air safety

Jan 13, 2014

Is air traffic control a saleable government service?

Selling AirServices Australia has DON'T GO THERE, written all over it. But that alone is unlikely to stop the government going there.

Ben Sandilands — Editor of Plane Talking

Ben Sandilands

Editor of Plane Talking

Cha-ching, ATC racking up sales from scenic cash register: AirServices photo

If there is one thing that the privately owned airlines of Australia, lead by the Qantas group, the Virgin group, and REX would urge the Abbott government NOT to sell to a private owner it would have to be the air traffic control provider, AirServices Australia.

But it is on the list.

It may even have been fleetingly thought about at times by some in the Rudd, Gillard, Rudd again government, more out of desperation than a matter of committed ideological values that favour the retreat of Government from any activity that might attract a good price, and cease to be a state funded obligation.

For the purposes of this conversation, let’s focus not on the political divide over public and private ownership and responsibility for essential service providers, but the state of AirServices Australia, the nature of the asset and the consequences of a sale of something which exercises monopoly pricing over its product, which is keeping airliners a safe distance apart.

In FY 2013 AirServices separated (but at times not nearly as professionally as required)  over four million aircraft from each other, made an operating profit after tax of $63.1 million, paid the Commonwealth two dividends totalling $21 million, claimed an after tax return on average equity of 14.8%, spent $185.1 million on its capital expenditure program, and employed 4204 people, including many who appear to spend most of their time on parasitical power plays similar to those of North Korea minus for the time being firing squads.

Or so it appears, at times.

In terms of safety, AirServices Australia, figures prominently in Australian Transport Safety Bureau reports into numerous serious incidents in which a regular theme is incompetent and unprofessional actions by ATC officers who were incompletely trained, or possibly fatigued, or both.

The reports are usually ignored by the general media because they require journalism, rather than the receipt and redirection of public relations statements.

In recent years AirServices Australia has lost track of  airliners, lied about losing track of airliners, improperly notified the ATSB of an incident, only to be forced to correct its notification, left inadequately trained staff on duty even after their being involved in serious incidents, allowed one aircraft to fly to its doom even after detecting that it was off course, and had instances where the intervention of line pilots was a factor in averting a serious incident because of hopelessly incompetent behaviour by a console operator.

It has been a disgrace, and that doesn’t include serious questions that have been raised by excessive credit card spending.

One might reasonably conclude that this all sounds like a very good case for selling it off to a ruthlessly efficient private owner, except that such an owner will have to invest a very significant sum to train staff and retain those who in recent years have left the organisation in droves for far better conditions, and professional respect, working for foreign ATC providers.

AirServices Australia is currently under new management. It has a very difficult task to keep appropriately skilled and recurrently trained staff in the numbers necessary to deliver its services to airlines. It has a legacy of stuff ups to fix, and there is no instant, overnight fix.

And even though it has a monopoly on providing its essential services, it may not have anything like the pricing power this might imply, because it wouldn’t take much by way of increased charges to destroy a very large number of already marginal rural routes flown by the likes of REX, Virgin Australia, Qantaslink, the defunct Brindabella Airlines, and a host of third tier regional carriers.

It would be fair to predict some tension within the coalition between National Party members and the transport minister and deputy PM, Warren Truss himself, and the Liberals with their total indifference to the bush, if not a thinly disguised desire to drive all those irritating rural bug smasher flights out of the way of their big flash intercity and international jets on the clogged runways of Sydney and Brisbane airports.

Selling AirServices Australia has DON’T GO THERE, written all over it.  But that alone is unlikely to stop the government going there.


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4 thoughts on “Is air traffic control a saleable government service?

  1. Geoff

    Currently as I understand it, Airservices has to reach an agreement with it’s customers through the ACCC about how much it can charge for certain period of time. However if there is an increase in air traffic and it makes too much it has to hand the excess back. If it does not make enough (or conversely spends too much) it has to belt tighten. At the same time it pays a premium to it’s owner, the Australian taxpayer, which has however been waived on occasions due to extraordinary circumstances.

    How you could sell that to a commercial operator escapes me unless dramatic changes were made that would inevitably increase air fares.

