Over the past 40 years, Congress has intermittently considered proposals to establish a government corporation or private entity to carry out air traffic functions currently provided by the Federal Aviation Administration (FAA). While the issue has been relatively dormant since a proposal offered by the Clinton Administration in the 1990s failed to gain the support of Congress, interest has reemerged following budget sequester-related funding cuts to FAA in FY2013. In January 2014, the FAA Management Advisory Council, a stakeholder advisory group, recommended spinning off FAA's air traffic functions, modeling the delivery of air traffic service functions after commercialized independent air navigation service providers in other countries, creating an aviation stakeholder board to oversee this work, and funding the newly formed corporation through a transparent schedule of cost-based user fees.
Many other countries have established government corporations, quasi-governmental entities, or private firms to perform air traffic services. While none of these air traffic service organizations are comparable to FAA in terms of their size or complexity, they represent a broad array of organizational models including a large number of wholly government-owned corporations, a public-private partnership model in the United Kingdom, a government-controlled joint stock company in Switzerland, and a fully private nonprofit entity controlled by aviation industry stakeholders in Canada.
Direct comparisons among these models have been limited. There does not appear to be conclusive evidence that any of these models is either superior or inferior to others or to existing government-run air traffic services, including FAA, with respect to productivity, cost-effectiveness, service quality, and safety and security. Certain corporate and private air traffic service providers have improved cost-effectiveness and performance as a result of access to financial markets to fund large-scale acquisition projects, and of faster implementation of technologies. In this regard, the tax status of a potential air traffic entity's debt could become a significant issue in the United States, as a privatized or a government-owned corporation could end up paying more to borrow in the financial market than the federal government does.
The prospect of reforming FAA air traffic services raises many unique challenges for congressional consideration, including
For four decades, Congress has intermittently debated whether the public would be better served if air traffic services currently provided by the Federal Aviation Administration (FAA) were instead provided by an independent entity. The many proposals and bills on this subject put forth over the years have distinguished two main alternatives to continued operation of the air traffic control system by a federal agency:
Proposals under both of these models have generally sought to establish stakeholder involvement in the business entity providing air traffic services though representation on a board of directors or other similar oversight body. Aviation stakeholders include the airlines, various general aviation interests, other aviation businesses, and military users of the airspace.
Interest in restructuring air traffic services, relatively dormant in recent years, reemerged in 2013 after budget sequester-related funding cuts led to staggered furloughs of FAA controllers at air traffic facilities across the country, deferral of plans to upgrade air traffic control facilities, and suspension of hiring and training of air traffic controllers. Congress may debate the issue as it considers legislation reauthorizing FAA programs and revenue authority beyond the end of FY2015.
This report looks at past proposals to privatize FAA and examines the way air traffic management is structured in other countries, particularly focusing on those that have opted for corporatization or privatization.
FAA, an agency of the U.S. Department of Transportation (DOT), oversees all civilian air traffic control operations across the United States. Air traffic control and modernization of air traffic facilities are funded through two accounts in the FAA budget. The Operations and Maintenance account, with an authorization of $9.65 billion in FY2015, funds air traffic operations, as well as aviation safety programs not related to air traffic control. The Facilities and Equipment account, authorized at $2.73 billion in FY2015, provides funding for the acquisition and maintenance of air traffic facilities and equipment, and for engineering, development, testing, and evaluation of technologies related to the federal air traffic system.
Under FAA's Operations and Maintenance account, FAA's Air Traffic Organization (ATO) operates 315 air traffic facilities, including 21 en route control centers, 24 stand-alone terminal radar approach control (TRACON) facilities, and more than 260 airport control towers (including towers with combined radar approach control facilities) across the country.1 ATO federal employee staffing totals about 35,000, of which more than 14,000 are air traffic controllers.
In addition, ATO oversees more than 250 airport towers run by private operators under the Federal Contract Tower program. Controllers and other staff in a contract tower are employees of the contractor, not of the federal government. FAA also has contracted out operations at flight service stations that provide weather briefings and flight planning services to owners of private aircraft (general aviation).
Slightly over two-thirds of FAA's total funding, and all funding for the Facilities and Equipment account, is provided through the Airport and Airway Trust Fund (AATF). Revenue sources for the trust fund include a 7.5% passenger ticket tax, a 4.3-cent-per-gallon tax on commercial jet fuel, a 21.8-cent-per-gallon tax on general aviation jet fuel, and other taxes on cargo, frequent flyer awards, international departures and arrivals, and fuel used by planes with fractional ownership. FAA also collects user fees from aircraft that fly in U.S.-controlled airspace but do not take off from or land in the United States. A portion of this fee, which is similar to overflight fees charged by other countries in conformance with agreements of the International Civil Aviation Organization (ICAO), is used to fund ATC services.
Proposals to restructure air traffic control have been offered since at least 1974. While many of these proposals have been drafted into legislation introduced in Congress, none of the measures has ever made it out of committee. These various proposals have purported to offer means of minimizing or avoiding a number of identified problems:
In 1974, a study commissioned by the Professional Air Traffic Controllers Organization (PATCO), the air traffic controllers union at the time, and conducted by Glen A. Gilbert and Associates, concluded that an independent government corporation with assured financing should carry out the air traffic control functions performed by FAA.2 Under the proposal, corporate policy was to be set by a board of directors, appointed by the President with Senate confirmation. The board was to comprise individuals representing the air transportation industry, government, consumers, and "environmentalists." The proposal called for the air traffic control organization to be managed by a president and chief executive officer, with smaller units headed by vice presidents and a senior vice president of operations.
Gilbert's report led to the introduction of two bills in 1976 (H.R. 12165 and H.R. 13004, 94th Congress) to establish a United States Air Traffic Services Corporation. Under the proposals, the corporation would have been managed by a 10-member board of directors with broad authority to appoint corporate officers and set tax rates for Airport and Airway Trust Fund revenue sources such as aviation fuel taxes, passenger ticket taxes, and cargo taxes. More modest measures introduced in the 94th Congress (S. 2434, H.R. 9930, and H.R. 11978) sought to reestablish FAA as an independent agency outside of DOT, a status it had held from its inception in 1958 until the creation of DOT under the Department of Transportation Act (P.L. 89-670) in 1967. None of these bills was reported out of committee.
In August 1981, more than 11,000 striking air traffic controllers were fired after failing to heed a presidential directive ordering them back to work within 48 hours.3 Warning that this was not an isolated incident, the Heritage Foundation issued a report in 1982 proposing an alternative corporate model for air traffic control.4 The report, prepared by Robert Poole of the Reason Foundation, proposed a two-tiered corporate model, with a not-for-profit corporation responsible for system design and coordination and for awarding long-term contracts to a second tier of for-profit contractors that would operate air traffic facilities. Each contractor was to be limited to operating no more than three facilities to promote competition and protect against monopoly pricing. Decentralization at this second tier, the report argued, would provide safeguards against system-wide strikes while allowing for unionization and collective bargaining at the local level. The report concluded that its proposal was consistent with Reagan Administration objectives to reduce the size of the federal government while at the same time being amenable to labor interests. This proposal did not result in legislation.
The corporatization concept was taken up in 1985 by the Air Transport Association of America, an airline trade group (now called Airlines for America). At that organization's behest, the National Academy of Public Administration examined the concept in detail in 1986.5 That study recommended separating FAA from DOT, either by turning it into a government-owned corporation or by spinning off FAA's air traffic functions into a stand-alone government-owned corporation. Elements of that second alternative were incorporated into S. 1159 (100th Congress), which would have created a National Aviation Authority as an independent government corporation headed by a presidentially appointed director. The authority would have taken over all air traffic control services administered by FAA, funding itself through user fees. A policy advisory board was to conduct twice-yearly reviews of the authority's operations and submit its observations and recommendations to the President and congressional oversight committees. Safety standards for the proposed authority were to remain the responsibility of FAA.
Air traffic control was among the functions studied by a commission established by President Ronald Reagan to evaluate opportunities for privatization across the federal government. The commission's final report, released in 1988,6 found that post-deregulation airline traffic growth, particularly at hub airports, was placing serious strains on FAA air traffic resources. It also criticized "micromanagement" of FAA operations by DOT, the Office of Management and Budget (OMB), and Congress.
The commission's recommendations were more complex than those of previous studies. It urged that safety regulation remain under the purview of FAA, but that portions of the system be considered for private operation. More specifically, it suggested that FAA should retain authority over en route centers, but that certain functions performed in those facilities, such as equipment maintenance and weather briefings, be contracted. The commission recommended that FAA move incrementally toward a system of privately operated airport traffic control towers, starting with towers at smaller airports. Additionally, the commission suggested that FAA contract operation of its flight service stations, but argued against imposing user fees for flight services over safety concerns. Some of these recommendations were subsequently implemented, notably the growth of contract tower operations since 1993 and the 2005 contract for flight service station operations. However, the commission's recommendation to increase the portion of FAA expenditures paid for through direct user charges has never been accepted by Congress.
In 1993, the National Commission to Ensure a Strong Competitive Airline Industry, created pursuant to P.L. 103-13, found that FAA was incapable of performing its future mission under its existing organizational structure.7 It cautioned that the existing federal budget process did not provide a stable, predictable source of revenue or a means to leverage that revenue to fund FAA operations and capital programs. Rather, the commission found that FAA was severely limited by its dependence on a political and unpredictable budgetary process, a cumbersome procurement system, and a "pay-as-you-go" approach to major capital investments rarely seen in the business world. It recommended the creation of a corporation within DOT to manage and fund air traffic control.8 It called for removing the funding of these activities from the federal budget, and creating sufficient flexibility in the corporate structure to develop systems for procurement, staffing, and financing consistent with best practices in the private sector.
