Air Traffic Inc.: Considerations Regarding the Corporatization of Air Traffic Control

Summary

Over the past 40 years, Congress has intermittently considered proposals to establish a government corporation or private entity to carry out air traffic functions currently provided by the Federal Aviation Administration (FAA). While the issue has been relatively dormant since a proposal offered by the Clinton Administration in the 1990s failed to gain the support of Congress, interest has reemerged following budget sequester-related funding cuts to FAA in FY2013. In January 2014, the FAA Management Advisory Council, a stakeholder advisory group, recommended spinning off FAA’s air traffic functions, modeling the delivery of air traffic service functions after commercialized independent air navigation service providers in other countries, creating an aviation stakeholder board to oversee this work, and funding the newly formed corporation through a transparent schedule of cost-based user fees.

Many other countries have established government corporations, quasi-governmental entities, or private firms to perform air traffic services. While none of these air traffic service organizations are comparable to FAA in terms of their size or complexity, they represent a broad array of organizational models including a large number of wholly government-owned corporations, a public-private partnership model in the United Kingdom, a government-controlled joint stock company in Switzerland, and a fully private nonprofit entity controlled by aviation industry stakeholders in Canada.

Direct comparisons among these models have been limited. There does not appear to be conclusive evidence that any of these models is either superior or inferior to others or to existing government-run air traffic services, including FAA, with respect to productivity, cost-effectiveness, service quality, and safety and security. Certain corporate and private air traffic service providers have improved cost-effectiveness and performance as a result of access to financial markets to fund large-scale acquisition projects, and of faster implementation of technologies. In this regard, the tax status of a potential air traffic entity’s debt could become a significant issue in the United States, as a privatized or a government-owned corporation could end up paying more to borrow in the financial market than the federal government does.

The prospect of reforming FAA air traffic services raises many unique challenges for congressional consideration, including

the framework and governance of a future air traffic services corporation;

its organizational structure and elements;

corporate financing and FAA funding mechanisms;

measures to ensure a smooth transition;

labor provisions to address legal rights of labor organizations while minimizing potential system disruptions;

safety regulation and oversight of the corporation;

measures to address corporate liability; and

safeguards to assure equitable treatment to the wide array of system users.