ATC Commercialization Policy: Has It Been Effective?

Transcription

1 ATC Commercialization Policy: Has It Been Effective? Presentation to the World Bank April 6, 2006 By Glen McDougall Canada 1

2 Purpose Polarized opinions in US on effects of commercialization Some say ATC Commercialization dangerous, a resounding failure, widely unpopular idea Others say ATC Commercialization safe, more cost efficient, responsive to users What is the evidence? Objective of study to provide unbiased performance information for policy-makers Looks at performance of ten commercial Air Navigation Service Providers (ANSPs) from 1997 to 2004 compared to the FAA 2

3 What are Air Navigation Services? Chicago Convention of 1944 requires governments to ensure services to international civil aviation: safe & efficient separation of air traffic infrastructure of communication, navigation & surveillance facilities information to pilots Hence a core common output from all ANSPs, ideal for this type of policy study ANS represents 5% to 10% of airline operating costs In addition, ANS service quality has significant impact through safety, delays and flight efficiency 3

4 Definition of Commercialization Range of organizational options that introduce business practices Financial autonomy a prerequisite Includes government department with user fees and access to capital markets Separate government agency Six variants of government-owned corporation Public-private partnership 49% owned by government, control to Airline Group Non-profit, private corporation not owned by government with stakeholder-appointed board 4

5 All ANSPs fully participated: Airservices Australia NAV CANADA DSNA France DFS Germany Irish Aviation Authority LVNL Netherlands Airways New Zealand ATNS South Africa Skyguide Switzerland NATS UK FAA/ATO USA Government Corporation Non-Profit Private Corp Dept w Fin. Autonomy Government Corporation Government Corporation Government Agency Government Corporation Govt-owned Public Co. Govt-owned Non-Profit Joint stock Corp(99.9%) Public Private Partnership Government Department 5

6 Funding from multiple sources: One quarter each from providers, customers & suppliers, governments and charitable foundations to academia Providers: CANSO, Airservices Australia, NAV CANADA, DFS Germany, Irish Aviation Authority, LVNL Netherlands, Airways NZ, NATS UK Customers & suppliers: IATA, ARINC Government: Transport Canada, European Commission SES, CAA UK Foundations: Donner Canadian Foundation, Searle Freedom Trust (US) 6

7 Advisory Committee Senior international experts Provided advice and guidance throughout project, reviewed documents for accuracy and impartiality Chaired by George Mason University Members included an ex-faa Administrator, the Chairman of FAA s Management Advisory Council, the World Bank (Doug Andrew), the CAA UK and others Observers: US Government Accountability Office, Transport Canada Inclusive invited other groups to participate (unions, general aviation) Committee not asked to endorse findings 7

8 Project Team included three universities: Directed by in Canada Project Director former government official who managed ATC commercialization in Canada Senior Air Traffic Controller as expert advisor School of Public Policy at George Mason University, Virginia Maxwell School of Syracuse University, New York McGill Institute of Air & Space Law, Montreal 8

9 Three new bodies of work: Legal Descriptions by McGill University of governance structure of each commercial ANSP, organized by topic Over 200 interviews with ANSP management, unions, customers, regulators, military, tech suppliers, international agencies in cooperation with George Mason University Normalized trend analyses of Key Performance Indicators by Syracuse University safety, modernization, cost, service quality, public interest and financial stability 9

10 Trend Analysis Trend analysis compares relative performance of an ANSP over time with its own starting point All absolute units normalized to 100 to allow comparisons of trends Avoids difficulty and debate over benchmarking where units of measure must be identically defined Provided each ANSP used consistent definitions throughout period, can compare trends between ANSPs Study looks for behavioral tendencies resulting from commercialization 10

11 Comparability: Size Large difference between volume of US system compared to any other: US has 6 times IFR traffic as Canada (18.6M movements vs 3.6M), 8 times that of Germany, France or UK Cleveland Center handles 3.0 million IFR movements, almost same as Canada VFR traffic extensive in US However, outputs of FAA similar to outputs of commercial ANSPs (ICAO), volume is scalable Study found FAA faces identical governance issues and has identical opportunities but greater impact Project concerns good governance, and like ethics, governance principles do not change with size 11

