President Donald Trump wants to privatize air traffic control. He says the current system run by the Federal Aviation Administration is out of date and the private sector can get things squared away faster and cheaper. But a leading economist says, “Perhaps not
Professor Kerry Tan of Loyola University Maryland’s Sellinger School of Business specializes in aviation. He says privatizing air traffic control has been debated for years, and the idea has merit. Especially since it may be faster to find money on the private side to upgrade the system; and as the President says, the system does need upgrading. But, Tan cautions against assuming the change is the best way to make air travel service better for consumers, or that it is “a silver bullet” to end flight delays and improve on-time performance.
What privatization looks like
As for what this particular privatization plan would mean to consumers, Tan, who got his PhD in Economics from Ohio State, says it appears likely to work this way. “Right now, when we book a flight we pay a seven and a half percent tax and various fees to help pay for the FAA services. If air traffic control is privatized there would be charged user fees for each flight. Like paying a toll for a highway. However, I think that the airlines will be able to easily just pass on this user fee to passengers. So from a consumer standpoint, I’m not sure if it is going to allow air fares to be cheaper or more expensive.”
The effect on competition
In terms of competition, among airlines and among different parts of the air travel industry, like general and corporate aviation, what’s this going to mean? Tan says: “The airlines are really in favor of this privatization of air traffic control—Delta being the notable exception. And I’m trying to think why the airlines would be so in favor of this.” It may have to do with control of the priorities of the air traffic control system. If there is bad weather, for example, the major airlines could be given permission to fly alternative routes and to alternative airports from which the Allegiant and Spirit Airlines of the world are grounded to clear the way.
What privatization means for smaller markets
And what about small markets? “Smaller markets are worried about what this would do to their particular airports and their particular city. Because basically the FAA has been financially incentivizing airlines to service small airports that might not otherwise be profitable operations.” The idea is that air service is important to the viability of smaller communities, whose success is in turn vital to the overall economy.
Does that get into the long-time debate over whether some public service functions are not suited to private operation where decision making is based on direct profit and loss and bigger picture issues are not in the mission? Kerry Tan says yes.
As to where is all this heading, Tan says there are a lot of things up in the air. “Basically all President Trump said is that this is something I’d like us to think about