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FAA ATO - Privatisation Doesn't Go Far Enough!

June 22, 2017

 

There has been discussion recently about privatising the USA's Air Traffic Control (ATC) provider the Federal Aviation Administration (FAA) Air Traffic Organisation (ATO).

 

I don't think the proposals go far enough!

 

Rep. Bill Shuster, R-Pa., chairman of the House Transportation Committee, said in his opening remarks at that committee, in relation to privatising the ATO, that, "Nothing less than America's leadership is at stake. In an industry that we pioneered and have led since Kittyhawk."

 

He then recounted the various attempts and proposed reforms to fix the FAA's problems. He continued, "Since 1995 Congress has passed various reforms to allow the FAA to run more like a business." Then he says, "All have failed to result in the FAA being run more like a business. The FAA has always performed like a massive bureaucracy and will continue to."

 

It seems to me that Mr Shuster has 2 main goals for the FAA: for it to be a world leading ATC provider and for it to run more like a business.

 

Whether the USA is, or will be again, a world leader in ATC is a matter of opinion. Running the ATO more like a business is more easily determined.

 

However, running it MORE like a business and running it AS a business in a competitive market are two entirely different things. Different. Entirely.

 

He read out the principles upon which the reform proposals would be based, the first of which, was to, "Create an independent, not-for-profit corporation to provide air traffic services (ATS)."


There are several other principles (among others) which will determine how the ATO will be structured which will achieve this aim:

  • Create a governance structure that is right-sized and balanced, and a Board with sole fiduciary responsibility to the organisation,

  • Free the air traffic control (ATC) business from the FAA's bureaucratic procurement process and the appropriations cycle, and

  • Give the new service provider the ability to access financial markets, leverage private funding for multi-year capital projects needed to modernise the system.

These are all admirable and sound attributes of a more business-oriented organisation.

 

If his proposed Bill, "to transfer operation of ATS currently provided by the Federal Aviation Administration to a separate not-for-profit corporate entity..." known as the Aviation Innovation, Reform, and Reauthorization Act of 2016 (AIRR Act) is enacted he will get his wish for the FAA to be MORE like a business. 

 

However, it will not be a competitive business in a commercial market. And there's the rub...

 

So, what's the difference? What does it matter?

 

The privatised ATO (PATO) will be a near monopoly.  Some towers are contracted out already but PATO, I expect, will retain the ATC Enroute Centres and the major airports' control towers.

 

There is nothing in the Bill about how the PATO will be economically challenged. I am assuming this will be left to the Board on which there will be representatives of those stakeholders that will be paying the charges which will fund PATO. Their desire for PATO to run as cheaply as possible whilst still maintaining acceptable safety standards will drive the cost structure. This should work fine as far as it goes. The charge-paying Board members have common goals in the safety realm - they want the ATC service to be as safe as reasonably practicable  And they can direct the CEO to drive the cost aspects in any way the Board agrees - downwards, presumably.

 

However, as Valentine Belonwu says in his article, there are 20 proven reasons why competition is good. Forbes magazine are of the same opinion in their gallery (but they only have 5 reasons).

 

Why has Mr Shuster gone for a monopoly ATC service provider model and not one that introduces competition to the ATC service provider market? 

 

Some say that privatising the ATO will be a bad thing - PATO will cut safety corners to save money. British Airways and QANTAS were government-owned airlines but have been privatised. They have excellent safety records and are regulated by the CAA and CASA respectively. I don't think any reasonable person would refuse on safety grounds to fly on their aircraft.

 

NATS, one of the UK's ATC service providers, was privatised in 2001, is also regulated by the CAA and also has an excellent safety record. In fact, NATS's safety record has improved markedly since privatisation, as has its efficiency.

 

I expand on the concept and advantages of competition in the ATC service provision sector in my article:  Competition > Efficiency > Safety: ATM Competition in Australia (and the USA) which can be found on my website www.thecrom.com. I make the case that increased competition leads to improved safety.

 

If the AIRR Act comes to fruition, Mr Shuster will achieve his goal of making the FAA ATO run more like a business. However, will it be a world leader? They say in sport that you have to beat the best to be the best. The only way to be the best in the ATC service provision world is to be in a competitive market and win and retain contracts.

 

Just privatising the FAA ATO doesn't go far enough. The American ATC service market should  be opened to competition.  

 

 

Peter Cromarty

 

Peter Cromarty is a former air traffic controller and pilot. He spent 27 years as a safety regulator of ATM/CNS, airspace and aerodromes.

View his Linked In profile

 

 

If you've read this far and you are still wondering where the heading photograph was taken: Atlanta Hartsfield, 2005

 

 

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