In the aftermath of the September 11 terrorist attacks, travelers’ fears of flying have given way to their anxieties about delays they may encounter when going through airport security, leaving the departure gate and taking off, flying to their destination, and landing and disembarking from the aircraft. In 2005 inflight delays and earlier airport arrivals for security screening were estimated to cost passengers and airlines in the United States $40 billion annually.
Of course, delays are hardly a new concern with airline travel. As shown in figure 2-1 [see PDF], travel times have been increasing for the past three decades. Forecasts by the Federal Aviation Administration (FAA) call for more than 1 billion passenger enplanements by 2016, indicating that landside and airborne delays and their associated costs will become significantly worse unless the nation’s aviation infrastructure—airports and air traffic control—improves the efficiency with which it helps passengers get to their destinations.
Currently responsibility for basic aeronautical services in the United States—including terminals, gates, taxiing areas, and runways—lies with local governments that operate airports either directly, as in the case of small airports, or through airport authorities, as in the case of medium and large airports. The Transportation Security Administration (TSA) is responsible for airport security, and the FAA provides air traffic control. In 2004 the FAA’s air traffic control function was reorganized into the Air Traffic Organization (ATO), a “performance-based” organization.Nonetheless, the ATO remains an agency within a civil aviation administration that is funded by annual budget appropriations from Congress.
Congress has repeatedly criticized the FAA for the excessive delays and cost overruns it has experienced in trying to develop a technologically up-to-date air traffic control system that would reduce U.S. airborne delays by expanding usable airspace capacity. Some members of Congress have characterized the TSA as a bloated bureaucracy whose screening tasks could be performed better and more efficiently by private screeners. Congress has not singled out airport authorities for criticism, but before September 11, Rudolph Giuliani, then the mayor of New York City, advocated privatization of the airports managed by the Port Authority of New York and New Jersey. Despite complaints by elected officials and an increasingly frustrated flying public, delays seem to be an inescapable part of air travel. Finally, in September 2007, President George W. Bush invited aviation officials and U.S. Department of Transportation secretary Mary Peters to the Oval Office to discuss solutions to air travel delays, proclaiming,“We’ve got a problem,we understand there’s a problem, and we’re going to address the problem.”
In our view, excessive travel delays are—to a significant extent—a manifestation of the failure of publicly owned and managed airports and air traffic control to adopt policies and introduce innovations that could greatly improve the efficiency of the U.S. air transportation system. Given little economic incentive and saddled with institutional and political constraints, major airports and the air traffic control system have not exhibited any marked improvement in their performance for decades despite repeated assurances that they would do so, and they have provided little reason for policymakers and travelers to expect such improvements to ever occur.
Some observers believe that delays would be reduced if the nation invested more money in airports and air traffic control. However, the returns from such spending would be compromised by the system’s vast inefficiencies. Thus, the key to reducing delays efficiently is to rid the system of its major inefficiencies. We believe that can be accomplished only by privatizing the nation’s aviation infrastructure. The aim of this chapter is to argue that by operating in a less constrained and a more competitive environment, privatized airports and air traffic control would have the potential to improve service to travelers and reduce the cost of carrier operations while maintaining the nation’s outstanding record of air travel safety in the face of an ever greater volume of traffic. In addition, privatized airports could facilitate greater competition among airlines that would lead to lower fares.
We recognize that privatization of public aviation facilities does not guarantee that monopolies will not be formed. Thus, we call for carefully designed privatization experiments to preview the extent of competition that is likely to develop among airports and the resulting economic effects and to alleviate concerns that public airports will be replaced by private monopoly airports. We also recognize that privatization faces strong resistance from entrenched interests who benefit from current policies. At the same time, as indicated by President Bush’s recent attention to the problem, policymakers cannot ignore the political costs of periodic crises related to increasing travel delays. It is our view that the impasse in reforming aviation infrastructure policy would be broken if experiments reveal that the flying public would realize large benefits from privatization.
Congress enacted legislation in 1996 to create a federal airport privatization demonstration program, but barriers to participation have discouraged significant experiments. As discussed in other chapters in this book, during the last several years countries such as Australia, New Zealand, and the United Kingdom have privatized their airports, and countries such as Canada and the United Kingdom have explored ways to enable private entities to provide (at least in part) their air traffic control services. We hope U.S. policymakers will intensify their efforts to encourage the private sector to participate in addressing growing concerns that the nation’s air transportation system is inexorably headed toward longer delays and potential threats to safety.
In what follows,we provide institutional background on U.S. aviation infrastructure; assess the economic efficiency of current public policy toward airports, air travel security, and air traffic control; and outline the case—including experiments to produce hard evidence—for privatizing these services.