The entire FAA reauthorization bill has been held up in Congress over the issue of air traffic control "privatization" at small VFR towers. A nine-month, multimillion-dollar lobbying and ad campaign by the National Air Traffic Controllers Assn. (Natca) claims the Bush administration is putting air safety at risk with plans to farm out the U.S.' entire ATC system to the lowest bidder. Although the actual battle concerns fewer than 70 small non-radar control towers, the rhetoric is obscuring a growing, bipartisan consensus favoring fundamental ATC reform (see p. 54).
A long array of critical reports by the General Accounting Office and Transportation Dept. Inspector General's Office documents the FAA's chronic problems and enormous cost overruns in its attempt to modernize. Simply put, the FAA has demonstrated it is not structured to manage a high-tech, 24/7 service business like air traffic control.
The FAA is a command-and-control regulatory agency, constrained by federal budget rules and subject to detailed oversight from Congress. And the FAA struggles so mightily because air traffic's fundamental characteristics are much more like those of a commercial business than a typical government activity.
First, ATC activities are purely operational. Obviously, they must be regulated for safety, but experts (including four former FAA administrators) agree that safety regulation can and should be organizationally separate from ATC operations -- removing the inherent conflict of interest in our current system. Second, because ATC is purely operational, its mission is clear and its performance is measurable. And third, ATC's customers -- airlines and private planes -- are identifiable, and most of the benefits of ATC accrue directly to those who pay the costs.
Because of these three basic characteristics, 29 countries -- including Canada, the U.K., Germany and Australia -- have shifted to autonomous, not-for-profit air traffic organizations outside the traditional government bureaucracy that are funded directly by their users and able to borrow in the capital markets. A half-dozen major studies and task forces have endorsed similar ideas for the U.S.' ATC system during the past decade. And two years ago, a dozen retired FAA officials signed a public statement calling for this kind of reform.
Republican and Democratic administrations alike have taken these ideas seriously. In 1993, then-Vice President Al Gore called for moving FAA's ATC operations to an independent government corporation. And in 1995, the Clinton administration proposed legislation to create a self-supporting U.S. Air Traffic Services Corp., but it failed to get support on Capitol Hill. The Bush administration, especially former Office of Management and Budget Director Mitch Daniels, has shown interest in Canada's successful transformation of its governmental ATC operation into Nav Canada, a private, nonprofit corporation.
Separately, Daniels launched a government-wide push for performance-based governance, the President's Management Agenda. One key pillar of that agenda is "competitive sourcing, "which requires federal agencies that produce commercially available services to subject them to competitive bidding. The operation of small, non-radar control towers has long been recognized as a service that the private sector can and does provide. As of now, 219 such towers are operated by private contractors, and repeated studies by GAO and the inspector general show these towers operate just as safely as similar towers run by FAA. But they cost less than half as much to run. The inspector general has recommended that the remaining 71 small FAA towers be opened to competition. And that's what sparked this year's union campaign to make that competition illegal, and to block any meaningful ATC reform.
Natca makes two arguments: first, that "privatization" puts air safety at risk, and second, that the Bush administration plans to "privatize" -- meaning contract out -- the entire ATC system. Neither is true.
Take safety first. A fundamental principle of safety regulation is that it should operate at arm's-length from the entity being regulated. In no other area of federal safety regulation does the same organization both operate and regulate. Indeed, in all the rest of aviation, the FAA regulates at arm's-length the airlines, the manufacturers, airports, pilots, mechanics and private control tower operators. Only with respect to mainstream ATC is it both provider and regulator. In addition, the sine qua non of aviation safety is better technology. The FAA is notorious for lagging in technology, denying aviation the full benefits of what today's scientists and engineers have produced.
In addition, ATC safety has improved in countries that have converted their ATC bureaucracies into freestanding, bond-financed service businesses that are regulated for safety. And as documented repeatedly by the inspector general, the safety record of U.S. contract towers has been at least as good as that of comparable facilities run by the FAA.
What about the Bush administration's "secret plan" to contract out the entire ATC system? To the best of our knowledge, there is no such plan -- and never was. None of the federal commissions or task forces that have recommended fundamental reform has proposed that model, nor do we.
We favor the general approach urged by all of these reports, which is to fundamentally reform the existing ATC organization, pulling it out of FAA and setting it up as a nonprofit entity that is funded by direct user fees against which bonds can be issued to pay for modernization. No controllers or technicians would lose their jobs, but the new entity could hire and fire like a private business. And the FAA would become a purely regulatory agency that oversees the new entity.
There is broad, bipartisan consensus among aviation experts worldwide for such reform. It would be tragic if Congress foreclosed such change by acceding to union demands to freeze the costly and ineffective status quo.
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.
Dorothy Robyn, an economic consultant with the Brattle Group, was responsible for aviation issues at the National Economic Council in the Clinton White House.