Flying High(er): Much-Needed Aviation Infrastructure Reform on the Horizon | Citizens Against Government Waste

Flying High(er): Much-Needed Aviation Infrastructure Reform on the Horizon

The WasteWatcher

Thanks to some thoughtful leadership on Capitol Hill, the skies could soon get a little friendlier for the travelling public and taxpayers, if innovations envisioned for the aviation industry come to fruition as the result of legislation being considered over the next several weeks.  On February 3, 2016, House Transportation and Infrastructure Committee Chairman Bill Shuster (R-Pa.) introduced H.R. 4441, the Aviation Innovation, Reform, and Reauthorization (AIRR) Act.  The current authorization of the Federal Aviation Administration (FAA) expires on March 31.

One of the more compelling reforms included in this legislation is Chairman Shuster’s vision for a transformational air traffic control (ATC) apparatus, which he has described as “a federally chartered, fully independent, not-for-profit corporation to operate and modernize the ATC system.”  The Council for Citizens Against Government Waste (CCAGW) co-signed an open letter to Congress dated February 8, 2016, with several other fiscally conservative organizations, stating (in part) that Chairman Shuster’s framework is “an excellent foundation upon which to build a new model for an operation historically mired in old-style thinking and fiscal ineptitude.”

On January 15, 2016, the FAA Office of Inspector General (OIG) issued a report, “FAA Reforms Have Not Achieved Expected Cost, Efficiency, and Modernization Outcomes.”  The OIG reported that eight of FAA’s 15 recent major system acquisitions were over budget by a total of $3.8 billion, and eight were behind schedule by an average of more than four years.  The critique was yet another on a long list of warnings that the agency is fundamentally incapable of managing such ambitious tasks as NextGen, a project to build a twenty-first century ATC network.  Today, despite the fact that the FAA’s budget nearly doubled between 1996 and 2012 and personnel levels remained constant, NextGen remains a distant goal.

In the February 8 joint letter, CCAGW and fellow signatories admonished Congress that:

A better approach is needed now.  To us it is an axiomatic economic principle that user-funded, user-accountable entities are far more capable of delivering innovation and timely improvements in a cost-effective manner than government agencies.  By drawing upon the positive experiences of dozens of nations that have freed their air traffic control enterprises from the stifling grip of bureaucracies, Chairman Shuster’s framework has much greater promise of fulfilling the objectives of NextGen.  If this framework is properly developed into legislation and implemented, consumers will experience fewer travel delays, the movement of goods will become more efficient, aircraft will burn less fuel, air safety margins will increase, capacity will expand, responsiveness and transparency will improve, political micromanagement will recede, costs will be easier to control and sustain, and the economy could experience tens of billions of dollars in growth.

Naysayers (those who, charitably, fear change or, more cynically, prefer to protect “turf” in their defense of the status quo) have adopted a “sky is falling” attitude over Chairman Shuster’s outline, as though it were completely set in legislative stone, implying that supporters are nefariously trying to preclude thoughtful debate.  To the contrary, from the joint letter:

In truth, most of them are opposed to any meaningful conversation over shifting the direction of air traffic control policy.  They claim that the plan is “privatization,” when in fact the proposal calls for a nonprofit entity.  They assert that the general aviation community would be disadvantaged, even though the independent organization would include all stakeholders and customers of the system, from labor unions to airlines to piston-engine pilots.  In any case, user charges for piston and non-commercial turbine aircraft would be waived.  They contend that a nonprofit arrangement would be an unconstitutional delegation of Washington’s authority over air traffic control, even though a private-contractor tower program has existed for 30 years.  This inconvenient reality aside, regulating safety—including that of the air traffic control system—would remain an inherently governmental function in FAA’s hands.  Indeed, clarifying this mission could actually sharpen FAA’s focus on maintaining America’s aviation safety record. … The time is long overdue to move the nation’s ATC system toward proven, user-based solutions that will allow America to remain competitive in the skies.

