FAA Air Traffic Control Tower

NextGen Air Traffic Control and Creative Destruction


Now that the sequestration related travel delays seem to be over, regardless of who is to blame, we have a bigger issue regarding air travel to address. Ten years ago, Congress established a planning office for implementation of the Next Generation Air Transportation System, NextGen. This GPS based technology will replace the antiquated, ground based radar system used since the 1950’s. The new system will reduce costs for airlines, travelers, the FAA, and private pilots, while making air travel safer and more efficient. One would assume a technological advancement, with so much promise for improvement, would be a priority, but implementation has suffered setbacks and delays from political forces.

Air travel delays cost passengers and airlines roughly $12 billion a year. The NextGen system will allow air traffic to be monitored from anywhere, even over sparsely populated areas with no radar towers. Planes would be able to take more efficient flight paths. Faster routes will save passengers time, and the airlines fuel, which means lower costs, and less pollution. On September 12, 2012 the Inspector General Calvin Scovel testified before the House Infrastructure Subcommittee and outlined some technical problems with implementation. NextGen was originally was supposed to be fully operational by 2020, but due to setback, it is now projected to be 2025, at a cost of $25 billion.

Blame for delays has been placed on the high price tag. The FAA is run by the Federal government, so the cost to upgrade will have to be payed for by tax payers. However, upgrading to NextGen will mean consolidation, which should provide substantial cost savings. A policy study by Robert Poole of the Reason Foundation found that full consolidation of Terminal Radar Approach Facilities (TRACONs) and Centers, would create total operating cost savings of almost $1 billion a year, or around 10% of the FAA’s annual budget. With these significant savings, NextGen should be a priority.

There is also a high cost to the airlines. Retrofitting the planes with NextGen technology could cost up to $500,000 per plane. But, NextGen will save airlines money as well. The NextGen system will allow planes to do more coasting on landings, and shorten routes, saving an estimated 25 to 50 gallons of jet fuel per flight. At current jet fuel prices, that means $200 to $400 of savings per flight. An airline only needs 1500 flights to make up for the cost of installation. The CEO of United Continental Holdings, Jeff Smisek, said NextGen could save “1 million barrels of jet fuel a year.” NextGen would be a worthwhile business investment.

The primary impediment seems to be politicians, fearing job loss. Implementation of NextGen means significant consolidation, from 21 en route centers and 171 ATC facilities, to as few as 35 super-hubs. Fewer facilities, equipped with NextGen, will be able to safely handle at least twice as many aircraft. Poole of the Reason Foundation wrote “Congress tends to resist consolidating ATC facilities because of concerns about job losses.” Poole pointed out that in 1982 a consolidation proposal was dropped due to lack of support in congress. In a paper for Brookings Institution’s The Hamilton Project, Dorothy Robyn wrote that Congressmen “often cited concern about the loss of jobs in their districts as a reason for blocking large-scale consolidation.” Elected officials object because job losses could hurt reelection. The term for NextGen’s impact is creative destruction, and those in power are often threatened by changes to the status quo.

Creative destruction is ruinous for cartels and those in power, because it spreads prosperity from incumbents to new actors. Throughout the centuries those in power have opposed new technology. In 1589, the first knitting machine was presented to Queen Elizabeth I, who denied a patent because she feared job loss would lead to political destabilization. In 1705, the first steam engine ship was destroy in Germany by the boatmen guild, because their jobs were threatened. And in Austro-Hungary, railways could only be powered by horses until 1860, because Francis I feared industry would upset the feudal system. There are countless others examples throughout history, and today.

NextGen-type systems have already been successfully implemented in Australia, Canada, and the United Kingdom, although in each of these countries air traffic control is privately operated. As long as these operations remain under the budget of the FAA in the United States, we could see continued delays and setback in the implementation of NextGen. Members of Congress should consider air traffic control commercialization, and push for this obvious, smart investment into US technological infrastructure.