Infrastructure Watch: The Impact of Proposals to Private Air-Traffic Control on Supply Chains
This time around, manufacturers have not yet meaningfully weighed in on the proposal. There can be no doubt, however, that privatizing air-traffic control could fundamentally change the system in ways that will impact supply chains. Obviously, in a “user pays” system, which is essentially what is being proposed, the direct costs of air transportation increase, though proponents of the change argue that privatization will result in decreased air costs overall – so what the financial impact will be is unclear. (Indeed, there is not even agreement among experts whether Canada’s privatization increased or decreased the cost of air transport.)
Privatizing air-traffic control is also thought to be a way to avoid government procurement rules for air traffic control that the FAA is otherwise bound to observe, but that critics argue have hampered air-traffic control modernization effects. Quicker and more effective modernization of air-traffic control will improve service and reduce costs – the thinking goes.
Manufacturers who rely primarily on water or land transportation – and many are like this – may assume that air-traffic control privatization will not impact their supply chains. This thinking is likely wrong, since the concept of privatization is central to President Trump’s infrastructure vision generally, and air-traffic control is viewed by many as a test case. If air-traffic control privatization can be accomplished, this will very likely set the stage for the greater use of roadway tolls and water usage fees – essentially, privatizing these methods of transportation as well.
While there may be nothing wrong in theory with a user-based system of ground and air transportation, however, the devil may well be in the details; pulling off transportation privatization generally will inevitably require the creation of public-private partnerships that may be beyond the sophistication of many of the government entities that will need to be involved. This could roil transportation, and hold up needed infrastructure improvements, indefinitely.
So how likely is air-traffic control privatization to happen? Reconfiguring the system requires approval of Congress, and Members of Congress from rural districts have repeatedly expressed the concern that privatizing air traffic control will favor bigger markets at the expense of smaller ones. Indeed, the Chair of the Senate Committee on Commerce, Science, and Transportation indicated yesterday that there are no plans to include the air traffic control privatization proposal in any upcoming legislation, because the votes are not there.
Therefore, it is an open question if infrastructure privatization is here to stay, or to what extent it is here to stay. Privatization of any of the nation’s infrastructure, however, will require manufacturers and their supply chains to re-cost and re-evaluate their transportation and logistics plans.