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Reason Foundation

Air Traffic Control Reform Newsletter #24

Topics include: lessons from flight service station outsourcing; FAA's budget woes; increasing controller productivity through technology; and why more flight levels aren't producing expected time savings.

Robert Poole
February 1, 2005

In this issue:

Lessons from Flight Service Station Outsourcing

FAA pulled off a big win by putting the operation of its obsolescent Automated Flight Service Station system out for competitive bids. Thanks to lively competition among bidders given a relatively free hand to think outside the box, Lockheed Martin's winning bid will provide improved services to pilots and major cost savings to taxpayers over the 10-year term of the contract.

The contract involves 58 Flight Service Stations: physical facilities staffed by 2,500 flight service specialists. They provide weather briefings, flight plan filing services, and other assistance almost exclusively to private pilots. Though the cost of operating this program has been between $500 and $600 million per year, the fuel taxes paid by the private pilots who are the system's customers generate only about $60 million per year. That gross disparity led even major private pilots' organization, AOPA, to favor the outsourcing process, in hopes that a modernized, lower-cost program would be able to survive in an FAA under severe budgetary pressures.

The winning bid looks like it will deliver. The $1.9 billion contract, over 10 years, should save FAA $2.2 billion net—i.e., the cost will be cut by more than half. The two keys to these savings are better technology and facility consolidation. In addition to putting in state-of-the-art computers and displays, Lockheed Martin will close down 38 of the 58 facilities, running the program out of just 20 locations. One casualty of that change will be that the two percent of pilots who liked to get "walk-in" briefings will no longer be able to do so (but can get phone and on-line services like everyone else). But that�s a small price to pay for such major improvements. Under the contract, Lockheed is contractually committed to achieving a variety of performance goals that should mean better services to its pilot customers. AOPA is cheering the promised improvements, as well it should, because the program will continue to operate without charging anything to pilots.

And it looks like the consolidation can be carried out with minimal layoffs. First, Lockheed will offer all the positions it needs in the consolidated facilities to current FSS employees. Second, about half the current employees will become eligible to retire over the next few years, as the consolidation takes place (by March 2007), and many are expected to retire. Third, FAA is encouraging those interested and qualified to apply to become air traffic controllers; about 400 are already certified, and the agency is waiving its normal age-31 limit for new hires. Fourth, FAA is also giving FSS employees preference to fill other openings within the Air Traffic Organization.

What can we learn from this successful outsourcing? First, competition works, especially if it permits bidders to think outside the box. There are many more opportunities for outsourcing within FAA, where not only new technology but restructured services could be procured. Second, modernization is not just new equipment. It's taking advantage of new technology to rethink old ways of doing things—such as having facilities spread all over the country just because that's the way it's always been done. There are huge opportunities for facility consolidation in air traffic control, as overseas ATC corporations in Australia, Germany, South Africa, and the U.K. have already realized. And third, at a time of massive upcoming retirements, modernization and facility consolidation can be accomplished without painful and disruptive layoffs.


More Budget Woes Facing FAA in FY 2006

The proposed $13.78 billion FAA budget is 0.6% less than last year's, which spells trouble for an agency beset by soaring air traffic and the return of serious congestion. In the same week the budget was released, DOT announced that 21.9% of all major airline flights arrived 15 or more minutes late last year, one-fifth more than in 2003 and back to the record high levels of 2000, a year we'd all rather forget. And taxi-out times reached an all-time high, averaging 16.2 minutes last year.

To cope with all this, FAA's budget calls for a 6.5% increase in Operations (mostly payroll). The Airport Improvement Program (AIP) takes a 14% hit, to $3 billion, which will mean less funding for critical runway expansions. And the critically important account for modernizing the agency's still antiquated technology, called Facilities and Equipment, gets another 3% cut, on top of last year's 12% cut.

Controllers' union president John Carr was quick to attack the Operations budget plan for hiring just 595 new controllers, when the agency's own 10-year plan for coping with the huge upcoming controller retirement wave calls for hiring 1,249 in FY 2006 (it's right there on page 7 of the 95-page plan).

Perusing the agency's FY2005 and FY 2006 "Budget in Brief" documents, I note that even this very lean budget may be over-optimistic on the revenue side. Last year's document had estimated that Aviation Trust Fund income for FY2004 would total $10.5 billion, but the actual total turned out to be $9.7 billion. The new budget is based on estimated income of $11.9 billion, but for the first time there is no breakdown of how much of this would come from each of the various aviation user taxes. And this year's budget also relies on further drawing down the dwindling balance in the Trust Fund, leaving an uncommitted balance of just $1.2 billion by the end of FY 2006. (Just three years before, that number was $3.9 billion.)