These recommendations by the National Commission to Ensure a Strong Competitive Airline Industry were echoed in the findings of the National Performance Review, led by Vice President Al Gore, as part of a broad initiative to "reinvent" government to reduce costs and deliver services more efficiently.9 The review concluded that FAA's air traffic control system was "constantly hamstrung by budget, personnel, and procurement restrictions."10 The review found that FAA's 10-year National Airspace Plan, first released in 1981 and revised numerous times, was, at that point, 10 years behind schedule and 32% over budget. It found that air traffic control technology modernization had been stymied by annual appropriations that precluded long-range fiscal planning, and that the federal personnel system made it difficult for FAA to attract experienced controllers in high-cost areas. It recommended a government-owned corporation within DOT that would be able to borrow from capital markets, make equipment purchases as needed, and hire and fire workers more easily than FAA. The review recommended that the corporation be supported by user fees and governed by a board of directors representing the system's customers. FAA, relieved of its operational role under this plan, was to focus on safety regulation.
In January 1994, the Clinton Administration released its "Initiative to Promote a Strong Competitive Aviation Industry,"11 largely adopting the work of the airline industry commission and the National Performance Review, including the recommendation to create a government corporation to carry out FAA's air traffic functions. Four months later, FAA released a formal proposal to establish a public corporation to run the nation's air traffic control system. Under the proposal, the corporation was to be administered by a chief executive officer and overseen by an 11-member board of directors representing various aviation interests. The corporation was to set fees for services to cover its operational costs.
This plan was introduced in legislative form in 1995 (H.R. 1441, 104th Congress). The bill sought to establish the United States Air Traffic Service (USATS) Corporation starting in FY1996. Although the government was to pay certain transition and startup costs, the corporation's ongoing costs were to come from user fees and other charges imposed by USATS, set so as to satisfy the corporation's obligations without restraining competition or violating obligations under international agreements. The corporation was to carry out a cost allocation study to determine the appropriate fee structures based on air traffic service categories and user categories, including commercial aviation, general aviation, and public-use aviation. The bill, however, would have specifically restricted the corporation from imposing fees on public or military aircraft, as well as on general aviation aircraft not used to provide transportation for compensation or hire. As a government corporation, the proposed corporate entity was to be exempt from corporate taxes.
General aviation interests largely rejected the proposal, despite specific language exempting general aviation users from air traffic service fees. The Aircraft Owners and Pilots Association (AOPA) argued that fees charged to general aviation could eventually become a means for funding the proposed USATS. More immediately, however, general aviation groups expressed concern over the airlines' influence on the USATS board. Turning over control to a board dominated by airline interests was likened to "privatizing ... highways, then turning over control to the truckers," who would give little consideration to the needs of automobile drivers.12
In a February 25, 1994, memorandum to House Aviation Subcommittee Members, Chairman James Oberstar criticized the Clinton Administration's ATC reform proposal.13 He argued that organizational disruption could erode safety, and that having airlines participate in the ATC board could lead to decisions that would not put safety first, such as reducing aircraft spacing to increase capacity or cutting back on staffing to control ATC costs and related airline fees. Representative Oberstar also expressed concern that airlines could come to dominate the board and the shaping of corporate policy. He argued that as a natural monopoly, an ATC corporation would not be subject to competitive pressures that would promote efficiency. He pointed to mismanagement among government contractors as a significant factor in delays and cost overruns in air traffic modernization projects like the Advanced Automation System.
A particularly scathing assessment of the USATS proposal came from May 1994 testimony by the General Accounting Office (now the Government Accountability Office, or GAO).14 GAO rejected the Clinton Administration's conclusion that procurement regulations were a significant factor impeding FAA's progress on ATC modernization initiatives, finding that technical and managerial factors were the root causes of modernization delays and cost overruns. GAO's analysis attributed some of the blame for these problems to poor performance by private contractors. GAO also expressed skepticism that the proposed corporation could achieve financial self-sufficiency, pointing to Amtrak as an example of a corporatized government agency that had responded to financial problems by deferring maintenance and putting off equipment upgrades. GAO concluded that a shift to a corporate structure "does not necessarily correlate with success or serve as a panacea for the problems of the predecessor organization."15
While advocates for ATC corporatization or privatization have continued to lobby for FAA reform, the concept has received relatively little policy attention since the failed effort to implement the Clinton Administration proposal two decades ago. However, ongoing concerns over FAA funding and air traffic systems modernization have renewed interest in the topic.
In January 2014, the FAA Management Advisory Council, a stakeholder advisory group, unanimously agreed to four principles for reforming aviation policy. The council recommended completely separating the Air Traffic Organization from the rest of FAA, modeling it after commercialized independent air navigation service providers in other countries, and creating an aviation stakeholder board to oversee its work. Complementing that structure, it recommended financing ATC operations through a transparent schedule of cost-based user fees for air traffic services and phasing out general fund support. The commission also recommended reforms to eliminate redundant regulatory oversight.16
Airlines have long supported efforts to move air traffic services out of FAA, or, at a minimum, to implement reforms to allow it to operate in a more business-like fashion. However, past attempts to corporatize FAA's operations have met with formidable resistance, particularly from nonairline general aviation interests. General aviation groups have argued that they would have a relatively small stake in the governance and oversight of an air traffic corporation, and that the concerns of private pilots, corporate jet operators, and noncommercial airports would be overshadowed by those of the airline industry and the major passenger airports. Additionally, general aviation users have often raised concerns that the funding mechanisms for a privatized or corporatized air traffic system could cost them more than the current system of fuel taxes.17 Recently, however, AOPA president Mark Baker indicated his organization would be open to proposals that could lower the costs of flying for general aviation users and address inefficiencies at FAA.18
Labor organizations representing air traffic controllers and FAA technicians had historically favored a move away from FAA to a corporate structure for air traffic control. This sentiment, however, largely shifted to general support of the FAA-managed system after labor gained collective bargaining rights following personnel reforms made in the 1990s.19 Under these reforms, controllers and other FAA employees were able to bargain collectively for pay, a situation unique in the federal government. Despite contentious contract negotiations between FAA and controllers during the George W. Bush Administration, the National Air Traffic Controllers Association (NATCA) did not advocate for corporatization or privatization. Instead, it commissioned a study highlighting the pitfalls of corporatization or privatization.20 Management-labor relations at FAA seem to have been smoother under the Obama Administration. Nonetheless, current NATCA president Paul Rinaldi has indicated that further discussion on air traffic control reform is needed, and has called for a sustainable way to move forward with regard to funding air traffic modernization and FAA's NextGen system in particular.21 NATCA has not formulated a formal position on the issue of privatization or corporatization of air traffic services.
Historically, most proposals to corporatize or privatize air traffic services have envisioned user fees, rather than taxes, as the revenue source for the proposed corporation. Such fees, which could be based on aircraft weight and distance flown, air traffic services provided during approach and landing, and airport surface movements, would be compelled to adhere to policies agreed upon by the International Civil Aviation Organization (ICAO).22 Proposals to replace or augment U.S. aviation taxes with user fees linked to air traffic services have met with considerable opposition. The George W. Bush Administration's proposal to establish a system of user fees for commercial jet aircraft and certain other aircraft using busy terminal airspace was not accepted by the 110th Congress. In both the 110th and 111th Congresses, a Senate proposal to impose a $25-per-flight surcharge on commercial flights and general aviation jet traffic was sharply criticized by general aviation interests and was not approved. A proposal by the Obama Administration for a per-flight user charge of $100 on commercial and general aviation jets and turboprops that fly in controlled airspace, first introduced in 2011 and reintroduced in each subsequent FAA budget submission, has not been acted upon by Congress.23 Congressional reluctance to accept aviation user fees leaves unanswered the question of how a corporatized or privatized air traffic control system would be funded.
While opposition to corporatization and user-fee funding of air traffic services stalled the legislation to implement the USATS proposal, the Federal Aviation Reauthorization Act of 1996 (P.L. 104-264) instead included language authorizing reform of the FAA procurement and personnel management systems in order to keep pace with new technology and match resources with personnel needs. The act mandated the creation of a 15-member FAA Management Advisory Council designated by the Secretary of Transportation, including 13 members representing aviation interests, 1 member from the Department of Defense, and 1 member from the Department of Transportation. The council is charged with providing guidance to FAA with respect to operations and regulatory matters affecting industry stakeholders. As noted above, this council recently recommended further action to fully corporatize or privatize FAA air traffic control functions (see "FAA Management Advisory Council Report (2014)").
The same law established the National Civil Aviation Review Commission and tasked it with analyzing alternative financing and funding for the aviation system. The commission's report, released in December 1997, proposed moving to an ATC system financed by user fees. The commission argued that a fee-based system could be more adaptive to changes in priorities and programs, and was likely to be treated more favorably in the budget process.24 It called for a user fee-funded Air Traffic Performance Fund to replace the Airport and Airway Trust Fund, which was to be phased out. It also called for the creation of a performance-based structure (i.e., a data-driven, results-oriented business approach) for air traffic services, managed by a chief operating officer and overseen by a stakeholder board. The commission recommended that FAA adopt a comprehensive set of system performance metrics to gauge service and safety.
