Conferees call for immediate air traffic control overhaul including privatization

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Conferees Call For Immediate ATC Overhaul, Including Privatization

Story Filed: Monday, November 08, 1999 11:20 PM EST

Nov. 08, 1999 (AIRLINE FINANCIAL NEWS, Vol. 14, No. 44 via COMTEX) -- Slater Announces Chicago Aviation Conference

Executives at three major airlines and top government transportation officials attending a three-day aviation conference here last week called for a massive and immediate overhaul of the nation's ailing air traffic control (ATC) system in an effort to stem mounting financial losses from spiraling delays.

In individual speeches to about two hundred aviation industry representatives at the Global Summit on International Aviation Infrastructure conference conducted Oct. 31 through Nov. 3, executives of American Airlines [AMR], Continental Airlines [CAL] and United Airlines [UAL], agreed that privatization of all or part of the nation's ATC system is needed immediately to slow losses in the hundreds of millions of dollars per year for airlines.

At the conference, U.S. Department of Transportation (DOT) Secretary Rodney Slater announced he has invited the transport ministers and director generals from 100 countries to attend an aviation summit in Chicago Dec. 6-7, 1999. Further details about the conference will be published in Airline Financial News as they are made available.

The United States is already in the grip of aviation gridlock which will only continue to strangle the lifeblood from the nation's airline industry as delays drain major airlines of tens of millions of dollars per month, per carrier, and threatens the wellbeing of countless other businesses which rely on goods shipped by air, said Gordon Bethune, Continental's chairman and chief executive officer. Bethune, who presented the keynote address at the end of the three-day seminar, presented statistics illustrating how the ATC system already is overloaded.

His comments were echoed by Slater, who said the "highest priority" facing Congress is to pass laws "enabling the air traffic control system to work like a business."

Aviation's increasing impact on businesses throughout the world mandates an immediate solution for not only U.S. ATC problems, but also in the European ATC system, which is experiencing as bad or worse delays, Slater said. "Five years ago world aviation directly accounted for more than $1 trillion of economic activity. By the year 2010, the direct economic impact will approach $2 trillion," Slater said.

Internet By Air

As Internet commerce continues to play a larger role in worldwide business transactions, participants must not forget the physical aspects of doing business," Slater said. "You can order 'Steaks from Omaha' on line, but you can't download them onto your plate. Overnight delivery still requires planes, as well as trucks and highways, to move a product from the warehouse to your house.

"No nation is exempt from the gravitational forces of global economic integration that are driving the pressures on system capacity. As the world economy expands, aviation must meet the expected tidal wave of additional passengers and cargo," he declared.

Slater said the DOT is making billion-dollar physical improvements to airports in Miami, Dallas-Ft. Worth, San Francisco, Detroit, St. Louis and Orlando in addition to the more modern radar and computer systems the Federal Aviation System (FAA) has been installing at airports throughout the nation.

Slater said more improvements are needed, such as using global positioning satellites to provide exact location status to airlines en route and help them land in all types of weather.

Global agreements on Open Skies legislation must continue in order to streamline the introduction of foreign carriers into the skies of other nations, Slater said. "The United States now has 36 agreements around the world, some of which have led to as much as a six-fold increase in traffic."

Despite the success of bilateral open sky agreements, Slater called for a "new perspective" to create a "regime that integrates all of our partners and all of their partners in a more comprehensive approach."

With that in mind, Slater announced the Chicago conference he is planning next month, which he is calling Aviation in the 21st Century - Beyond Open Skies. Slater said representatives of U.S. and foreign airlines and airports, international organizations, trade associations, manufacturers, and others are expected to attend, in addition to at least 70 transportation officials from other nations.

Slater chose Chicago as the location because of the historic Chicago Aviation Conference that met there 55 years ago from the day (Nov.1) that he gave his speech at the infrastructure summit. At that earlier conference, the world's bilateral aviation agreements were signed following the end of World War 2.

