May 2, 2017 / 6:31 PM / 4 months ago

U.S. air-traffic revamp is overdue for boarding

A plane passes in front of a full moon over New York City February 17, 2011.Eric Thayer

WASHINGTON/DALLAS (Reuters Breakingviews) - U.S. air-traffic control badly needs first-class treatment. Donald Trump's administration wants to privatize the organization that coordinates flights and manages often antiquated systems. The Federal Aviation Administration, currently in charge, has faced obstacles in trying to upgrade its 1940s-era technology, a project estimated to cost about $35 billion. Canada pioneered a self-funding, stakeholder-governed model. A similar approach could work for the more complex American system if carriers, politicians and the like can dump their baggage.

In most ATC operations across the United States, flight patterns are still organized on paper strips and passed by hand from one controller to another. The old-school radar used to mark planes with dots on screens can be off by as much as three miles.

There were nearly 40 million flight movements in the United States in 2015, according to the FAA. Of the much smaller number of commercial flights, over 80 percent arrive on time, according to the U.S. Bureau of Transportation Statistics, but that's still a lot of delays. Though the FAA is gradually upgrading its technology, almost a quarter of the late arrivals are attributed to air-traffic control – and that doesn't include late-arriving aircraft, some of which may be delayed by ATC, as well. Those advocating for a new system – including airlines as well as the administration – say that the GPS capabilities of cell phones are more sophisticated than the technology that organizes U.S. air traffic.

An overhaul has been proposed multiple times since the 1990s, but policy and funding have been at the mercy of a dysfunctional Congress. The FAA was partly shut down in 2011 because of political budget squabbles, and in 2013 more than 15,000 employees, including 3,000 safety inspectors, were temporarily put on leave. Right now, Washington will probably rely once more on short-term budget extensions, and without a longer-term deal something similar could happen again.

Trump has likened U.S. airport infrastructure to "a third-world country," while U.S. Transportation Secretary Elaine Chao said at the Milken Institute conference on Monday that action on air-traffic control was overdue. It's true that plenty of other nations have jumped ahead with ATC technology. Dozens have upgraded their systems in recent decades. The UK is the only one that now has air traffic managed for profit within a public-private partnership, a model dating back to 2001. Other countries such as Germany and Australia have adopted government-owned company models, though Australia is considering a shift to something more like Canada's private, non-profit structure. A key feature that differentiates all of them from the FAA is that all of them are self-funded.

In Canada, legislators worked with the airline industry and other stakeholders to put air-traffic control into a private corporation. Nav Canada, as it's called, started in 1996 with a $2.3 billion bank loan, overseen by a board made up of airlines, government representatives, unions and other stakeholders. Roughly 6,000 employees were plucked out of the public sector and moved into the corporation. Nav Canada has since shed 25 percent of those workers. The company is self-funded through user fees and bonds, and profit is plowed back into improving infrastructure and services. In 2016, Nav Canada reported revenue of C$1.4 billion ($1 billion) and net income of C$37 million.

The shift meant Nav Canada no longer had to rely on the government for funding, and the accompanying upgrades in technology and efficiency improved the ATC picture in several ways. Required distances between airplanes have been reduced, helping to relieve bottlenecks, according to Nav Canada. Routes have gotten shorter too, decreasing fuel usage. It develops software inhouse, which Nav Canada sells to other ATC operators.

The FAA has more than nine times Nav Canada's roster of air-traffic controllers and a much bigger budget, but Nav Canada is more productive. It clocks 1,900 flight hours per controller each year versus just above 1,800 hours for the FAA, according to the Civil Air Navigation Services Organization. The U.S. air network is bigger and more complicated than Canada's – Nav Canada handles about 12 million flight movements each year – but similar improvements ought to be there for the taking.

The problem is getting the various U.S. stakeholders to agree. Even airlines, all of which want improved technology, don't see eye-to-eye on how this should be achieved. Bill Shuster, who leads the U.S. House Transportation Committee, has proposed a similar structure to Canada's. His initiative has fresh momentum thanks to the administration’s backing. Some U.S. airlines like Southwest and American Airlines support Shuster's plan but Delta, for one, has publicly opposed it, preferring upgrades within the existing FAA framework.

One issue is cost. Delta argues that air travelers would end up covering ATC fees which could rise by 20 percent or more in a privatized system versus the existing system. Direct comparisons are hard to come by, but an Eno Center for Transportation study in February suggested the all-in cost in privatized markets is lower than the full U.S. tax burden for equivalent flights.

Another point of contention is the control of a new U.S. ATC system. Shuster's proposal last year – he is working on a new one – was for a 13-member board representing the government, air-traffic controllers, pilots, four airlines and others. One danger of this allocation would be an even greater concentration of airline-industry power with the largest U.S. carriers, which already have big market shares.

One way or another, tens of billions of dollars are needed to upgrade air-traffic control across the United States. Because the beneficiaries – air carriers and, ultimately, passengers – are easily identified, it's also a good candidate for a full or partial privatization that removes the funding burden from government and the political drag from air-traffic management. The benefits would far outweigh the costs of any compromises airlines, lawmakers, unions and everyone else involved might have to make.

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