FAA Breakup: Why a Government Agency May Go Nonprofit

Earlier this week, Rep. Bill Shuster (R-Pa.) said he would introduce a bill to spin off the air traffic control services of the Federal Aviation Administration (FAA) as a corporate nonprofit.

While privatization advocates promise greater efficiency and innovation from a nonprofit air traffic control service, the idea of privatizing a government agency has rankled those who oppose the idea of ceding any public agencies to private organizations. But generally, even the staunchest proponents of breaking up the FAA agree with that sentiment.

"Most government agencies are doing inherently governmental things,”Bob Poole says, brushing off the idea of a general trend of government agencies privatizing. “But implementing and operating a safe high-tech business, I think, is a distinctly different function."

Bob Poole, an MIT-trained transportation infrastructure expert and advisor to four U.S. presidents, has been pushing for the FAA’s air traffic control service (ATC) to be broken off into a private entity since the 1980s. He’s one of the original proponents of privatizing government services in the U.S. In fact, Poole is credited with coining the term, “privatization.”

"Here's the problem,”he says. “You really have two organizations in one at the FAA.”Poole describes the agency as both a rule-making safety regulator and a high-tech operations team directing thousands of airplanes aloft in the United States at any given moment. Since both of those branches are lumped together in one giant government agency, the monolithic FAA moves slowly—far too slowly to keep pace with the rapidly changing avionics industry.

While it maintains a sterling safety record, the FAA still has ATC systems that rely on World War II-era radar instead of the newest satellite-tracking systems. The FAA’s modernization effort, named NextGen, has been plagued by delays. A scathing report published last month by the National Research Council said the plan would not accomplish its goals in the foreseeable future, adding that “‘NextGen’has become a misnomer.”

From the many FAA veterans he’s spoken with over the years, it’s not just congress or outside experts who are frustrated with the agency’s inability to move. “They all roll their eyes and throw up their hands,”Poole says.

Still, one might wonder what’s wrong with an aviation regulator erring on the side of an abundance of caution. The FAA, after all, has that excellent safety record.

"The risk-averse culture is appropriate for the safety regulator,”Poole says of the FAA’s rule-making and oversight duties. But, “it’s not appropriate for the people who have to deal with changing technology,”Poole says, pointing to the FAA’s air traffic control service. “It's just not a competent technology company.”

If the FAA’s air traffic control had a company culture more akin to Google, Poole says, or perhaps Verizon—a technology corporation that’s also a public utility—then the ATC would be better able to update it’s systems and create even better ones. “Air traffic control is being denied that type of approach,”he says, “because of the institution it's now entrapped in."

According to proponents, an independently-run nonprofit ATC corporation would still answer to the FAA’s rulemakers. It would be free of onerous FAA micromanagement and red tape. It could rely on fees to fund itself instead of the increasingly unreliable national budget—in 2011 alone, Congressional standoffs cost the agency over $400 million in lost revenue.

Such an air traffic control system would not be the first. New Zealand was actually the first country to privatize its air traffic control in 1987. Since then, over 50 countries have followed suit. The US, in this respect, is the odd one out.

NAV Canada is a not-for-profit, non-shareholder corporation that has been directing air traffic up north for nearly two decades, racking up international awards as the best navigational service in the world. “This has worked astoundingly well,”Poole says. A US system would likely be modeled on the Canadian plan.

Two sticking points for critics have been what power this nongovernmental agency will have and who will control it.

Rep. Peter DeFazio (D-Ore.), a prominent critic of privatizing FAA operations, commissioned a study by the non-partisan, independent Congressional Research Service that concluded a nonprofit ATC “may be unconstitutional.”That study’s finding was based on the idea that an ATC nonprofit would violate the non-delegation clause of the constitution which says that the government cannot delegate regulatory power to a private entity. The CRS report assumed that the nonprofit would be both operating and regulating air traffic control in the US.

This is simply not true, Poole says. To reach its conclusions, the CRS report analyzed the NAV Canada model and an unpublished roundtable report that Poole participated in. But in the CRS report, a crucial definition was “footnoted as having been provided by DeFazio's office”Poole wrote in his newsletter earlier this year. “And therein lies a basic flaw in the analysis…”

“The whole idea of separating ATC safety regulation from operation of the ATC system is to retain in government the power to make the regulations,”he wrote. The corporation would simply operate the system.

While Poole stops short of accusing DeFazio’s office of meddling with the report, he says the constitutionality question is basically a straw man argument.

“I think whoever in Congress is drafting the legislation is going to have to be very cognizant of where the boundary is between what the FAA does and what the corporation does. But I don't see a problem with that."

But even with questions of legality out of the way, opponents to privatization worry that a private board, made up of airlines, air traffic controllers, and airport operators would not be acting in the best interest of the flying public.

That’s why safeguards should be clearly articulated in the law, Poole says. One requirement should be that board members hold no current affiliations with unions, airlines, or other interested parties. Another should mandate that board members hold a fiduciary responsibility to all the corporation’s stakeholders, which should include passengers. Moreover, the board wouldn’t be meeting in secret. “This would be subject to public scrutiny, FAA regulatory oversight, and so on,”Poole says. “It would hardly be a cabal operating behind closed doors."

But Bill Shuster will need more than just Bob Poole’s confidence to pass his FAA reform bill. The Congressman will need votes, and he’ll probably need Poole to testify again. After all, with his long history of advocating for a private air traffic control service, you might say this whole ATC privatization business was his idea in the first place.