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Reason Foundation

Airport Policy and Security Newsletter #27

Topics include: landing fees at general aviation airports; the expanding Registered Traveler program; countering shoulder-launched missiles; airport privatization poison pill; and other news.

Robert Poole
July 1, 2007

In this issue:


Why Not Landing Fees at General Aviation Airports?

The vast majority of U.S. airports serve "general aviation"—i.e., non-airline flights. Such flights range from single-engine piston planes owned by individuals or flight schools to business jets and turboprops and on-demand air taxi services. And if any of the proposed very light jet (VLJ) air-taxi business models succeeds, there could be a lot more demand from that promising sector.

Yet unlike airline-service airports, most GA airports do not charge landing fees. Instead, they struggle to make ends meet by charging tie-down and hangar rental fees, and making money from the fixed base operators (FBOs) that sell fuel and offer other services to private pilots using the airport. One estimate is that only about 20% of large GA airports charge landing fees, and hardly any medium or small ones do. Among other things, this means that itinerant aircraft operators (ones not based at the airport) may pay little or nothing to use a GA airport, especially if they don't always buy fuel there.

The consequences of not charging landing fees go beyond revenue shortfalls. By not systematically recording which planes come and go, GA airports are falling short in the security area. One estimate is that 10 to 15% of all aircraft landing at GA airports are not accounted for. And since many of these airports don't have control towers, or don't have tower operations at night, it's anyone's guess who may be landing and taking off there.

In the past few years, at least two companies have emerged to assist GA airports in identifying and, if they wish, charging fees to all aircraft using their airport. TTI Wireless has put its focus on aircraft monitoring, for security and other purposes, including billing. Its WASP system records the N-number which is required by law to be stenciled on the side of every plane operating in U.S. airspace. WASP uses a set of infrared detectors and wireless digital video cameras to record the tail numbers of all incoming and outgoing aircraft. The images are transmitted to a central WASP database to be matched against FAA's global database of all N-registered aircraft; they are also scanned against FAA and TSA watch lists. TTI offers a subscription service that provides the airport with the details of each operation, including the aircraft owner, for billing purposes. An article in Airport Magazine (October/November 2006) identified four GA airports that have implemented the system thus far: three in TTI's home state of North Carolina and one in Florida.

The other company is Virginia-based Vector-US, Inc. While it also offers airfield surveillance systems, it puts a particular focus on landing fees. Its FlightRev system is a turnkey approach that identifies each aircraft by tail number, bills the operator, and collects the fees. Because Vector offers a service, rather than a product, there is no capital cost to the airport and no need for any airport staff to do the billing. Vector makes its money as a percentage of what it collects and remits to the airport. The company says that its system determines each aircraft's model, its billable weight, and real operator, "to ensure that an accurate bill gets in the ands of the person who will pay it." The company's showcase FlightRev installation is at Hanscom Field, near Boston, where they are collecting about $2 million per year in landing fee revenue.

Ironically, I've heard that the Aircraft Owners & Pilots Association (AOPA), which has been railing against any and all proposed user fees for air traffic control, has been giving GA airport managers a hard time on the subject of instituting landing fees. This is ironic, because one of AOPA's priorities is the survival of GA airports, many of which are threatened with closure because the city government in many cases has to subsidize them, and they could realize substantial property tax revenue if the land were converted to other uses. Making GA airports robustly self-supporting is in the interest of GA pilots everywhere, and landing fees would contribute significantly to that goal.

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Registered Traveler Program Builds Support

With summer travels leading to renewed gridlock at some airport security checkpoints, frequent travelers can only cheer the growth in airport participation in the Registered Traveler program. It's operational now at Cincinnati, Indianapolis, JFK, Newark, Orlando, Reno, and San Jose, with startups coming later this year at Albany, Atlanta, Denver, Huntsville, Jacksonville, Little Rock, San Francisco, and Washington Dulles and Reagan National. These services will be provided by any of five companies approved by the Transportation Security Administration, and will be fully-interoperable. That means my Clear card will be good at every airport participating in the RT program, regardless of which company is operating at a particular location.

Some airport managements, and the Air Transport Association, are still not convinced that RT is a good idea. A tourism, hospitality, and leisure survey commissioned by Deloitte Touche recently found that 61% of travelers were unaware of the program. And when those travelers had RT explained to them, only 17% expressed interest in joining. This despite that same survey's finding that "long lines at checkpoints" was their most common travel complaint. A broader survey of airline passengers, by Gallup, found that security hassles was by far the number one complaint about air travel.