Another issue that is expected to be the subject of lively (and, hopefully, thoughtful) debate involves the funding mechanisms for aviation infrastructure.  While following Chairman Shuster’s lead to “remove the federal yoke from air traffic control,” lawmakers must do the same when it comes to how airports are financed.  In a separate letter to Congress dated February 11, 2016, CCAGW joined with other conservative groups to advocate for greater local authority over infrastructure improvement, by removing the federally imposed cap on the Passenger Facility Charge (PFC):

America’s airports are powerful economic engines, generating more than $1.1 trillion in annual activity and supporting more than 9.6 million jobs.  However, airports require approximately $15.14 billion annually in infrastructure improvements to update aging facilities, relieve delays and congestion, promote safety and security, enhance the passenger experience, as well as spur airline competition to provide consumers with more choices and affordable options.  Washington should get out of the way and allow airports to set a PFC that is in line with local needs and reflects market realities.

Originally limited to $3.00 per flight segment when this concept of locally determined fees was initially created by Congress in 1990, PFCs have been capped at $4.50 per flight segment since 2000.  As a result, the purchasing power of these revenues has fallen by about 50 percent.  To restore its original purchasing power, the cap on PFCs would have to be raised to $8.50.  Moreover, to maintain that same purchasing power while also reducing airports’ future dependence on the whims of Washington, the PFCs should be indexed for inflation.

More to the point, PFCs can only be spent at the airport that collects them (typically, at the point of embarkation for each flight), and they do not pass through federal hands.  For anyone who fears “sky’s the limit” runaway spending, these dollars are limited to specific purposes:  FAA-approved projects that enhance safety, security, or capacity; reduce noise; or increase air carrier competition.  And PFCs cannot be used to underwrite other revenue-generating activities, such as paid parking garages or rental car facilities, which the private market is more than capable of providing.

Consider also the hodgepodge of other taxes that increase the cost of airline tickets, which fills the coffers of the Airport and Airway Trust Fund administered by the FAA.  As noted in the Tax Foundation’s May 11, 2015 publication, “Improving Airport Funding to Meet the Needs of Passengers,” these include excise taxes on domestic airline passenger tickets (7.5 percent of the ticket price), domestic airline passenger flight segments ($4.00 per passenger per segment), international passenger arrivals and departures ($17.70 per international flight, $8.90 per flight between the continental United States and Alaska or Hawaii), and aviation fuels ($0.44 per gallon).  Additionally, the September 11 Security Fee ($5.60 per one-way trip) is remitted to the Transportation Security Administration.

According to the Tax Foundation, there were 740.2 million total enplanements at 1,987 airports in 2013.  However, 712.9 million, or 96 percent, occurred at only 135, or 7 percent, of all airports.  The 30 so-called “large hubs” alone accounted for 533.2 million passengers, or 72 percent, while the 33 “medium hubs” and 72 “small hubs” accounted for 118.5 million, or 16 percent, and 61.2 million, or 8 percent, respectively.  At the same time, 27.3 million enplanements, or less than 4 percent, were attributed to the remaining 1,852 general aviation airports.  Despite constituting 93 percent of all airports, general aviation airfields averaged less than 15,000 enplanements apiece, compared to almost 5.3 million passengers per airport at the top 135.

That same year (2013), the FAA awarded Airport Improvement Program grants totaling $3 billion, with $540 million, or 18 percent, earmarked for general aviation projects.  In other words, airports serving almost exclusively private planes garnered almost five times the amount of federal funding that they would otherwise proportionally rate, with commercial passengers footing the bill.  While general aviation airports play an important role in the overall airways system, such disparities in funding highlight the need for a more equitable financing mechanism that is less arbitrarily redistributive.

This reasonable view was expanded upon by National Taxpayers Union President Pete Sepp, who wrote in his June 12, 2015 blog post:  “Congress could take several approaches toward streamlining the byzantine structure of taxes, fees, and charges that government heaps upon air travelers and airlines. … That entails providing net relief in the total tax and fee load on air travelers and the industry.  The legislation must also phase in changes concurrently, avoiding the ‘raise taxes now, cut some later’ ploy that Washington often seems to concoct.”

Other countries have accomplished similar goals with impressive results:  look no further than Canada, a leader in efforts to modernize the aviation industry.  In addition to successfully corporatizing air traffic control, our northern neighbor has also given airports the ability to fend for themselves and become financially self-sufficient.  Everyone involved in air traffic control and airport modernization should look closely at the “Maple Leaf Model.”

Like any flight delayed by the inefficiencies of the nation’s outdated aviation infrastructure, the time for Washington to get out of all but the inherently governmental aspects of the aviation industry is long overdue.

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