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Airport Policy and Security Newsletter #57

Risk-based security for incoming travelers, registered traveler and Midway privatization

Robert Poole
May 7, 2010

In this issue:

A Small Start Towards Risk-Based Screening

One of my regular themes ever since the 9/11 attacks is that it is hugely costly and ineffective to treat all air travelers as equally likely to be a threat and therefore to subject everyone to the same level of airport screening. The rejoinder has always been that the alternative would be "profiling" which calls up the adjectives racial, ethnic, and religious . But my argument has been that a risk-based system should be based not on those factors but on behavioral and up-to-date intelligence information. So I was pleased by the Transportation Security Administration's announcement early last month of a new policy along these lines.

As you recall, after the Christmas underwear bomber incident, the TSA implemented the blunderbuss "14-country rule," under which all travelers heading for the United States who were born in or traveling through any of 14 countries (such as Yemen and Pakistan) would automatically get secondary screening before being able to board a U.S. flight. Not only was this discriminatory; it was also stupid. As former security official Stewart Baker put it in a blog post on April 3rd, "al Qaeda could avoid the policy just by picking a 15th country."

The new policy, which according to Baker was quietly put into place in February, does intelligence checks on all passengers heading to the United States and alerts the airlines to those it judges to need secondary screening. The new approach looks not only for known terrorist identities, but also for people about whom only fragmentary negative information exists. It was unveiled publicly on April 2nd, at which time the 14-country rule was officially scrapped. Baker speculates that the White House wanted to avoid looking soft on terror when it announced the scrapping of "14-country," so decided to unveil the formerly classified replacement policy at the same time. "Either that, or a leak forced a haphazard early announcement." (www.volokh.com/2010/04/03/what-is-tsa-doing)

However it happened, I will give two cheers to the administration for finally taking a meaningful step towards a risk-based screening policy. Why isn't TSA taking the next logical step and applying it also to domestic travelers? Baker notes that this approach can be applied more readily on international flights because everyone on them must have a passport-and passports are hard to forge. For domestic flights, most people present driver's licenses, quite a few of which are phony. But even if that remains an obstacle, the other end of the risk spectrum is to allow very low-risk travelers to opt-out from costly and time-consuming at-airport screening. That's the concept underlying "registered traveler" programs, the shifting fortunes of which are discussed in an article below.

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U.S. Airport Privatization Update

Chicago has received another extension of time from the FAA, enabling it to hang onto its slot for Midway Airport in the Airport Privatization Pilot Program. Sources tell me that Mayor Daley is leery of taking near-term action due to lingering negative reaction to his privatization of the city's downtown parking meter system last year. But investor interest in Midway appears to have revived, with the waning of the credit crunch. Bob Montgomery, vice president of properties at Midway's anchor tenant, Southwest Airlines, told LexisNexis that he has seen three "feasible" proposals from would-be acquirers recently.

Chicago holds the one slot in the five-slot pilot program that is reserved for "large hub" airports, as defined by the FAA. One slot is reserved for a general aviation airport, and Gwinnett County, GA has applied for that one for its Briscoe Field. Two other air-carrier slots are held by New Orleans (for Louis Armstrong International Airport) and Puerto Rico (for San Juan's Luis Munoz Marin International Airport), leaving one slot still vacant. When I was in New Orleans last month, one source told me an outside consultant study had recommended against privatizing the airport, and new mayor Mitch Landrieu, who took office on May 3rd, has not stated his position on the issue. Hence, no RFQs or RFPs have been issued yet. Puerto Rico, on the other hand, has an ambitious, across-the-board privatization agenda, of which the airport is just one component. Public Works Financing (April 2010) reports that the state has hired Credit Suisse as its advisor on privatizing the airport, and an RFQ is anticipated in the near future.

In response to my comments in last month's issue about the anti-privatization "poison pill" in the House bill to reauthorize the FAA, an attorney with considerable knowledge about infrastructure privatization (and familiarity with the Midway efforts) wrote to suggest that my concerns were overstated. On the airline approval requirement, he wrote that "I doubt that the [change to] 75% would have any significant impact. One of the lessons of Midway is that if you have a deal that is economically attractive to the airlines with the biggest economic stake, it will also be attractive to the others." And he followed up with some specifics from senior airline officials who are positive about Midway privatization.

