In The News

Conservatives Against Modern Skies?

By Robert Poole 
May 2, 2016

Removing air-traffic control from the government is a positive reform for passengers, airlines, and taxpayers.

What would you say if I told you that a plan to remove over 30,000 people from a poorly performing federal bureaucracy was being opposed by a coalition of liberal/left Democrats, a handful of special interests — and a few conservatives? Welcome to the proposed separation of the foundering air-traffic-control system from the federal government.

Air-traffic control (ATC) is operated by the Federal Aviation Administration and funded by a combination of aviation taxes and a subsidy from general revenues. Ever since the Reagan administration, the FAA has been trying to modernize the ATC system, taking advantage of new technology to unclog the congested airways. Yet the system still relies on 1960s technology: radar instead of GPS to keep track of planes, paper flight strips with handwritten changes instead of electronic data on controllers’ screens, and unreliable voice radio instead of digital communication. Tens of billions have been spent on new computer systems and minor technology upgrades, but three decades of reports by the GAO and the Department of Transportation’s inspector general have documented repeated cost overruns and late deliveries and an ever-receding target date for true modernization.

Dating back to Reagan’s transportation secretary, Jim Burnley, a growing consensus has emerged that air-traffic control is better viewed as a 24/7 high-tech service business than as a tax-funded, federally subsidized bureaucracy. National commissions, think-tank reports, and industry studies have all reached this conclusion, but reform efforts have gotten nowhere in Congress — until this year. In February, the House Transportation and Infrastructure Committee passed a bill that would remove the Air Traffic Organization (the operational arm of the FAA) from the FAA and reconstitute it as a self-funded, nonprofit, private company. It would be governed by a board representing all segments of aviation and regulated for safety — at arm’s length — by the remaining FAA, just as that agency regulates airports, airlines, and private pilots.

That may sound radical, but divestiture of ATC has become the global norm over the past 30 years. Since New Zealand divested Airways New Zealand in 1987, over 50 countries have done the same. These air-navigation service providers operate like utilities, charging customers directly for their services, issuing revenue bonds to finance large-scale modernization projects, focusing on serving their aviation customers instead of pleasing politicians, and standing on their own two feet financially.

The proposal adopted by the House committee was developed over several years by an expert task force (on which I served), made up primarily of former senior DOT and FAA officials who had concluded from their own experience that ATC is poorly suited to be part of a tax-funded bureaucracy. Our work got little traction with aviation groups until the budget sequester of 2013, which furloughed controllers and came close to shutting down 150 privately contracted control towers. This created a “never again” mindset for the airline trade group Airlines for America (A4A) and the controllers’ union, NATCA, which began serious discussions with the task force.

To build broader aviation support, the Eno Center for Transportation convened a working group, co-chaired by former DOT secretary Burnley, which held monthly meetings with all aviation stakeholders for about 18 months. The consensus report urged that the ATO be removed from the FAA and set up as either a nonprofit private corporation (like the highly successful Nav Canada) or a government corporation (like Airways New Zealand).

It was only after the House committee began holding hearings on the idea last year that opposition developed. Left-wing groups attacked the concept as “handing over a vital government function to special interests.” The trade association for business jets – NBAA — used similar language to attack the proposal, arguing that a proposed shift from the minuscule fuel tax that such planes currently pay (relative to the cost of serving them) to a direct user charge (as exists in every country but the U.S.) would make flying unaffordable. And, to many people’s surprise, Delta Airlines broke ranks with its fellow A4A members and quit the organization, arguing that the change would disrupt the FAA’s “progress” on modernization.

