Across the Aisle From American’s SVP of Government Affairs on Why Privatizing Air Traffic Cont

A couple of weeks ago, I posted an interview with Steve Dickson, Delta’s SVP of Flight Operations, on why Delta opposes efforts to privatize air traffic control in the US. This week we look at the other side of the coin. Will Ris, American’s outgoing SVP of Government Affairs, spoke with me to discuss American’s position that air traffic control should be put into the hands of a non-profit corporation and removed from the government. He bristled at the idea of calling this privatization, and you’ll see why in the interview below.

After a long career with American in Washington, Will is stepping down at the end of this year so it was great to talk to him one last time in his official capacity. Even though he was accompanied by Jean Medina (from Airlines For American, aka A4A, which is championing this position for all its members) and Matt Miller from American corp comm, I knew Will wouldn’t disappoint.

Cranky: I’m a little sad that you’re there, Matt. I was hoping Will would just go completely off the rails since he’s probably in between a couple of retirement parties now.

Will: I may still do that. What do I have to lose, right? But for the record, how cranky are you today? Because if you’re really cranky, we can postpone this call.

Cranky: I’m good today. I’m just fine, so let’s get started. I spoke with Steve Dickson at Delta which takes the opposite view of A4A and most US carriers it seems. Now it’s your turn. Why should we be privatizing ATC?

Will: Ok, let’s start by talking about the topic, because we don’t believe we should be privatizing ATC as that term is normally

Cranky: So what’s the sound bite terminology that should be used for this?

Will: It’s that we’re looking for a congressionally-chartered not-for-profit organization. That’s really important. It’s an organization that would be run in a business-like fashion with all the tools that the private sector has, but with none of the profit-making incentives. Around the world as we look at other systems, we’ve looked at different models. I think we emphatically believe that a not-for-profit congressionally-authorized organization is the best way to go.

Cranky: Is there an example somewhere in the world that you’re trying to emulate?

Will: We think there are lots of systems around the world. From the beginning, Australia and New Zealand have systems that have been very successful. We think Nav Canada is successful. They have improved the quality and efficiency of air traffic control in the jurisdictions they serve uniformly. They’ve done it without excessive costs. There’s no one particular model, but certainly we’re very familiar with the Nav Canada model and think it has a tremendous amount of value to look at.

Cranky: What’s the primary motivation for pushing to this model? It still requires congressional action, which generally means it might happen in 100 years. What is it about this model that’s going to solve the issues?

Will: The main thing about the model is that it’s not about the technology. It’s about the financing and the governance of the system. What’s unique today is we have a set of circumstances here [that] there is enormous consensus growing that we should do this. This is not a new idea. This has been floating around for decades. It was an idea that was proposed in the Clinton administration. It was endorsed by numerous studies. Every time there’s been a study about how to make air traffic more efficient, this concept has been raised.

What’s happened is we have growing consensus that the status quo is simply not acceptable. And the main part that’s not acceptable is the uncertainty of the financing tied up in the federal budget. It’s not that we can fix that just by saying we’ll give it more money. That’s not how it works. And the way that the government entities have to expense their money, they have to do it on an annualized basis. So you have an organization that has to make huge investments in capital and it doesn’t have the tools to do it as we do in the private sector. If we had to buy all of our airplanes with cash generated in the year that we’re buying the airplanes, we’d have the smallest fleets in the world. But we can go to the capital markets; we can engage in long term planning with a great deal of certainty that we’ll have the resources.

Cranky: The piece specifically about funding… opponents have said that there are other parts of the government that don’t have this issue. They function without these stop-gap extensions. They think it can be fixed. You’ve been here for decades. Is that something that can be fixed under the current structure?

Will: I don’t think it’s true. That’s a pipe dream. There is nothing in the federal government that is equivalent to this. This is a government organization that is running what is tantamount to an operational business providing services day after day, year after year. It’s totally unique. You can’t point to other agencies in the Department of Transportation. They don’t do this. We’ve seen the effect of a sequester; the effects of a shut down. When you shut down anything for even a couple of days in this business, it takes months to get it going again. Being in the federal budget process is a problem…. Those who are very much part of the system, like air traffic controllers. NATCA is incredibly articulate about the stress that the federal budget process puts on the recruiting, the training, and the retention of air traffic controllers. They’re really worried about it. And if they’re worried about it, we’re worried about it.

Cranky: Do you envision this effectively saying, “look we’re gonna take the current organization, the people, the projects, and just change the funding structure”? In other words, do you like the projects in the pipeline right now and you just don’t think they can get done?

Will: Yeah, I think, well who knows what happens in the very long run, but in the short run absolutely. We know what we have to do. We know what the goal is. This isn’t about making huge technological changes. It’s about expediting a process that we know has been much slower than it needs to be and creating an environment where innovation and change can be adapted as technology develops and comes on board. But we’re not looking for a radical wholesale change. We would assume that day one of the organization, the same people would be doing the same things, but they’d be subject to a different financing and different governance system.