12 Comparability: Productivity EUROCONTROL FAA study 2003 showed several European en-route centers to be more than 60% less cost-effective than average of 3 FAA Centers Cost-effectiveness included controller productivity, hours worked per year, wage rates, exchange rates, support costs etc However, controller productivity (IFR flight-hours per controller hour) identical Cleveland vs London, both less than Indianapolis or Albuquerque Complexity assessed no systemic difference Average 29% higher productivity in FAA sample versus European sample 12

13 EUROCONTROL FAA Study 13

14 FAA Terminal ATC Benchmark Pilot Study February 2005 Compared terminal & tower ATC cost effectiveness at paired airports similar in configuration and volume Four airports in US have no match in volume Adjustments made for traffic type Movements per controller in ops working hour New Orleans 2.5, Dublin 3.9 Dulles 2.8, Toronto 3.0 Tampa 2.6, Sydney 1.9 Philadelphia 3.1, Frankfurt 3.2 San Diego 1.9, Auckland 2.2 Average 1% difference in productivity per working hour 14

15 IFR Movement Trends # IFR Movements Controlled Normalized, first year of data = SkyGuide NATS U.K. Airservices Australia IAA Airways NZ DSNA DFS LVNL ATNS NAV CANADA FAA Year 15

16 Findings: Safety Safety regulators and accident investigation boards confirm safety not compromised by commercialization Several safety regulators report improvement in safety culture, reliability of reporting & better visibility of safety issues Overwhelming support for separation of regulator from provider removes conflict of interest Trends show decrease in serious safety incidents for 9 of 10 ANSPs Swiss ANSP had a safety issue lack of safety oversight and, some believe, airlines too dominant No safety trend data for FAA 16

17 Trends in Safety Incidents Serious Safety Incidents per IFR Movement ATM-related 200 Normalized, first year of data = NATS U.K. Airservices Australia IAA Airways NZ DSNA DFS LVNL ATNS NAV CANADA Year 17

18 Findings: Modernization All commercial ANSPs in sample are modernized with few exceptions Like Night & Day before & after commercialization Consistent view of stakeholders that technology implementation in commercialized ANSPs far ahead of where it would be in government Much tighter business discipline less time in development, less customization, rapid deployment No gold plating on investments Stronger customer influence on priorities FAA had mixed results, cost overruns and delays but had significant cost growth compared to decreasing trends in commercial ANSPs 18

19 CAPITAL EXPENDITURES Capital Expenditures (in 2004 Constant National Currency) - for Larger ANSPs Only 160 Normalized, first year of data = NATS U.K. Airservices Australia DSNA DFS NAV CANADA FAA Year 19

20 Findings: Cost 30% gap in trends in cost per IFR movement between several commercial ANSPs and FAA Major benefit of commercialization Model makes difference customers most satisfied with cost control in Australia, Canada and New Zealand Strongest results when model provides clear separation from government socio-economic priorities Government priorities on job protection, development of small communities, stimulating industry, local benefits etc in conflict with cost efficiency 20

21 COST PER IFR MOVEMENT Total Annual ANSP Costs by IFR movements (2004 Constant National Currency) Normalized, first year of data = SkyGuide NATS U.K. Airservices Australia IAA Airways NZ DSNA DFS LVNL ATNS NAV CANADA FAA Year 21

22 Findings: User Fees Has brought users to the table Major benefit in allocative efficiency how much services cost and which services are important Fees were generally decreasing, however, because ATC relatively fixed cost in short term, fees in several ANSPs increased with traffic downturn (9/11 etc) Customers surveyed 4 years after fee increases still strongly prefer commercialized ANSP to government E.g. German airlines pressured government to further distance DFS from government for better cost control public private partnership planned 22

23 User Fees (En-route) Unit Rate - Enroute (2004 Constant National Currency) 140 Normalized, first year of data = SkyGuide NATS U.K. Airservices Australia IAA Airways NZ DSNA DFS LVNL NAV CANADA Year 23

24 Findings: Service Quality Some improvement in delays through correcting short-staffing, innovative technology Large improvement in delay trends in European commercial ANSPs vs FAA uncertain how much commercialization was contributing factor Major difference in customer responsiveness resulting in improvements to flight efficiency: e.g. oceanic satellite technology years ago in commercial ANSPs but just happening at FAA ADS-B in Australia, rapid RNP procedures Customers strongly supportive of benefits of commercialization on service quality Frustration over slow progress at FAA 24

25 Delays: European Commercialized ANSPs vs FAA ATC Induced Delays in Minutes per Flight Normalized, first year of data = SkyGuide NATS U.K. DSNA DFS FAA Year 25

