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Reason Foundation

Air Traffic Control Reform Newsletter #90

FAA reauthorization, aviation emissions trading war, ATC user fees, Europe's next-generation milestones, ERAM woes and FAA shortcomings

Robert Poole
February 24, 2012

In this issue:

One Cheer for the FAA Reauthorization

After 23 extensions since the nominal expiration of the last FAA authorization (Sept. 30, 2007), Congress finally enacted and the President signed the bill. Despite some blather by politicians about how the bill opens the door to ATC modernization by fully funding NextGen, the bill does nothing of the kind. In fact, it freezes for four years the FAA budget account (Facilities & Equipment) from which NextGen projects (and a lot of other capital expenditures) are paid for. All the other main accounts are also frozen for four years—airport grants (AIP), operations (mostly payroll), and research (tiny), making this the first FAA reauthorization ever that does not increase spending.

Actually, however, the impact is worse than flat. That’s because the largest budget category, the $9.6 billion per year Operations account, almost certainly will not remain at that level during the four-year period. Doing so would mean violating the terms of the FAA’s union contracts, which provide for annual increases in compensation. Hence, when Congress each year gets around to appropriating the money for FAA, if it sticks with the overall $15.9 billion per year FAA budget total, something else will have to be cut if Operations goes up each year. It won’t be AIP, because that is the one category that is on the “mandatory” side of the budget. The Research account is too small to matter. So the account that takes the hit will be—you guessed it-- Facilities & Equipment (a.k.a. NextGen). Just to illustrate the magnitudes, assume the Operations budget increases by 5% in each of FY2013, 2014, and 2015. By FY2015, it would have increased from $9.653 billion to $11.174 billion, and the four-year difference would be $3.024 billion. Subtracting that from the budget’s  four-year total for F&E ($10.906 billion) would reduce F&E to $7.872 billion over four years. So FAA would have to defer some $3 billion of F&E projects into future years, further stretching out the transition to NextGen. (And this example ignores the possibility of across-the-board cuts in all federal discretionary spending as a future deficit-reduction measure.)

Given this dismal outlook, one of the few good elements of the bill is its approval of provisions aimed at facilitating equipage of aircraft to operate in a NextGen environment. For example, last year Nexa Capital Partners proposed an innovative NextGen Equipage Fund. This is a creative effort to resolve the conundrum faced by airlines when deciding when to make the capital expenditures to equip their planes with systems to interface with NextGen systems such as ADS-B, DataComm, etc. Airlines (and business jet operators) rightly fear that if they act too soon, FAA will fail to deliver operational programs that interface with their new onboard gear. So the Equipage Fund would buy the hardware from suppliers and get it installed on aircraft fleets, but the aircraft operators would not start making lease payments until the FAA capability was operational (i.e., they would start paying only when they started to get benefits from the new systems). That model would leave the Equipage Fund holding the bag in the event of FAA delays. Fortunately, the bill provides for equipage loan guarantees from the government. That should enable the Equipage Fund (and others) to get moving on NextGen equipage—assuming DOT and FAA make it a priority to get the loan guarantee provision up and running.

Aviation’s Emissions Trading War

Many readers have asked my thoughts on the current battle over the European Union’s attempt to force non-EU airlines to buy emissions permits for all their flights to and from Europe (and for the total miles flown, not just the miles flown in Europe). So even though this issue relates only at the margin to air traffic control, here is my take on it.

First, to my non-lawyer mind, it seems outrageous to expect non-EU airlines to pay Europe for miles flown outside EU airspace. Second, since every EU member state is a member of ICAO (the UN agency set up to deal with international aviation issues) and a signatory to its Chicago Convention, airlines and non-EU governments are quite justified in arguing that international airline emissions should be dealt with via ICAO rather than being unilaterally imposed by one subset of countries. So in general, I’ve been glad to see serious opposition from the strange bedfellows opposing the EU plan, including the governments of the United States, China, Russia, India, Brazil, Saudi Arabia, the UAE, etc., along with IATA, Airlines for America, and the Association of European Airlines. I view the February 24th “Moscow declaration” outlining a raft of possible retaliatory measures as a positive development.

