The battle lines are drawn in the debate over US air traffic control (ATC) privatisation. On the one side are the heads of most major airlines, industry observers and consultants, who believe the time has come for the USA to follow Canada and privatise its ATC system. On the other side, privatisation opponents include the air traffic controllers' union and general aviation interests. Looking on nervously is the Federal Aviation Administration, which oversees ATC. The agency is forced to straddle the fence because of its political ties to the government, but realises that some change is inevitable.
At a November conference in Washington DC on aviation infrastructure, American Airlines chairman Don Carty summed up the animosity among the factions. "Instead of collaborating to find solutions, we spend most of our time being mad at each other," he said. "Because our customers are mad at us, at least in part because of delays over which we have little or no control, the airlines are mad at the FAA. The FAA's air traffic controllers are mad at us for building our schedules around hubs that operate on nothing but peaks and valleys, thus making their lives more difficult. The FAA is also mad at Congress for holding its funds hostage.
"Everybody's mad at everybody else, and everybody's catching it from all sides. Meanwhile, the skies are getting more and more crowded, and our ATC system is falling further and further behind the modernisation curve."
United Airlines president Rono Dutta and Continental chairman Gordon Bethune also used the conference to announce their support for reform of the US ATC system. But they differ on what shape that reform should take. Carty believes it is necessary for the FAA to adopt "private sector discipline" in its management, including modern cost-accounting methods and systems to measure performance.
However, Carty stops short of calling for privatisation per se, stating: "While ATC privatisation may or may not be the answer, it is certainly worth taking a hard look at the experiences of Canada, Germany, Australia and New Zealand to see what lessons we can apply to our own situation."
Dutta strikes a conciliatory tone, too, calling for a task force of representatives from the FAA, airlines, general aviation, air traffic controllers, pilot groups and the military to develop ATC reform.
Praising Canada
Bethune is the most outspoken supporter of full privatisation, arguing that a restructured ATC should be extricated from politics and be made performance-based and accountable.
He says access to the system should be guaranteed to all users, and that everyone with a stake in it should have a say in its operation. Praising the privatisation of Canada's ATC system - which he points out has improved service while reducing user fees by 27% - Bethune envisions an independent ATC system, developed in partnership with the government, with "access to capital markets and the freedom to invest wisely".
Robert Crandall, retired AMR chairman, is similarly vocal in his support for privatised ATC. At a conference in New York on delays, he described privatisation as "essential if we are to overcome the deficiencies that plague the US ATC system". He, too, points to Nav Canada - a non-profit-making company created by Canada's parliament, the directors of which represent all its constituencies - as an exemplary model, although he adds that privatisation can be accomplished "in any number of ways".
Another long-standing supporter of ATC privatisation is Robert Poole, president of the Reason Foundation, a conservative think-tank based in Los Angeles. According to Poole, the USA's obsolete ATC system not only creates massive delays - costing, he says, $4-6 billion annually in airline and passenger time costs - but also hinders competition because new entrant carriers find it "almost impossible" to find space at congested airports. The solution, he believes, lies with commercialisation, in which ATC is spun off by the government into a separate corporation that charges fees for its services, issues bonds to underwrite modernisation, pays market wages to employees and uses business-like procurement methods for new technology. Countries that have successfully done this, he says, include Australia, Canada, Germany, New Zealand, South Africa and Switzerland.
Like many others, Poole believes the Nav Canada system provides the best model for the USA to emulate. "I predicted it would be a workable model and this has happened. This has strengthened the case for the USA," he says.
There are entrenched opponents of privatisation, however. Among the most vocal is the Aircraft Owners and Pilots Association (AOPA), which represents an influential general aviation lobby. AOPA president Phil Boyer objects to taking a government monopoly and turning it into a private entity. "You'll end up with two organisations, one that is government-based and regulates safety [the FAA], and a private organisation that runs ATC," he says. "The FAA has both under its aegis now. We're concerned about splitting the two functions apart."
Boyer is also worried about governance of a privatised ATC system. "All privatisation proposals involve heavy airline control of governance. The same airlines that can't run their own operations efficiently would play an integral part in running a major safety function," he says.