26 Findings: Public Interest Impact on Labor no real change to wages and benefits, but better technology and working environments Management-labor relations situational Improvements in civil-military cooperation Charges to general aviation modest No changes to service to small communities but pressure to reduce cross-subsidization Financial stability strong all weathered perfect storm after 9/11, SARS etc Most difficult problems were with UK PPP caused by government imposed debt and regulated price-cap 26

27 Findings: Stakeholder opinion Almost unanimous support for commercialization from regulators, customers, military ATC and unions of commercialized ANSPs Undoubtedly one of the greatest benefits of ANS commercialization is that there never has been any confusion over just who precisely the customer is. Air New Zealand 27

28 Tying it All Together: Who is the Client? Principal-agent problem In past, ANS a public good, tax-based, in government department clear that client was government, general public Providing financial autonomy tended to redefine client as aviation community Higher performance where: customers have effective influence (but not control) ANSP can respond to customer needs by being insulated from political micro-management and government direction 28

29 Tying it All Together: What is the Public Interest in ANS? Public Interest in air navigation services not same as government s socio-economic or political interests Study found that redefinition of client helped define public interest Focus on safety; system efficiency including delays; access to airspace; consumer protection; good employer etc Many tools available to government: legislation, regulation, legal recourse and more Ownership and operation by government has not been essential to protect the public interest 29

30 Tying it All Together: Common Constraints on Performance High labor costs: Labor intensive service Controllers well paid, low hours International market Customers intolerant of labor disputes Absence of a profit motive: No commercial ANSPs in sample maximize profit Agreed or legislated rate of return, or price cap, excess profits returned to customers Even in Public Private Partnership in UK, private shareholders not expecting commercial return 30

31 Tying it All Together: Constraints (cont d) Uncertainty of demand Except where airspace small, not feasible for aircraft to avoid an ANSP Hence most ANSPs are passive recipients of traffic volume Relatively fixed costs in short term, so most volume risk passed to customers who experience lower fees as volumes increase, higher fees when volume falls (ceteris paribus) Planning capacity (staffing, training, investment) depends on reliability of traffic forecasts over or under capacity leads to criticisms of inefficiency or causing delays 31

32 Linking Structure to Performance: Government Ownership & Control Itself not a critical factor Most important that managers have control of resources, levels of service and business decisions and that managers accountable for performance Some ANSPs have mechanisms that insulate them from government (New Zealand), eliminate or reduce government ownership (Canada, UK), or have strong boards coupled with government restraint (Australia) Current FAA structure has extensive government micro-management, political direction from lobbying, conflict between customer service and government priorities resulting in low performance 32

33 Linking Structure to Performance: Stakeholder Involvement Introduction of user fees has improved allocative efficiency by information exchange on which services are important and how much services cost Where customers actively involved, and ANSP is transparent, investments scrutinized for value, costs minimized, and services maximized Customers are few in number and financially articulate results in efficiency gains and reduction of gold plating Governance structure affects degree of customer influence from presence on board (should be at arm s length) to degree of customer focus permitted 33

34 Linking Structure to Performance: Regulatory Framework Government must fulfill its regulatory responsibilities for safety and consumer protection Example of poor safety oversight leading to consequent major increase in safety infractions Regulators advise government should strengthen ANS safety regulatory capacity before commercialization Variety of economic regulatory models in sample tailored to needs of aviation community and degree of stakeholder influence Long term ANSP-Customer price and service agreements encouraged by some regulators, IATA 34

35 Conclusion ATC Commercialization is effective: Some models increase performance more than others Commercial ANSPs exhibit three main strengths: Sensitivity to customer needs Agility in reaching a decision Ability to carry it through Commercialization has many choices not all or nothing Commercialization works best where several factors come together: Independent governance structure Effective customer influence Robust government oversight 35

36 A to Z Guide to Commercialization Best Practices Commercialization is a means to an end: improved performance contribution to aviation value chain Report highlights lessons learned, what to avoid A to Z Guide on what to consider when ATC reform is being discussed Does not advocate a particular governance structure but gives policy-makers information on what works and what doesn t Large impact of ANS on aviation sector makes commercialization worthy of consideration 36

37 Good information makes for good policy 37

38 Availability of Report Available Now Includes CD of McGill report on legal descriptions of the commercial ANSP governance structures To order contact or visit 38