Second, let me call your attention to a Feb. 13th article in the Financial Times, “Emissions Trading: Cheap and Dirty,” which warns that the EU’s Emissions Trading System (which they are trying to force airlines into) is on the verge of collapse. In principle, economists can show modeling results that portray either emissions trading or a carbon tax as providing equivalent incentives to reduce the targeted emissions (in this case CO2). In the real world, however, an emissions trading system appears to be far more vulnerable to political pressures to treat different industries differently, and to provide arbitrary schedules for what fraction of permits must be purchased as opposed to being handed out at no charge—and the EU system has been rife with both.  As the FT article notes, “The EU’s experience reveals the problem with relying on policymakers to make the long-term projections that underlie such a complex and sprawling market—particularly in the midst of wrenching economic changes and relentless pressure from corporate lobbyists.”

An especially serious problem for aviation is the volatility of emission permit prices. In recent trading, they have hit as low as €7 per metric ton, compared with a peak of nearly €30 in July 2008. That kind of volatility makes it very difficult for an airline to forecast its operating costs, notes economist Kevin Neels of the Brattle Group in Washington, DC. By contrast, a carbon tax that applies the same rate to all users of energy would be far more predictable. Economist Jan Brueckner of UC Irvine agrees that the price fluctuations of a cap-and-trade system could be problematic for airlines. He notes that in 2009 the EU system would have imposed permit costs equal to 24% of an airline’s per-passenger fuel bill, versus about 8% at current emission permit prices.

And airlines should not look to biofuels for a near-term alternative. In his article “Fueling Debate” in Aviation Week’s Oct. 24/31, 2011 issue, Robert Wall reported that at then-current biofuel prices, using biofuels would cost more than €300 per metric ton of CO2 reduction. Only massive government subsidies could make that an affordable option for airlines.

Despite all the posturing, there are signs that an ICAO alternative is under development, aiming for release around the end of this year. “Market-based measures” are under serious consideration, ICAO Secretary General Raymond Benjamin told Aviation Daily last month. And in mid-February, the European Commission’s director-general for mobility and transport, Matthew Baldwin, said the EU is “not wedded” to its emissions trading system for aviation, and would be willing to consider an ICAO alternative.

The most straightforward alternative would be something like the World Bank proposed recently in its “Mobilizing Climate Finance” report: a $25/ton carbon tax. That study estimated that this would increase ticket prices a modest 2 to 4 percent, while reducing aviation emissions 5 to 10 percent. If all signatories to the Chicago Convention could agree on that plan, with each member applying it within the airspace for which it provides air navigation services, we would have the basis of a simple, fair, and predictable global carbon-reduction system for aviation.

Congress Further Undermines ATC User Fees

While the White House has once again trotted out its dead-on-arrival proposal for a $100 per flight “ATC user fee,” Congress has provided an even better illustration of why we should never trust it to enact real user fees in support of the ATC system.

The dirty deed was done in the recently enacted FAA reauthorization bill. As you will recall from last summer, the original House bill called for phasing out an egregious subsidy for small towns called the Essential Air Services (EAS) program. That bill reduced the annual amount of funding for EAS over a four-year period, at which point the program would sunset (except for Alaska and Hawaii). It was one aspect of this plan that led to the two-week partial shut-down of the FAA last August, when the Senate refused to accept an extension measure that included a modest restriction on EAS.

The proposed House-Senate compromise on EAS showed the program shrinking somewhat over four years, from $193 million in FY2012 to $143 million in FY2015—a taxpayer savings of $111 million over four years. And the original breakdown from the Conference Committee showed those annual numbers as the sum, each year, of two components: $50 million in mandatory spending (from overflight fees) and the balance as discretionary spending. (Overflight fees are cost-based charges applied to international flights that make use of the FAA’s air traffic control services while flying over--but not landing in--the United States.)

Taxpayers for Common Sense (TCS), which has been fighting EAS subsidies for years, dug a little deeper. They noted that the final conference report specifies that revenue from overflight fees is “immediately available” for use in EAS, as it was under the previous FAA authorization. But thanks to a recent FAA rulemaking, overflight fee revenues will increase dramatically during the four fiscal years in question. Instead of the $200 million that would have been collected under the previous formula ($50 million per year), the expected total will now be $365 million. Thus, instead of a decrease in EAS funding of $111 million over four years, there will now be an increase of $165 million over that same period.

Overflight fees are the only example of the FAA’s Air Traffic Organization actually charging users for the services it provides to them. Yet instead of these funds going to shore up the agency’s squeezed ATC budget, our elected representatives have decided instead to use those dollars providing subsidies for small-town air service. All of which demonstrates why Congress should not be in charge of creating ATC user fees.
 
