Should the United States Get Out of the Air Traffic Control Business?

The federal budget sequester may advance an old proposal that was once unthinkable: privatizing the U.S. air traffic control system.

In a story today that’s well worth reading for anyone who flies, Bloomberg News lays out the arguments being made to get Uncle Sam out of the business of directing airplanes. This debate is hardly new, although the meat cleaver Congress took to the federal budget in January has given the proposal new impetus and appears to have made leaders of the labor union, the National Air Traffic Controllers Association, ready to discuss fundamental changes.

“My organization has pivoted,” Paul Rinaldi, president of the controllers union, said at a symposium in June on modernizing air traffic control in response to the deep budget cuts. “If we do not mature, have this discussion, find a way to sustainably fund this system properly so that we can modernize it, we are going to fall way behind the world.” (A video of the panel discussion on FAA funding can be viewed here.) The union has not advocated any particular approach or called for air traffic control to be privatized, hoping instead to foster a wider, public discussion of the issue.

The Federal Aviation Administration cut $637 million from its $16 billion budget this fiscal year as a result of the sequester and faces similar cuts in the year beginning Oct. 1. In April, the traveling public felt the first effects of the reduced funding with furlougs hitting some 50,000 FAA employees touching off about 2,300 flight delays. Days later, after heavy press coverage and outrage from airlines, Congress passed legislation allowing the agency to transfer funds to end the furloughs.

The basic change would be to fund traffic control not with taxes but through a “fee for flight”—a twist on the medical profession’s fee-for-service model—collected by a government corporation or a public-private partnership of some sort. About two-thirds of the costs of operating the U.S. air-traffic system comes from excise taxes on airline tickets and jet fuel, Bloomberg News reported. And with appropriations from Congress serving as the basis of long-term capital projects, the FAA’s ability to complete a transformation to a satellite-based routing system—as well as other large, capital-intensive efforts—has been called into question.

“The idea that you pay for $20 billion dollar infrastructure projects out of annual operating cash flow is nuts,” Robert Poole Jr., a co-founder of the libertarian Reason Foundation and a long-term advocate of moving ATC out of the federal government, said at the June conference. “You wouldn’t run any business that way.”

Dozens of countries, including Australia, Canada and Germany, have relinquished the management of flight traffic to various private and public-private organizations in a bid to increase efficiency, lower costs, and boost safety. Funding air traffic control through fees also allows the agency in charge to issue bonds and pay for large projects, Poole has argued. Many of those agencies even enjoying investment-grade credit ratings.

There’s also the matter of public safety and bragging rights: For decades, the U.S. has boasted the safest air traffic system, and some foresee that title being supplanted by other nations that operate their airspace differently. Others, however, argue that controllers should be government employees and that privatization could compromise safety. “I do know that the current system is broken and this conversation needs to start to happen,” Rinaldi said.

Original article:  http://www.businessweek.com