On the other House bill provision, which would forbid Airport Improvement Program "entitlement" grants to airports privatized under the Pilot Program, he pointed out that any large airport which charges a passenger facility fee (PFC) of $4.50 (as Midway does) is only allowed 25% of its "normal" entitlement grant amount, and that the PFC provisions in the House bill would eliminate such grants for any large airport that charges a PFC higher than $4.50. He agreed with me that the elimination of discretionary grants for privatized airports is "offensive," but added that "a privately operated airport's ability to get such grants in competition with public airports has always been at best speculative, and no private operator could count on it, so I don't think it would really have an up-front impact."

I hope he's right, but I still think the House/Senate conference committee should reject those provisions; they send the wrong message, and nothing like them appears in the Senate bill.

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Three-Way Struggle to Revive Registered Traveler

In the past few months, more security experts have been speaking out in favor of implementing a meaningful U.S. registered traveler program. To many, the impending widespread use of body-scanners seems to have provoked more serious interest in exempting a significant fraction of regular travelers from such checkpoint hassles. That was part of the rationale set forth by Edward Luttwak of the Center for Strategic and International Studies in a Wall Street Journal op-ed January 19th. It was also part of the case for a "trust-based" screening system put forward by the Air Line Pilots Association in a January white paper, "Meeting Today's Aviation Security Needs."

We are still waiting for the administration to get a new TSA Administrator through the confirmation process, so that TSA can decide on the parameters of the replacement for the failed, non-risk-based "registered traveler" system whose providers' business models tanked last year. Meanwhile, the bankruptcy court last month finally settled the disposition of the assets of the principal former provider, Verified Identity Pass. The winner of its assets (the Clear membership list, the brand, and airport kiosks-but not the airport contracts, which were voided in bankruptcy) was start-up company AlClear. Runner-up was another start-up, Henry, Inc., which still hopes to operate a competing service. And former provider FLO Corporation, now teamed with Cogent Systems, ARINC, and RAM Associates, is also going forward with its own system, and has just announced its initial airport contract, with Indianapolis.

AlClear would appear to have an advantage thanks to acquiring the Clear assets. It plans to notify all former Clear members and give them a 30-day period in which to opt out, in which case their biometric data (fingerprints and iris scan) will be destroyed. Otherwise, per the bankruptcy judge's ruling, they will be deemed to have consented to become members of AlClear's new program. Those who go with AlClear "will receive the service without cost for a number of months equal to the number of months that remain on the transferred customer's original membership agreement contract." Those who opt out, however, will apparently receive no refunds.

In the absence of a TSA decision to do meaningful background checks on members, the only thing these companies will be able to offer is "head of the line" access, not exemption from any of the standard checkpoint rigamarole. So it's not obvious that AlClear, for example, can get enough people to pay its announced price of $179 per year. Still, for many busy frequent flyers, not having to factor a large amount of "buffer time" into how early to get to the airport may be worth it.

But this kind of time-saving for frequent travelers will add nothing to aviation security,  because the TSA will still be devoting just as much resources to each RT member as it devotes to every other traveler. That is not the kind of risk-based screening that ALPA, Luttwak, and Poole are calling for.

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PFCs, Projects, and Earmarking

Last month's article in support of Congress allowing airports to charge higher passenger facility charges (PFCs), as is provided for in the House reauthorization bill, brought emails from several airport directors.

One explained that while I emphasized needed terminal expansions as a major use of PFC monies by the airports that levy them, PFCs can be used for a wide variety of airport projects. Provided the project can get the "multiple levels of approval from the airlines, the FAA, and the airport governing board," PFC monies can be used for new baggage systems, snow removal equipment, fire and rescue equipment, and security upgrades in addition to terminal expansion.

Another airport director pointed to a darker aspect of PFCs. Large or medium hubs that levy PFCs (as nearly all do these days) must give up 50% of AIP entitlement funds (with a $3 PFC) or 75% if the PFC is at the highest level currently allowed: $4.50. And if the House provision to increase the ceiling to $7 is enacted, then large airports charging that would have to give up 100% of entitlement grants. But since Congress is not reducing the size of AIP, the pool of funds available to Congress to earmark will increase considerably. To use this director's own words, "Congress is playing the usual shell game that results in the members putting more federal tax revenues at their disposal that they can channel as they wish to help themselves get re-elected. They don't care whether the projects are justified or unjustified; they just want the credit for 'bringing home the bacon' to trumpet to their constituents."

