Clinton V. Oster Jr., professor and associate dean at the School of Public and Environmental Affairs at Indiana University, is one of America’s foremost aviation experts, whose research interests include air traffic management and infrastructure, aviation safety, economics and competition policy and environmental and natural resource policy. He has been a consultant to the U.S. Department of Transportation, the Federal Aviation Administration, NASA, the European Bank for Reconstruction and Development, state and local governments and private sector companies in the U.S., Canada, the United Kingdom, Russia and Australia. He has also co-authored four books on aviation safety and various aspects of the U.S. airline industry’s adaptation to deregulation; his latest is Managing the Skies: Public Policy, Organization and Financing of Air Navigation with John S. Strong.
In the book, Oster and Strong write that the United States’ air traffic control system has fallen far behind that of the rest of the developed world. The United States is the last major country that finances air traffic control with taxes — mostly excise taxes on airline tickets — rather than user fees, and it’s the only developed nation that still runs air traffic control with a government agency. As a result, they write, the United States is faced with a mismatch between air traffic volumes, which drive costs, and the revenue that flights generate. Oster discussed the book’s findings — and potential solutions — with Miller-McCune staff writer Matt Palmquist.
Miller-McCune: How did the United States come to be in the position it’s in?
Oster: We went through some early struggles to try to figure out funding and the like. During the Nixon administration, we said, “Funding air traffic control out of general revenues without a dedicated funding source is not a very good idea. So we need some sort of a trust fund approach — like the Highway Trust Fund.” We had a notion of a trust fund whose tax would be dedicated to a particular use. We did that with the Airport and Airways Trust Fund. Some of that went for air traffic control, and some of that goes to infrastructure on the ground: airport improvements.
Miller-McCune: But things have changed since then …
Oster: At that time, business aviation was pretty much nonexistent. We were in the jet era, but the world was pretty homogenous in terms of aircraft. Air freight and air cargo weren’t that big of a deal. We had a domestic-passenger-airline world. For the most part, airplanes were about the same size. The exception would be some of the smaller commuter aircraft, which at the time were propeller-driven. This is before airline deregulation. At the time we had this notion that it was OK to subsidize short-haul transportation, because these people were just going to hook up to longer flights anyway. So the notion of a passenger-based tax system, at the time we put it into effect, was not at all an unreasonable way to go. At the time nobody was thinking about, “Well, how closely does this match to costs?” because back then, a ticket-tax-based system probably matched up well. There were no low-cost carriers; the government was controlling the fares; the fares were mileage-based and regulated. The problem is the world changed in terms of the mix of aircraft. There’s been a huge growth in the number of business jets. And we’ve seen more diversity in the size of passenger jets, the most notable being regional jets. We’ve also seen low-cost carriers, with a big variation in average ticket prices between them and the big boys. All of a sudden, something that was a tax based on the percentage of the fare per passenger wasn’t matching up with costs very well.
Oster: These changes happened gradually, and people tended to focus more on other issues. How much of this (funding) should go to airport development? How much of it should go to big airports or little airports? Was there adequate revenue generated? As it developed and some of the people were getting a bit of a break on paying less than the costs they imposed — regional jets, business aviation — once you’re getting a cross subsidy, you really don’t want to give it up. You begin to think of it as an entitlement. Those patterns are hard to change.
Miller-McCune: Would it be too simple to say that a big part of the problem here is that business jets and carriers aren’t paying their share?
Oster: That’s certainly part of the problem, but what you’re being asked to pay doesn’t reflect the cost you’re imposing on the system. You charge a regional jet the same thing as you charge a jet that has four times as many passengers. In a user-fee system, a blip on the screen is a blip on the screen — it takes the same capital, takes the same controller workload to handle that aircraft, no matter how many passengers. In a system where you pay based on the costs you impose on the system, we’d probably see fewer regional jets in highly congested airports like LaGuardia and (Reagan) National Airport … I say that even though I take a regional jet to get to Washington. It might make some small step toward rationalizing the system in terms of congestion.
As you saw other changes, you’d really like the revenue stream to mirror that. Could I have a tax system that generates the same amount of money? Sure. Would that tax system adjust automatically to changes in the pattern of the airline industry? The tax system won’t do that. The user-fee system would do that. I think that’s one of the real advantages of it.
Miller-McCune: The first half of the book looks at all the different air traffic control programs around the world. How have other countries been able to modernize in ways the FAA hasn’t?
Oster: One of the common things across the experiences of other countries is they’ve looked at their systems and said, “Boy we’ve got some modernization of the system to do, and it’s gonna be expensive. We don’t want to face the wrath of having to say we’re taking this out of general revenues, instead of health care or education. So let’s separate it out and take it out of the government revenue allocation process, and let’s set up a system where the folks who use the system pay for the system. That way, we as a government are not put in a situation of having to defend choices that might be rational but are also going to be unpopular.” That’s probably been an aspect of it in Canada, the U.K., Australia and New Zealand.
Miller-McCune: Those are the principal countries we would be looking at as positive models?
Oster: Yes. In particular, they’re positive models because, even though they’re smaller than we are, they have many of the same kinds of problems we have in terms of congested corridors and so forth. It’s not a huge leap from a Canadian or an Australian system to (an air traffic control system in) the U.S.
