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Air Traffic's Window of Opportunity

User fees can modernize, stabilize system

Robert Poole
May 9, 2005

America's air traffic control system is facing a perfect storm. The acknowledged funding gap over the next five years is $8 billion, and with business-as-usual budgeting, the shortfall could be as much as $25 billion over the next 20 years. This comes just as air traffic is making a strong rebound, but one in which passengers are flying in a changing mix of mainline, regional, corporate and micro jets and even air taxis. Add to that the impending retirement of two-thirds of the controller workforce, obsolescent facilities and equipment, and the situation looks bleak.

Yet the funding crisis is so severe that it is prompting efforts to think outside the box. At FAA's Trust Fund Forum in Washington Apr. 25-26, it became clear that the ATC system faces not one but two crises--not just in funding, but also in performance. And they are critically linked.

Yes, the promising new Air Traffic Organization (ATO) is starved of capital. But with its budget and priorities still micromanaged by Congress, its promise of being "performance-based" rings hollow with aviation users. Grandiose plans by the FAA's Joint Planning and Development Office (JPDO) to double or triple ATC capacity within 20 years have no credibility when users see the same old ways of doing business in place. As a result, though these users need and want the expanded system, they are reluctant to support the kind of root-and-branch funding reform that would provide the capital funding needed to bring it about. They understandably fear "feeding the beast": pouring new billions into an organization that has never been responsive to their need for more capacity at lower cost.

That's why the idea of carving out one of the existing tax revenue sources as a dedicated revenue stream for modernization bonds misses the point. Users rightly fear this would produce more examples of multi-billion-dollar cost overruns and multi-year schedule slips, while "modernizing" an ATC system that needs instead to have its basic modus operandi rethought. As one participant put it, "Why should we put billions into modernizing a bunch of centers we don't need?"

There is a powerful case, as sketched out by the JPDO, for changing ATC to a net-centric model, in which vastly more information is used to keep far more planes in a given chunk of airspace, safely (see p. 41). This means major changes in what facilities are needed (and where), as well as in how many and what kinds of people are needed, and what their roles are. But fundamental, performance-based change of this kind will not come about as long as members of Congress run the system, with their priorities being to protect jobs in their districts and ensure contracts for local firms.

The alternative, as recommended eight years ago by the Mineta Commission and implemented in nearly 40 other countries, is a self-supporting ATC system governed by and run for the benefit of its aviation customers. That means a real board of directors made up largely of airline and general aviation representatives. And it means funding that is outside the federal budget process, with charges for IFR services paid directly by the customers to the ATC provider (the ATO). That kind of revenue stream will be bondable, providing the large one-time investment needed to transform the system into something like that proposed by the JPDO.

With consolidated facilities and significantly more automation, unit costs should be dramatically lower than today. And the expanded capacity should eliminate the delays otherwise facing all users over the next 20 years. For the smaller aircraft that would likely pay more than they do today under the new system, those fees would be at least partly offset by fewer hours wasted in delays and circuitous routings.

Conventional wisdom says that getting the various aviation factions (ATA, ACA, RAA, NBAA, NATA, AOPA, etc.) together on anything--let alone a system where they would shift to dreaded "user fees"--is impossible. But times have changed. The airspace of the next few decades will increasingly be filled with very light jets, RJs and UAVs, in addition to conventional airliners. Without fundamental ATC reform, the limited system capacity will inevitably lead to forms of rationing, as we already see at Chicago's O'Hare. Every part of aviation that flies IFR and uses ATC extensively has a major stake in fundamental ATC reform. And every part of aviation must be prepared to pay its fair share, now that we will finally know what ATC services cost.

There's about an 18-month window of opportunity for the aviation community to come together in favor of a self-supporting ATC system operated by and for its customers. The existing excise taxes expire in Fiscal Year 2007. The replacement hiring and training of two-thirds of the controller workforce has already begun. Crucial facility replacement decisions must be made soon. And non-cost-effective "modernization" projects must be dropped to make way for those that are critical to the net-centric future system.

Finally, even if the aviation community can pull together to support this kind of reform, is there any chance of Congress letting go of budgetary control? There is, because they did it once before. In 1986, Congress was persuaded that keeping Dulles and National Airports as line-items in the FAA budget was starving them of capital and preventing them from truly serving their customers' needs. They were turned over to a newly created, stakeholder-controlled airports authority, and became fully self-supporting based on fees and charges paid by their users. The transformation of those airports in the ensuing 20 years speaks volumes about what we can do to transform air traffic control.

Robert W. Poole, Jr. is Director of Transportation Studies at Reason Foundation. A version of his air traffic control corporation concept was implemented in Canada in 1996. He has advised the Office of the Secretary of Transportation the White House Office of Policy Development, the National Performance Review, the National Economic Council, and the National Civil Aviation Review Commission on air traffic control.


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


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