President Trump kicked off infrastructure week on Monday, June 5th, by proposing to corporatize the U.S. air traffic control system, shifting about 35,000 workers, including unionized traffic controllers, technicians, and others, off of the government payroll, and removing the Federal Aviation Administration from its role operating the business that it regulates. It’s an idea that has been in the national discourse since at least the 1980’s, and is supported by the major U.S. airlines and other key industry players, including the union representing air traffic controllers.
Under the administration’s proposal, some of the FAA’s current responsibilities would be shifted to a newly formed federally-chartered private nonprofit corporation. The shift would be a reorganization, not an asset sale, with assets transferred to the new nonprofit corporation at no charge, over a three-year transition period. The nonprofit corporation would be governed by an 11-15 member board comprised of representatives of aviation stakeholders, including airlines, airports, ATC employees, private-plane groups, and others. Funding for air traffic control currently is reliant on the vagaries of the government’s budgetary process, with taxes collected on fuel and airline tickets. Under the proposal the taxes would be eliminated and the corporation would be funded based on a customer user-fee model to be established by the board. Proponents argue that the nonprofit corporation would be better able to enter into long tem commitments because it wouldn’t be dependent on annual appropriations, which would expedite modernization of the system, help address the shortage of air traffic controllers, improve safety, and reduce costs.
In part, the proposal is inspired by NAV CANADA, the world’s first fully privatized civil air navigation service provider, created in 1996 through the combined efforts of commercial air carriers, general aviation, the Canadian government, employees and unions. NAV CANADA is the world’s second-largest air navigation service provider, managing 12 million aircraft movements a year for 40,000 customers over 18 million square kilometres. NAV CANADA’s revenues come from aviation customers, not government subsidies. It aims to keep customer charges stable and improve safety and flight efficiency by investing in operations and controlling costs. Its services encompass air traffic control, flight information, weather briefings, aeronautical information, airport advisory services and electronic aids to navigation.
NAV CANADA’s 15 member Board of Directors is elected by key stakeholders, all of whom are Canadian citizens and member s of the company: four elected by commercial carriers through the National Airlines Council of Canada; one elected by business and general aviation through the Canadian Business Aviation Association; three elected by the government of Canada; two elected by employee unions; four independent Directors elected by the Board; and the CEO. The corporation has a 20 member advisory committee of aviation professionals elected at its annual meeting.
In announcing the administration’s plan to spin off U.S. air-traffic control from the FAA, the president’s top infrastructure adviser, D.J. Gribbin, said You have what is in essence a technology business embedded in a governmental agency. NAV CANADA’s success in developing and marketing its suite of products and services illustrates Mr. Gribbin’s point. NAV CANADA developed its own advanced air traffic management (ATM) technology, NAVCANatm, including integrated ATM products, applications and services that is sold internationally and deployed at more than 100 sites worldwide.
Canada is only one of many jurisdictions that have effectively privatized air traffic control. Other successful examples include Austria, Germany, New Zealand, and Switzerland. A 2005 study in the Journal of Aviation/Aerospace Education & Research determined that privatization of those systems into quasi-governmental corporations resulted in increased flight safety. As of 2005, three out of four of the countries experienced an increase in efficiency. Two of the countries indicated a decrease in ATC operating cost, while one experienced an increase in ATC operating cost. Results suggested that applying corporate personnel management techniques increased safety and efficiency. All of the subjects indicated that increased safety resulted from quicker equipment modernization that was not possible under previous bureaucratic governmental procurement policies. Corporate procurement procedures for equipment reduced operating cost. The study concluded that reduced cost and increased safety would result from applying those models to the U.S.
Privatization and corporatization of the U.S. air-traffic control system may be an idea whose time has finally come. Variations on the idea have been successfully implemented around the world. However, the U.S. is not Canada, and whether or not, and to what extent, these models successfully translate to the vast network of the ATC System that the FAA operates all 50 states, Guam, American Samoa, Panama and Puerto Rico, may soon be demonstrated.
Nossaman’s 30-plus infrastructure attorneys offer clients, colleagues, strategic partners and industry media a wealth of practical experience, insider insight and thoughtful analysis here on Infra Insight. We blog about what we know best, from industry-leading procurements to local and national policy developments that affect the market and our clients.