    There are bits of Airservices that the taxpayer could sell, such as the fire services and the individual control towers, but the natural buyer would be the airport where they were positioned and I think we went down that road about ten years ago without any success. Even now all of those facilities are paid for by the aviation industry, there is no taxpayer funding involved.

    Privately owned navigation aids also come to mind, but that already occurs and once again the natural buyer for the local NDB would be the airport. Many of those airports are borderline profitable and exist to keep the community connected to the outside world so the line between taxpayer provided and privately provided would become blurred again.There would inevitably be requests for Government funding to keep the local NDB/VOR/DME etc on the air.

    The US Government is one of the most pro-business in the world but has never separated it’s ATC service from the Federal sphere and for good reason. The FAA’s radars and other infrastructure are part of the countries air defences. They have handed over many small control towers that play no part in the national defence, but we have very few of those.

    The only country I know of that has “privatised” ATC is the UK. (If the Middle East comes to mind my understanding is that Serco and others simply hold contracts to provide ATC services on behalf of the sovereign Government. That is not privatised in sense I think our Govermentt is considering.) In the UK the air defence infrastructure pre-dates the civil ATC infrastructure and the UK RAF has effective control of all of the nations airspace outside of the main terminals and air routes.That makes privatising the small civil entity a much easier proposition. Remember also that the airports own the airport approach navaids, the towers, the approach control units and the firies. Most if not all are made contestable by the owners who contract the services out. (Approach Control for Doncaster Airport is provided by Liverpool Airport on the other side of the country)

    I would argue that Australia is more like the US than Europe and there is an argument that would say that all of our airspace should be administered by the people in the national interest (for the people)as is done by the FAA. The previous Government ordered Airservices and the DoD to invest in a joint aircraft surveillance and control system. This is going ahead and promises an integrated effort which should make our airspace more efficient and better defended. Not just because the output of many more sensors would become available to RAAF air defence by default, but also because joint control centres will enhance inter-operability and coordination.

    How will we hand over the civilian side of that to a private business?

  2. ghostwhowalksnz

    The UK ATC (NATS) seems to be more of a public- aviation industry partnership, with the government having 49% of the shares, a consortium of major UK airlines 42%, Heathrow 4%, and the employees ( managers ?) 5%
    Thats seems to be a workable arrangement. As Ben has pointed out the current Australian governance seems to be unable to provide the standard of service required

  3. ggm

    the question in my mind is ‘contestability’ -If we consider any single region of airspace, could you imagine having your choice of ACC available for the region? Is it even remotely plausible to suggest two distinct ACC providers somehow shared the space?

    I think airspace is like radio spectrum. Absent some very smart change, its not innately contestable. It looks like it functions as a public utility or a non-contestable regulated monopoly for the wider public interest.

    Sell it? sure. the UK model would work fine. Why should I care? Well… firstly there is this nasty profit-extraction issue: “get more planes in the slot I want to make vig on the airspace drop the separation move tin” is not making me happy. Secondly, there is the question about appropriateness. Qui Bono?

    I dont think its privatisation as much as industry cost-recovery and user-pays. Making it a 3 way split of gov/industry/pilots? Maaaaybe but I doubt it runs any better.

    I am not a pilot. I am a passenger.

  4. Brendan Jones

    Mentioned this briefly in another thread, but it’s the largely untold story of how Air Services Australia stopped the US from distributing an immensely valuable public domain resource DAFIF *for free* because some greedy Australian public servants wanted to cash in:

    DAFIF was publicly available until October 2006 through the Internet, however it was closed to public access because ‘increased numbers of foreign source providers are claiming intellectual property rights or are forewarning NGA that they intend to copyright their source’. Currently only Federal and State government agencies, authorized government contractors and Department of Defense customers are able to access the DAFIF data.

    At the time of the announcement, the NGA did not say who the ‘foreign source providers’ were. It was subsequently revealed that the Australian Government was behind the move. The Australian Government Corporation Air Services Australia in September 2003 started charging for access to Australian data. Rather than exclude the Australian data, the NGA opted to stop making the data available to the public.

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