Some of the National Civil Aviation Review Commission's recommendations were reflected in the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (AIR21; P.L. 106-181), enacted in April 2000. That law created a chief operating officer (COO) position within FAA to carry out strategic planning for air traffic services, address system modernization, improve productivity, implement cost-saving measures, and develop budget requests. The legislation did not, however, establish an air traffic entity for the COO to manage.
Subsequently, in December 2000, President Clinton issued Executive Order 13180, establishing the Air Traffic Organization within FAA to carry out air traffic services, acquisitions, and research activities under a business-like organizational structure.25 The order designated the COO as the head of the ATO. Oversight was to be provided by the Air Traffic Control Subcommittee of the Aviation Management Advisory Council.
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Controversy over the "Inherently Governmental" Designation In issuing Executive Order 13180, President Clinton specifically described air traffic services as "an inherently governmental function." According to the Office of Management and Budget (OMB), an inherently governmental function is one whose performance is so intimately related to the public interest that it necessitates or mandates performance by government employees. The designation of air traffic services as inherently governmental proved problematic not only because there were many examples of air traffic services being provided by quasi-governmental and private entities outside the United States, but also because air traffic services were being performed by contract personnel in the United States under the Federal Contract Tower (FCT) program. Moreover, FAA was looking to move forward with a large-scale competitive sourcing initiative to determine if its flight service stations could be managed in a more cost-efficient manner by a private entity. With FAA facing legal challenges to the FCT program, President George W. Bush issued Executive Order 13264 on June 4, 2002, amending Executive Order 13180 to remove the "inherently governmental" language. The order stirred controversy in the FAA reauthorization debate, prompting the inclusion of provisions to prohibit ATC privatization in FAA reauthorization bills considered during the 108th Congress (see H.R. 2115, S.Amdt. 893 to S. 824). Vision 100, the Century of Aviation Reauthorization Act (P.L. 108-176), did not include any language protecting air traffic services from privatization after Congress received a letter from FAA stating it would take no action on ATC privatization prior to the end of FY2004. Under current law, FAA is not prohibited from engaging in competitive sourcing. |
While Congress has not endorsed corporatization or privatization of ATC, FAA has exercised existing authorities to take a number of steps expanding the role of contractors in providing air traffic services. These actions have not required legislation, but have generally been well supported by Members of Congress. They include increasing the number of air traffic control towers operated by contract personnel, outsourcing flight service station operations, and using "design, build, maintain" contracts to expand contractor roles in maintaining newly acquired air traffic technologies.
FAA contracts out the operations of about half of all airport air traffic control towers in the United States under the Federal Contract Tower (FCT) program. The program came into existence in 1982—initially as a trial program at five airports—in an effort to provide continued air traffic services at low-activity towers in the wake of the nationwide air traffic controller strike and subsequent dismissal of striking FAA air traffic controllers. For the first 12 years, the program remained relatively small, growing to 27 towers by 1993. It was expanded further after gaining the attention of the National Performance Review, which endorsed FCT as an effective means of lowering government costs. In 1999, Congress mandated an FAA study to examine further expansion of the program to include all FAA-operated towers without radar capability. At the same time, Congress funded a cost-sharing program allowing towers that would not otherwise meet FAA's cost-to-benefit criteria to remain operational so long as requisite funding, up to 20% of the total operational costs of a tower, is provided by nonfederal sources.
A 2003 audit by the DOT Office of Inspector General (OIG) found that average operating costs at 12 contract towers were $917,000 per year lower than those at comparable FAA-run towers. These cost savings were attributed primarily to lower staffing levels and lower salaries at the contract towers.26 The OIG audit found no notable differences between FAA-staffed towers and FCT towers with regard to safety.
As of December 2013, there were 252 towers operating under the FCT program, including 16 in the cost-sharing program.27 Currently, contract towers are staffed by personnel employed by one of three companies under contract to FAA: Midwest Air Traffic Control, RVA Robinson Aviation, and Serco. Tower controllers at contract tower facilities are hired and trained by these companies. Many of the controllers have former experience as military air traffic controllers, while some come from the ranks of FAA controllers.
In March 2013, FAA announced it would close 149 FCT program towers in response to FY2013 budget sequester funding cuts.28 It subsequently reduced the number of proposed closures to 125 towers, but the closure plan never came to pass. Congress intervened by passing the Reducing Flight Delays Act of 2013 (P.L. 113-9) and directing FAA to keep all FCT program towers open through the end of the fiscal year. The FCT program has been fully funded as a part of FAA's operations account since then. However, the incident illustrates how the need for annual appropriations measures may adversely affect the delivery of air traffic services.
Since 2006, FAA has contracted out the work performed at automated flight service station (AFSS) facilities that provide preflight and in-flight weather briefings and flight planning services, mostly to general aviation operators. In 2005, FAA completed one of the largest competitive source selection processes ever conducted in the federal government, covering the functions of about 2,500 federal positions at 58 AFSS facilities in all states except Alaska. FAA projected that the shift to contract operations and consolidation would save $1.7 billion over 10 years.29
Lockheed Martin Corporation was awarded a five-year contract with an additional five-year renewal option to operate AFSS facilities throughout the United States (except in Alaska, where flight services are still provided by FAA employees). Under the contract, Lockheed has consolidated operations into three facilities operating around the clock and two additional facilities open part-time. Collectively, these facilities are staffed by fewer than 900 employees. Thus, the contractor has reduced the number of facilities by more than 90% and the number of positions by more than 60% compared to 2005. These reductions reflect changes in user demand for services, largely stemming from increased reliance on web-based information, and increased reliance on automation as well as efficiencies gained from consolidation.
In 2007, soon after Lockheed Martin took over, AFSS operations experienced service disruptions related to equipment modernization and failed to meet a number of performance criteria specified in the contract.30 As a result, FAA withheld $9.7 million in contract performance incentives in 2007. Since then, performance objectives have been met, and the contract operation has received positive satisfaction ratings from users. The contract has been extended through 2015.
Historically, FAA has maintained air traffic control equipment through a combination of its own technician workforce and support services contracts. Increasingly, though, instead of contractors designing and building equipment to hand over to FAA to operate and maintain, contracts make private vendors responsible for continuing maintenance of equipment. In some cases, contractors retain ownership of the equipment and may charge FAA for use.
A prime example of these so-called "design, build, maintain" contracting practices is the Automated Dependent Surveillance-Broadcast (ADS-B) ground station contract. ADS-B is the backbone of GPS-based aircraft tracking envisioned as part of the NextGen air traffic modernization initiative. Under the contract arrangement for about 800 ADS-B ground stations that are to relay broadcasts of aircraft position data to ATC facilities, the system developer, ITT Corporation, is to retain ownership of the equipment and maintain and operate the stations through 2025. FAA is to pay a subscription fee to have ADS-B data relayed to its facilities.31
The increasing role of contractors in maintaining air traffic control equipment is an interesting development in the context of policy debate regarding ATC corporatization. Advocates of corporatization argue that a corporation would have greater flexibility that could simplify contractual arrangements for maintaining ATC equipment, while those in favor of retaining air traffic as a federal function may point out that FAA is already making effective use of nontraditional contracting practices to implement NextGen.
Several countries have established government corporations or private entities to provide air traffic services. Such organizational forms are permissible under international law, which gives countries the exclusive right to regulate and control the use of navigable airspace overlying territorial lands and waters,32 as well as to regulate and control flight operations in designated airspace regions overlying international waters.
While most countries have established governmental civil authorities to regulate the use of sovereign airspace, the air traffic services that manage the use of that airspace need not be part of the same entity that establishes regulations. Broadly, these air traffic services include
The term "air navigation services" encompasses all of these components, and has been adopted internationally to refer to the activities carried out by entities performing these functions, which are known globally as air navigation service providers (ANSPs).33 In addition to its regulatory authority over civilian aircraft operations and airspace, FAA is the ANSP for the United States.
Regulation of flight operations remains mostly a governmental function. Increasingly, however, countries are establishing independent government-owned or private corporations to carry out the operational delivery of air navigation services, including air traffic control, weather reporting, flight planning, and traffic flow management. Wholly government-owned corporations are the predominant organizational structure of air navigation service providers outside the United States, while some countries, like France, Greece, Japan, and Mexico, operate as government agencies similar to FAA and the ATO.