The whole world—except us--charges airspace users for air traffic control services. And the U.S. position at ICAO and elsewhere has strongly supported such fees. But those charges are a direct payment for services received by airspace users only in the 50+ countries that have de-politicized the provision of air traffic control. How can you tell the difference? Follow the money. If the proceeds from ATC charges go into the government’s budget and must be allocated by a legislative body, those are not user charges: they are taxes. But if they go directly to the air navigation service provider (ANSP) to pay for the costs of ATC provision—and only those costs—they are real user fees (like utility bills). And in the best-run ANSPs, the airspace users are represented on the ANSP’s board, ensuring proper governance.

At the very least, Congress should promote transparency by funding EAS subsidies out of the general fund and devote overflight fee revenues to the costs of operating and maintaining the ATC system.

Europe Reaches Milestones Toward Next-Generation ATC

In the past six weeks, several milestone accomplishments have occurred in Europe, marking real progress toward the EU version of NextGen—the Single European Sky. The first of these was the first test flight of an airliner in regular airspace using four-dimensional (4-D) air traffic management. The plane was Airbus’s specially equipped A320 and the February 10th flight originated at Toulouse, flew to Copenhagen and then on to Stockholm. The test flight verified the automated exchange of data between the plane’s flight management system (FMS) and ATC centers on the ground, via digital datalink. On the first leg, the airborne and ground systems agreed on the required time of arrival at a merging point near Copenhagen Airport. After entering Danish airspace, the A320 made a continuous descent approach toward the airport but then climbed and changed course for Sweden, negotiating a second time constraint for a merging point near Stockholm’s Arlanda Airport. It then proceeded to land at Arlanda. The test validated the ability of the aircraft to comply with time constraints negotiated, via automation, with the relevant control centers, and is an important step towards routine 4-D flight operations in European airspace (three dimensions in space plus time).

Late last year DFS, the German ANSP, switched on its new air traffic management system for upper (en-route) airspace. Called P1/VAFORIT, it is designed for 4-D operations, with automatic digital data exchange with adjacent centers in other countries, controller-pilot data link (fully operational by next month), and the elimination of paper flight strips. The system gives controllers early alerts of possible conflicts, enabling them to take action at an early stage. It also allows for much greater use of direct routings, which save time and fuel. As part of transitioning to P1/VAFORIT, DFS will be shifting all en-route operations to its Karlsruhe center early next year. This will involve relocating 95 controllers from their current center in Munich (about 284 km. away).

The third milestone also took place in Germany: the first fully certified GPS augmentation system for precision landing approaches, known as a ground-based augmentation system (GBAS). The Honeywell SmartPath system became operational at Bremen Airport on February 10th, after several years of testing with Air Berlin and TUIfly. DFS told Aviation Daily that Air Berlin has been approved for unlimited use of the GBAS with its 737 fleet. The SmartPath  system was certified as a primary landing system at Bremen by Germany’s aviation safety regulator, the Federal Supervisory Authority for Air Navigation Services. The single GBAS can support up to 26 approaches to different runways, is less affected by weather and obstacles, and costs less to acquire and maintain than a 20th-century instrument landing system (ILS). The initial certification at Bremen is for Category 1 landings, but DFS expects certification for the more- demanding Cat. 2 and Cat. 3 operations by mid-decade. DFS plans to remove its ILSs once all aircraft are equipped for GBAS landings.

Honeywell reports that a GBAS it has installed for Airservices Australia at Sydney Airport is expected to be certified by June, and the certification process for Cat. 1 GBAS operations is also under way in Spain and Sweden. As I reported here some months ago, the first GBAS installed in the United States, at Newark Airport in 2009, is still not certified due to continued interference from GPS jammers used by truck drivers on the nearby New Jersey Turnpike. In addition, the Government Accountability Office reports that the FAA’s progress with GBAS has been delayed due to budget cuts. (See GAO-12-48, November 2011)

ERAM Woes Illustrate FAA’s Underlying Procurement Problems


Not wanting to beat up on the FAA in every issue, I have held off writing about a whole series of reports from the DOT Office of the Inspector General and the Government Accountability Office since last summer. These have included OIG reports faulting FAA’s approach to System Wide Information Management (SWIM)—AV-2011-131 from last June, OIG’s report on FAA’s inadequate acquisition workforce—ZA-2011-148 from last August, GAO’s report on delays in NextGen programs--GAO-12-141T from last October, and last week’s GAO-12-223 on 30 ATC acquisition programs, finding half behind schedule and one-third experiencing significant cost overruns. The worst part of this is that similar reports were being written in the 1980s, when I first began researching air traffic control. The recent reports sound very familiar, with only a new set of acronyms as newer acquisitions take the place of older ones.

