Fair Representation

The Reason Foundation’s Bob Poole assesses the White House’s ATC reform principles

At a gala White House event on June 5th, the Administration made its strongest endorsement yet of converting the FAA’s Air Traffic Organization into a self-supporting ATC corporation, along the general lines of what was narrowly approved last year by the House Transportation & Infrastructure Committee. Chairman Bill Shuster (R, PA), who has championed the idea for several years, also spoke at the event and has said repeatedly that this year’s version will include changes based on feedback received over the past year.

Since both the Shuster and White House proposals have been inspired by the 20+ year success of Nav Canada, it is useful to keep its model in mind as we review the new White House document. First of all, many of the five-page document’s principles are in accord with both the Nav Canada model and what Shuster hinted at in his remarks at the May 17th hearing. These include:

  • Arm’s-length separation of ATC service provision from government safety regulation;
  • Full cooperation with the Department of Defense, preserving all current FAA and ATO interactions with DoD;
  • Making the new corporation a nonprofit entity;
  • Consistent with this being a reorganization, not an asset-sale “privatization,” transferring the existing assets to the nonprofit corporation at no charge;
  • Making a smooth and fair transition for ATO employees to the corporation; and,
  • Ensuring that employees are prohibited from striking, as they are today.

The document is somewhat better than last year’s bill in several areas. First, it calls explicitly for open access to the National Airspace System by new entrants (such as drones and space launch companies) and for guaranteed access to the NAS for rural users and general aviation users.

It also calls for a three-year transition period to implement the stakeholder board, recruit and select a CEO and top management, and develop the initial schedule of customer fees and charges. This transition period is also reflected in recent OMB budget documents that show the phase-out of most current federal aviation excise taxes as the new ATC fees are implemented in year 3.

But there are several other points I’m not sure have been fully thought through. One is the short paragraph on noise impacts near airports due to changing flight patterns. This seems to imply that the ATC corporation would have the unilateral ability to change flight patterns, with FAA responsible only for reviewing them on safety grounds.

That could be a stumbling block for House Members with large (metroplex) airports in their districts. A probably minor point is that although the five-page document calls for the ATC corporation to be nonprofit, it nowhere specifies that it should be authorized to issue its bonds on a tax-exempt basis.

Another problem is the discussion of ATC fees and charges. This long section would exempt from fees only national security, governmental, and public safety users, and that all other users “should pay their fair share.” Strictly speaking, that would imply that business jets would pay the same fees as large airliners—which no air navigation service provider (ANSP) anywhere in the world does.

It would also ignore the sensible Nav Canada approach for small GA planes of charging them a single annual charge (like the motor vehicle registration fees we all pay), ranging from C$68 to C$227 per year. ICAO charging principles are used worldwide for air traffic control, and they rely on formulas based on aircraft gross weight and distance flown, with allowance for taking congestion into account. That would be a far better basis for the charging principles than a quixotic quest to make every category of airspace user pay its “fair share.”

But the part that troubles me most is the section on governance, about which I testified last month. The idea begins with a version of the stakeholder board used by Nav Canada and adapted in last year’s T&I Committee bill. It would start off with two seats nominated by major airlines, two seats nominated by large aviation unions (controllers and pilots), one nominated by general and business aviation, one nominated by airports, and two nominated by the federal government.

Those eight would select the CEO (as 9th member), and the nine would select four independent board members. Structurally, this is quite similar to the Nav Canada model. It’s an improvement over last year’s bill in having only two out of 13 seats nominated by major airlines and by including a seat nominated by airports. Both changes should somewhat reduce concerns of small cities, rural areas, and general aviation about “dominance by the major airlines.”

However, in a major departure from the stakeholder board concept, those categories would only apply to the three-year transition period and the first year of full operations. After that, the board could select anyone, presumably by majority vote, and that could include far more airline people, for example. Also left out of this section are two key conditions that apply both in Nav Canada and in last year’s bill:

  • That no board member may receive any financial compensation from any aviation organization while serving on the board; and,
  • That all board members would owe a (legally enforceable) fiduciary duty to the ATC corporation.

Both of those provisions are essential. And future members should continue to be nominated by a carefully balanced group of aviation stakeholders.

In short, the Administration’s five pages provide several new emphases, but also some provisions that are ill-advised and should be rejected for inclusion in the forthcoming bill.

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One Response to Fair Representation

  1. Eamon Friel says:

    The government of Canada sold the ATC assets to Nav Canada for $1.5 Billion(can$) It was not a free transfer.
    Nav Canada initiallt used a $3 billion line of credit from the banks for the purchase before they issued revenue bonds.