With some 16 nations having privatized all or part of their ATC systems, Slater called for immediate consideration of a nearly two- year-old proposal by a commission appointed by the president to create a performance-based organization for air traffic services that would be "managed and funded like a business."

Lighting Fires

Saying he has been traveling around the nation, giving essentially the same speech calling for immediate changes in the ATC system, Continental's Bethune said he has done so because "this is an issue of enormous national and international significance and it must be heard by Congress, the Administration and by all those who can and will influence the future shape of our international and national aviation system. It is time for comprehensive change."

Mixing humor with his otherwise serious plea for the creation of a new national task force to quickly study and recommend ATC changes to Congress, Bethune tried to light a fire under conference attendees to prompt them to also begin lobbying for change.

"Gridlock is not an issue for the future - it is happening now and it is happening daily," Bethune said. "I know that any proposal for significant change here in Washington creates an immediate lobby of naysayers who insist, despite all evidence to the contrary, that the world is indeed still flat. Well, my friends, the world is not flat and the ATC system is failing us, and it will continue to do so at an alarming rate until we change how we do business."

Bethune said the first step to bring real change to the ATC system is for Slater to immediately call for privatization of the nation's ATC system and to convene a panel of aviation industry representatives to decide on how much of the system should be privatized, when it should be sold and to whom. He suggested the Unites States follow Canada's lead and create a not-for-profit corporation like Nav Canada, a group comprised of Canadian airlines and related businesses, which recently bought that nation's ATC system for $1 billion.

"As a private company, Nav Canada understands that customer satisfaction is the key," Bethune told the conferees. "In fact, a company executive has said that it now seeks to run the system for the benefit of the users, instead of the convenience of the government." Bethune said the outcome in Canada, "after a mere two and one half years, is that the quality and safety of the service has improved, while in July, the charges for services were reduced by 27 percent."

Restructured ATC

Germany and New Zealand also have privatized some of their ATC systems and have "experienced timely and cost-effective modernization," Bethune said. Latvia, the Czech Republic and South Africa are creating "business-like entities" to run their ATC systems, he said. In Britain, the Labor Party has authorized the sale of stock in a for-profit company that will operate England's ATC system.

Whether the U.S. ATC is fully privatized, Bethune said it must be:

* Extricated from politics. "The ATC must be able to set its own fees

and control its revenues and have access to capital markets. It must be able to make long-term investments wisely based on the needs of the ATC system without having to balance those needs against other governmental priorities;"

* Performance based. "Safety must always be the highest priority and

subject to government oversight, just as the government regulates the safety of private airlines today. We must also have a structure that provides incentives to serve the needs of the customer efficiently. It is critical to have the ability to hire quickly, the ability to pay competitively and the ability to respond to changing technology in real time. Success must be rewarded;"

* Accountable. "Right now we have an ATC system that reports to the

FAA, that reports to the DOT, that reports to the White House, and that is micro-managed by a board of 535 Members of Congress. And when something doesn't work, the buck never stops anywhere. We need a chief executive officer who is accountable to the government and the users, just as airlines are accountable to the government, our passengers and shareholders."

In response to a question from a conferee asking who he had in mind to run the new, privatized ATC system, Bethune elicited laughter by promoting Southwest Airlines'[LUV] chief executive, Herb Kelleher. Kelleher has been quoted recently as saying that since Bethune talks about privatizing the ATC system so much, perhaps he should run it.

Not Airlines' Fault

All three airline executives who addressed the conference bristled when referring to claims made by some that U.S. airlines are creating much of the ATC delays by scheduling too many flights to arrive or take off from an airport at the same time. Randy Schwitz, executive vice president of the National Air Traffic Controllers Association (NATCA) told Airline Financial News in August that airlines over-schedule peak hours knowing that all the planes they and their competitors hope to land at a particular airport at the same time cannot all be accommodated (see AFN, Aug. 9, 1999).

"The theory apparently is that it is outrageous that we are scheduling flights when customers want to travel," Bethune told conferees. "We should schedule them when it is convenient for the government, say at two, three and four in the morning. Then, there wouldn't be delays. Well, I guess that's right - and there wouldn't be any passengers, either."