I'm not too surprised by those findings. The target audience for RT has never been all air travelers; rather, it's frequent air travelers (like me), the vast majority of whom travel on business and cannot afford to waste their time standing in lines. That's why I was glad to see the Business Travel Coalition take a strong stand in favor of expedited RT deployment. In a widely circulated article, BTC's Kevin Mitchell called on airlines to support this goal, citing Southwest chairman Herb Kelleher on how critical to airline profits the last six passengers on a flight can be. Security hassles have led to a reduction in airline mode share (in favor of driving) for short-haul air travel in the years since 9/11. And "the aggravation and unpredictability of the security process continue to suppress demand from the business traveler segment throughout the country." ("Gridlock Inside the Airport," Kevin Mitchell, Aviation Daily, June 22, 2007.)

Additional support is coming from the Discover America Partnership, which has called for an international version of RT for frequent international visitors. And in Canada, both the Canadian Airports Council and the Air Transport Association of Canada are pressing the government to approve a Canadian RT program similar to that in the United States. The Toronto airport signed up with Verified Identity Pass back in March 2006, but has been unable to implement the Clear program, pending government approval. And that still seems a ways off. Transport Canada blandly responds to inquiries by saying that "The Canadian Air Transport Security Administration is facilitating discussions with the industry to develop a proposal to implement." So Canadian frequent flyers shouldn't expect action any time soon.

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Countering MANPADS Still a Conundrum

Man-Portable Air Defense Systems (MANPADS) are systems like the shoulder-fired Stinger missiles the U.S. government provided to the mujahedin fighters against the Soviet invasion of Afghanistan. Hundreds of thousands of them are unaccounted for in various countries, and some fraction of them are in the hands of various terrorist groups. What to do about this threat to commercial airline activity still divides defense and security people, and for good reason.

There seem to be three possible alternatives, other than doing nothing. The most-discussed is to equip the entire U.S. airliner fleet with protective systems that could defeat the homing system (usually infrared) on these missiles. The second is to protect airports—generally meaning only the ones handling the large majority of all passenger service. The third is for the government to take aggressive action to reduce or eliminate the supply of MANPADS in non-military hands.

The threat is real, and the consequences of a successful attack on a U.S. airliner, especially in U.S. airspace, would be very large. But based on the relative handful of MANPADS attacks on airliners worldwide thus far, the probability of such an attack still seems very low. Hence, this seems to be another case where it's important to find an approach that gives the maximum bang for the buck.

I'm still not persuaded that equipping all airliners passes that test. Rand Corp. has estimated that the 10-year cost of installing and maintaining the systems would be about $38 billion. I've seen more recent estimates that the operating and maintenance costs could be in the range of $1.5 million per plane, per year. To put that number in perspective, an aviation consultant recently estimated, for a 350-seat aircraft flying 5,000 miles/day, 350 days per year, this would work out to 0.24 cents per available seat mile. At an average load factor of 80%, that's 0.3 cents per passenger mile. Doesn't sound like much till you scale that up to actual flights. A thousand-mile flight means $3 extra per passenger; a 2,500-mile transcon flight requires an added $7.50/passenger. That's a far cry from the $1/passenger number thrown around by aerospace firms, based only on the one-time cost of purchasing and installing their systems.

Compared to that, I've written before about more cost-effective ground-based airport-protection systems like Raytheon's Vigilant Eagle and Northrop Grumman's Skyguard. Now the Homeland Security Dept. is about to fund studies of another airport-specific alternative. Project Chloe would station unmanned aerial systems (UASs) at 60,000' over major airports, equipped with sensors and a laser jammer. This sounds very, very technically challenging, given the huge coverage area, the very quick reaction time needed, and the danger of inadvertently hitting an airliner with the laser beam. But such a high-altitude spotter might be a useful adjunct to a ground-based system. It will be interesting to see the results of the study, for which a contract is due to be awarded in September.

Meanwhile, there is some progress on the effort to take existing MANPADS out of circulation. In January President Bush signed legislation authorizing the State Department to "secure, remove, or eliminate" MANPADS and other weapons that pose a proliferation threat, and declares it to be U.S. policy to hold governments accountable if they provide MANPADS to bad guys. And Aviation Daily reported (June 20th) that the House will meet the President's request for funds to buy up MANPADS and similar weapons. The program in question is reported to have already acquired and destroyed 17,000 of the missiles.