The House committee’s bill was based on Nav Canada’s nonprofit-corporation model. Canada’s transition took place 20 years ago, and Nav Canada has been a huge success. Even Canada’s business-jet people love it, concluding that the modest user fees they pay give them a much-improved system. Nav Canada’s user fees are 30 percent less today, in real terms, than they were at the outset, and the company has just announced a rate reduction. It has modernized Canada’s ATC technology and become a global vendor of systems it develops, while reducing costs and increasing productivity. During that same time period, the FAA’s budget has more than doubled, while its productivity has declined. Nav Canada has won awards from its aviation customers as the world’s best ATC provider, and its long-time CEO just won a coveted award from Aviation Week.

House-committee Democrats mobilized against the bill on ideological grounds, but it passed on a strict party-line vote in February. Since then, “corporatization” of ATC has been endorsed by an array of former DOT secretaries and FAA administrators, along with three former heads of the Air Traffic Organization. It has been denounced by leaders of the Appropriations Committees in both houses, who don’t want to lose the ability to micromanage ATC by controlling its budget. And Delta and NBAA continue their attacks.

Into this debate have stepped two unlikely conservative opponents: Diana Furchtgott-Roth, writing at National Review Online, and Steven J. Allen of the Capital Research Center. They have criticized the bill as a “union giveaway” and a “fake ‘privatization.’” These attacks are troubling not only because they are wrong, but because they conflict with free-market think-tank research dating back to a 1982 Heritage Foundation paper, numerous studies by the Reason Foundation, a powerful recent examination by the Hudson Institute, and longtime support from the Cato Institute.

The National Taxpayers Union organized a letter signed by over a dozen center-right transportation researchers supporting corporatization.

The “fake privatization” charge seems to be saying that a nonprofit corporation couldn’t possibly be viable. Allen even misconstrued the plan as a government-sponsored enterprise (GSE), like Fannie Mae, when in fact it would be far more analogous to the American Red Cross, federal credit unions, and the original COMSAT Corporation (which was later privatized). Federally chartered nonprofits select their own boards, receive no federal funds, and operate as self-supporting businesses, as Nav Canada has done for 20 years (with, incidentally, an investment-grade bond rating).

There is only one for-profit, partly privately owned ATC corporation – NATS, in the UK. Like any investor-owned utility, it faces cumbersome rate regulation by a government board, which is what Allen is implicitly advocating. A stakeholder board, like Nav Canada’s, has every incentive to run a tight ship so as to keep its fees low and affordable. There is zero support in the U.S. aviation community for a for-profit ATC corporation, so conservatives who urge this are raising an irrelevant point.

As for the “union giveaway” claim, I’m sure some conservatives suspect that NATCA must have a hidden agenda of being able to control the ATC corporation. After all, its predecessor union, PATCO, thought it could get away with an illegal strike, until it crossed Ronald Reagan. Allen and Furchtgott-Roth both claim that the House bill fails to forbid strikes by controllers, which is flatly wrong. It incorporates several parts of existing statutes that ban strikes (and could easily be amended to state this even more plainly).

They also misconstrue words like “confer” and “collaborate” in the bill, referring to controller involvement in modernization projects. Former Air Traffic Organization head David Grizzle has explained that those terms are in use in the ATO today and do not give NATCA control or veto power over anything. Instead, their inclusion in the bill’s language is intended to foster the kind of collaborative corporate culture that has worked wonders at Nav Canada. There, teams including engineers, software writers, controllers, and technicians work together to devise new systems and procedures, a lot faster and less expensively than the way the FAA attempts to do those tasks. NATCA leaders have visited Nav Canada and come away very impressed, not only with the far better systems that their controllers use but also with the process that leads to those systems’ development.

In short, conservatives who oppose corporatization are mistaken. Still, their opposition might sway conservative Republicans whose votes could be critically important when the House bill reaches the floor. There is a strong consensus within most of aviation, among former senior transportation officials, and among free-market think tanks that the ATC system needs to be divested from the federal government. Instead of denouncing this effort, thoughtful conservatives should be helping to fine-tune the bill to ensure that this long-needed transition can finally take place.

Robert Poole is the director of transportation policy and the Searle Freedom Trust Transportation Fellow at the Reason Foundation.