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Annual Privatization Report 2013

Air Traffic Control

Subsection of Annual Privatization Report 2013: Air Transportation

Robert Poole
April 1, 2013

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Global ATC Trends

During the past two decades, more than 50 governments have “commercialized” their air traffic control systems. That means they have organizationally separated the ATC function from their transport ministry (putting it at arm’s length for safety regulation), removed it from civil service, and made it self-supporting from fees charged to aircraft operators for ATC services. As of mid-2012, the association for air navigation service providers, CANSO (the Civil Air Navigation Services Organization) lists 76 full members, i.e., entities that provide air navigation services. Of those, over 50 are commercialized; these include the ANSPs of Australia, New Zealand, Thailand, India, Canada, the U.K., Ireland, Germany, Spain, Portugal, Austria, Switzerland, most of the rest of the E.U. countries, and South Africa. Governmental ANSPs include Cyprus, Luxembourg, Greece, the Maldives, and the FAA’s Air Traffic Organization (which is still embedded within that agency and funded by annual appropriations from the federal budget).

In December 2011 CANSO published its second Global Air Navigation Services Performance Report. Twenty-nine ANSPs provided data for the report, which covers 2006–2010. Most are from Europe, but others include FAA’s ATO, Nav Canada, SENEAM (Mexico), AAI (India), ATNS (South Africa) and Airways New Zealand. On cost per IFR flight hour, the least costly among developed countries were Canada, Estonia, and New Zealand. The highest-cost and least cost-effective were AENA (Spain) and LVNL (Netherlands). The highest productivity, measured as IFR flight hours per controller, was recorded by the FAA ATO, followed closely by Nav Canada and then the ANSPs of Portugal and the Czech Republic.

Spain’s AENA was much in the news during 2010–11. For years, Eurocontrol’s ANSP performance reports had highlighted AENA for very high costs and low productivity. In response, the Spanish government rescinded its 2010 rate increase and responded to an illegal strike by controllers by enacting major reforms of work rules and overtime. It also reformed controller recruitment and training and deregulated the provision of control tower services, opening them to non-AENA competition. The resulting law reduced AENA’s rates by 15% over the 2010–2012 period. Control tower outsourcing began with an initial 13 small and medium towers in the second half of 2011, with another 47 planned for outsourcing in 2012. In September 2011 AENA announced that the team of Ferrovial and NATS (the UK’s ANSP) won the contract for 10 domestic towers, with Saerco winning three towers in the Canary Islands. But the new government that took over in 2012 has not proceeded with outsourcing the other 47 towers.

U.S. Air Traffic Control

The FAA reauthorization bill enacted in February 2012 included no reforms to the governance and funding of the FAA and its air traffic control system. However, it did continue a several-decade trend of allowing the agency to contract for the provision of services, as well as authorizing some form of public-private partnership to assist aircraft operators to acquire on-board equipment needed to take advantage of forthcoming NextGen ATC technologies.

The longest-standing FAA outsourcing program involves the purchase of control-tower services, on a competitive bid basis, from tower operations companies. As of 2012 there are 250 control towers in the program, begun by the Reagan administration in the wake of the illegal controllers’ strike in 1981. Three companies currently run these mostly low-activity towers: Midwest ATC, Robinson Aviation and SERCO. Studies by the GAO and the DOT Inspector General have found that contract towers deliver performance as good as or better than comparable FAA-run towers, but at substantially lower cost. The most recent contract tower review, by the US DOT Office of the Inspector General, found that as of July 2012 the typical contract tower cost the FAA $537,000 per year, versus $2 million for a comparable FAA tower. And according to the Inspector General, the safety record of contract towers surpasses that of comparable FAA towers.

A second example of outsourcing is the Flight Service Station program. This set of facilities provides flight plan filing and weather briefing services to private pilots. It was technologically outdated and very costly to operate in 2005, when Lockheed Martin won a competitive contract to modernize and consolidate FSS facilities. Thanks to a significant investment in automation and displays, this labor-intensive and facility-intensive program has been reduced from 58 sites to just six, and from around 2,000 people to just over 600. FAA’s monitoring reports find that the program is meeting or exceeding all 20 customer service performance metrics.

A recent example of service outsourcing concerns one of the key building blocks of the NextGen ATC modernization program. Called ADS-B, it’s a way of keeping track of aircraft locations using GPS position information, which is far more accurate than radar for this purpose. Rather than simply purchasing, installing and operating the hardware for the nationwide network of ADS-B ground stations, the ATO put out to bid the service of procuring, installing, operating and maintaining the entire network. The winning bidder was ITT, and the installation of the ground stations nationwide is proceeding on schedule.

The FAA followed a similar model for procuring another key NextGen capability, digital communications to replace many routine voice communications between controllers and pilots. Under a seven-year contract (with up to 10 one-year additions), a team led by Harris Corporation will deploy data communications equipment in control towers nationwide by 2016 and in en-route centers in 2019. Harris and its subcontractors will also contract directly with communications service providers to establish data communications network services.

Finally, to reduce the risk of aircraft operators buying and installing NextGen equipment before the FAA has its own systems in place to deliver the promised services, the agency is developing procedures under which private-sector firms such as the new NextGen Equipage Fund can make volume purchases of such equipment from manufacturers and lease it to airlines and other aircraft operators. The operators would not begin making lease payments until the FAA started providing the service, and the FAA would reimburse entities like the Equipage Fund for costs incurred during such FAA delays. The aim is to encourage large numbers of aircraft operators to equip during the early phases of the start of new NextGen services, rather than waiting until a critical mass of other operators equips.

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


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