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House Bill Calls for Nav Canada Type Nonprofit ATC Corporation

Washington, February 5, 2016 | Justin Harclerode (202) 225-9446
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House Bill Calls for Nav Canada Type Nonprofit ATC Corporation
Reason Foundation
Robert Poole
February 5, 2016

After telegraphing their intent to do so for the past half year, House Transportation & Infrastructure Committee Chair Bill Shuster (R, PA) and Aviation Subcommittee Chair Frank LoBiondo (R, NJ) have introduced their six-year FAA reauthorization bill, including a long section detailing the transformation of the current Air Traffic Organization into a self-supporting nonprofit ATC Corporation. Details of the corporation and the transition process constitute Title II of the Aviation Innovation, Reform, and Reauthorization Act (the AIRR Act), released February 3rd. A hearing to discuss the bill and the ATC Corporation is set for February 10th.

As promised, the ATC Corporation is a U.S. adaptation of the nonprofit, self-supporting, stakeholder-governed Nav Canada, which has transformed air traffic control north of the border and across the North Atlantic in its two decades of experience. It would be federally chartered (like the American Red Cross and the U.S. Olympic Committee), with all the normal powers and duties of a public utility. Like user-governed co-ops that provide electricity, telecommunications, and water supply in much of America, it would not need economic regulation because the rate-payers would have strong representation on the governing board. The FAA would become the arm's-length safety regulator, in accord with ICAO standards that went into effect more than a decade ago. Since it would not receive any federal tax money, it would be insulated from all the constraints of the government budget process. That would also enable it to issue revenue bonds for major capital improvements, just as airports have long been able to do.

While this would be a big change to a key portion of the U.S. aviation system, it is hardly the radical change that opponents are claiming by dubbing it "privatization." Groups like the National Business Aviation Association, Delta Airlines, and the gaggle of left-wing groups that have just formed Americans Against Air Traffic Privatization all use the P word to frighten people. "Privatization" implies either selling a government enterprise to a for-profit company (e.g., privatization of Conrail) or contracting out a government function to such a company (e.g., outsourcing of FAA Flight Service Stations). What the AIRR Act proposes instead for the FAA's Air Traffic Organization is reform in place. The same people would go home one day as government employees and come back to work the next day as ATC Corporation employees, with the same union contracts, the same pension benefits, and the same jobs. All that would be different are the funding system, the governance mechanism (stakeholder board), and some of the top management. That is not "privatization" in any meaningful sense of the term.

Speaking of the stakeholder board, here is how the bill proposes to create a workable balance. It calls for an 11-member board of directors, consisting of the CEO plus the following members appointed by designated aviation stakeholders:

  • 2 appointed by the Secretary of Transportation, presumably representing the traveling public;
  • 4 appointed by the primary airline trade group;
  • 2 appointed by the primary organization for general and business aviation;
  • 1 appointed by the primary air traffic controllers' organization; and,
  • 1 appointed by the largest airline pilots' organization.

All board members would be required by law to owe a fiduciary duty to the best interests of the ATC Corporation, rather than to the group that appointed them.

NBAA and its allies have made a lot of noise claiming that the board would be dominated by "special interests," by which they seem to mean the airlines. But four out of 11 seats is hardly a recipe for domination (and don't expect the pilots' union appointee to be in lockstep with airline interests!) So that argument will now be far less credible.

The other hobby horse of the coalition of general and business aviation groups that has questioned corporatization has been the specter of unaffordable ATC user fees. AOPA and NBAA have raised tons of money over the years to protect their members from this menace. But the legs have been cut out from under them by Shuster and LoBiondo, since the bill explicitly exempts both piston GA and "non-commercial" turbine GA from paying any fees, even the very modest flat annual charge that piston GA pilots pay to Nav Canada. Without that to rail against, what substantive argument do the GA groups have left?

In terms of stakeholder influence I think the most important development occurred within an hour or so of the bill's unveiling on Feb. 3rd. Controllers' union NATCA released a statement by President Paul Rinaldi endorsing the plan set forth in the bill as good for the country and good for NATCA's membership. Rinaldi, Vice President Trish Gilbert, and other senior officials have been actively engaged in discussions of this subject for the past three years—with the Business Roundtable project, with the Eno Center project, and with Aviation Subcommittee staffers developing the bill. They have also visited Nav Canada, and done their own due diligence about how its transformation, and several others, have worked out for controllers and other employees. NATCA's carefully considered support should help make this subject worth serious consideration by Democrats in Congress—and by the Administration.

The introduction of a very good bill is a milestone—but it's still a long way from enactment. We can expect a spirited debate over the next several months. But an idea that was first proposed in the 1970s by Glen A. Gilbert, the "father of air traffic control," is closer to realization than ever before.
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