Economic Thoughts on our Aviation Eco-System
- johnsonrsf
- 3 minutes ago
- 9 min read
In response to the lack of Air Traffic Control (ATC) paychecks during the so called “government shutdown”, there were once again calls to “privatize” the ATC. That we should follow Canada’s lead on this one and create a separate, financially independent entity to manage the flow of our nation’s air traffic. As the owner & operator of an aircraft (N123PJ), and as an active instrument rated private pilot who relies on a well-functioning ATC for flight safety, here are my thoughts on this proposal.
But no matter my conclusion, it was despicable that our politicians knowingly chose to reduce the safety of our air traffic system to leverage a negotiating advantage during the so called “shutdown”.
This should never happen again.
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Let’s start with a little economic refresher…
Within a geographically widespread area, it is unavoidable that economic goods are produced in one location and consumed in another. Which is why reliable and efficient transportation services, whether they be on land, air or water, are essential for healthy economic growth. Furthermore, it is desirable that within each such domain there are competing private service providers, as such de-centralization will encourage innovation and competitive pricing.
Not only does this $1.8 trillion transportation service eco-system enhance our economy, between direct and indirect employment, they represent about 10 million jobs, which is roughly 7% of our GDP.
In addition, the U.S. aerospace industry generated about a $74 billion trade surplus in 2024.
Which leads to the obvious conclusion that our aircraft / airspace eco-system is a net plus for our economy. Goven this, is it really broken? Does it really need to be fixed?
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While decentralized free-market eco-systems are usually preferred, our national transportation systems tend to operate within what is referred to as a “commons”, a shared economic resource that usually requires oversight by the government, preventing what is known as “the tragedy of the commons”, an abuse of this shared resource that is damaging for all. These shared commons include airspace, water ways, railways, and interstate highways.
What are the responsibilities of the government when it comes to managing such shared commons? Priority for national security and first responders comes to mind, followed by safety and collision avoidance, the protection of people and property, fair and economically efficient usage of this limited resource, and finally, international compatibility at the borders.
Most transportation service providers in the U.S. are competing entities, which is why we have experienced gradual improvements in, for example, the commercial airline industry. Aircraft are safer, quieter, more affordable and more fuel efficient than ever before. But should the whole transportation system, including the management of the airspace commons, be removed from direct government control?
Specifically, should ATC be directly, indirectly, or not all part of the federal government?
ATC today is part of the FAA (Federal Aviation Authority), and thus directly controlled by the federal government. The FAA is mandated to manage our shared airspace, with a primary focus on safety, followed by efficiency. The very high reliability of today’s aircraft is the result of many hard lessons from the past. Aircraft must be certified to carry passengers, certified to fly at high altitudes and certified to fly in poor weather. Pilots require extensive training and certification, as do the mechanics that repair the aircraft. Navigation systems are complex and require constant testing for accuracy, with backup systems everywhere. The published routes that aircraft fly require extensive testing and constant updating to ensure safety. Airports require maintenance and upgrades.
All of this, and more, is the responsibility of the FAA.
In fiscal year 2024 the FAA’s total budget was $24.8 billion, of which about $19 billion (75%) was funded by users of the airspace, and about $6 billion (25%) by taxpayers. About half of the FAA’s budget, or about $12 billion, is allocated to ATC operations. An additional $12.5 billion one-time boost for ATC was part of the Big Beautiful Bill, for the improvement of the ATC infrastructure.
To put things in perspective, the portion of the FAA budget paid by taxpayers ($6 billion), represents about 1/1000 of the federal government’s annual budget of $7 trillion.
Including planned future ATC infrastructure improvements, our government will be spending about $10 billion per year over the next few years to fund a system that represents an annual $1.8 trillion of economic activity, at an overhead of about 0.5%. Given this relatively small overhead, and the fact that it is an essential component of a $74 billion trade surplus, why has the FAA historically been underfunded? Why is the ATC chronically understaffed while using antiquated equipment?
Think about this next time you fly. After you paid your taxes.