Miller-McCune: Talk a little about the Canadian air traffic control system, NAV CANADA.
Oster: They call it a non-share capital corporation — I tend to think of it as a users’ co-op. Canada had similar problems to the U.S. in that (it has) a small-community issue — (it realizes) there are some social benefits of having air service into small communities even though they might not pay for (the service) themselves, so (Canada puts) a little subsidy in for small communities. (It has) a general-aviation (as opposed to a military or scheduled-airline] issue — in parts of Canada, general aviation is an important part of the economy. (The country recognizes) there are situations where general aviation doesn’t really put a load on the air traffic control, so (it’s) really quite careful about not charging inappropriately.
The Canadians do seem to work together cooperatively well. Would that work here? As one person put it to me: “The Canadians are just nicer than we are.”
Miller-McCune: But the users’ co-op idea isn’t the only approach the U.S. could take.
Oster: No. The other approach is more along the lines of Australia and New Zealand, with the government corporation. In fact, that was proposed under the Clinton administration; Congress didn’t buy it, and once they saw that it wasn’t going to work, the Clinton administration, in a curious thing, did a 180 and suddenly started labeling air traffic control “inherently governmental”— which was bizarre, given that six months earlier, they’d been saying they’d make it a government corporation.
Miller-McCune: So how do you explain the resistance to it?
Oster (after a long sigh): It took Congress out of the loop. It precluded the ability of congresspeople to micromanage air traffic control. And they protested vigorously. It came mostly from the heads of the various aviation committees at the time. The response was instantaneous and negative. And what it came down to is that Congress didn’t want to be taken out of the loop. One of the approaches in order to leave them a little bit in the loop is to say, “The airport improvement program is an economic development program; let’s separate it from air traffic control, and you guys can still have it,” because at the end of the day, the airport improvement program means distributing pork to local districts. And it’s not linked in any significant way to air traffic control, because most of the money goes to small airports.
Frankly, if you talk to people who are running air traffic control systems, the last thing they would want is that the airport improvement program be under their jurisdiction. They’re really not connected in any way. Let that part go where it goes. Let an organization be focused on running the air traffic control system. The government would still do the regulatory and safety oversight, which everyone would argue is a perfectly appropriate government function.
Miller-McCune: I’m curious, too, about the air traffic controller on the ground. As you say in the book, U.S. air traffic controllers have longer workweeks and handle many more planes than their counterparts around the world. What’s your sense of the morale and of how the industry is coping with all this?
Oster: I think it’s really hard to say. Because of the most recent contract dispute with the air traffic controllers, that’s what’s driving a lot of what’s in the media. They’re clearly unhappy that they couldn’t come to the contract they wanted and (that they) had this contract imposed on them. But these are people who love what they’re doing, who would love to have better and more modern equipment and who would love to be consulted more and be more heavily involved in making improvements. One of the striking differences, especially between (the U.S.) and the U.K. or Canada, is that we tend to talk about the next generation of air traffic control systems whereas they talk about continuous, incremental improvements. Many of those improvements are coming up from the floor, where the controllers are working. I’m just struck by that. We’re talking about a system that needs to operate with an incredibly high degree of reliability, continuously. Would you rather make lots of small incremental changes? Or big massive changes that change everything all at once? I think we got that part backward.
Miller-McCune: How much of a danger is it when we hear about the retirement of an upcoming generation of air traffic controllers?
Oster: Well, again, that’s hard to say. If you look at the numbers, the FAA is working pretty hard to hire new controllers. For the most part, we’re seeing controllers coming in. There’s a lot of rhetoric that says we’re going to be short of full-performance-level controllers (FPLs). Being an FPL means you have to be able to work all the stations. If you’re not an FPL, the station you’re working at, you’re just as competent. If you want to make it sound like a horror story, you talk about FPL controllers. If you want to be a little more realistic, you say as long as the management can do it well, it’s probably not that big of a deal. I’m not hugely concerned because I think the FAA is working hard to recruit new controllers. It’s not like it’s that hard to recruit people into this job: The pay is very, very good for high school graduates.
Miller-McCune: When you look around the world, which country has the best air traffic control system?
Oster: I really think that for the U.S., either the government-corporation approach of Australia or New Zealand or the user-cooperative approach of NAV CANADA could have great promise here. You’re going to hear people say, “Well, Cleveland Center handles more traffic than the whole Canadian system.” Well, so what? I mean, that’s a fascinating statistic but totally irrelevant. There are some heavy air traffic corridors in Canada, between the major cities. The issue isn’t the total amount of traffic handled; it’s how you handle it.
Miller-McCune: In 2004, the U.S. created the Air Traffic Organization, a performance-based organization within the FAA to manage the air traffic control systems in the U.S. Given the huge boom in airline traffic that’s expected over the next few years, do you think it was a step in the right direction?
Oster: It was a step forward, and it provided a more logical structure. Cynics or opponents said, “This is a move toward privatization because now you’ve got something that could be carved off.” Privatization is the big red herring. Nobody in the world’s done it. Germany thought about it for a while. This is not about privatization. What it’s about, I think, is having a sensible service that is appropriately paid for by the users, organized in a professional way, that lets the users of the system dictate what happens, rather than political considerations. Where that’s happening in the rest of the world, it seems to work quite well.