Being stuck in an airport terminal waiting for an overdue departure is no fun. Being stuck in an airplane waiting to land or take-off is worse still. But the first requirement for any aviation and air traffic system is ensuring the safety of its passengers. The problem for the new proposal from Rep. Bill Shuster, R- Pennsylvania, is that his plan would put the regulation of safety rules in one organization – the existing Federal Aviation Administration – and the implementation of those rules in another – a new air traffic control corporation.
Under the current system, the FAA is accountable for any deficiencies in air safety. Leaders of the FAA may find fault with the performance of people who work under them, but ultimately the buck stops at the top. In the Shuster privatization plan, air traffic control would be separated from the FAA in a new, nonprofit corporation. At the same time, this new organization would be subject to FAA regulation. What could go wrong? Well, if there is some calamity, each organization could blame the other. Accountability fails.
The performance of workers anywhere depends on the organization for which they work and the incentives and pressures they face over the course of the working day. That goes to management and up the chain of command to leadership.
Shuster’s new organization would be chartered as a nonprofit, so it might appear that a profit motive could not lead to bad management decisions. However this nonprofit status would be illusory because the organization’s funds would be paid with user fees and taxes set and charged by the very same for-profit industry interests that the organization services.
The new organization could face cost pressures greater than those faced today by the FAA because it would have a separate budget and be required to raise its own revenue without the assistance of the government and the general fund contribution of the U.S. Treasury. Some taxpayer groups are worried that it would go to Congress for bail-outs, but the bigger concern is that, to avoid such embarrassment, it could face difficult trade-offs and make poor decisions between saving money and safety.
Proponents say that this move would help free the FAA from the challenges of the budget process, but the FAA would still be charged with safety regulation, and its funding would be still be subject to all the same budgeting processes that privatization advocates cite as a rationale for their plan. In fact, all the problems that privatization advocates cite afflicting air traffic control under the FAA would remain for the FAA’s safety regulation.
In the matter of air traffic control, the supposed rigor that competitive markets bring to business firms does not figure under privatization, corporatization, or whatever you want to call it. The new air traffic control entity would be a monopoly. Its users would have no more choice than users do today. There would be no “market” to instill discipline and solicitousness toward customers on the part of the new organization.
In general, the Shuster plan is a black box. There is really no way to tell how things might work differently inside this new, separate organization. The clearer features of the plan include the construction of a new governing board, purposely unaccountable to Congress; the reassignment of revenue sources (wherein the levels of taxes or user charges remain to be determined); and the likely exposure of the federal government to an independent borrower’s indebtedness.
The case for a privatization or corporatization of U.S. air traffic control remains to be made. FAA is charged by some privatization advocates as being too “risk-averse.” I don’t know about you, but when I’m sitting in a chair, in the sky, I like risk-averse.
— Max Sawicky is an economist and writer specializing in public finance and privatization.