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Unless otherwise indicated, all dates are expressed in fiscal years, except those referring to legislative actions. |
In the coming years, the Congress will consider legislation appropriating funds for the National Airspace System Plan, a comprehensive strategy for modernizing the nation's air traffic control system. At $11 billion over the next two decades, the costs of the Federal Aviation Administration (FAA) plan would exceed 36 times the total federal funding provided in 1982 for investment in air traffic control, making this one of the largest federal expenditures ever for a public works project. The Congress will, therefore, want to weigh the plan's costs against its potential benefits, judge whether it will prove a sound investment with a good rate of return, and assess its financial prospects. To provide information for these deliberations, the Congressional Budget Office has prepared this study of the FAA plan at the request of the Senate Committee on the Budget and the House Committee on Appropriations, Subcommittee on Transportation.
David L. Lewis prepared the study in the Congressional Budget Office's
(CBO) Natural Resources and Commerce Division under the supervision of
David L. Bodde and Everett M. Ehrlich. The author owes special thanks to
Johanna Zacharias for editing the manuscript and to Kathryn Quattrone for
typing the several drafts and producing it for publication. Patricia H.
Johnston and Nancy H. Brooks also provided editorial assistance. For invaluable
advice and assistance with the analysis, the author wishes to acknowledge
Joseph S. Revis of J. S. Revis Associates; staff members of the World Bank,
especially Pedro Taborga and Jenifer Wishart; Richard R. Mudge, of the
CBO; Seymour Horowitz and S. B. Poritzky of the Federal Aviation Administration;
as well as persons at the Office of Technology Assessment, the General
Accounting Office and in other governmental, aviation, and electronics
manufacturing organizations. Other staff members of the CBO who provided
valuable comments include Robert Hartman, Robert Lucke, Suzanne Schneider,
and Peyton Wynns. James N. Daukas, Jonathan Gifford, and Lauren Wasserman
also assisted in preparing the analysis. In keeping with the CBO's mandate
to provide objective analysis, this paper offers no recommendations.
Alice M. Rivlin
Director
August 1983
SUMMARY
CHAPTER I. INTRODUCTION
CHAPTER II. COSTS AND BENEFITS OF THE FAA PLAN
CHAPTER III. COST EFFECTIVENESS OF THE FAA PLAN
CHAPTER IV. FINANCING THE FAA PLAN
APPENDIX A. ESTIMATED TIME PATH OF CAPITAL COSTS UNDER FAA ASSUMPTIONS AND FORECASTS
APPENDIX B. ESTIMATED TIME PATH OF BENEFITS UNDER FAA ASSUMPTIONS AND FORECASTS
APPENDIX C. EXPLAINING AND FORECASTING PAST TRENDS IN AIR TRAFFIC
APPENDIX D. BACKGROUND ISSUES AND COMPUTATIONAL METHODS IN INVESTMENT APPRAISAL
APPENDIX E. TIME--VALUING AN INTANGIBLE
| TABLES | |
| 1. | PROSPECTIVE COST ESTIMATES OF IMPLEMENTING THE NATIONAL AIRSPACE SYSTEM PLAN, 1983-2005 |
| 2. | PROSPECTIVE BENEFIT ESTIMATES OF THE NATIONAL AIRSPACE SYSTEM PLAN, 1983-2005 |
| 3. | PROJECTED PRODUCTIVITY IMPROVEMENTS FROM THE FAA PLAN, BY AIR TRAFFIC CONTROL SYSTEM COMPONENT, TO YEAR 2000 |
| 4. | PROJECTED AIR TRAFFIC CONTROL EMPLOYMENT UNDER THE FAA PLAN, TO YEAR 2000 |
| 5. | EFFECTS OF ALTERNATIVE PRODUCTIVITY ASSUMPTIONS ON EVALUATION OF THE FAA PLAN, 1982-2005 |
| 6. | EFFECTS OF ALTERNATIVE TRAFFIC FORECASTS ON EVALUATION OF THE FAA PLAN, 1982-2005 |
| 7. | EFFECTS OF ALTERNATIVE CAPITAL COST ASSUMPTIONS ON EVALUATION OF THE FAA PLAN, 1982-2005 |
| 8. | EFFECTS OF TECHNOLOGICAL OBSOLESCENCE ASSUMPTIONS ON EVALUATION OF THE FAA PLAN, 1982-2005 |
| 9. | EFFECTS OF ALTERNATIVE ASSUMPTIONS ON EVALUATION OF THE MICROWAVE LANDING SYSTEM, 1982-2005 |
| 10. | BREAKDOWN OF PROJECTED AIRPORT AND AIRWAY TRUST FUND OUTLAYS, 1983-1987 |
