Privatize Air Traffic Control, Redux

Yesterday, the Federal Aviation Administration (FAA) suspended all domestic departures across the United States for over four hours, a situation that appears to be occurring with increasing frequency. The last nationwide grounding took place in 2023, while regional groundings have affected major airports such as Newark, Dallas, and the entire Northeast in the past two years. In October of 2025, my post highlighted regional groundings and delays caused by labor issues.

The FAA's current understaffing of air traffic controllers, with an estimated shortage of around 3,500 personnel, is a contributing factor to these disruptions. This staffing shortage has led to mandatory overtime for remaining controllers, sometimes for six days a week, and in some cases, without pay during the recent government shutdown. The underlying issue, however, is a poorly incentivized system where airlines bear the costs when the system fails but have little influence over its operation.

The Transportation Secretary suggested that the grounding was due to aging telecommunications equipment (TDM circuits) overloaded with data, whereas the fundamental problem lies in the system's incentives. Airlines are responsible for the costs when the system fails, yet they have minimal say in its management. Contracting out certain functions may offer some advantages, particularly with competition, but it does not equate to privatization.

Privatizing air traffic control services aims to align incentives by putting responsibility for the system in the hands of those who suffer financially when it fails. This means removing political influence from mission-critical services. Canada successfully implemented this model in 1996 by transferring air navigation services to NAV CANADA, a private, non-profit entity funded by user fees rather than taxpayer dollars.

NAV CANADA operates with multi-year budgets and is governed by professionals, contributing to safer and more accurate satellite-based navigation systems.

By contrast, the U.S. NextGen program has delivered only about 16 percent of its promised benefits, years late and over budget. The Office of Inspector General has noted that FAA's modernization efforts have consistently faced challenges, resulting in delays and cost overruns. Airlines are keenly aware of the need for reliability, capacity, and modernization but have no leverage due to lack of political accountability.

Therefore, the solution proposed is to fund air traffic control through user fees paid by those who depend on its performance, placing airline executives on the board of the non-profit organization, similar to Canada's model. This aligns power with incentives, ensuring that performance improvements will be driven by economic motivations.