A 2005 GAO study of ANSPs in Australia, Germany, New Zealand, the United Kingdom, and Canada found that all were subject to external safety regulation, operated as self-financed businesses, and, as monopoly providers of their services, constrained by procedural guidelines or economic review and oversight by government.34 GAO also found that all five of these ANSPs had improved productivity and operational efficiency through investments in facilities and equipment. GAO concluded that commercialization had allowed these ANSPs to implement modernization projects more efficiently through access to cash flow and borrowed funds. Some ANSPs indicated that the corporate model enabled them to buy and modify commercially available products, allowing them to achieve benefits faster and at lower cost than if they had designed and built systems from the ground up. Additionally, the corporate structure allowed European ANSPs to form partnerships for large-scale procurement.35
Table 1 provides a general overview of the size and complexity of selected global corporate ANSPs. Data for FAA are provided in the table for comparison.
|
Country |
ANSP |
Towers |
Centers |
Employees |
Organization |
|
|
Australia |
Airservices Australia |
29 |
2 |
4,204 |
Gov't-owned corporation |
|
|
Belgium |
Belgocontrol |
5 |
1 |
919 |
Public company |
|
|
Canada |
NAV CANADA |
42 |
7 |
4,832 |
Private company |
|
|
Finland |
Finavia Corporation |
25 |
1 |
1,612 |
Gov't-owned public limited corporation |
|
|
France |
DSNA France |
86 |
5 |
7,846 |
State agency |
|
|
Germany |
DFS Deutsche Flugsicherung GmbH |
16 |
4 |
5,938 |
Gov't-owned company |
|
|
Greece |
Hellenic Civil Aviation Authority |
18 |
2 |
680 |
Civil service agency |
|
|
Ireland |
Irish Aviation Authority |
3 |
2 |
642 |
Commercial state-sponsored body |
|
|
Italy |
ENAV, S.p.A. |
40 |
4 |
3,276 |
Joint-stock company |
|
|
Mexico |
SENEAM |
58 |
4 |
2,254 |
Gov't agency |
|
|
New Zealand |
Airways New Zealand |
29 |
1 |
761 |
Gov't-owned corporation |
|
|
Poland |
Polish Air Navigation Services Agency (PANSA) |
13 |
1 |
1,771 |
"Certified legal entity" |
|
|
Portugal |
NAV Portugal |
10 |
2 |
993 |
Gov't-owned company |
|
|
Romania |
Romanian Air Traffic Services Administration (ROMATSA) |
16 |
1 |
1,516 |
Self-financed government administration |
|
|
Russia |
State ATM Corporation |
250 |
57 |
9,500 |
Gov't-owned corporation |
|
|
Slovenia |
Slovenia Control, Slovenian Air Navigation Services, Ltd. |
4 |
1 |
215 |
Independent gov't-owned company |
|
|
South Africa |
Air Traffic & Navigation Services (ATNS) |
23 |
2 |
1,050 |
Gov't-owned corporation |
|
|
Spain |
AENA |
22 |
5 |
4,249 |
Publicly owned company |
|
|
Switzerland |
skyguide |
14 |
2 |
1,330 |
Nonprofit joint-stock company |
|
|
Turkey |
State Airports Authority & ANSP (DHMI) |
36 |
2 |
4,822 |
Gov't-owned enterprise |
|
|
United Kingdom |
NATS UK |
16 |
2 |
4,440 |
Public-private partnership |
|
|
United States |
Federal Aviation Administration (Air Traffic Organization) |
512 |
21 |
34,911 |
Federal agency (separate organization) |
Source: Civil Air Navigation Services Organization, CANSO Members, available at http://www.canso.org/canso-members.
Note: Bolded countries indicate organizational models examined in further detail in this report.
None of the ANSPs in other countries are comparable to FAA in terms of their size or complexity. Nonetheless, collectively, the ANSPs in Europe bear some similarities to FAA, although European airspace is not as busy as U.S. airspace, primarily because it does not have the volume of nonairline general aviation traffic that the United States does.
The following six sections discuss a broad sampling of the various organizational models seen among ANSPs globally.
NAV CANADA was established in 1996 as a nonprofit private corporation. It is governed by a 15-member board of directors comprising 4 members representing airlines, 3 representing the Canadian government, 2 from employee organizations, and 1 representing general aviation interests. Additionally, there are 4 members from outside aviation selected by those stakeholder members, and a company president chosen by those 14. The corporation is broadly described as a private-sector nonprofit company. The company has been established as a nonshare entity, meaning that while user stakeholders are represented on the board, they do not have defined ownership. Long-term financing is obtained through publicly traded bonds.
NAV CANADA sets user fees based on projected flight operations to offset operational costs, capital expenditures, and debt service requirements. NAV CANADA is required to set its charges at levels projected to cover its costs. However, it maintains a rate stabilization account so that it need not raise or lower fees every year in response to changes in air traffic. The process appears to be effective in maintaining stable rates, as NAV CANADA user charges did not increase between 2007 and 2014.
In 2012, NAV CANADA partnered with Iridium Communications Inc., a satellite communications and data network provider, to form Aireon LLC.36 Aireon is developing a satellite-based global aircraft tracking system using the Iridium NEXT satellite constellation, which is expected to be launched starting in 2015, to relay aircraft position data to air traffic control facilities. Under the arrangement, NAV CANADA will be the first customer for this service, using the satellite-based system to improve surveillance of North Atlantic airspace and of remote regions of northern Canada and the Arctic.
Air traffic services in New Zealand are provided by the Airways Corporation of New Zealand, known as Airways NZ. Airways NZ was one of the earliest corporate models for air traffic control, established in 1987. It is overseen by a seven-member board of directors appointed by the ministers for state-owned enterprises and finance. Airways NZ describes itself as a highly autonomous version of a government-owned corporation, operating largely as a private company with a high degree of economic self-regulation.37
Airways NZ sets user fees based on the principle of economic value added (EVA). This operates as a sort of self-regulating scheme under which a portion of net operating profits is returned to system users as rebates. It also consults with users in setting fees through a memorandum of understanding with major airline customers.
In 1995 the Australian Civil Aviation Authority was divided into Airservices Australia, the ANSP, and the Australian Civil Aviation Safety Authority, the government air safety regulator. Since then, air traffic in Australia has been managed by Airservices Australia, a government corporation. Airservices Australia is managed by a board of directors appointed by the Australian Minister for Infrastructure and Regional Development. The board is composed of a chair, a deputy chair, and six nonexecutive directors, and also includes the chief executive officer.
Airservices Australia revenues derive from a fee-for-service scheme for air traffic services and airport rescue and firefighting services. Airservices' pricing structure is overseen by the Australian Competition and Consumer Commission. Revenue growth in recent years has allowed Airservices Australia to realize operating profits and make investments toward capital expenditures while providing customers with rebates in 2013.38
In Germany, air traffic functions were transferred to a state-owned corporation, Deutsche Flugsicherung (DFS), in 1993. The company operates four control centers and manages about 3 million flights annually. It has a staff of about 6,000, of which about 1,900 are air traffic controllers.39
In Germany, the push toward a corporate air traffic entity initially came from air traffic controllers who viewed their civil-service wages as being substantially lower than those of colleagues elsewhere in Europe, particularly at Eurocontrol, whose responsibilities include upper airspace in northwestern portions of Germany as well as the Netherlands, Belgium, and Luxembourg. The concept did not move forward for several years, however, until agency officials concluded that the German federal government's annual budget process would constrain efforts to modernize air traffic technical infrastructure. They reasoned that an independent, user fee-funded enterprise could more effectively procure systems and installations. Initially, efforts to privatize air traffic services were hindered by an interpretation that under the German Constitution such services were considered "sovereign competencies," or inherently governmental functions typically reserved for civil servants.40
Since its inception, DFS has been funded entirely by user fees. Currently, user fees in Germany and across the European Union (EU) are being harmonized under the EU charging scheme. En route service charges have been based on EU regulations since 2012. Terminal services have continued to operate under a full-cost recovery method of accounting, but will come under EU regulation beginning in 2015.
Air traffic control in Switzerland and portions of adjacent airspace is operated by skyguide. Skyguide operates as a joint-stock company, although the Swiss government must control a majority share. Currently, the Swiss government holds almost all (more than 99%) of the shares, although legally it can hold as little as 51%. Skyguide is overseen by a seven-member board of directors appointed by the shareholders. In principle, skyguide is privately held in a manner similar to NAV CANADA, although in its current form it is more similar to Airways NZ. A successor to Radio Schweiz AG, which had been responsible for air navigation services in Switzerland since 1931 as a nationalized company, skyguide falls under the regulatory authority of the Swiss Federal Office of Civil Aviation.
Skyguide receives the majority of its revenue from charges on overflights, and receives additional revenue from approach charges paid by aircraft using Swiss airports. Skyguide derived about 14% of its 2013 operating revenue for air navigation services from the Swiss government. Additionally, Swiss Air Force compensation for military flights comprises about 8% of skyguide's air navigation services revenue. Skyguide's commercial air traffic revenue has suffered from several years of decline in the number of flights handled, forcing a number of cost-cutting measures and increases to route charges.
Skyguide management was implicated in the July 1, 2002, midair collision north of Überlingen (Lake Constance), Germany, that destroyed a Russian passenger jet and a DHL cargo jet and resulted in 71 fatalities. German air safety investigators found that skyguide did not ensure that all open controller workstations were continuously staffed during late-night shifts. Instead, one controller managed two stations while the other controller on duty rested, a practice that was tolerated by management for several years.41 Corrective actions were taken based on the findings and recommendations of the investigation. Nonetheless, critics of air traffic control privatization or corporatization have used this as an example of how corporate cost-cutting measures, such as reducing staffing during nighttime lulls, could erode safety.42
In the United Kingdom (UK), air traffic services have operated as a public-private partnership by NATS Holdings Limited since 2001. NATS derives from a predecessor government agency, the National Air Traffic Services. The UK government holds 49% and a controlling "golden" share in the corporation. Initially, the private partner chosen was the Airline Group, a stakeholder conglomerate made up of airlines and aircraft leasing companies. Over the years, the Airline Group ownership has diversified to include institutional investors including the Universities Superannuation Scheme, a pension plan for college educators, which acquired a 49.9% noncontrolling stake in the Airline Group in November 2013.