| 11. | BREAKDOWN OF PROJECTED AIRPORT AND AIRWAY TRUST FUND REVENUES, 1983-1987 |
| 12. | ANALYSIS OF AIRPORT AND AIRWAY TRUST FUND UNDER FAA ASSUMPTIONS, 1983-1987 |
| 13. | ANALYSIS OF AIRPORT AND AIRWAY TRUST FUND, ASSUMING GRADUAL RECOVERY IN PASSENGER YIELDS, 1983-1987 |
| 14. | ANALYSIS OF AIRPORT AND AIRWAY TRUST FUND, ASSUMING GRADUAL RECOVERY IN PASSENGER YIELDS AND MATURITY SCENARIO FOR PASSENGER MILES |
| 15. | ANALYSIS OF AIRPORT AND AIRWAY TRUST FUND, UNDER FAA APPROPRIATIONS FOR 1984 |
| A-1. | PROJECTED FEDERAL INVESTMENT AND USER COSTS FOR AVIONICS EQUIPMENT |
| B-1. | PROJECTED FEDERAL AND DIRECT USER BENEFITS |
| B-2. | PROJECTED MICROWAVE LANDING SYSTEM BENEFITS |
| C-1. | SUMMARY OF FAA FORECASTS, BY PERIODS |
| C-2. | ACCURACY OF FAA FORECASTS OF NUMBERS OF AIRCRAFT HANDLED BY AIR ROUTE CENTERS |
| C-3. | ACCURACY OF FAA FORECASTS OF INSTRUMENT OPERATIONS AT AIRPORTS WITH FAA TRAFFIC CONTROL TOWERS |
| C-4. | ACCURACY OF FAA FORECASTS OF AVIATION FUEL CONSUMPTION |
| C-5. | SUMMARY OF RECENT FAA FORECASTING MODELS, BY AVIATION ACTIVITY |
| C-6. | RECENT FAA FORECASTS OF AIRCRAFT HANDLED BY AIR ROUTE CENTERS |
| C-7. | RECENT FAA FORECASTS OF INSTRUMENT OPERATIONS AT AIRPORTS WITH FAA TRAFFIC CONTROL SERVICE |
| C-8. | RECENT FAA FORECASTS OF AVIATION FUEL CONSUMPTION |
| C-9. | ALTERNATIVE FORECASTS OF AIRCRAFT HANDLED AT AIR ROUTE TRAFFIC CONTROL CENTERS |
| C-10. | ALTERNATIVE FORECASTS OF INSTRUMENT OPERATIONS AT AIRPORTS WITH FAA TRAFFIC CONTROL SERVICE |
| C-11. | ALTERNATIVE FORECASTS OF AVIATION FUEL CONSUMPTION |
| FIGURES | |
| 1. | ACTUAL AND PROJECTED FEDERAL CAPITAL SPENDING ON AIR TRAFFIC CONTROL, 1960-1987 |
| 2. | AIR TRAFFIC CONTROL OPERATION AND MAINTENANCE COSTS WITH AND WITHOUT NATIONAL AIRSPACE SYSTEM PLAN, FAA FORECAST, 1981-2000 |
| 3. | ACTUAL AND PROJECTED COMMERCIAL AIRLINE PASSENGER MILES, 1959-2005 |
| 4. | ACTUAL AND PROJECTED GENERAL AVIATION ACTIVITY, 1959-2005 |
| 5. | ACTUAL AND PROJECTED REVENUE YIELD TO COMMERCIAL AIRLINES PER PASSENGER MILE, 1980-1987 |
The Federal Aviation Administration (FAA) has formulated its comprehensive National Airspace System Plan to modernize and improve the efficiency of the nation's air traffic control system. Last year, the FAA spent more than $2.4 billion to equip, maintain, and staff the existing system. The system today is a blend of several generations' engineering and equipment, much of which has been outmoded by technological advances. Though still adequate to maintain a high standard of safety, the system is already the cause of rising operating costs, and its effectiveness may soon be limited by the demands of increased air traffic. Further, because the system is made up of numerous installations and is heavily labor intensive, there is significant potential for improved effectiveness with fewer facilities and less manpower.
The FAA plan would achieve such efficiency gains, but at considerable investment cost both to the federal government and to users of the air traffic control system. On the basis of FAA data, the Congressional Budget Office (CBO) has placed the total cost of implementing the plan at $10.7 billion (in 1982 dollars) between 1982 and the turn of the next century, while estimating savings in operating and maintenance costs alone at $24 billion over the same period.
If fully implemented, the FAA plan offers the nation a sound economic investment. Indeed, such an investment appears overdue. The cost effectiveness of the plan, however, depends on organizational changes in the FAA, including a consolidation of facilities and a reduction in staff. In the past, such changes have been of great concern to the Congress, the FAA work force, and aviation interests. Failure to follow through with these changes could result in investment costs that exceed benefits to the FAA.
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