Very interesting article! It makes sense that a number of government services could operate more efficiently if privatized; e.g. USPS. With regard to ATC, would the airlines then be the primary source of income thereby increasing passenger fees?
An interesting piece. Privatized ATC is hard, because a) ATC is a natural monopoly, b) it produces a product with wide public benefits; c) there are inherent conflicts among user classes; d) it is desirable to avoid boosting cash flow via under-investment, ; and e) the complexity of writing contracts that are sophisticated enough to mitigate a), b), c), and d).
It is difficult to imagine multiple competing ATC systems, at least within a single airport or geographic regions. So, we are stuck with a single monopoly provider, presumably government-franchised. An unregulated monopoly provider could set prices based, not on the cost of its services, but on the value of air access to particular airports or regions, permitting them to extract rent from airlines, airports, and slots. And it could get worse from there.
The main point is that unregulated private provider is a non-starter unless you want it evolve into an aviation services monopoly like Soviet Aeroflot. So, private ATC has to regulated like a public utility (like electricity) or a common carrier (like railroads) to provide equal access and open entry and exit to all airlines and not price general aviation out of existence. ATC has to prioritize safety. ATC has to maintain its facilities and invest to meet growing demand rather than restricting demand through pricing or congestion. Private ATC's pricing or reimbursement mechanism should reflect this requirement. T
These points make for a complicated contract or franchise agreement, with the devil in the details. It takes a very capable government to write such contracts, and to keep various interested parties from tilting it one direction or another.
Thanks for reading Arthur, and for the thoughtful reply. You make many good points. I'll need to write a follow up article discussing what I think could ultimately be the solution- a sort of hybrid model, where ATC has no central authority and instead works like a protocol- like the internet- in which public and private entities could participate. The biggest problem in my mind, as you noted, with a private ATC is the potential for abuse of the monopoly. Or, even in the absence of a monopoly of the whole system, it still seems problematic to let a single entity control access to an entire airport/airspace. I like that our current model facilitates fair and open access to the skies- a small cessna has the right to land at an airport, just as a large airliner does.
I don't mean to suggest that privatized Air Traffic Control is infeasible. NAV Canada is a private non-profit, and the for-profit NATS provides ATC under contract with the UK government and some smaller countries. Air Services Australia is a government-owned corporation. So, it can be done, but it has to be done cleverly. There are, however, two other conceptual problems to be dealt with: 1) reliability. Given the potential human and economic cost of ATC failures, reliability is far more valuable to users and the public at large than to an ATC provider (except in terms of the politics). Very high levels of reliability, which often require a lot of redundancy, are expensive to provide and hard to price. Reductions in reliability may be hard to detect in the short run. 2) Uneven unit costs vs pricing and ATC behavior. The cost of providing ATC services as a function of traffic volume may be U-shaped. Higher per user costs for low volume airports (think Alaska), declining with volume, until unit costs (may) climb again for ultra-high volume airports, like JFK, ORD, etc. Per user costs interact with the level of reliability provided, as well how one manages peak demand (think ORD at 5:30 pm vs 10 pm). Lastly I would recommend Clint Oster's 2007 book "Managing the Skies," for a discussion of public policy and ATC.
I second N- you shed light on yet another topic I never had thought about. Tbh if I had to guess I wouldn’t have thought ATC was government-funded. Keep us updated if they do go private?
Very interesting article! It makes sense that a number of government services could operate more efficiently if privatized; e.g. USPS. With regard to ATC, would the airlines then be the primary source of income thereby increasing passenger fees?
Thank you! Yes - I think that's how it works overseas where the airlines pay in to fund the organizations that run atc through fees.
An interesting piece. Privatized ATC is hard, because a) ATC is a natural monopoly, b) it produces a product with wide public benefits; c) there are inherent conflicts among user classes; d) it is desirable to avoid boosting cash flow via under-investment, ; and e) the complexity of writing contracts that are sophisticated enough to mitigate a), b), c), and d).
It is difficult to imagine multiple competing ATC systems, at least within a single airport or geographic regions. So, we are stuck with a single monopoly provider, presumably government-franchised. An unregulated monopoly provider could set prices based, not on the cost of its services, but on the value of air access to particular airports or regions, permitting them to extract rent from airlines, airports, and slots. And it could get worse from there.
The main point is that unregulated private provider is a non-starter unless you want it evolve into an aviation services monopoly like Soviet Aeroflot. So, private ATC has to regulated like a public utility (like electricity) or a common carrier (like railroads) to provide equal access and open entry and exit to all airlines and not price general aviation out of existence. ATC has to prioritize safety. ATC has to maintain its facilities and invest to meet growing demand rather than restricting demand through pricing or congestion. Private ATC's pricing or reimbursement mechanism should reflect this requirement. T
These points make for a complicated contract or franchise agreement, with the devil in the details. It takes a very capable government to write such contracts, and to keep various interested parties from tilting it one direction or another.
Thanks for reading Arthur, and for the thoughtful reply. You make many good points. I'll need to write a follow up article discussing what I think could ultimately be the solution- a sort of hybrid model, where ATC has no central authority and instead works like a protocol- like the internet- in which public and private entities could participate. The biggest problem in my mind, as you noted, with a private ATC is the potential for abuse of the monopoly. Or, even in the absence of a monopoly of the whole system, it still seems problematic to let a single entity control access to an entire airport/airspace. I like that our current model facilitates fair and open access to the skies- a small cessna has the right to land at an airport, just as a large airliner does.
I don't mean to suggest that privatized Air Traffic Control is infeasible. NAV Canada is a private non-profit, and the for-profit NATS provides ATC under contract with the UK government and some smaller countries. Air Services Australia is a government-owned corporation. So, it can be done, but it has to be done cleverly. There are, however, two other conceptual problems to be dealt with: 1) reliability. Given the potential human and economic cost of ATC failures, reliability is far more valuable to users and the public at large than to an ATC provider (except in terms of the politics). Very high levels of reliability, which often require a lot of redundancy, are expensive to provide and hard to price. Reductions in reliability may be hard to detect in the short run. 2) Uneven unit costs vs pricing and ATC behavior. The cost of providing ATC services as a function of traffic volume may be U-shaped. Higher per user costs for low volume airports (think Alaska), declining with volume, until unit costs (may) climb again for ultra-high volume airports, like JFK, ORD, etc. Per user costs interact with the level of reliability provided, as well how one manages peak demand (think ORD at 5:30 pm vs 10 pm). Lastly I would recommend Clint Oster's 2007 book "Managing the Skies," for a discussion of public policy and ATC.
I second N- you shed light on yet another topic I never had thought about. Tbh if I had to guess I wouldn’t have thought ATC was government-funded. Keep us updated if they do go private?
Thank you! I will be sure to keep you updated.