I'm glad Congress wasn't stampeded into imposing a hugely costly mandate on the airlines. And it's good to see useful research still going on to try to figure out the best way forward on this troubling issue.

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Airport Privatization Poison Pill in House Bill

Lost in media coverage of the controversial provisions in the House FAA reauthorization bill that would rescind the current air traffic controller contract provisions, and another that would remove Federal Express workers from being covered by the Railway Labor Act, someone sneaked in a nifty little attempt to destroy the Airport Privatization Pilot Program. Sec. 143 of the bill doesn't repeal the 1996 legislation that allows up to five airports to be privatized via long-term lease. No, it just tries to make such deals impossible. First, it increases the already difficult requirement that lease terms be approved by airlines representing 65% of the annual landed weight at the airport in question; the new approval requirement would be 75%. But the real killer is making the privatized airport ineligible for Airport Improvement Program grants.

Now you might think, OK if the airport is going to be private, let it be truly private. But those airport grants are not some kind of gift from the Great White Father in Washington, DC. The source of that money is (primarily) the passenger ticket taxes we all pay each time we fly. Those funds go exclusively into the Aviation Trust Fund, which is the source of funding for AIP grants. Thus, passengers at a privatized airport would still pay the same aviation excise tax—they'd just get nothing back for it. This is simply an ideological assault on airport privatization, whose authors did not have the courage to propose repealing the 1996 law outright. By contrast, the Administration's reauthorization proposal had sought to beef up the Pilot Program by eliminating the airline approval requirement and expanding the number of slots in the program from 5 to 15.

This latest action shows how completely out of step the United States is with the global trend of airport privatization. A January report from the Centre for Asia Pacific Aviation found that 2006 was the second-busiest year for airport privatization worldwide since 1998, with 15 major airports or airport groups privatized (compared with 21 in 1998). In developed countries, "privatization can help avoid additional debt; transfer risk and/or responsibility in an operation; and introduce efficiencies that improve financial performance," said David Bentley, author of the report.

And a major new study by Arthur D. Little, analyzing the performance of recently privatized airports, found that airports perform better with investor ownership. "Costs are better controlled and productivity goes up," author Laurent Delarue told Air Transport World. "Cost reduction is as important as revenue increase to improve EBITDA [earnings before interest, taxation, depreciation and amortization]," generating 50% of the average EBITDA increase.

To be sure, airlines are never happy about rate increases, and the International Air Transport Association has been outspoken over what it considers unjustified increases at some privatized airports. But even IATA taxation chief Jeff Poole (no relation) concedes that "Of course every case is different, and in fact we do not really care who owns the airport." What really matters is whether there is an effective mechanism in place to limit increases to defensible amounts. As A. D. Little's Delarue points out, "privatization almost always comes with some investment program, therefore it is not so easy to say how [much] the increase in charges would have been if privatization wouldn't have occurred."

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News Notes

LAX Split Decision. The U.S. DOT upheld only part of its administrative law judge's May 15 ruling that rejected as discriminatory all the new lease rates and charges that Los Angeles World Airports imposed on airline tenants in certain terminals where their leases had expired (see Issue No. 26). It upheld LAWA's position on maintenance and terminal operations fees, but agreed that new fees relating to common areas were discriminatory because they did not apply to all airlines at LAX. Both the Air Transport Association and the Airports Council International cheered aspects of the decision.

New CRS Study on Terrorism. The Congressional Research Service has released a new report that appears useful. "Combating Terrorism: The Challenge of Measuring Effectiveness" points out that terrorism is a complex, multidimensional problem that requires responses that can adapt to "the evolving goals, strategies, tactics, and operating environment of the different terrorist groups." (www.fas.org/sgp/crs/terror/RL33160.pdf)

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Quotable Quotes

"In a global economy with mobile capital, it can be hard to say where ultimate ownership lies, anyway. The real test is whether a foreign buyer manages the investment in Britain well and improves productivity. ‘I don't mind if Spain owns Terminal 5 [at Heathrow] because they can't take it back with them,' says Sir Digby Jones, a former boss of the CBI [Confederation of British Industry]."
--"A Special Report on Britain," The Economist, Feb. 3, 2007

"One thing is certain: Airlines better get used to the idea that airports are shifting away from the traditional concept of public entity and moving into private ownership in whatever form this might be. The trend has become a near worldwide phenomenon."
--Cathy Buyck, "Public Monopolies, Private Profits," Air Transport World, June 2007.

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


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