial shutdown of the FAA in 2011 in a partisan dispute over subsidized flights to small cities and union-election rules, are spurring calls for changes that until recently were considered anathema to some aviation groups.

Like the controllers union, the lobbying group representing about 400,000 U.S. private pilots has altered its opposition to any non-government management of air traffic, because most nations pay for it by charging fees for flights.

“It makes sense to examine the alternatives for operating and funding the nation’s air-traffic control system,” Craig Fuller, who stepped down as president of the Frederick, Maryland-based Aircraft Owners and Pilots Association earlier this month, said in an e-mail.

‘Thinking Big’

While AOPA hasn’t changed its stand, it is willing to discuss how the FAA is funded and managed, Katie Pribyl, a spokeswoman, said in an e-mail.

About two-thirds of the costs of operating the U.S. air-traffic system comes from aviation excise taxes, including levies on airline tickets and fuel.

Lawmakers including House Transportation and Infrastructure Committee Chairman Bill Shuster, a Pennsylvania Republican, are “very interested in thinking big” on the issue, Holly Woodruff Lyons, Republican staff director for the committee, said Sept. 10 at a conference in Washington.

The FAA’s Management Advisory Council, an 11-member board that advises the agency, sent a letter to congressional transportation-policy leaders Aug. 2 saying sequester cuts underscored “the need to reform the policy, funding and governance structure of the FAA.”

Nav Canada

One possible model is the one adopted in Canada, where air-traffic control is overseen by a nonprofit corporation funded by user fees instead of tax money.

The change from government control helped the system become a global leader in adopting new technology and stabilized the operations’ finances, John Crichton, president and chief executive officer of Nav Canada, said in an interview last December.

Arrangements such as Nav Canada have worked because governments retained safety oversight, said Robert Poole, transportation director of the Los Angeles-based Reason Foundation and a longtime advocate for removing government control of air traffic.

Air-traffic systems run by nonprofits or government corporations charge airlines and private-plane owners fees that are more reliable than tax money, and can sell bonds to pay for capital improvements, Poole said.

Without political interference, those systems have been able to close underutilized towers, consolidate radar rooms and make other efficiency gains, he said.

Nav Canada may be better at some functions, such as guiding flights over oceans, than the U.S. system, Rinaldi said in his June remarks.

“If we do not mature, have this conversation, find a way to sustainably fund this system properly so that we can modernize it, we are going to fall way behind the world,” Rinaldi said.

Donohue, now an engineering professor at George Mason University in Fairfax, Virginia, was an FAA point man for Clinton’s proposal in the 1990s. He said budget pressures make a transformation the most probable since he tried it.

“No betting man would bet that this would happen,” he said. “But I’ve had 40 years in and around the government and I’ve never ceased to be amazed at the speed of some changes.”

To contact the reporter on this story: Alan Levin in Washington at alevin24@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net


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