That’s really important. Today what happens, the governance is done in the political environment. Congress has a lot of good intentions, but it has the ability to send mixed signals about priorities that aren’t necessarily consistent with the best interest of the users of the system. So it’s to have a board of directors that would be focused on the basic principles of safety and efficiency at reasonable cost. We’ve seen around the world where this has happened. It hasn’t skewed the system to any particular group of users. It only increases the efficiency of the system where it’s been implemented.

Cranky: What Delta is saying is, “there’s a lot of good happening right now and this is going to be disruptive.” It sounds like what you’re proposing is not actually disruptive. It’s really more of a change in funding?

Will: This is the one argument that I think is just the weakest possible argument that it would be disruptive. I agree with the premise of your question. I don’t think it would be nearly as disruptive as people might be fearful of. What we’re trying to do is change the financing and the governance. But that aside, not to do something that’s really, really important around which there’s tremendous consensus just because it’s hard is crazy.

If you think about all the decisions made in the last decade in the airline industry… when Delta and Northwest decided to merge, I bet there were people inside either company that said “this would be really disruptive, I’m not sure we should do this.” In retrospect, it probably was disruptive, more than we’re talking about here. But it was worth doing. And just to say something is hard or may have some bumps in the road is absolutely the weakest argument, because then we wouldn’t do anything.

I’m unfortunately old enough to have been a part of the airline deregulation process back in the 1970s. This was exactly the argument people were using. “We can’t do it. It’s gonna be really disruptive. There may be safety implications.” And none of that came true. But there was a lot of opposition to it. And to its great credit, Congress just bit the bullet and said it was the right thing to do. If we hadn’t done that, we would have the worst aviation system in the world today.

Cranky: If that’s the weakest argument, then what’s the strongest?

Will: I don’t think any of the arguments are very strong, but I think the strongest one arguably is that you have to go do it right or it has the potential of being a disaster. It’s true. The transition has to be done carefully and thoughtfully with the cooperation of all parties. But all the perceived dangers and escalation of costs, there is no empirical evidence showing that’s true. There are hypotheticals, Congress can continue to tax the airlines no matter what system there is, but that’s hypothetical.

Before we signed on to this, we not only had our operational people but we had our financial officers at all the airlines look at this with a sharp pencil. We said, “we may propose something here that transfers the financial burden from the passengers to us. We’re going to have to write the checks. So we want you to look at this and make sure this makes sense from an economic point of view.” And when they did that, universally they came to the conclusion, at least the current members of A4A, that this has more chance of reducing cost because of the ability to utilize capital more efficiently, then increase cost. But the actual costs themselves aren’t as important as the efficiencies you create in the system. We’re willing to step up to the plate and write the checks to support the system through user fees instead of just collecting the money and passing it on.

Cranky: The expectation is that this would be funded straight through user fees?

Will: Yep.

Cranky: Is the argument that there should be a reduction in taxation elsewhere to offset that?

Will: Yeah. The bulk of the money today comes from the 7.5 percent excise tax. To the extent we’d take a federal function out of the government, those fees should be reduced or eliminated proportionally. There are other functions that will continue to be in the government so there will be some need for taxation but it’ll be reduced proportionally.

Cranky: Well apparently they’ll be using the money to fund road paving or something. Though that’s a whole different issue.

Cranky: If you were handicapping this, what do you think the chances are right now?

Will: I would give it an 85 to 90 percent chance of being successful. Getting a hard piece of legislation passed is like launching a rocket to the moon. There’s a certain window in time and space that you need. And I think we’re coming to that point. I’ve had more than 40 years experience including working on the Airline Deregulation Act. You need among other things a really strong advocate in Congress who understands the issue and is willing to take it on and get it done. In airline deregulation we had Senator Cannon and Senator Kennedy who passionately felt strongly about it and pushed hard.

Today we have the Chairman of the House Transportation and Infrastructure Committee [Rep Bill Shuster, R-PA] who understands this beautifully, who is really committed to getting it done, who is really respected for his views on this. You also need a great deal of unanimity in the airline industry. We have that with one lone exception. There was an A4A call in which large carriers, small carriers, regional carriers, cargo carriers, everyone stepped up to the plate at the CEO level saying this is what we need to get done. That is similar to what we saw in airline deregulation, though I have to admit the one airline that continued to oppose it until the very end was American Airlines. And yet the wisdom of Congress was “we’re gonna do the right thing.” And I think that’s gonna happen here.

The House is on a trajectory that’s very positive. The final component here is that we’ve reached a set point where we have a great deal in common in terms of our worry about the status quo with the air traffic controllers union, the Air Line Pilots Association, and other key stakeholders in the system. And nobody has come out yet and endorsed, we haven’t seen the proposal yet, but I’m optimistic that we could have a very substantial agreement on it, and I’m hoping that includes general aviation…. This should be for everybody.

Cranky: Will this be your retirement job? Running this thing?

Will: I want to take over The Cranky Flier. I want you to run the system and I wanna sit there and pontificate on things.

Cranky: Sounds good to me. Thanks for the time Will, and enjoy retirement.

Now you’ve heard both sides of the argument. What do you think should happen?

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