Jobs at stake
Another group opposing ATC privatisation is the National Air Traffic Controllers Association (NATCA), whose members' jobs might be at stake if the system is commercialised. Nav Canada cut its staff mostly by laying off administrative workers, although it has given many remaining controllers pay increases of up to 40% in exchange for longer hours and more flexibility in scheduling.
Randy Schwitz, executive vice-president of NATCA, says his group opposes privatisation in part because it assumes the system would be operated by more than one contractor, which would mean the loss of today's seamless system. NATCA is also concerned that major airlines would dominate its board and try to direct funding to major hub airports. Small airports, airlines and general aviation would take a back seat to the larger airlines, says Schwitz.
The association worries that controllers would lose bargaining power in labour negotiations. "In the private sector, when employees and management negotiate, management can implement their last, best offer, which employees can reject and go on strike," says Schwitz. "But controllers will never be given the ability to strike. Today, if we can't reach an agreement, a government panel rules. In the private sector, there would be no checks and balances."
Some parties are deliberately not taking a public position in this debate. These include Southwest Airlines chief executive Herb Kelleher, who has pointedly declined to support privatisation, preferring instead to support management reform of the FAA. Observers say Southwest and America West are concerned that, if a privatised ATC requires them to pay user fees, this would raise their cost structure and make them less competitive.
"Herb is concerned that, if we do what was done with Canada's ATC, the system will be controlled by the largest airlines," says one observer. "They could do things with fees and investments that would favour them and disadvantage him."
The FAA, whose purse strings and budget are controlled by Congress, is also careful not to take a stance on privatisation. Officials will say only that air traffic services worldwide "have been organised and managed in a variety of ways. Privatisation is one option. While there are a number of options, we are in absolute agreement with the airline industry that modernising the system is critical".
With such differing opinions and concerns about how to proceed, most observers predict that ATC reform remains several years away. Darryl Jenkins, director of the Aviation Institute of George Washington University, host to the infrastructure conference, says: "As long as Kelleher and Bethune cannot reach consensus, the airlines are not going to get much out of Congress. If the industry's not united behind the project, Congress won't spend much time on it. We need somebody somewhere to take possession of this, to get the rival parties to make compromises, because there's plenty of room to make compromises."
Daniel Kasper, a consultant with LECG in Cambridge, Massachusetts, predicts all parties involved in the privatisation controversy will probably "continue muddling through" for a while. He suggests no real reform will occur before the presidential election this year, although he fears "a major catastrophe of some sort" could change the situation. That leaves everyone agreed on just one point: that the USA is likely to see air traffic congestion become at least as bleak in mid-2000 as it was last year.
"The question is: at what point in the pain threshold does the political bottleneck over privatisation break?" asks Kasper. "I hope that eventually sanity will prevail."
| Some of the air traffic control corporations | ||||
| Country | Corp name | Year established | Functions | ATC funding source |
| Australia* | CCA | 1988 | ATC + reg | Mostly user fees |
| Austria | Austria Control | 1994 | ATC + reg | 60% = user fees |
| Belgium | Belgocontrol | 1998 | ATC | n/a |
| Canada | Nav Canada | 1996 | ATC | 100% user fees |
| Germany | DFS | 1993 | ATC | 100% user fees |
| Ireland | IAA | 1994 | ATC + reg | 100% user fees |
| New Zealand | Airways Corp | 1987 | ATC | 100% user fees |
| Portugal | ANA | 1992 | ATC + airports | 100% user fees |
| South Africa | AT&NS Co | 1993 | ATC | 100% user fees |
| Switzerland** | Swiss Control | 1988 | ATC | 100% user fees |
| Thailand** | Aero Thai | 1948 | ATC | 100% user fees |
| United Kingdom*** | NATS | 1972/96 | ATC | Mostly user fees |
| Notes: *Considering spin-off of ATC as separate corporation. **Partial user ownership. *** Considering sale of NATS. Reg = regulatory Source: Reason Foundation | ||||
Source: Airline Business