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Reforming the Federal Aviation Administration: Lessons from Canada and the United Kingdom

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Reforming the Federal Aviation Administration: Lessons from Canada and the United Kingdom 2 0 0 6 Reforming the Federal Aviation Administration: Lessons from Canada and the United Kingdom AuthorClinton informationV. Oster, Jr. goesProfessor here of Public and Environmental Affairs and Associate Dean for Bloomington Programs School of Public and Environmental Affairs Indiana University Transformation Series With the assistance of: John S. Strong CSX Professor of Business Administration Mason School of Business College of William & Mary TRANSFORmaTION seRies Reforming the Federal Aviation Administration: Lessons from Canada and the United Kingdom Clinton V. Oster, Jr. Professor of Public and Environmental Affairs and Associate Dean for Bloomington Programs School of Public and Environmental Affairs Indiana University With the assistance of: John S. Strong CSX Professor of Business Administration Mason School of Business College of William & Mary T A B L E OF C ONT E NT S Foreword ..............................................................................................4 Executive Summary ..............................................................................6 Introduction .........................................................................................7 Part I: Reforming the Federal Aviation Administration .......................11 Reforming the Federal Aviation Administration ..............................12 The Need for Reform and the Three Challenges ...........................12 Reforms in Canada and the United Kingdom...............................16 Assessing the Options for FAA .....................................................19 Part II: Case Studies in Air Traffic Control Systems ............................21 United States: The Federal Aviation Administration ........................22 An Overview of FAA Today .........................................................22 History and Background ..............................................................26 Calls for Reform...........................................................................30 The Mineta Commission and the Air Traffic Organization ............32 Fundamental Challenges That Remain .........................................33 FAA Since 2001 ...........................................................................40 Lessons from the FAA Experience ................................................41 Canada: NAV CANADA .................................................................42 History and Background ..............................................................42 NAV CANADA’s Performance 1996–2001 ...................................44 NAV CANADA’s Current Performance and Outlook .....................45 Lessons from NAV CANADA .......................................................46 United Kingdom: National Air Traffic Services ...............................48 History of Reform Efforts ..............................................................48 Moving Toward Corporatization ...................................................49 Financial Structure and Regulation ..............................................50 Sale and Initial Ownership/Management Structure ......................50 NATS’ Financial Difficulties After September 11 ..........................51 NATS’ Situation and Outlook .......................................................52 Lessons from NATS ......................................................................52 Lessons and Conclusions ....................................................................54 Acknowledgments ..............................................................................56 Appendix: How Does the Air Traffic Control System Work? ..............57 Endnotes ............................................................................................60 Bibliography .......................................................................................62 About the Author ...............................................................................64 Key Contact Information ....................................................................65 3 REFORMING THE FEDERAL AVIATION ADMINISTRATION F OR ew OR D On behalf of the IBM Center for The Business of Government, we are pleased to present this report, “Reforming the Federal Aviation Administration: Lessons from Canada and the United Kingdom,” by Clinton V. Oster, Jr. Over the next 20 years, the Federal Aviation Administration (FAA) will face changes to its scope and methods of service delivery. The volume of air traffic control activity is projected to increase dramatically in this period. In addition, substantial technological improvements are needed to FAA’s air traffic control infrastructure that is responsible for accommodating this larger traffic volume, while also supporting FAA’s Albert Morales continued drive toward increased air safety. These challenges will require substantial capital investment to maintain the air traffic control system’s capacity and technological currency. The increased volume of air traffic and the availability of new technologies are predictable and, therefore, can be planned for. Of larger concern are the less predictable issues of governance and sources of funding. The nation’s air traffic management system serves a diverse group of stakeholders with varied, and sometimes conflicting, interests. As a branch of the federal government, the air traffic management system is subject to political direction, and this has at times diffused accountability for the system. Closely tied in with governance issues is the challenge of funding major capital investments. In this important report, Professor Oster examines air traffic control systems in Canada and the United Kingdom to see John Kamensky whether their experience with funding capital investments might be applicable to the United States. Both Canada and the United Kingdom have converted to private sector operating models for their air traffic control systems. 4 IBM Center for The Business of Government REFORMING THE FEDERAL AVIATION ADMINISTRATION The current method of funding the air traffic management system in the United States has proven more volatile in behavior than the related cost structures, leading to swings in funding gaps or surpluses. This mismatch of funding and costs, compounded by the requirement for a substantial capital investment to maintain the system’s effectiveness and safety, has increased the likelihood of a crisis in major capital funding for the U.S. air traffic management system. This report explores the key issues facing FAA and describes the alternative models being used by Canada and the United Kingdom. By evaluating their successes and challenges, Professor Oster provides valuable infor- mation and insights that we trust will be helpful in the forthcoming debate over alternative air traffic management models for the United States. Albert Morales Managing Partner IBM Center for The Business of Government [email protected] John Kamensky Senior Fellow IBM Center for The Business of Government [email protected] www.businessofgovernment.org 5 REFORMING THE FEDERAL AVIATION ADMINISTRATION E xecu T ive S umma RY Delivering air traffic control services was for many The ATO may be an important step in improving air years the exclusive province of government. Historically, traffic control in the United States, but formation of most countries provided air traffic control through the ATO did not respond to three fundamental chal- civil aviation departments operated with annual lenges that, unless addressed, will severely hinder budget appropriations from the central government. both management of the air traffic control system More recently, in over 30 countries, most notably and efforts to modernize it to keep pace with the Canada and the United Kingdom, air traffic control anticipated growth in aviation: is being provided by autonomous authorities oper- ating on market-based principles with considerable • Air traffic control funding has a fundamental managerial discretion and funded by fees collected disconnect between the factors that drive the for the services they provide. In the United States, costs of providing the services and the factors the Federal Aviation Administration (FAA) remains a that drive the revenues used to provide the government agency and faces serious problems both in financial support. operating the air traffic control system and particularly • Air traffic control modernization programs in making the productive, long-term capital investments continue to be hampered by the poor perfor- necessary for that system to accommodate the antic- mance and high costs of capital investment ipated growth in aviation. This report compares the programs. experiences of FAA in the United States, NAV CANADA in Canada, and National Air Traffic Services (NATS) • Air traffic control lacks organizational indepen- in the United Kingdom in terms of their ability to dence, which prevents resources from being used manage their air traffic control systems in the face in the most effective ways and which also results of changing traffic volumes and travel patterns and in self-regulation of the air traffic control system. their ability to manage and finance modernization and long-term capital investments. NAV CANADA and NATS are examples of two different types of autonomous authorities. While The problems facing FAA have been recurring themes these two organizational forms are quite different, for decades. For nearly 20 years, a series of special they share the characteristic that both have over- commissions
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