[Response from our readers] Why conservatives and libertarians support the ATC Corporatization

The following article by Robert Poole, Searle Freedom Trust Fellow and director of transportation policy at the Reason Foundation, is in response to the March 2016 Labor Watch (https://capitalresearch.org/2016/03/labor-watch-march-2016-patcos-revenge-capitol-hill-cronyism-may-give-the-air-traffic-controllers-what-they-always-wanted/):

Steven Allen’s “PATCO’s Revenge” seriously misunderstands the current effort to reform the provision of air traffic control in the United States. His piece has three parts: retelling the story of the 1981 strike by the former union PATCO, an attack on Rep. Bill Shuster and his father, and a critique of the House bill that includes ATC corporatization.

I remember the PATCO strike, because shortly after the strike the Reagan White House flew me in from California to brief DOT Secretary Drew Lewis and FAA Administrator Lynn Helms on how to rebuild the system. My recommendation of a self-supporting nonprofit corporation was too radical in 1981, but the Heritage Foundation commissioned me to write a policy paper for them explaining the concept, and I gave a presentation on it the next year at the annual meeting of the Transportation Research Board. The strike is a useful reminder of why U.S. law forbids controller strikes, as does the current House bill. But PATCO is long gone, and the current union NATCA is a very different organization.

The politics of Rep. Shuster and his father are neither here nor there. Neither Shuster nor Airlines for America (A4A) came up with the corporation proposal. It was originated by a task force (set up in 2011 by the Business Roundtable) consisting mostly of former DOT and FAA officials from both Republican and Democratic administrations, along with me and several other consultants. For over two years we reviewed the FAA’s numerous failures at ATC modernization and the underlying causes: political micromanagement, unstable funding, insufficient technical and managerial talent, etc. as documented by over two decades of reports from GAO and the Department of Transportation’s Inspector General. We also reviewed the past 20 years of ATC reform around the world.  Nearly all developed countries have shifted their ATC systems out of their transport agencies and converted them to self-supporting corporations.

The first reactions to our presentations to stakeholder groups like A4A and NATCA were cool. But in 2013 the sequester hit, with furloughs of controllers and the potential shutdown of 150 privately contracted control towers. Discussions got a lot more serious then, and a working group co-led by former Reagan Transportation Secretary Jim Burnley held monthly sessions with all aviation stakeholder groups discussing reform options for about 18 months. Airline and NATCA officials made visits to Nav Canada, generally viewed as the best of the 50+ air traffic corporations (and the world’s second-largest ATC provider).

It was only at this point that discussions began with Rep. Shuster, the very effective chairman of the Transportation & Infrastructure Committee that has primary jurisdiction over the FAA. Shuster, his Aviation Subcommittee Chair, Rep. Frank LoBiondo (R—New Jersey), and the committee’s GOP staffers were all frustrated by the FAA’s chronic cost overruns and schedule slips. They held numerous fact-finding sessions and made their own visits to Nav Canada. The bill they drafted largely reflected our task force’s recommendations.

Now we get to the real question: Is this proposed corporatization “fake privatization” or something more significant?

Air traffic control is and will be a monopoly. Besides a government bureaucracy, there are only three basic ways to provide such a service:

• A private, for-profit company with rate regulation (like investor-owned electric utilities);
• A government corporation (like municipal utilities); or,
• A private, nonprofit corporation, with federal charter and stakeholder governance (like electricity co-ops, credit unions, and the American Red Cross).

Worldwide today, there is only one (partially) private air traffic control (ATC) corporation (NATS in the U.K.), with cumbersome rate regulation. Most countries have created independent government corporations that function as real businesses, with government as the sole shareholder. That’s a far cry from the kinds of government corporations we have in the USA—politicized entities like Amtrak and the Postal Service.

Nav Canada is the only private, nonprofit ATC corporation currently operating. It is not a “government-sponsored enterprise” (GSE); it is entirely private, governed by a carefully balanced set of stakeholders, including representatives of the general public who fly on airlines. In its 20 years of operation, it has dramatically modernized ATC technology, putting the FAA to shame. The rates it charges its ATC customers are 30% lower today in real terms than they were 20 years ago—while FAA’s budget has doubled in this period. It has an investment-grade bond rating, and is able to finance long-lived capital modernization—something FAA cannot do.

And—very relevant to the discussion of unions—Nav Canada has developed a highly collaborative corporate culture. It develops the requirements and designs of new systems in-house, at a small fraction of the cost for equivalent FAA projects. These projects are developed by teams of engineers, software writers, controllers, and technicians. And the results speak for themselves. A recent Bloomberg article relates how, starting 18 years ago, Nav Canada’s in-house team developed and implemented electronic flight strips, which produce records of each flight.  These electronic strips have replaced the kinds of paper flight strips still used nationwide by FAA (and not scheduled to be replaced by electronics for another decade). Entrepreneurial Nav Canada has sold new systems (including electronic flight strips) to ATC corporations in Australia, Britain, and a number of other countries. (www.bloomberg.com/news/articles/2016-04-12/paper-pushing-flight-controllers-see-future-in-canada-s-system)

Nav Canada’s culture is the model for what NATCA and our task force hope to achieve by creating a comparable nonprofit ATC corporation for this country. Allen and NRO critic Diana Furchtgott-Roth have mis-read provisions in the House bill as handing control to unions. But the bill provides transition provisions, continuing in force current union contracts until they expire, retaining binding arbitration, and obviously protecting employees’ earned pension benefits. ATC Corporation employees would not be civil servants, nor would they or their unions have veto power over management decisions. As former FAA Chief Counsel David Grizzle has pointed out, in a unionized company, “conferring” and “collaborating” with them is simply part of a good corporate culture. Despite claims to the contrary, the House bill retains several provisions of current law making strikes by controllers illegal. Should NATCA engage in an illegal strike, one of those provisions would automatically de-certify it as the controllers’ bargaining agent. (https://cei.org/blog/air-traffic-control-reforms-will-give-us-modern-technology-not-union-giveaways)

Finally, the bill would not grant control of the ATC Corporation board to “the airlines.” The board would consist of people nominated by a balanced array of stakeholders, with only four of the 13 seats nominated by airlines. No board member could receive any compensation from any aviation company or organization while serving, and every board member would owe a legally enforceable fiduciary duty to the corporation, not to the stakeholder group that nominated him or her. This system has worked very well for two decades at Nav Canada.

In short, what many of us have argued for—and what the House bill would provide—is the transformation of our poorly performing ATC system into a superior organizational model that has an outstanding two-decade track record in Canada. The United States is the last remaining developed country that still has a tax-funded, politicized ATC system comingled with its safety regulator. We now have a critical mass of aviation, business community, and think tank support for putting this reform in place, converting a poorly performing bureaucracy into a high-tech service business—and shifting about 30,000 people off the federal payroll. It would be tragic and ironic if conservative opposition caused this reform to be stillborn.