LHR Airports Limited, formerly the British Airports Authority, was included as a partner in NATS Holdings Limited following a financial restructuring in which it received a 4% stake in the company in exchange for £65 million (roughly $93 million based on exchange rates at the time). As part of the restructuring, the UK government provided a matching £65 million to NATS Holdings to stabilize its finances, which had suffered from the airline industry downturn following the September 11, 2001, terrorist attacks.
Currently, the UK government holds 49% of NATS Holdings, the Airline Group controls 42%, LHR Airports Limited holds 4%, and the remaining 5% is made available to the company's employees through an employee share plan. NATS Holdings operates on a for-profit basis, with its en route air traffic services subsidiary fully regulated economically by the Civil Aviation Authority (CAA). NATS Holdings maintains a separate free-market subsidiary that provides contract air traffic control and other related services at airports both in the UK and internationally. CAA exerts both safety and economic regulation over NATS within the UK.
In December 2014, NATS UK experienced a large-scale system failure at its main air traffic control center in Swanwick, Hampshire, causing widespread delays and cancellations. Some have raised concerns that the failure may be attributable in part to cost-cutting efforts that have delayed upgrades, while others have suggested that NATS UK's selection of a more costly but hard-to-maintain custom configuration may have been a factor.43 While an inquiry into the failure has been launched, it is unclear whether the business model was in any way a contributor to the event, as system failures of various scales have occurred at a number of ANSPs, including FAA.
Comparing performance among ANSPs is difficult, as performance may be affected by a variety of unique factors. Europe, for example, has 37 separate ANSPs operating 63 en route facilities to manage airspace only slightly larger than that of the United States, but with only 63% as much air traffic and far fewer general aviation flights.44 While much of Europe has moved to corporatized models for managing air traffic control over the past 25 years, direct comparisons with the government-run model of the United States have significant limitations due to these differences.
The main source of data on the productivity and relative costs of ANSPs is the Civil Air Navigation Services Organization (CANSO), a global trade organization of which FAA and other major ANSPs are members. While CANSO has endeavored to develop a process for directly comparing productivity and cost among ANSPs, not all members provide it with the necessary data for making direct comparisons. Of the ANSPs providing comparable data to CANSO, only one, NAV CANADA, handles slightly more than one-tenth the volume of air traffic handled by FAA.
Statistical analysis provided by CANSO offers a means to compare ANSPs in terms of productivity and cost-effectiveness. Since productivity and cost metrics are calculated based on air traffic controller workforce size, air traffic controller labor costs, and air traffic volume, productivity will tend to be low in countries where traffic is comparatively sparse, and costs will be comparatively greater in regions where labor costs are generally high. In examining performance and safety, it is often more meaningful to look at changes over time for individual ANSPs, rather than comparisons between ANSPs, recognizing that trends may be influenced by other factors besides the structure and operations of the ANSP.
CANSO defines productivity as the number of flight hours completed by aircraft operating under instrument flight rules (IFR)45 logged by an ANSP divided by its operational air traffic controller workforce. The resulting metric, IFR flight hours per air traffic controller, provides a rough indication of controller workload. Productivity is highly correlated with traffic density.
CANSO data for 2012 show that FAA handled 1,729 IFR flight hours per air traffic controller, while NAV CANADA's productivity topped the list at 1,739 IFR flight hours per controller. A number of smaller countries, including Thailand, Finland, Romania, New Zealand, Lithuania, and Slovenia, had fewer than 700 IFR flight hours per controller.
A 2009 report found that the ANSPs in Australia, Canada, New Zealand, and the United Kingdom reduced costs per IFR aircraft movement between 5% and 15% from 1997 to 2004.46 The study found that in France, where air traffic services are carried out by a government agency, costs were reduced by about 15%, so cost savings are not entirely unique to corporate or private ANSPs. However, over the same period, FAA's operating costs increased by more than 20%, driven in part by labor costs that increased at rates higher than those of any other ANSP.
As reported by CANSO, operating costs among ANSPs for air traffic services provided to aircraft other than those operated on oceanic routes in 2012 ranged between $135 per IFR hour in Mexico and $879 per IFR hour in Slovakia. FAA costs were slightly lower than average, at $454 per IFR hour. However, FAA's average annual costs have been rising at a somewhat higher-than-average rate, with an average annual change of 5.8% observed between 2008 and 2012. Comparatively, NAV CANADA's costs were $276 per IFR flight hour, with an average increase of only 0.3% annually.
A major influence on the cost-effectiveness of air traffic services is employment costs. Direct comparisons of costs are difficult to gauge due to widely disparate wage rates and cost-of-living differences across the various countries. CANSO examined employment costs per IFR flight hour, adjusted for purchasing power parity (PPP) to reflect those cost-of-living differences. Again, employment costs for FAA were in the middle of the range, although significantly above employment costs for NAV CANADA on a PPP basis. Whereas FAA's annual average change in employment costs between 2008 and 2012 was 5.0%, the average annual increase over that period for NAV CANADA was 0.4%.
A 2009 research report concluded that service quality among corporatized or privatized ANSPs has improved in most cases.47 Performance improvements included improved flight efficiencies and reduced delays. The study found that between 1997 and 2004, airline delays attributable to air traffic control had decreased at several corporate air navigation service providers including NATS UK, skyguide in Switzerland, DSNA in France, and DFS in Germany. The study attributed service quality and performance improvements to technological modernization. The study reasoned that no longer having to compete for funds with other government projects as well as extensive input from airspace users allowed these ANSPs to pursue technology projects having the greatest anticipated impact on service quality. The researchers found that commercial and private ANSPs were more willing to forgo nonessential features and use off-the-shelf solutions to assure faster implementation and lower acquisition costs. The researchers contrasted this to FAA efforts, which have typically suffered from delays and cost overruns. These acquisition delays, they argue, have affected operational performance and service quality.
While some tangible aspects of service quality have improved under corporate or private models, it remains unclear whether this has had any effect on system users' satisfaction and perceptions of service quality. Data on this issue are limited. In one 2006 survey, perceptions of service quality and satisfaction with the delivery of air traffic services were found to be better among U.S. pilots reporting on FAA performance compared to Canadian pilots reporting on their experiences with NAV CANADA.48
A 2005 study examining ATC systems in Australia, Germany, New Zealand, and Switzerland concluded that these corporate models fostered improved safety, but conceded that safety could not be adequately measured or forecasted.49 More systematic analysis of safety under several corporate and private ATC models was reported in a 2009 study.50 Findings indicated that several corporate air traffic service providers have reduced rates of serious air traffic-related safety incidents between 1997 and 2004. The researchers concluded that "commercialization" of air traffic services did not erode safety culture and oversight. Executives at air navigation service providers indicated that safety was integral to their business, while government safety regulators described their role as being the same as conducting oversight and regulatory enforcement among airlines. In Canada, both safety regulators and investigators from Transport Canada and the Canadian Transportation Safety Board reported "that there had been more reliable reporting and a stronger safety culture since commercialization."51 The view that safety culture, safety data reporting, and visibility of safety improved under corporate or private structures was echoed by several other safety regulators. There was broad consensus among regulators that safety is not compromised by corporatization or privatization, and data indicated a general trend of reductions in serious safety incidents among these ANSPs.
The September 26, 2014, arson at FAA's Chicago air traffic control center highlighted the potential physical security risks posed by contractors and employees with access to facilities. Nonetheless, there is no conclusive evidence that corporate or private entities are less capable then federal agencies of providing adequate security. Most critical infrastructure in the United States, such as chemical plants, refineries, pipelines, and the electrical grid, is owned, operated, and maintained by private corporations. These entities have been working closely with government regulators over the years to address security risks.52 In 2005, GAO found that many of FAA's physical and cybersecurity measures for critical air traffic control facilities were inadequate.
The prospect of reforming FAA air traffic services into a government corporation or private entity raises many unique challenges to be considered in crafting and debating enabling legislation. This section reviews some of the key considerations.
The organizational structure and managerial and financial oversight of a new air traffic services entity could take one of many forms. The U.S. government already has made use of most of these models for other purposes, and they have been employed for air traffic control in other countries.
A number of entities fall under the broad rubric of "quasi-governmental organizations" and exist as hybrids between governmental and private sectors. Examples include the Tennessee Valley Authority, mortgage lender Fannie Mae, intercity passenger rail provider Amtrak, the Smithsonian Institution, and the National Academies. FAA itself works closely with the MITRE Center for Advanced Aviation System Development, a congressionally chartered not-for-profit corporation, on air traffic control technologies.
Many federal agencies rely on contracts with private-sector entities to provide goods and services. FAA itself has extensive experience with outsourcing both major acquisitions of air traffic control technologies and certain operational aspects of the national airspace system. To date, FAA has not outsourced any operations associated with radar control of air traffic, such as terminal radar approach control (TRACON) facilities and en route centers, and has contracted out air traffic services only at low-activity nonradar towers.
Although NATS UK is a unique example of public-private partnerships (P3s) in air traffic control, Congress has shown great interest in P3s in other fields as a means to leverage government assets, potentially reduce federal government costs, and share risks with private firms. Some federal agencies, especially the Department of Defense and the Department of Veterans Affairs, have relied extensively on public-private partnerships for real-property management.53 DOT has encouraged states to use P3s to design, build, maintain, and operate highway and public transportation projects.54 A P3 approach could be regarded as a hybrid between a government-owned corporation and a completely private entity, with both the federal government and aviation industry stakeholders sharing in financial and organizational oversight.