The good news is that even with these funding challenges, as measured by the airspace safety record, ATC has performed very well. While the recent accident involving the helicopter in DC was very unfortunate, prior to that there has not been a single passenger fatality on a major U.S. commercial carrier since 2009. Given that there are about 27,000 commercial flights per day in the U.S., this is quite an accomplishment.
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What exactly does the ATC do? It manages and optimizes the flow of aircraft in our shared airspace, preventing aircraft from flying into the ground or into each other.
Our airspace is broadly separated by two flight categories, VFR (think small piston aircraft flying locally at small, un-towered airports) and IFR (think jet traffic flying between towered major airports). There is about a 50/50 split between VFR and IFR traffic. Of the IFR flights, about 65% are commercial carriers, and the rest a mix of private and military. IFR flights tend to be above 18,000ft, and VFR below 12,000ft. In 2024 in the U.S. there were about 16 million IFR flights and about 14 million VFR flights.
All IFR flights require ATC service and attention, while most VFR flights do not. Those VFR flights that do require limited ATC service are serviced at a lower priority than the IFR flights.
VFR means “Visual Flight Rules”, which implies flying in good weather, knowing the airspace rules, and flying your own path. IFR (instrument Flight Rules) implies that you are following ATC instructions, from takeoff to landing. If you abide by these instructions, you will remain clear of the ground and all other IFR traffic (and most VFR traffic). IFR must be used when flying in clouds, fog, or on dark nights. Special training is required for IFR flights, with both the pilot and the aircraft required to be certified for instrument flying.
ATC instructions are called “clearances”, as in “we have clearance Clarence”. While ATC instructions can sometimes be as simple as compass heading and altitude, often they involve following published charts that the pilot (and the autopilot), must be able to accurately navigate. The publication and updating of these charts are one of the important functions of the FAA.
ATC also manages most ground movement of aircraft at major airports.
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About 25 years ago when I first started flying, I remember hearing lost pilots on the radio asking ATC for help. Thanks to the rollout of GPS, this does not much happen anymore, if at all. Every smart phone and device has become a battery backed, GPS equipped flight navigation assistant.
As technology has advanced, so has flying. Today most aircraft navigate almost exclusively using GPS. The paper maps and charts are now stored electronically, and cell phones with Bluetooth work surprisingly well as a backup form of communication at lower altitudes, while an on-board Starlink will cover all altitudes. Autopilots have improved to the point where newer planes can self-land in an emergency. Cirrus aircraft are even equipped with an emergency parachute!
After GPS, the other successful significant system upgrade was the rollout of the Automatic Dependent Surveillance-Broadcast System (ADS-B), which is a mesh RF network that connects aircraft with many scattered ground stations, which are in turn connected to a central server. ADS-B greatly enhances ATC situational awareness as it reports in real time the position, altitude, air speed and unique ID of all equipped aircraft. It also increases the situational awareness of pilots who now can receive real-time weather, traffic and other information.
An ADS-B transceiver is very inexpensive, and almost all U.S. aircraft are now equipped. It creates a WIFI signal connects it to an iPad or whatever, where an app such as Foreflight presents the received information. For those that want to help ATC and pilots, it is very easy to install and operate your own ADS-B ground station. You just need a Raspberry Pi microcontroller, an RF antenna and an internet connection.
I can only speculate what future impact AI will have on flight safety, but I suspect it will be a good one.
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So, should ATC be directly managed by the FAA, or spun off as a “private” entity?
Consider the USPS. It was created by the Postal Reorganization Act of 1970 and is in theory an independent entity within the federal executive branch. The USPS must comply with its federal mandate to deliver mail to every address in the U.S. for a common price, and in theory, is self-funding via stamp revenue. While it must compete with the likes of FedEx and UPS for package delivery, for “letter” delivery it was granted a monopoly. Plus, only the USPS can deliver anything to USPS mailboxes.