Bethune said the airlines must book when customers want to fly. He compared the rigidity of airline schedules to an employee scheduling problem Washington, D.C. Police Chief Charles Ramsey was dealing with trying to get police officers to work nights and weekends. Ramsey said he would agree to have his officers work only days if criminals would sign a memorandum of understanding with him, vowing they would commit crimes only during regular police working hours. Bethune said expecting airlines not to fly at peak demand times is just as ludicrous as expecting criminals to commit crimes only during weekdays.

Ugly, Getting Uglier

Delays are "ugly and getting uglier" American's chief executive, Don Carty, told conferees. "We must act fast to increase the capacity of this nation's airspace." But in order to do that, those involved in the aviation industry must quit a "debate on air traffic congestion that has gone from finger pointing to outright ugliness," Carty said.

"A recent so-called issues ad by one organization accused airlines of putting profits before safety. I am willing to tolerate criticism as part of a vigorous political debate, but I cannot and will not accept rhetoric that questions our industry's commitment to safety," Carty said.

"The sad irony of the situation is that while the airlines, the FAA and Congress are all scrambling to avoid blame, or protect their own individual interests, the truth is that our real interests are very aligned. Unfortunately, instead of collaborating to find solutions, we spend most of our time being mad at each other."

Because "customers are mad at us, airlines are mad at the FAA," Carty said. FAA air traffic controllers are mad at the airlines for building schedules around hubs "that operate on nothing but peaks and valleys, making our lives more difficult." The FAA is angry at Congress for holding its funding hostage, which makes it hard for the FAA to plan investments in new technologies. Airlines are upset with Congress for "sticking its nose into an area, customer service standards, that ought to be left to the marketplace," he said.

"In many ways, airlines are in the sweet spot when it comes to all the changes taking place in the global economy today. Trade barriers are falling. Anyone with a modem can open his or her own global business. Connectivity and access, which is what airlines are all about, are key drivers in this new economy," Carty said.

But air travel is running the risk of being "left behind" if it becomes ever more of a hassle and less and less reliable, he said. "Instead of being a central player, we'll become an anachronism, an afterthought," Carty said.

In his speech, United's president, Rono Dutta, agreed with much of what Bethune and Carty outlined, saying the nation's ATC system is "in crisis" and "we need to find solutions and find them fast." Like Bethune, Dutta said fundamental reform of the FAA must be undertaken by a group comprised of industry representatives.

"This cannot go on," Dutta said. Year to date, United has experienced 863,000 delay minutes due to problems with ATC flow control, the equivalent of a year-and-a-half of lost time at a cost of $373 million to the airline to date, he said. That is a 22 percent increase in its costs for delays over 1998. Slater, 202/366-5582; Bethune, 713/324-5080; Carty, 817/967-1577; Dutta, 847/700-5538 << The World According to Bethune

According to Continental's Bethune, the nation's ATC system must be overhauled because:

* There are currently 625 million passenger minutes of delays each

year which cost the economy more than $4 billion annually;

* Passengers are being delayed a total of 28,500 hours a day on

average;

* System delays January-August this year were 50 percent higher than

for the same period in the years 1984 through 1997;

* FAA delays per 1,000 operations for the first eight months of 1999

were up about 20 percent on a combined basis at 55 of the busiest airports nationwide; with the 156 percent increase at Detroit being the worst.

-- Homer Beanfang (Bats@inbellfry.com), November 09, 1999

Answers

It would certainly be ironic for thse conference attendees if y2k was so severe that instead of the FAA being privatized, the airline industry was nationalized.

-- a (a@a.a), November 09, 1999.

more cheery reasons to fly the friendly skies NOT

-- no fly (zoned@out.now), November 09, 1999.

Old saying: "government can do two things efficiently - make war and inflate the currency". ATC wasn't mentioned, was it?

my site: www.y2ksafeminnesota.com

-- MinnesotaSmith (y2ksafeminnesota@hotmail.com), November 09, 1999.


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