Rather than trying to summarize all of those, I’d like to zero in on one of the most serious problem procurements, En-Route Automation Modernization (ERAM). Its troubles have been documented by OIG and GAO, but the most succinct summary I’ve seen appears in the February 1st issue of Avionics Today: “ERAM Troubles” by Callan James. The intent of ERAM is to replace the ancient software at the 20 en-route centers with state-of-the-art software that will interface with all the key NextGen programs: ADS-B, DataComm, SWIM, etc. The current system, called Host, is decades old and written in obsolete languages such as Jovial and Basic. ERAM is being developed in Ada, and was intended to be easily interfaced with and upgraded as the various NextGen systems are implemented.

FAA awarded a sole-source, 10-year, $2.1 billion contract to Lockheed Martin in 2003; after a protest by Raytheon, the latter was added as a subcontractor. James reports that the inquiry triggered by Raytheon’s protest revealed that “neither FAA nor Lockheed Martin appeared sure how the upgrade was to be accomplished,” except that ERAM would be implemented “incrementally.” The FAA’s team leader also stated that they did not know how the complex task of decomposing old software to get it to run on a new platform would be accomplished. Despite these uncertainties, the FAA did not conduct a risk assessment, which is most unfortunate.

It turns out that there was not a single Host system, but—in effect—20 different systems, each unique to the specific en-route center at which it is installed. The original software has been enhanced and patched numerous times at each site. Nevertheless, after Lockheed Martin completed the basic ERAM software, the FAA tested and approved it at its Atlantic City Technical Center in 2007. Big mistake. Because once they did that, all the modifications and tweaks necessary to customize ERAM for each of the 20 centers became add-ons to the contract. As you have probably read, the initial installations, at the relatively lower-traffic Salt Lake City and Seattle Centers, revealed the enormity of the problem. Although full implementation was originally scheduled to be achieved by the end of 2010 (at all 20 centers), that date has now been extended to 2014, and the OIG estimates the program will end up $500 million over budget. As of February 1st, ERAM has finally achieved initial operating capability at six additional centers (besides Salt Lake and Seattle), leaving only 12 more to go.

Unfortunately, by pursuing the implementation in this site-specific, incremental manner, FAA missed a huge opportunity to replace the jury-rigged patchwork that Host had become. Had the agency pursued the kind of ATC modernization being implemented by Airservices Australia, DFS in Germany, Nav Canada, and the UK’s NATS, it would have developed the new system starting from scratch and implemented it in a much smaller number of replacement centers. The software, displays, and procedures would be the same everywhere, and the new system could be operated in parallel with the old ones until it was fully tested and approved. At that point, the old system and old centers would be shut down, with the new system and new centers taking over.

ERAM will definitely be an improvement over Host, but nowhere near as big an improvement as it could have been. In that sense, it represents an enormous missed opportunity.

News Notes

Local Controllers Work for Fraport in Germany
News reports on the strike by “airport workers” at Germany’s largest airport, Frankfurt, revealed that most of them are “apron control” staff, though some are reported as working “in the actual air traffic control center”—presumably the tower. Thus, it appears that local ATC services in Germany can be provided by airport operators such as Fraport, rather than by the German ANSP DFS. Tower services are also open to competition in New Zealand, Spain, and the U.K., and will soon be in Sweden.

Feedback on DFS Continuous Controller Concept

My article last month on ATC without sectors, in which a flight would be handled by only one controller from take-off to landing, brought this response from a recently retired (U.S.) chief pilot: “[This] isn’t at all a new concept. It has been proposed many times since Glen Gilbert in the ‘30s. Further, it isn’t good enough. A 6:1 ratio [of planes to controllers] isn’t at all good enough to fix the problem. . . [which is] the ATS separation process. Specialists have to be the managers of an automated (RNP-based) trajectory separation process handling at least a ratio of aircraft to specialists of 100:1 . . . for it to even have a chance of being economic and safe (i.e., not cost far more per flight than is affordable).”

