As Congress takes up a bill to renew funding of the Federal Aviation Administration (FAA), the controversial plan from Rep. Bill Shuster (R-PA) to privatize U.S. air traffic control promises to be a sticking point. One thing that Congress clearly does not need is an additional source of delay in doing its normal business, given the pressing problems with hurricane relief, passage of a budget, and other major legislative tasks.
Boosters of the plan often point to the example of other countries that have undertaken similar reorganizations, including Great Britain. Chances are they haven’t talked to travelers who bear the burden of that new regime. It turns out that doubts over the wisdom of the British restructuring are rising in Britain itself.
If you think airline service in the U.S. is terrible, apparently privatization in European countries has not spared their passengers from the same grief. Complaints from travelers in Europe about flight delays and unpleasant conditions in the air and in airport terminals would be familiar to U.S. travelers. On August 7, 2017, the British Independent ran a story headlined “Every summer, airports and everyone connected with air travel decide to inflict as much misery as possible on customers – and no one is prepared to take the blame.”
The British National Air Traffic System (‘NATS’) was privatized in 2001, when a 51 percent ownership share was sold to the private sector. Control in this arrangement was dominated by the major airlines, which is also what is feared will result in the U.S. from Shuster’s plan. Two advantages of the British reform compared to the proposal in our Congress is first, the British government kept an ownership stake in the system, and second, it made some money by selling shares to the airlines. Under the Shuster plan, the entire set-up would be given away for free.
In August of this year, Britain’s air traffic regulator, the Civil Aviation Authority, reported that NATS service suffered from failure to manage staffing shortages due to sickness, unforeseen retirements, and refusals to work overtime. The example of European nations’ privatization of air traffic control is often cited as evidence of its appropriateness for the U.S., but apparently service across Europe also leaves much to be desired.
One motive for privatization in the U.S. is the need to upgrade the technology. This appears to have been a problem in the British case, even after privatization. The head of the British system was quoted as saying “The U.K.’s airspace was designed decades ago and doesn’t allow us to take advantage of the technology on board modern aircraft that would raise capacity, and also reduce emissions and noise for communities on the ground.” Technological advance and innovation are said to be the fruits of privatization, but apparently such benefits are not guaranteed.
In the same vein, in 2014 British business secretary and parliamentarian Vince Cable criticized NATS for inadequate capital investment. As the BBC reported, “He said it was running “ancient computer systems, which then crash”. This was in the wake of a computer glitch that, according to the BBC, affected “thousands of passengers.”
NATS’ difficulties with investment points to a problem that could arise in the U.S. case. The separation of NATS from full British government control came with strings attached that limit NATS’ ability to raise its own funds for investment. The result is that the British government has been obliged to provide additional funds. Under the Shuster plan, the new system would have more power to set its own taxes and fees, but insofar as the Congress objects to an independent agency creating revenue-collection devices, the Federal government could still end up responsible for bail-outs and other infusions into a new air traffic control entity. At the same time, the difficulty of “letting go” means the same political pressures that inhibit investment in the U.S. could carry over into a new “privatization” set-up.
Aside from technological weakness, why isn’t the NATS system working? Britain’s Civil Aviation Authority (CAA), their own version of the FAA, found understaffing and low employee morale to be problems. They also said the air traffic control system needed to “boost its resilience.” In the U.S., a lack of flexibility in the face of adversity is a complaint commonly directed at government operations, one that privatization is supposed to remedy.
The CAA sourly noted “Nats is already the second-highest cost air traffic control service provider in the EU, and posted profits of £126 million last year.” So not only is service lacking, but British travelers are paying a premium for it.
Air traffic control privatization was not the only sad chapter in British transportation policy. In 1996 they performed a wholesale privatization of passenger rail. Subsequently, multiple polls of Britons have shown a preference for nationalizing it again.
Going on with yet another dubious privatization bespeaks the Brits’ triumph of hope over experience. In economics, we call the prevalence of beliefs that have been disproven many times over “zombie economics.” As long as most of the big airlines have a big financial interest in taking over air traffic control, it’s another of those bad ideas that will never die.
Max Sawicky is an economist and writer specializing in public finance and privatization.