What an interesting contrast this all makes with Canada. Our northern neighbor's aviation law allows airports to collect an Airport Improvement Fee (AIF) for capital-improvement projects. Like our PFC, it is bondable, and can therefore be used to pay debt service on airport revenue bonds. The list of eligible projects is negotiated with the airlines at the airport in question. And note this: each airport decides on the level of its AIF. The article from which I got this information focused on the Quebec City airport, whose AIF as of last summer was C$20 per departing passenger. Now that's decentralization!

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Separate Terminals for Low Cost Carriers

Low cost carriers (LCCs) have become a global phenomenon, with many examples in North America, Europe, and the Asia-Pacific region. More recently, we have been seeing airports actively seeking to be attractive business partners for LCCs, offering less-expensive facilities tailored to quick turn-arounds and therefore charging less than would be the case if those airlines used regular terminals.

This phenomenon takes two forms: low-cost terminals and low-cost airports. An article in Issue No. 3 of Big Pond Aviation's newsletter spotlights several recent examples of the former. Privatized Copenhagen Airport is completing its new CPH Swift low-cost pier this year. The six-gate facility will open in the third quarter, with an initial capacity of 6 million annual passengers. It will be open to all airlines meeting a set of requirements, including a maximum turn-around time of 30 minutes. Another such low-cost-carrier terminal (LCCT) is under construction at Kuala Lumpur, Malaysia, to replace its original (full-up) LCCT which opened in 2006. One new LCC airport is Uppsala Airport north of Stockholm, Sweden, which started operations this spring. And India has given the OK for a new LCC airport near Jaipur, to be open by 2014.

Back in February 2008 the Centre for Asia Pacific Aviation published what I think is the first-ever report on Low Cost Airports and Terminals. Last October it published a revised edition, more than 300 pages long. It includes 10 pages on "demands placed on airports by low-cost carriers," followed by two case studies from Europe (one of which is Liverpool's John Lennon Airport). Detailed chapters follow on such airports in Europe, North America, and Asia Pacific, plus chapters on a variety of related topics. I'm intrigued by the report's list of low-cost airports and terminals in this country, which consists of Austin, BWI, Chicago Midway, Dallas Love Field, JFK (presumably JetBlue), and Pittsburgh.

Alas, I won't be reading the report any time soon, since its $1,250 price tag is beyond Reason Foundation's budget. But if this subject is of serious professional interest to you, you can buy the report online at: www.centreforaviation.com/hub/product_info.php?cPath=18products_id=286.

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News Notes

Is Airport Security Screening "Inherently Governmental"?

What tasks must be performed by federal workers and what may be performed by private contractors? Over the years, this has been a contentious issue for new presidential administrations, with strong advocacy by federal employee unions to encompass as many categories as possible as "inherently governmental" and therefore not subject to outsourcing. On March 31st the Obama administration published its draft guidelines on this issue in the Federal Register . Included on the proposed list of "inherently governmental" tasks is airport security screening. This contradicts the provision in the Aviation & Transportation Security Act of 2001 that allows airports to opt out of TSA screening (replacing it with TSA-certified security contractors). It also would be out of step with national practice in Canada, where all such screening is outsourced, and in most of Europe (where airports make their own decisions regarding self-provision or contract provision).  I hope I'm not the only one who's noticed this.

"Tarmac Delay Rules Will Cause Flight Cancellations"

That's the headline on my April 29th blog posting on this subject, on the Reason Foundation blog "Out of Control." (http://reason.org/blog/show/tarmac-delay-flight-cancellations) In addition to educating readers on the complexities of real-world airport and airline operations, it notes that of the DOT's outrageous $27,500/passenger fine, not one cent would be paid to passengers as compensation for the delays (or for the regulation-caused cancellations that will result).

New Update on Global Airport Privatization

Newsletter 3 (April/May 2010) from UK-based Big Pond Aviation carries a lead article on "Recent Airport Sales/Lease Activity." I follow this field pretty closely via the aviation and business media, but even I learned some new things from this article. There is also a handy table on the ownership status of the world's top 30 airports (by annual passengers, as of 2009). You can sign up for the newsletter at www.bigpondaviation.com.

Reports on Airport Land Use Compatibility

The Transportation Research Board's Airport Cooperative Research Program has released two reports on "Enhancing Airport Land Use Compatibility." Volume 1 covers land use fundamentals and implementation resources, while Volume 2 includes a land-use survey and case study summaries. They constitute ACRP Report 27. Go to: www.trb.org/Publications/Public/PubsACRPProjectReports.aspx.