ADS-B Has 2013 Equipage Deadline in Australia
Aircraft operating above 29,000 feet in Australia must be equipped with ADS-B/Out by Dec. 12, 2013, Australia’s aviation safety regulator CASA has reminded users. The country’s equipage deadline is one of the earliest in the world. ANSP Airservices Australia says that over 70% of international flights in Australian airspace are already equipped, but many smaller airlines and business jets are not yet equipped. After the deadline date, non-equipped aircraft will be restricted to flying below 29,000 feet. Australia is moving faster than most on ADS-B because a large fraction of its airspace lacks radar coverage, and aircraft in that airspace must use procedural separation.

Contract Tower Program Tweaked by FAA Reauthorization
No major changes were made to the FAA Contract Tower Program in the final FAA reauthorization bill signed this month by President Obama. There were minor changes in the cost-share provisions, and regular safety audits of contract towers are now required. The final bill did not include a House-passed provision that would have allowed airports with low-activity VFR towers staffed by FAA to transition to contract tower status on request. As of the first of this year, there are 248 airports with contract towers, according to the 2011 Annual Report of the U.S. Contract Tower Association.

New Transponder Code for U.S. Gliders
For decades, glider pilots and aviation safety advocates have urged that gliders, because their flight characteristics differ considerably from those of powered aircraft, identify themselves using a different transponder code. The FAA has finally done so; as of March 7th gliders not in contact with an ATC facility should squawk 1202, rather than 1200 or 1201, making it easier for controllers to identify which blips are gliders. Surprisingly, “use of the code is encouraged but not required.”

CANSO Welcomes Two More Full Members
Last month the trade association for air navigation service providers welcomed two additional ANSPs as full members. They are the National Airports Corporation (NAC) of Zambia and PT Angkasa Pura II of Indonesia. NAC is a government corporation created in 1989 to operate Zambia’s four international airports and to provide air navigation services nationwide. Angkasa Pura II provides air navigation services in the Jakarta flight information region of western Indonesia. Angkasa Pura I provides comparable services in eastern Indonesia but has not yet joined CANSO.

Correction re Spanish Control Tower Outsourcing
In last month’s issue I reported that the winner in the bidding to operate the three control towers in the Canary Islands was SERCO. Several readers pointed out that the actual winner is a different company, SAERCO—“a small consultancy founded by two brothers in defense ATC partnered with the Czech ANSP.” I am happy to publish this correction and apologize to both companies for getting it wrong last month.

Quotable Quotes

“Cuts in system development budgets could also delay the schedule for harmonization [with Europe] and the realization of interoperability benefits. FAA officials told us that they normally absorb funding cuts by eliminating or delaying programs, with funding cuts taking precedence over previously agreed-upon schedules, even those whose schedules they have previously coordinated with Europe. For example . . . FAA is restructuring its plans for its ground-based augmentation system (GBAS) because of potential funding reductions. These officials said that FAA might have to stop its work on GBAS while SESAR continues its GBAS development, with the result that SESAR may have an operational GBAS, while FAA does not. A delay in implementing GBAS would require FAA to continue using the legacy Instrument Landing System, which does not provide the benefits that GBAS would provide . . . . Such a situation could further fuel stakeholder skepticism about whether FAA will follow through with its commitment to implementing NextGen, and in turn, increase airlines’ hesitancy to equip with NextGen technologies.”
--Government Accountability Office, “Next Generation Air Transportation: Collaborative Efforts with European Union Generally Mirror Effective Practices, but Near-Term Challenges Could Delay Implementation,” GAO-12-48, November 2011, pp. 24-25

“Basically, there is no way that any organization, fettered with federal personnel recruitment and management strictures, lack of accountability that prevents both punishment for poor performance and reward for achievement, systems and equipment procurement requirements, and day-to-day political meddling that constitutes FAA’s operating environment could pull [NextGen] off. Just about every element necessary for a well-managed enterprise is simply not allowed in the federal bureaucracy . . . . Organization structures, personnel decisions, penalties and rewards, hiring and firing, numbers of staff and their assignments are all subject to minute oversight by OMB and Congress. Processes for contracting and procurement are specifically prescribed and often undertaken by other agencies altogether. Finally, there’s the funding issue . . . . In what normal enterprise does a major undertaking like NextGen have to move forward with no ability to anticipate from one time period to another (usually less than one year at a time) how much money will be available to the company? How do you do planning and programming of any kind?”
--David Z. Plavin, former Director of Aviation for the Port Authority of New York & New Jersey and former President of Airports Council International-North America, in online aviation discussion group, Oct. 10, 2011 (used by permission)


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


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