Technological advance and innovation are said to be the fruits of privatization, but apparently such benefits are not guaranteed.
As Congress takes up a bill to renew funding of the Federal Aviation Administration, the controversial plan from Rep. Bill Shuster, R-Pennsylvania, to privatize U.S. air traffic control promises to be a sticking point. Boosters of the plan often point to similar reorganizations, including Great Britain. Chances are they haven’t talked to travelers who bear the burden of that new regime.
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 Aug. 7, 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 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. The British reform has two advantages to the U.S. proposal: First, the British government kept an ownership stake, and second, it made 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 the NATS service suffered from failure to manage staffing shortages. 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.” 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.” Technological advance and innovation are said to be the fruits of privatization, but apparently such benefits are not guaranteed.
NATS’ difficulties with investment points to a problem that could arise in the U.S.. 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 the federal government could still end up responsible for bail-outs for the 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” setup.
Aside from technological weakness, why isn’t the NATS system working? Britain’s Civil Aviation Authority (CAA), its own version of the FAA, found understaffing and low employee morale to be problems. It 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 in Virginia, specializing in public finance and privatization.