Creation of a private corporation regulated by the FAA could be similar in corporate structure to NAV CANADA, in which stakeholders with diverse interests are represented in corporate governance through the board of directors. While a private air traffic services corporation could be publicly traded, it may be preferable to be closely held only by aviation industry stakeholders. NAV CANADA, the one clear example of a private corporation, is relatively closely held by a relatively small group of industry stakeholders. This is considerably different from a company whose stock or shares are publicly traded. In theory, ownership of Switzerland's skyguide, which can profit from the fees collected for its services, could be more widely distributed to interested public parties. However, limited investor interest has meant that skyguide has remained almost totally under government ownership.
The "FAA Management Advisory Council Report (2014)" called for separating out ATO as a service-oriented unit that could be spun off as a corporate entity. However, corporatizing ATO as it currently exists could prove problematic because certain closely related functions, such as facilities and equipment acquisition and maintenance, would be left with FAA. This might leave ATO to use buildings and equipment over which it would not have control. While the current Federal Contract Tower program operates in this way, it is not the model employed in most international examples of completely corporatized air traffic service organizations. In most countries that have corporate air traffic organizations, the air navigation service provider owns the communications, navigation, and surveillance equipment that provides the technology for air traffic control. Such ownership generally allows air traffic services corporations to invest directly in service contracts, equipment replacement, and large-scale technology modernization initiatives. It is unclear how such arrangements would work in the United States if ATO were spun off without the associated facilities and equipment procurement and maintenance functions.
One of the purported advantages of corporatization or privatization of FAA is that this could facilitate efforts to modernize equipment and technology, particularly the complex and costly NextGen air traffic systems modernization initiative. If the proposed corporation does not have specific ownership of the equipment and facilities it operates, its role in modernization efforts may be more limited, and procurement activity might remain within FAA and under existing legal authorities and appropriations.
A more comprehensive transition to a corporate structure allowing for greater autonomy with respect to acquisitions and maintenance might include facilities and equipment functions directly tied to air traffic services. These functions are now funded through FAA's Facilities and Equipment Account. While they could logically be transitioned to a corporate air navigation service provider, policy makers may wish to retain functions related to performance testing or certification of air traffic and air navigation equipment as governmental regulatory functions. For example, flight testing that checks and certifies the operational performance of navigation facilities like instrument landing systems could arguably be regarded as regulatory certification activities and thus retained under FAA's safety functions. On the other hand, it could be argued that certain elements of such activities are central to maintaining operational reliability of air traffic control. The one past legislative attempt to deal directly with this issue, the United States Air Traffic Service Corporation Act (H.R. 1441, 104th Congress), expressly directed FAA to transfer to USATS possession, use, and control of all real property, equipment, frequency licenses, patents, and software rights necessary to carry out the functions being transferred to the corporation. However, the bill would have left it up to the FAA Administrator and the chief executive officer of the newly formed USATS to determine which functions and employees would be transferred from FAA to the corporation.
Historically, proposals to corporatize or privatize air traffic services in the United States have been intertwined with debate over the implementation of user fees for air traffic services. Although a government-owned corporation could be financed much as the FAA is financed today, through a combination of taxes and fees on passengers and cargo, an air traffic control organization owned by stakeholders or investors presumably would seek a fee structure that would enable it to recover the costs of providing various types of service.
NAV CANADA offers one example of such a fee structure. NAV CANADA is required by law to set rates for recreational and private aircraft in a manner that is not unreasonable and undue. It charges propeller aircraft weighing less than 2 metric tons (about 4,400 pounds) an annual fee of C$68 (US$59), and propeller planes weighing between 2 and 3 metric tons pay a C$227 (US$196) annual fee. Small propeller planes do not pay additional fees for using traffic control services, except when they fly to or from certain international airports.
For larger private planes and commercial aircraft, on the other hand, NAV CANADA charges fees that take into account aircraft weight and distance flown through controlled airspace. Rates, based on the maximum operating weight of each type of aircraft, are applied to a formula to assess each flight's costs for air traffic services. For example, a Boeing 737 flying from Toronto to Winnipeg may incur the following charges:
The total user fee for air traffic services provided for this hypothetical flight would therefore be C$1,089.21. The same route flown with a different aircraft would incur a different fee. Operators of smaller jets are permitted to pay a daily use charge that covers both en route and terminal services rather than fees based on weight and distance, and may find this more advantageous. For example, a 15,000-pound business jet making a round trip from Toronto to Winnipeg in a single day would incur charges totaling C$468.40 based on the aircraft's weight and distance flown, but the operator could elect to pay a flat daily charge of C$333 instead.55
The United States Air Traffic Service Corporation Act (H.R. 1441, 104th Congress) would have authorized the USATS corporation to impose fees on commercial air traffic for its services. Similarly, the Next Generation Air Transportation System Financing Reform Act of 2007 (H.R. 1356, 110th Congress) sought authorization for FAA to implement a schedule of user fees for air traffic control in terminal, en route, and oceanic airspace. Most small general aviation aircraft would have been exempt from the fees, unless operating in busy terminal airspace, but would have paid higher fuel taxes.
A changeover to user fees to fund air traffic services could create uncertainty as to how other elements of FAA's budget, including airport improvement grants, would be paid for. Currently, AATF revenue collections fund these activities, while FAA operations are funded in part by Treasury general fund appropriations. Under a system in which an air traffic services corporation is funded by user fees, the AATF could be retained and the fee collection schedule revised to provide funding for airport improvements and FAA aviation safety and research and development functions. Alternatively, additional fee structures and funds could be established for these activities. However, attempting to encompass FAA funding in the user fee structure for an air traffic services corporation poses several challenges, as outlined below.
Funding stability has been one of the key challenges facing corporate air traffic entities, whose operations and fee structures fall under varying degrees of governmental economic regulation.56 In some cases, government overseers have blocked proposed fee increases, notably in cases where they perceived economic factors contributing to revenue declines to be temporary. Such restrictions can in some case have a destabilizing effect. For example, at its inception, NATS UK was restricted from raising rates beyond a certain level tied to retail price index.57 This proved problematic following the 9/11 attacks in 2001, when significant declines in commercial aviation activity led to revenue shortfalls for NATS UK.
Various countries have adopted different approaches to addressing the challenge of maintaining fiscal stability for air traffic service providers while controlling rates. NAV CANADA is required to set rates at reasonable levels commensurate with current and future financial requirements, but has been permitted to establish a formal rate stabilization account so it need not raise or lower rates every time air traffic declines or increases. New Zealand has approached this issue quite differently by giving Airways NZ more autonomous self-regulation with regard to fee setting. Under this arrangement, Airways NZ has entered into agreements with stakeholders to create a structure under which Airways NZ sets rates in a stabilized manner, applying excess revenues as adjustments or credits to reduce user charges in subsequent years. This approach, which yielded minimal increases in user charges during the post-2001 decline in air traffic, was lauded by the International Air Transport Association, an international trade organization for airlines, in 2003.58
One possible advantage of a private or corporate model would be the corporation's ability to issue equity and bonds. Advocates for corporatization or privatization argue that access to bond markets could provide capital to fund major technology upgrades and system modernization projects, such as the NextGen initiative. The ability to issue equity would be more significant if the corporation were to be under private ownership; shares of stock could be sold to attract additional participants to the ownership consortium, to compensate employees, or to acquire other companies.
In 1993, the National Commission to Ensure a Strong Competitive Airline Industry recommended that the corporate entity it proposed to establish within DOT have the ability to issue long-term bonds for capital purchases. Similarly, the United States Air Traffic Service Corporation Act (H.R. 1441, 104th Congress) would have given the proposed USATS corporation specific authority to incur debt through notes or other obligations either to the U.S. Treasury or to private entities through instruments such as corporate bonds. The bill would have capped the corporation's total outstanding balance on all debts at $15 billion. Plans to incur debt would have required the review and approval of the Secretary of Transportation under the proposal.
If it wished to give an independent air traffic control corporation the ability to issue bonds, Congress would face consideration of the tax status of those instruments. Publicly owned airports generally issue tax-favored municipal bonds to meet their capital needs; as investors are not liable for taxes on the interest payments, the issuers can obtain lower interest rates than are available with taxable bonds.
Privately owned companies and U.S. government entities, however, generally do not have access to the tax-exempt bond market. Unless Congress were to dictate otherwise, debt issued by an air traffic control corporation owned by private investors or by the U.S. government would be taxable to investors, requiring the corporation to pay higher interest rates than borrowers of similar credit quality in the municipal bond market. In addition, the corporation might have to pay higher interest rates on borrowings than the U.S. government itself, unless the government pledged its full faith and credit to servicing the corporation's debt. The United States Air Traffic Service Corporation Act (H.R. 1441, 104th Congress) would have specifically exempted the proposed USATS and interest on its debts from any state and local taxes, although the bill was silent with respect to federal taxes imposed on holders of the corporation's debt.
Initially, the workforce would change little under a gradual transition from FAA air traffic operations to an air traffic services corporation. The only source for sufficient numbers of qualified air traffic controllers and technicians would be FAA, and under any transition plan, the large majority of the FAA workforce (roughly 35,000 positions tied to air traffic services) would need to be shifted to the new corporation. The new management would face a need to maintain pay and benefits to assure workforce stability and continuity during the transition.
