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There has been a lot of discussion in the US recently on how to reform the FAA’s Air Traffic Organization (ATO). The ATO has been criticised by many for being inefficient and for failing to modernise. Furthermore, its funding is currently subject to federal approval of the FAA’s budget – a drawn-out and unstable process that places the ATO’s activities at risk.
One popular suggestion is to transform the ATO into a not-for-profit, government-owned organisation that would operate at arms’ length and be funded by user charges. Others have touted NAV Canada’s user-cooperative as a potential model to adopt.
So far there has been little discussion of the idea of a for-profit ATO despite this model being applied elsewhere. UK NATS, Airways New Zealand and Air Services Australia are all for-profit providers of air traffic services.
When raised, the idea for a for-profit ATO has been swiftly dismissed on the grounds that it would put essential services at risk or result in profits being put ahead of safety. However, many essential services (such as electricity, water and telecommunications) are often operated by for-profit suppliers. Meanwhile, as we’ve pointed out previously, an exemplary safety record is critical to the success of any business in the aviation industry.
Having a profit motive could deliver the required changes to the ATO. It would naturally provide a strong incentive to improve efficiency, to adopt new technology and to innovate, as well as to provide a customer-focused service. Of course, there is always a risk that a profit-driven service provider with market power will abuse its position and some type of economic regulation may be required. At the same time, it cannot also be assumed that a not-for-profit operator would always necessarily act in the best interests of consumers.
The option of a for-profit ATO therefore requires serious consideration by the US Congress.
In fact, while they’re at it, why not also consider exploiting the technological potential of NextGen and introducing competition for air traffic services in the US? As we’ve been saying for a while now, the liberalisation of the air traffic management industry could deliver huge benefits to the aviation industry.
For those interested in this option further, check out this paper which suggests the Federal Aviation Act was actually designed to allow for multiple private entities to operate air traffic facilities, potentially in competition with each other.
