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Reason Foundation

Air Traffic Control Reform Newsletter #4

Topics include: expanding airspace capacity via RVSM; NATCA's last-ditch defense of "inherently governmental;" the real story behind the NATS "bailout;" and other news.

Robert Poole
February 1, 2002

In this issue:

Expanding Airspace Capacity via RVSM

January 24 saw the successful implementation of the largest single increase ever in European airspace capacity. The upper airspace of 41 European countries will have 20 percent more ATC capacity by September, when the new system is fully phased in. Called reduced vertical separation minimums (RVSM), the new approach reduces the required vertical spacing in the airspace between 29,000 and 41,000 feet from 2000 ft. to 1000 ft. That adds six flight levels to the upper airspace, for a very significant increase in capacity. Eurocontrol estimates that the average annual cost savings to users—from delay reductions and fuel savings—will be 3.9 billion euros ($3.5 billion).

RVSM has been in existence for some time on the North Atlantic, implemented by the corporatized ATC providers Nav Canada and NATS. And Nav Canada announced last month that it will bring RVSM to northern Canada's airspace as of April 18th.

As for the United States, whose FAA still claims to be the world�s most advanced ATC provider, the current target date for RVSM is sometime in 2004. However, that date can hardly be considered firm, given (1) FAA's track record for implementing system improvements on schedule, and (2) lobbying efforts by operators of older business jets who don't want to spend the money to equip their planes for safe operation under RVSM standards or operate at lower, less-efficient altitudes, either.

Interestingly, the successful implementation of RVSM overseas punctures several myths and misconceptions that were common in last year's debates over corporatization of the U.S. ATC system. First, you'll recall the party line from NATCA and AOPA that fixing the ATC system would not increase capacity; what we needed instead was "50 miles of new runway." In point of fact, a 20 percent increase in upper-airspace capacity is pretty impressive—and it's happening now, not someday, maybe.

Second, we heard repeatedly that comparisons with overseas ATC corporations were irrelevant because no other country has the amount of air traffic that we do. Some of us argued at the time that the relevant standard was not the gross amount of traffic, but its density and complexity. In this regard, here's an excerpt from the Financial Times's January 26 article about RVSM's arrival in Europe:

Eurocontrol says the busiest "diamond" of airspace between London, Amsterdam, Paris, and Frankfurt is now treated as the approach to one big airport. Total traffic volumes are comparable to the eastern seaboard of the US, but aviation experts say there are few areas in the world where as much traffic converges on cities that are so close together.

And amazingly enough, to bring about the smooth implementation of RVSM, Eurocontrol had to coordinate with ATC authorities and companies in 41 separate countries! Since it already benefits from a "single sky," you�d think the FAA could have gotten the job done much sooner.


NATCA Still Singing that Tired Old "Inherently Governmental" Tune

Why has NATCA president John Carr managed to insert the phrase "inherently governmental" into practically every recent utterance? He did so on February 6th in a news release denouncing the President's 2003 budget language, and he did it again in touting a recent federal appeals court ruling that ordered the FAA to justify the legality its highly successful contract control tower program.

The answer is simple. Under long-standing administrative law, if an activity is ruled to be "inherently governmental," it cannot be privatized or outsourced under OMB's competitive contracting procedure, known as Circular A-76. NATCA cannot refute the DOT Inspector General's finding that the 209 contract towers are just as safe as comparable FAA-run towers—and cost only one-third as much to operate. So its only hope is to have the program declared illegal on procedural grounds. NATCA's court case has been dragging on for eight years, is still far from being resolved, and may ultimately fail. So NATCA got a better idea.

In the last few weeks of the Clinton Administration, the FAA was working with the White House on the Executive Order that would create the FAA's new Air Traffic Organization and appoint its Air Traffic Services Subcommittee. Carr and Jane Garvey went all-out to include the "inherently governmental" language in the Order (against strong internal opposition from the White House's reinventing government people). Carr and Garvey prevailed: the very first line of the Dec. 7, 2000 Order reads, "...the provision of air traffic services, an inherently governmental function..."