The situation might be different for management personnel, as the new organization might favor different managerial practices and approaches to meeting objectives. For this reason, reform proposals might include long-range plans for aligning the workforce with stated organizational objectives. These might involve performance-driven compensation, rewarding employees who achieve specific targets and deadlines, or providing wider incentive pay if the new organization reaches specified milestones for organizational change, cost savings, and system performance.
There is limited research on the experiences of other air traffic service providers who have transitioned from a government agency to a corporate entity. Anecdotal accounts of fiscal problems faced by corporate and private air traffic service providers suggest that the availability of start-up capital or other mechanisms to stabilize funding during the transition period may be important considerations. During the transition, a start-up fund or similar instrument may help assure that the entity has sufficient operating funds to stabilize itself in the case of unforeseen external events that could significantly impact revenues. Transition plans may therefore want to consider explicit provisions regarding financing for startup and transition costs and mechanisms to ensure the corporation's fiscal stability during the early years. The United States Air Traffic Service Corporation Act (H.R. 1441, 104th Congress) would have transferred from the AATF the obligated but unexpended balance of appropriations for air traffic services and facilities to the proposed USATS to cover the commencement of operations.
In general, FAA controllers and technicians, as government employees, are entitled to collective bargaining under the terms set forth in Title 5 U.S.C., Chapter 71. Labor organizations representing FAA employees, however, are prohibited from calling a strike, work stoppage, or slowdown, or organizing a picket that disrupts operations.59 President Reagan invoked these statutes in 1981, revoking recognition of the Professional Air Traffic Controllers Organization and firing controllers who continued to strike.
In contrast, corporations and labor organizations representing employees outside of government are generally covered under the labor provisions of Title 29 U.S.C., and in particular Chapter 7—Labor-Management Relations, of that title. In general, those provisions allow for lawful strikes or lock-outs as a measure of last resort once collective bargaining obligations have been met. A special provision in law requires a labor organization to give notification 10 days prior to striking, picketing, or engaging in any other concerted refusal to work at any health care facility.60 No similar provision currently exists for air traffic facilities. The United States Air Traffic Service Corporation Act (H.R. 1441, 104th Congress) would have given corporation employees the right to form a union and bargain collectively, but would have expressly prohibited strikes, work stoppages, or slowdowns. Airlines are generally covered under the Railway Labor Act, which bars strikes over minor disputes and permits them over major disputes only after all other negotiations and mediation procedures have been exhausted. The Railway Labor Act also gives the courts authority to order strikers back to work if legal conditions are not met. Such a framework could potentially be an alternative model for an air traffic services corporation, as it would not expressly prohibit strikes, but would place strong legal restrictions on such actions.
Currently, FAA promulgates orders and procedures governing air traffic operations and procedures for both ATO and contract towers. Internal oversight and disciplinary action are largely handled within FAA. However, broad oversight is provided by the DOT Office of Inspector General, as well as by the Department of Justice regarding matters of potential criminal wrongdoing.
FAA's current safety oversight of commercial airlines could readily serve as a framework for safety oversight of one or more air traffic services entities. Also, within the current ATO structure, FAA already oversees operations at federal contract towers, and it has processes in place for monitoring the safety of air traffic operations internally. These various elements could be combined to create safety regulations and policies for an independent air traffic services entity, whether it be a government corporation, a private corporation, or a public-private partnership.
Concerns over potential conflicts between safety and profit have been a central theme of criticisms of a corporate or private approach.61 NAV CANADA was structured as a nonprofit corporation to address concerns that profit motives could interfere with safety objectives. Other ANSPs, however, including NATS UK and skyguide in Switzerland, are operated on a for-profit basis.
Safety is not incongruent with for-profit models in aviation; the entire U.S. airline industry is privately owned, with a government agency, FAA, providing oversight. However, the analogy is imperfect because air traffic services typically exist as monopolies, similar to utility companies; the lack of competition eliminates the ability for a customer to choose a provider based on its safety record. Safety oversight of a for-profit monopoly air traffic services provider would likely rely predominantly on FAA oversight and enforcement, including fines or other punitive actions to address regulatory violations. Establishing the entity as a nonprofit organization, as NAV CANADA has done, may help improve cooperation among operators and regulators and improve safety culture. It is unclear to what extent, if any, profit motives may interfere with safety objectives.
Financial liability is a potential concern for a corporatized air traffic services entity. Tort claims may arise against the corporation. For example, if the actions of an air traffic controller are implicated in an aviation accident, individuals may seek restitution. Also, the corporation may be sued in response to its business practices. For example, if one airline perceives that traffic flow management practices at a particular airport disadvantage it by giving preferential treatment to a competitor, it could seek damages through the legal system.
Under current law, FAA is covered under the Federal Torts Claims Act (28 U.S.C. §§1346(b), 2671-2680), which defines the conditions under which tort claims involving property damage or loss, personal injury, or loss of life can be brought against federal agencies and employees.62 Under the Federal Tort Claims Act, the United States may not be held liable, although there are several exceptions. In contrast, a private company could be held liable under a much broader array of scenarios under certain state and federal laws as well as under civil torts.
The United States Air Traffic Service Corporation Act (H.R. 1441, 104th Congress) would have made the Federal Tort Claims Act applicable to activities of the proposed United States Air Traffic Services Corporation. Additionally, it sought to establish a formal legal framework for suits against the corporation challenging final orders or procedures regarding air traffic control. Under the proposal, the corporation would be represented in the courts by the Department of Justice. However, with the consent of the Attorney General, the corporation could contract for legal services or employ its own attorneys. The proposed legislation would have prohibited the use of the Judgment Fund of the United States for satisfying the payment of any claims against the corporation, thus appearing to leave the corporation fully at risk for liabilities against it.
Equitable treatment of all airspace users could be an important concern under a corporate air traffic services model. This would especially be the case if certain airspace users, such as airlines, were to own a significant portion of the entity's voting shares or to control a large proportion of the seats on the corporate board. Absent restrictions, such an entity could potentially favor commercial airline traffic over general aviation traffic, or could put a new passenger air carrier at a disadvantage by making its planes fly less favorable routings than competitors. Legislation to corporatize or privatize air traffic services could include provisions to safeguard against discrimination in the delivery of air traffic services.
Airports that receive federal funding are required to provide equitable, nondiscriminatory access to national airspace system users under specific grant assurances. Specifically, 49 U.S.C. §47107(a)(1) mandates that such airports "be available for public use on reasonable conditions and without unjust discrimination." Provision (a)(2) of that section requires that air carriers "be subject to substantially comparable charges" for similar use of the airport and its facilities. These provisions generally provide a framework under which federally funded airports must provide equitable treatment to all users of that airport. Similar provisions governing access to airspace and air traffic services could be included in legislation seeking to create an air traffic services corporation.
Canadian legislation has addressed the issue of price discrimination by requiring that NAV CANADA's fees be set so as to not differentiate among air carriers, including both foreign and domestic carriers. The fees must also be applied uniformly throughout Canada. Additionally, charges imposed on recreational and private aircraft must not be unreasonable or undue.
Another consideration is the adequacy of coordination with military, law enforcement, and emergency management agencies that may require access and utilization of air traffic service facilities, equipment, and data. In some cases, coordination with military and law enforcement, and homeland security agencies such as Customs and Border Protection and the U.S. Coast Guard, would be important considerations to assure access to airspace surveillance data that may be collected or stored by the corporation. Such data could be important for law enforcement and homeland security functions, particularly monitoring of airspace activities in proximity to U.S. borders and over territorial waters.
The United States Air Traffic Service Corporation Act (H.R. 1441, 104th Congress) would have required the USATS corporation to develop processes for assigning military personnel within the corporation, continue to share logistics and command and control systems with the military, and share aircraft tracking data with law enforcement agencies at no cost to track drug smuggling. The act would have authorized the President to transfer functions of the corporation to the Department of Defense in the event of war or national emergency.
