Privatization, aluminum sky-tube edition

This Congress still has some must-pass legislation to complete.

That includes a reauthorization bill that contains a bunch of much-needed reforms for the agency. But they slipped in a doozey of a change: complete privatization of air traffic control. The plan is to create a separate government-chartered independent non-profit to run the whole show, with the intention, of course, that it will be run much more efficiently than the ZAN-ARTCC-ATOPgovernment ever could. I liked quote from an unnamed conservative groups from another Hill article:

“To us it is an axiomatic economic principle that user-funded, user-accountable entities are far more capable of delivering innovation and timely improvements in a cost-effective manner than government agencies.”

Axiomatic, eh? Well, I think I see your problem…

Anyway, it’s worth taking a step back to think about this proposal from a few different angles. First, let’s remember what the FAA does. Really, there are three main activities:

  1. Write regulations
  2. Allocate funds for aviation-related programs (AIP and similar) and
  3. Run ATC (Note: the FAA’s ATC arm is called “ATO,” but I’ll keep calling it ATC here)

Honestly, there has always been something of a conflict between the needs of air traffic control with safety as top priority and efficiency and cost as lower priorities, and the rest of the organization’s needs. It is a small miracle that the FAA’s ATC runs the safest airspace in the world. But miracle or not, it is a fact.

Furthermore, it is also true that ATC has been slow to modernize. This is for several reasons. First, yes, government bureaucracy, of course. But there are other reasons, such as having congress habitually cut and delay funding for new systems (NB: when you are on temporary reauthorization, you don’t buy new things; programs do not progress. You just pay salaries.) Another problem is that the old systems, as cranky and obsolete as they are, work, and it’s just not a simple matter to replace a working system, tuned over decades with new technology, particularly if you require no degradation in performance in the process.

So does this justify privatization? Will a private organization do better in this respect? Well, here are some ideas for thought, in no particular order:

  • a private organization will use fees to fund itself. This might be good, because they should be able to raise all the money they need, but then again, fees might grow without control. A private organization running ATC is essentially a monopoly. Government control is a monopoly, too — except that you can use the levers of democracy to manage it
  • a fee-run organization will be mostly responsive to whomever pays the fees. In this case, it would be the airlines, and among the airlines, the majors would have the most bargaining power. Is this the best outcome? How will small carriers fare when it comes time to assign landing slots or assign routes to flight plans? How will general aviation do under such a system? Will fees designed for B747‘s coming into KEWR snuff out the C172 traffic coming into KCDW?
  • Regulatory capture is a problem for any industry-regulating government entity. Does the appointment of an all-industry board of directors for a private organization that assumes most of those functions “solve” that problem making total capture a fait accompli?
  • Will this new organization be self supporting or will it still depend on government money? How will it perform when there is an economic or industry slump? If there is a bankruptcy, who will foot the bill to keep the lights on?
  • When the inevitable budgets shortfalls come, how will labor fare? Will they have to sacrifice their contracts in order to help save the company?
  • I don’t know, but I’m just guessing, that nobody at the top of the FAA’s ATC today makes a million dollars a year. Will it be so under an private organization? If so, where might that money come from?
  • Does an emphasis on efficiency server the flying public? To that matter, do the flying public’s interests diverge from those of the airlines, and if so, how are they represented in the new organization’s decision-making?

I honestly have not considered or study this matter enough to have a strong opinion, but so much of it causes the hairs on my neck to stick out.

I’ll give the authors of this new bill credit for one thing: they managed to get the ATC union (NATCA) on board, essentially by promising continuity of their contracts and protections. I’m not sure if that comes with guarantees in perpetuity. One thing I noticed immediately is that current employees would be able to pay into the federal retirement system. New employees…


[ Full disclosure: I am a general aviation pilot and do not pay user fees to use ATC, and like it that way. I do understand that this is a subsidy I enjoy. ]




2 thoughts on “Privatization, aluminum sky-tube edition”

  1. My assumption is that the non-profit corporation would be captured by airlines, since their voice is dominant in the use of airspace. It seems to me like the sky really is a public good; there is no easy way to exclude people from the commons. I’m willing to pay a bit to prevent a tragedy of the commons whether I’m a passenger or just sitting on the ground.

    I’m not sure that the private monopoly here would necessarily result in rent-seeking by those at the top of the air traffic control bureaucracy, since their bargaining partners (airlines) are pretty tough customers, but I could be wrong.

    Keeping up my commenting streak, too.

    1. Thank you for the comments, and really, let me know if you want to guest post ever, too!

      The airlines are pretty tough customers, and yet their own investors haven’t been particularly stingy with executive compensation, so I don’t see a particular reason to think they would not allow it happen to the private ATC.

      I have a reference case: the California Independent System Operator (CAISO) which operates the electric grid in CA. The vast majority of their operating income comes by way of PG&E, SCE, and SDG&E. Furthermore, they are a not-for-profit. And yet I know the execs there are doing quite well. The president, Steve Berberich, for example, maks $860k/yr. (

      I don’t think it’s a huge problem, but it’s an annoyance.

      Regarding regulatory capture, I think to me the biggest question is whether we think the other airspace stakeholders’ interests are important enough and different enough from the airlines to justify representation in excess of their payments.

      I find it hard to argue seriously that GA deserves/needs special consideration, given the money behind GA users. On the other hand, I think if we let GA die off or become just for the supremely rich, in the long term we lock ourselves into the airline model forever, which is probably not good. Also, we give up a real freedom, even if for most it is only theoretically accessible.

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