Fast-forward to 2002. "Competitive Sourcing" is now one of five pillars of the President's Management Agenda, a high-level government-reform effort throughout the federal government. Since the FAA's contract tower program is a showcase for the merits of competitive sourcing, it would be amazing if the Bush Administration let NATCA's game plan succeed. Consequently, we'd be surprised if there were not a revised E.O. before too much longer.


Britain's NATS—Is This Really a "Bailout"?

The most ambitious privatization of ATC thus far attempted was last summer's sale of 46 percent of the UK's already-corporatized National Air Traffic Services (NATS) to a group of seven UK airlines. The government retained 49 percent ownership, and the remaining 5 percent was given to employees. As has been widely reported, the post 9/11 collapse of North Atlantic commercial air traffic hit NATS revenue very hard, leading to several months of frenzied discussion of its financial crisis. Finally, last week, the government injected 30 million pounds into NATS, which is being matched by 30 million pounds from the airline shareholders, via the four banks which have provided a 1.46 billion pound debt facility for NATS. British newspapers, egged on by the UK controllers' union, are calling this a "bailout." But is it?

As the Financial Times noted in a Feb. 20th leader, the government is still the leading shareholder in NATS. When a company's business plan is thrown for a loop by external events beyond its control, it has several courses of action open to it. It can reduce its operating expenses, which NATS is doing: most of the new 60 million pounds will go for "redundancy payments" to staff being let go as NATS scales back operations to match lower volume. It can defer costly capital investment, which NATS is also doing: it has pushed back by several years the long-planned new ATC center in Prestwick. And it can try to increase revenues, which NATS is also doing: it is seeking relief from the original regulatory regime which called for 14 percent rate decreases over the next three years. The government has not yet made a decision on that request. But if all these measures are not sufficient, shareholders may need to step up to the plate. Which is what the government—as principal shareholder—has done, along with the airline shareholders. Far from being a "bailout," this is simply an ATC business adjusting to very difficult circumstances.


News Briefs

Employee-Sharing by ATC Corporations. From Europe comes news of a unique collaboration between corporatized ATC providers. Germany's Deutsche Flugsicherung (DFS) is suffering from a shortage of controllers, while the Irish Aviation Authority (IAA) is making the same kinds of cutbacks as NATS, due to traffic decreases. So the two companies have worked out a two-year deal. Seventeen IAA controllers will be loaned to DFS until June 2004, working at the Bremen, Frankfurt, Langen, and Munich control towers. Last month the 17 began a six-month training program at the DFS Academy, which will give them DFS certificates. Yet another example of the flexibility gained by shifting from a bureaucratic to an entrepreneurial corporate culture.

More ATC Corporation News. The world's newest full-fledged ATC corporation is Oro Navigacija Lithuania. It met all the requirements (arms-length separation from aviation regulatory agency, self-support from user fees, etc.) for full membership in CANSO (Civil Air Navigation Services Organization) and was accepted as a full member in February. That brings the number of full members to 27. Another 30 ATC agencies of various kinds, including our own FAA, qualify as associate members. One of those, HungaroControl, completed its separation from the Ministry of Transport on Jaunary 1, 2002 and aims for full corporatization within 18 months. A complete listing of CANSO members can be found at www.canso.org.

Radio Interview with FAA Innovator. The head of the FAA's Logistics Center, Norman Bowles, will be the featured interviewee on PWC's "Business of Government" radio show, to be broadcast in Washington, DC on Saturday, March 9th, at 8 AM. Under his leadership, the Logistics Center has been "reinvented" over the past five years, shifting to user-based funding and creating a much more performance-based organization. The Center won the President's Quality Merit Award for 2000 as a result of these changes.


Notable and Quotable

A Feb. 26th article in New Straits Times (Malaysia) focused on concerns of the Star Alliance airlines over ATC and airport charges around the world. It included the following:

The January issue of Airline Business, in an article on the 36-hour strike by French air traffic controllers, included the following:


[Note: Back issues of ATC Reform Newsletter are available by email, upon request.]


Robert Poole is Searle Freedom Trust Transportation Fellow and Director of Transportation Policy


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