But thanks to advancements in technology, each year there is less first-class mail to be delivered by hand, decreasing the revenue of the USPS. Furthermore, as it lacks competition in letter delivery, there has been minimal innovation on the part of the USPS. And finally, contrary to its mandate, the USPS is not “self-funding”. For fiscal year 2025 it lost $9 billion, in addition to the $9.5 billion it lost in 2024, etc.
Clearly demonstrating that being “independent” and theoretically “self-funding” does not guarantee a long-term and stable solution, nor any innovation as it is not competing with anyone.
When there are calls to “privatize” ATC, there are inevitably references to how Canada “privatized” their ATC with wondrous results. But let’s be clear, there is nothing “private” about any of this. We are not talking about a privately owned corporation that is owned by investors, competing in a free market, striving for growth and profit. No, all we are talking about is a self-funded, non-competing non-profit.
Kind of like the USPS…
When Canada's ATC System first converted to the non-profit NAV CANADA in 1996, to its credit it successfully updated Canada’s ATC systems. It also introduced a new fee structure that made it financially independent from the Canadian taxpayer. As of 2023 it has issued about $1.6 billion (USD) in public debt to partially fund its operation.
All seemed good until Covid, with dramatically less flights, and thus dramatically less revenue, with debt to pay. NAV CANADA was forced to reduce operations including furloughs and control tower closures. The financial strain was made worse by the requirements to implement strict health protocols.
Even though the pandemic is long over, Canada’s ATC has yet to recover. Today it still suffers from a shortage of qualified air traffic controllers, flight delays, cancellations, and temporary tower closures at multiple airports. These problems are not expected to be resolved any time soon as the training of ATC professionals requires about 2-3 years, and salaries are not competitive with other well compensated sectors of the economy.
The result being that per the most recent ICAO Safety Audit, the Canadian ATC ranks below average when compared to the global average, while even with its own challenges, the U.S. ATC continues to score well above average.
Which leads me to conclude that rather than potentially breaking something that works well, that due to its immense size is critical to the global economy, the U.S. should just fix our ATC and not transform it. Not follow Canada’s path, but to simply fully fund the FAA, to update the ATC infrastructure. To encourage innovation as best as one can given that it is a government agency directly responsible for the safety of traveling citizens.
To prevent any future irresponsible “politician created safety gaps”, I support the proposed “Aviation Funding Solvency Act”, which will ensure that ATC employees continue to receive paychecks during any future “government shutdowns”.
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“Do you need permission to fly?” I am asked this question a lot. The quick answer is no; one does not need explicit permission from the government to fly. But just like operating a car on public roads, a license is required, and it is generally a good idea to be familiar with the rules, and to abide by them. In addition, a pilot needs to be certified for the type of aircraft they are piloting, and if they want to fly in bad weather, in crowded airspace, or at night, there are other optional certifications, such as being instrument rated.
Why should I be able to fly? Kind of gets back to why anyone should be able to do any activity without explicit government permission, even if that activity involves the usage of a shared society commons. Which is why we also do not need explicit permission to sail a boat on the ocean, or to hunt on many public lands. While these freedoms are not present in many other countries, in the U.S. such activities are constitutionally protected as our unalienable right to the “pursuit of happiness”, meaning that for the most part, government cannot apply excessive restrictions to such activities, that they should be available for the average citizen to pursue.
Thus, the fees, taxes, rules and regulations pertaining to private flight must remain reasonable.
Military and first responders should always have priority in the usage of commons, while commercial and private interests usually work out a fair and reasonable shared approach.
As a final thought, here is a list of the notable US-based aircraft manufacturers (past and present) where one or more of the founders were pilots themselves:
· Cessna Aircraft Company
· Piper Aircraft
· Beechcraft
· Grumman Aircraft
· Lockheed Corporation
· Learjet
· Mooney Aircraft
· Cirrus Aircraft
· Eclipse Aviation
· icon Aircraft
· Boom
All creating jobs, wealth and contributing to economic growth. A good enough reason by itself as to why private aircraft ownership and flying should continue to be encouraged in our unique, government limited, free market embracing society.