No-Fly List Nearly Doubles Since Christmas Bomber

The AP's Eileen Sullivan and Matt Apuzzo produced a detailed background article on the no-fly list and the other government watch-lists, dated March 10, 2010. It describes the four principal databases: TIDE, the Terrorist Screening Center's watch-list, the selectee list, and the no-fly list. It's a useful primer on the subject. (www.wopular.com/no-fly-list-nearly-doubles-flight-253-0)

Rome Airport Now Part-Owned by Singapore's Changi

Changi Airports International (CAI), a subsidiary of Singapore's Changi Airport, has purchased a 5% share in Gemina S.p.A., the company that owns Aeroporti di Roma (AdR). CAI, launched back in 1981, invests in foreign airports and does consulting work on airport planning and management. It's similar to subsidiaries doing likewise that are part of the airport systems of Houston and Vancouver. The investment in Rome's airport company is CAI's largest to date, according to Aviation Daily.

Follow-up on LAX North Runway

In Issue No. 55 (March 2010), I wrote about the consultant report that concluded only marginal safety gains would result if Los Angeles World Airports (LAWA) spent what some have estimated as $500 million to separate LAX's north runways to reduce collision dangers. FAA Administrator Randy Babbitt sent a letter to the City of Los Angeles on April 2nd, citing two recent runway incursions on the airport's north side, arguing that "safety and efficiency would be greatly improved by further separating the two runways and building a center taxiway between them." The North Airfield Safety Study examined that argument in detail and concluded that the additional safety benefits, beyond those being provided by the ASDE-X collision-avoidance system and runway status lights, would be miniscule.

Secure Flight Nears Full Coverage

The long, drawn-out process under which the TSA is taking over from airlines the task of matching passengers against federal terror watch-lists should finally be completed by June. The original deadline had been March 30th, but the Government Accountability Office reported at the end of March that TSA had completed this conversion for 39 airlines for all domestic flights, was partially finished at 11 others, and was still in the testing phase for another 19 airlines. Under this program, called Secure Flight, airlines are required to obtain passengers' full names, gender, and date of birth. This more-complete information is expected to lead to a significant reduction in errors (in which people with similar names to those on watch lists are singled out for either secondary screening or no-fly procedures).

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Quotable Quotes

"To screen passengers as persons instead of their bodies and belongings has an overwhelming advantage: it can detect a would-be terrorist even if the specific technique he tries to employ is not previously known. To inspect all shoes after a shoe bomber almost succeeded, or to pat down passengers after the underwear bomber almost succeeded, provides no defense against the next techniques that could be tried at any time. To screen passengers as persons would reduce costs and inconvenience very greatly, because entire categories of passengers could be waived through with a rapid examination of travel documents and a few random checks now and then. . . . With such a system that would discriminate only positively-only in favor of groups or categories of passengers and never against them-we could have real security at a drastically lower cost in money and inconvenience."

--Edward N. Luttwak,  Center for Strategic and International Studies, "The Body Scanner Scam," The Wall Street Journal, Jan. 19, 2010.

"In the airline industry, risk management is a well understood safety science with practical applications to each flight. Risk is measured, mitigated to acceptable levels, and flight operations proceed on that basis. Risk is composed of two variables: severity of outcome multiplied by the likelihood of occurrence. The outcome of an attack against an aircraft can be catastrophic. However, if the likelihood of that attack occurring is zero or a very small number (i.e., the risk posed by nearly all passengers), the total threat is also zero or negligible. . . . What we conclude from such a simple calculation is (1) establishing trustworthiness for each passenger is vital to understanding the amount of risk that each flight accepts, and (2) our finite security resources must focus primarily on identifying those with hostile intent and keeping them off of our airplanes. Today, our security efforts are primarily focused on the detection of threat objects carried by all passengers; this approach dilutes security resources across so many passengers that terrorists and others with hostile intent have an opportunity to circumvent detection."

--"Meeting Today's Aviation Security Needs: A Call to Action for a Trust-Based Security System," ALPA White Paper, January 19, 2010. (www.alpa.org/portals/alpa/pressroom/pressreleases/2010/whitepapers/AviationSecuritySystemsWP_1-19-10.pdf)


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


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