In other words, this is not a sustainable path, financially. They can't raise the ticket tax, because so many airlines are broke (and are already poised for war against the Administration's proposed increase in the TSA-related security tax). In today's deficit-reduction climate, they can't hope for more from the general fund. And there's only $1.2 billion left in the Trust Fund to draw against to balance the '07 budget. Yet somehow funds have to be found to hire and train about 1,200 controllers per year over each of the next 10 years. And major technological modernization has to somehow be funded during this same time period.

Clearly, it's time for some outside-the-box thinking on how to pay for air traffic control. A forthcoming Reason Foundation report will address this subject.


Using Technology to Increase Controller Productivity

If you've spent time in a control tower (or read a book such as Paul McElroy's novel TRACON), you know that basic flight information is recorded on paper strips, which are passed from hand to hand. But overseas, that process is being replaced by sophisticated display systems, which are leading to a growing number of "paperless" towers. Aviation Week (Jan. 31, 2005) reported that London's Stansted airport tower introduced such an Electronic Flight-Progress Strip system last November, and it will be rolled out at Gatwick mid-2005 and Heathrow in 2006.

The UK's ATC corporation, NATS, has adapted the system developed by Nav Canada in 1998, which is called EXCDS (Extended Computer Display System). EXCDS is operational in 11 towers in Canada, including Calgary, Montreal, Toronto, and Vancouver. The system brings together information that was previously assembled from several different systems. At Stansted, for example, it draws upon not only NATS's National Airspace System but also Eurocontrol's integrated flight processing system and the airport's gate information system. NATS reports that despite some initial reticence, controllers are generally positive about the new system. It's been well-accepted in Canada, too.

Nav Canada has found that in large towers, the use of EXCDS saves four to five people per tower—the controller assistants whose main function is to handle paper strips. Freeing up controllers in this manner could make a big difference as the ATO attempts to cope with shortfalls stemming from the impending retirement bulge and its limited ability to hire and train replacement controllers.


More Flight Levels--but Are There Really Time Savings?

On January 20th, the FAA implemented new 1000-foot altitude separation in the airspace between 29,000 and 41,000 feet, known as Domestic Reduced Vertical Separation Minimums (DRVSM). Historically, separation at those altitudes was 2,000 feet, because 20th-century altimeters got less accurate at higher altitudes, and the normal 1,000-foot spacing used at lower altitudes was considered too difficult to maintain. But with more-accurate altimeters and other equipment, the world began the switchover several years ago: the North Atlantic in 1997, Australia and the Pacific in 2000, and both northern Canada and Europe in 2002. So the FAA was a bit late to the party, but better late than never.

The doubling of flight levels at the altitudes where most airliners fly should be a big plus. First, it means a potential doubling of en-route capacity, at a time when flight numbers are steadily increasing. Secondly, it offers the potential of saving time and fuel, as more planes can fly at "optimum" altitudes in terms of winds and aircraft performance. FAA's cost-benefit study cited net savings from these purposes (after the $900 million cost to users to equip their planes) of $5.3 billion over 10 years—a benefit to cost ratio of nearly six to one.

But as usual, the devil is in the details. In the past two weeks, I've been hearing from pilots and dispatchers asking: where's the beef? So far, they see no signs of time or fuel savings, because the rest of the ATC system is not equipped to take advantage of what the new altitudes offer. For example:

It pains me to report these things, because DRVSM is a great step forward, and was implemented smoothly and competently. But if the rest of the system continues to operate unchanged, we will not see anywhere near the $5 billion in promised benefits.


News Note

Single European Sky Design to be Outsourced. Eurocontrol is going out to bid for the design of Europe's future air traffic control system. The agency invited bids from coalitions representing a wide variety of industry groups. The winner will come up with the overall concept and will deliver a European Air Traffic Management master plan. This "definition phase" of the Single Sky program is due to be completed by 2007. Bids will be accepted through April 5th, the contract negotiation is expected to take six months, and the definition work itself is planned for 18 months. One team, the Air Traffic Alliance, has already lined up over 40 members, headed by Airbus, EADS, and Thales. It includes Boeing ATM, 11 airlines, five large hub airports, 10 ATC providers, and several other aerospace firms.

ATC Corporations Team Up to Redefine Airspace. Part of the plan for Europe's Single Sky is to redefine the airspace, disregarding national borders in favor of "functional airspace blocks." Corporatized ATC providers are keen to position themselves for key roles in the redesigned system. Thus, last week the UK's NATS and the Irish Aviation Authority announced a joint study of one such block, to be carried out by Helios Technology Limited. Germany's DFS is reported to be holding talks with ATC providers in the Benelux countries about forming another such airspace block.


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


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