| 1. |
Federal Aviation Administration, A Plan for the Future: 10-Year Strategy for the Air Traffic Control Workforce, 2014-2023, 2014 CWP, Washington, DC, 2014, http://www.faa.gov/air_traffic/publications/controller_staffing/media/CWP_2014.pdf. |
| 2. |
Glen A. Gilbert & Associates, Aviation Consultants, The Future ATC System: Inside or Outside FAA (Executive Summary), http://digitalcollections.library.gsu.edu/cdm/ref/collection/PATCO/id/143568. |
| 3. |
Theresa L. Kraus, The Federal Aviation Administration: A Historical Perspective, 1903-2008, Federal Aviation Administration, 2008, https://www.faa.gov/about/history/historical_perspective/. |
| 4. |
Robert W. Poole Jr., Air Traffic Control: The Private Sector Option, Heritage Foundation, Backgrounder No. 216, October 5, 1982. |
| 5. |
National Academy of Public Administration, The Air Traffic Control System: Management by a Government Corporation, March 1986. |
| 6. |
President's Commission on Privatization, Privatization: Toward More Effective Government, Report of the President's Commission on Privatization, March 18, 1988. |
| 7. |
The National Commission to Ensure a Strong Competitive Airline Industry, Change, Challenge, and Competition: A Report to the President and Congress (Washington, DC: USGPO, 1993). |
| 8. |
Ibid., p. 8. |
| 9. |
Vice President Al Gore, From Red Tape to Results: Creating a Government that Works Better and Costs Less, Report of the National Performance Review (Washington, DC: USGPO, 1993), pp. 60-61. |
| 10. |
Ibid., p. 60. |
| 11. |
U.S. Department of Transportation, Growing to Meet Global Competition: Clinton Administration's Initiative to Promote a Strong Competitive Aviation Industry, January 1994. |
| 12. |
Phil Boyer, "President's Position: Black Thursday," AOPA Pilot, February 1994, p. 2. |
| 13. |
Memorandum from James L. Oberstar, Chairman, Aviation Subcommittee, House Committee on Public Works and Transportation, U.S. House of Representatives, to Aviation Subcommittee Members, Re: Reorganization of the FAA, February 25, 1994. |
| 14. |
U.S. General Accounting Office, Air Traffic Control: Observations on Proposed Corporation, GAO/T-RCED-94-210, May 12, 1994. |
| 15. |
Ibid., p. 15. |
| 16. |
Stephen D. Van Beek, FAA and Aviation Policy Reform: Now Is the Time, FAA Management Advisory Council 2011-2013, Washington, DC, January 29, 2014. |
| 17. |
Phil Boyer, "President's Position: Black Thursday," AOPA Pilot, February 1994, p. 2. |
| 18. |
Susan Carey and Andy Pasztor, "Sparks Fly on Privatizing Air-Traffic Control," Wall Street Journal, August 24, 2014. |
| 19. |
See, especially, P.L. 104-264 §253; 49 U.S.C. §40122. |
| 20. |
Elliott Sclar, Pitfalls of Air Traffic Control Privatization, Columbia University and the HDR Management Consulting Group, Report Commissioned by the National Air Traffic Controllers Association, February 2003. |
| 21. |
Justin Bachman, "Should the U.S. Get Out of the Air Traffic Control Business?" Bloomberg Businessweek, September 23, 2013. |
| 22. |
International Civil Aviation Organization, ICAO's Policies on Charges for Airports and Air Navigation Services, Eighth Edition, Doc 9082, 2009, http://www.icao.int/publications/Documents/9082_8ed_en.pdf. |
| 23. |
Office of Management and Budget, Living Within Our Means and Investing in the Future: The President's Plan for Economic Growth and Deficit Reduction, September 2011, pp. 22-23. |
| 24. |
National Civil Aviation Review Commission, Avoiding Aviation Gridlock and Reducing the Accident Rate: A Consensus for Change, Washington, DC, December 1997, http://www.library.unt.edu/gpo/NCARC/reports/pepele.htm. |
| 25. |
Executive Order 13180, "Air Traffic Performance-Based Organization," 65 Federal Register 77493-77494, December 11, 2000. |
| 26. |
Office of Inspector General, U.S. Department of Transportation, Safety, Cost, and Operational Metrics of the Federal Aviation Administration's Visual Flight Rules Towers, Report Number AV-2003-057, September 4, 2003. |
| 27. |
U.S. Contract Tower Association, U.S. Contract Tower Association Annual Report 2013, http://www.contracttower.org/ctaannual/13CTAannual.pdf. |
| 28. |
CRS Report R43021, Proposed Cuts to Air Traffic Control Towers Under Budget Sequestration: Background and Considerations for Congress, by [author name scrubbed]. |
| 29. |
Statement of The Honorable Calvin L. Scovel III Before the Committee on Transportation and Infrastructure, Subcommittee on Aviation, United States House of Representatives, The Conversion of Flight Service Stations From FAA to Contract Operations, Office of Inspector General, Department of Transportation, CC-2007-102, October 10, 2007, https://www.oig.dot.gov/sites/default/files/FSS_Testimony_Web_File.pdf. |
| 30. |
Ibid. |
| 31. |
Adrian Schofield, "ADS-B Unleashed," Aviation Week and Space Technology, April 27, 2009. |
| 32. |
Although there is no uniform consensus regarding the boundaries of sovereign airspace, it is generally considered to correspond with recognized land borders between countries and the limits of territorial waters extending 12 nautical miles from a country's coastline. While no agreement exists regarding the vertical extent of sovereign airspace, common references include a 50-vertical-mile extent and a 62-mile altitude (the Kármán line), both well above the operating altitudes of controlled civilian air traffic, generally below 60,000 feet (roughly 11 miles high). |
| 33. |
Civil Air Navigation Services Organisation (CANSO), Global Air Navigation Services Performance Report 2013: 2008-2012 ANSP Performance Results, Transpolis Schiphol Airport, the Netherlands, January 2014, https://www.canso.org/sites/default/files/Global%20ANS%20Performance%20Report%202013.pdf. |
| 34. |
U.S. Government Accountability Office, Air Traffic Control: Characteristics and Performance of Selected International Air Navigation Service Providers and Lessons Learned from Their Commercialization, GAO-05-769, June 2005, http://www.gao.gov/assets/250/247283.pdf. |
| 35. |
Ibid. |
| 36. |
NAV CANADA , "NAV CANADA Announces Agreement with Iridium To Launch Satellite-Based Aircraft Tracking," press release, June 19, 2012, http://www.navcanada.ca/EN/media/Pages/news-releases-2012-nr21.aspx. |
| 37. |
Airways New Zealand, A Strategic Vision of Air Traffic Management in New Zealand to 2015 and Beyond, Second Edition, Christchurch, New Zealand, May 2009. |
| 38. |
Airservices Australia, Airservices Annual Report 2012-13, http://www.airservicesaustralia.com/wp-content/uploads/Annual_Report_2012-13.pdf. |
| 39. |
DFS Deutsche Flugsicherung GmbH, DFS Deutsche Flugsicherung: A Brief Portrait of the Company, October 2012, http://www.dfs.de/dfs_homepage/en/Press/Publications/dfs_kurzportraet_en.pdf. |
| 40. |
Stefan A. Kaiser, "Two Recent German Cases of Privatization: Air Traffic Control and the Space Agency," Air Law, vol. XVI, no. 3 (1991), pp. 12-32. |
| 41. |
German Federal Bureau of Aircraft Accidents Investigation, Investigation Report: Accident, 1 July 2002 (near) Ueberlingen/Lake of Constance/Germany, AX001-1-2/02, May 2004. |
| 42. |
See, e.g., National Air Traffic Controllers Association, Formalizing 'Inherently Governmental' Status of Air Traffic Services, http://www.natca.org/legislative_current_issues.aspx?zone=Legislative-Current%20Issues&pID=198. |
| 43. |
Peggy Hollinger and Elizabeth Rigby, "Nats Defends Air Traffic System as Failure Scrutinised," Financial Times, December 15, 2014. |
| 44. |
EUROCONTROL Performance Review Commission and FAA Air Traffic Organization System Operations Services, 2012 Comparison of Air Traffic Management-Related Operational Performance: U.S./Europe, 2013-AJR-887, Washington, DC, November 2013. |
| 45. |
Aircraft operated under instrument flight rules (IFR) are those under direct air traffic control procedures and separation standards. |
| 46. |
Glen McDougall and Alasdair Roberts, "Commercializing Air Traffic Control: Have the Reforms Worked?" (Legal Studies Research Paper Series, Research Paper 09-11, Suffolk University Law School, Boston, MA, 2009). |
| 47. |
Ibid. |
| 48. |
Michael W. Essner, "Air Traffic Control Service Quality in the United States and Canada: A Comparative Analysis Using the Servqual Model," (PhD Dissertation, Capella University, 2007). |
| 49. |
Anthony W. Adams, "The Effects of Air Traffic Control Privatization on Operating Cost and Fight Safety," Journal of Aviation/Aerospace Education & Research, vol. 14, no. 3 (Spring 2005), pp. 21-30. |
| 50. |
Glen McDougall and Alasdair Roberts, "Commercializing Air Traffic Control: Have the Reforms Worked?" (Research Paper 09-11, Legal Studies Research Paper Series, Suffolk University Law School, 2009). |
| 51. |
Ibid., p. 8. |
| 52. |
See CRS Report RL30153, Critical Infrastructures: Background, Policy, and Implementation, by [author name scrubbed]. |
| 53. |
CRS Report R43337, Public-Private Partnerships for Purposes of Federal Real Property Management, by [author name scrubbed] and [author name scrubbed]. |
| 54. |
CRS Report R43410, Highway and Public Transportation Infrastructure Provision Using Public-Private Partnerships (P3s), by [author name scrubbed]. |
| 55. |
NAV CANADA, Customer Guide to Charges (Effective November 15, 2013), Ottawa, ON, Canada, http://www.navcanada.ca/EN/media/Publications/Customer-Guide-Charges-EN.pdf. |
| 56. |
Ira Lewis, "Analysis of Alternative Institutional Arrangements for Reform of U.S. Air Traffic Control," International Public Management Journal, vol. 7, no. 3 (2004), pp. 385-414. |
| 57. |
Ibid. |
| 58. |
Ibid. |
| 59. |
5 U.S.C. §7116, §7120. |
| 60. |
29 U.S.C. §158(g). |
| 61. |
See, especially, Elliott Sclar, Pitfalls of Air Traffic Control Privatization, Columbia University and the HDR Management Consulting Group, Report Commissioned by the National Air Traffic Controllers Association, February 2003. |
| 62. |
See CRS Report 95-717, Federal Tort Claims Act (FTCA), by [author name scrubbed]. |