Air-traffic-control turbulence

Aug 26, 2018 - 4:00 PM

Efforts to privatize the U.S. air-traffic-control system and to change how it’s funded have been dragging on for years. These efforts gained more traction in 2017, however, as ATC privatization was proposed by President Trump’s 2017 budget and the House Transportation and Infrastructure Committee approved (by a 32-to-25 vote) a bill sponsored by Bill Shuster (R-Pennsylvania). Both proposals would turn over the ATC system to a private, nonprofit corporation (called, in Shuster’s version, the American Air Navigation Services Corporation, or AANS).

At first blush, this seems like a crazy idea, but Canada and the United Kingdom, two countries not known for insane behavior, have privatized air-traffic-control systems. To paraphrase Henry David Thoreau, less government is better, so we’re better off (the thinking goes) if we hand over our air-traffic-control system to a private enterprise, even if it’s not driven by a profit motive. The new-and-improved ATC would be, at least in Shuster’s version, run by a 13-member board of directors drawn from various ­aviation sectors. The folks in the tower would become employees of AANS instead of the Federal Aviation Administration.

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As currently run by the FAA, America’s ATC system is funded by excise taxes on transportation and fuel that are little known to the public. It’s a mystery why more travelers aren’t aware of the transportation tax, which is often called the “ticket tax” because it adds 7.5 percent to the cost of airline tickets and charter flights. The fuel tax is below the public radar, however, because it’s paid at the gas pump. (For jet fuel, the current rate is 21.9 cents per gallon; for avgas, it’s 19.4 cents.) Various wrinkles and exemptions apply. A higher rate is charged, for example, if a truck delivers the fuel to the airport; there’s also a surcharge for gas used in a fractional-ownership program.

The ticket and fuel taxes are in large part mutually exclusive. After collecting the ticket tax, airlines and charter operators are eligible for a refund of most of the tax paid when fueling their jets. Non-commercial, private aviation simply pays the fuel tax. Receipts from both taxes are funneled into the Airport and Airway Trust Fund that Congress established in 1970 to provide a dedicated source of funding to keep our aviation system running. The costs of the ATC system, airport improvements, and FAA operations are supposed to be paid from this fund.

It isn’t clear what’s wrong with this arrangement. The airlines, however, would prefer that AANS, not Congress, control their financial contribution to the ATC through a new tax—not to be called a tax, of course, but rather a “user fee,” a charge for the use of FAA navigational services that, in Shuster’s bill, would replace the ticket tax.

User fees are not a new concept; they’ve been bandied about for years, and both the George W. Bush and Obama administrations proposed them, without success. The fees would give airlines greater flexibility in paying their share of ATC expenses than the present system. But does privatizing ATC and paying for it with user fees make sense? Not really. Why would we essentially give away our ATC assets to a private company like AANS with no provision to get them back, if necessary? And what do we privatize next—the Air Force? The FBI?

Still, some policy wonks derive philosophical satisfaction from shrinking our federal government, and fans of privatization argue that the industry would run the ATC system more efficiently, with the cost of operations allocated more fairly through user fees than it is with the ticket tax. Proponents don’t seem concerned about the enormous expense likely required to completely retool how the ATC runs and is paid for, and not much is known about how the retooling would work. Wouldn’t it be better to spend the money on continuing to modernize the ATC system?

Though Shuster’s bill only replaces the ticket tax with user fees and preserves the fuel tax for non-commercial aviation, there’s no guarantee that, once user fees are established, they wouldn’t eventually replace the fuel tax as well. Currently, as noted earlier, private aviators support the ATC system and the FAA by paying fuel taxes every time they buy gas. Fuel taxes are thus collected before the aircraft fly anywhere and are easily funneled to the Trust Fund coffers. User fees, however, are based on use, so they must be determined and paid after they are incurred. Hence the need for more federal government tax collection bureaucracy.

Even if user fees replace only the ticket tax, there’s also no guarantee that the new setup wouldn’t require Congressional bailouts from general taxes or that those user fees wouldn’t rise through the roof. The experiences in Canada and the United Kingdom are not encouraging in that regard.

The biggest losers with ATC privatization are likely to be business and general aviation. Superficially, a board of directors with a variety of aviation “stakeholders” would run Shuster’s AANS, but critics say that, given where the members are drawn from, the board would end up controlled by airline-related interests. They worry that the focus would accordingly be on the major airline corridors, with rural airports and users becoming second-class (or maybe third- or fourth-class) citizens. When the Trust Fund no longer receives the proceeds of the ticket tax, where will the money come from to pay for airport improvements? Additional funding for rural airport upgrades is supposedly on the table, but there’s nothing definite in terms of sources and amounts. If the airlines control the AANS, will improvements at the airport in, say, Muscle Shoals, Alabama, ever take priority over upgrades at Chicago’s O’Hare?

No wonder the National Bus­iness Aviation Association, Aircraft Owners and Pilots Association, General Aviation Manufacturers Association, and other industry groups lined up in opposition to privatization. A joint release from these organizations advocates reform rather than revolution: “We believe efforts should focus on developing a long-term FAA Reauthorization that creates the stability and funding necessary and that can reach the President’s desk for signature.”

For the third year in a row, privatization efforts in the House have stalled, but there’s no guarantee they won’t be back in 2019. The FAA isn’t perfect and—though it’s the best operation of its kind in the world—neither is our air-traffic-control system. But there’s a good argument that it’s easier and safer to try to improve the existing system rather than opening a can of worms by consigning air traffic control to the private sector.