In this issue:
Back in August, panic broke out at JFK International Airport, leading to mass chaos in several terminals as social media spread false reports of an active-shooter situation. Only a week later, a similar episode took place at LAX, also spreading to multiple terminals. In late November, the report of a joint investigation of the JFK debacle by federal and New York State officials cited “a failure of bureaucracy, where the lack of clear lines of authority and poor communication” led to JFK Airport grinding to a halt.
The New York Times article on the report of the “JFK International Airport Multi-Agency Security Review Team” pointed out that there were no plans in place for orderly evacuation of terminals in the event of a security incident. There are separate video surveillance systems, operated by different entities (including airlines), which are not centrally monitored so that authorities can figure out what is happening where. And a plethora of agencies with security and/or law enforcement responsibilities have no overall coordination when a serious incident occurs. At JFK they included:
As reporter Barbara Peterson put it, in a piece for CNTraveler.com, “A major problem facing airport security is the post-9/11 patchwork of different agencies that are involved in keeping airports safe. While all airports are required by the FAA to perform emergency drills, TSA—which is nominally in charge of security—is limited to the checkpoint area, although it does perform spot checks of airport employees in other areas.”
This problem stems from the flawed organizational structure mandated in the hastily-passed 2001 legislation that created TSA. Instead of creating a serious regulator and policy-maker for transportation security (as the original House bill had intended), it created a bizarre combination of regulator and service provider, which essentially self-regulates the provision of airport screening. The unintended consequence is fragmented airport security, in which TSA runs screening but the airport is responsible for everything else—with no one entity responsible for the overall security of the entire airport.
While sweeping reform of TSA’s flawed structure has seemed beyond the scope of what Congress might take on, the November election might have changed things. In his acceptance speech at the Republican convention, Donald Trump promised to “fix TSA at the airports, which is a total disaster.” That statement appears to have encouraged Rep. Mike Rogers (R, AL) to announce plans for legislation that would “allow airports to end the federal screening workforce, replacing them with qualified private contractors. This will allow TSA to work directly with its stakeholders on technology and information-sharing, while being focused on the real threats to our transportation systems.”
A long article in the Boston Globe (December 8th) by reporter Neil Swidey, while praising TSA Administrator Peter Neffenger for improving operations during his recent tenure, also highlighted Rogers’ ideas for reform. Rogers told Swidey that outsourcing airport screening (as is common in Europe and Canada) “will be my number-one priority in the next Congress on the Homeland Security Committee.”
And rather than parroting TSA union misrepresentations that outsourcing means “returning” to the low-wage rent-a-guards of the pre-9/11 era, Swidey educated his readers as follows:
“It’s important to note what Rogers means by privatizing [screening]. He does not want to dismantle the entire agency and put screening responsibility back in the hands of individual airports and airlines. Having different standards at 440 airports around the country, he admits, is a non-starter in a post-9/11 world. What he wants to do is to turn over many of the roughly 47,000 TSO screener jobs to private contractors while keeping in place the TSA oversight bureaucracy.”
In other words, Rogers is proposing to end fragmented airport security and to remove the conflict of interest between service provision and regulation that Congress built into TSA at its creation. This will be a major battle, but if the new President supports it, the odds of success will be much greater than zero.
Former TSA Administrator Kip Hawley created quite a stir with a recent op-ed in the Los Angeles Times titled “The Scary Truth About TSA’s PreCheck Security Vulnerabilities.” Hawley, who opposed any and all trusted traveler concepts while in office, wrote that PreCheck’s “vulnerabilities represent a clear and present danger that demands urgent attention.”
Hawley faults the enrollment process as unable to fully verify an applicant’s identity, claims that terrorists will recruit people with clean records for aviation terrorism, and faults faster PreCheck lanes for creating over-crowding in the regular lanes. Noted security expert Bruce Schneier wrote a blog post in response, first stating that he himself had pointed out the same problems as early as 2004—but ended up with very different policy recommendations. I think both are overly critical of PreCheck, but Schneier has a more realistic approach regarding PreCheck’s future.
Here’s my take on this controversy. First, Hawley in particular stresses that it is probably impossible to screen out 100% of potential bad guys who seek to enroll in PreCheck. That’s probably true, but if you insist that any security system achieve 100% protection, you are engaged in a fool’s errand. Benefit/cost analysis (such as that carried out for PreCheck by analysts John Mueller and Mark Stewart in June 2016 for Newcastle University) compares benefits received by millions of air travelers against probabilistic costs of terrorists outfoxing the system. That’s the only sensible way to assess such a program, and it is only in the post-Hawley era that TSA and parent DHS seem to be acting on such assessments.
Schneier does suggest ways of further reducing the already low probability of terrorists getting past PreCheck. One way would be to “scrub PreCheck enrollees for false identities.” As he notes, that could be done by using commercial databases. That was the basic idea of the now-cancelled third-party recruitment program, under which big data firms developed algorithms that TSA tested by giving the firms a large database of potential enrollees seeded with questionable people. I’m told that some of these algorithms passed muster with TSA, but as I and others have reported, protests and a lawsuit by current monopoly TSA recruitment contractor Morpho Trust led to cancellation of the third-party program before any contracts could be awarded.
Rather than abolishing PreCheck, in a subsequent blog post Hawley suggests increasing the use of conventional screening techniques in PreCheck lanes, presumably on a random basis—such as K-9 teams, behavior-detection officers, explosive trace detection swabs, and body scanners. Some of this might be justified, but how much should be the subject of further benefit/cost analysis.
Reviewing these further thoughts from Hawley, Schneier concludes that our experience with PreCheck thus far tells us that “basically, there are no terrorists” seeking to board U.S. airliners. And hence he proposes that “Instead of screening PreCheck passengers more, we should screen everybody else less.” I think that goes too far, but I also think TSA is on the right track in seeking to get many more frequent flyers into the program, reserving “regular” screening for those who travel infrequently and those about whom much less is known than those who pass the enrollment hurdles for PreCheck.
In a surprise announcement on November 3rd, the county executive of New York’s Westchester County announced an agreement with Oaktree Capital Management to lease the Westchester County Airport in White Plains for 40 years, under the FAA Airport Privatization Pilot Program. The two-runway airport handles 1.75 million annual passengers, with the large majority flying on American, JetBlue, and United Airlines. The County filed a preliminary application with the FAA the next day, and the FAA approved it early in December.
County Executive Rob Astorino had hoped to get quick approval of the deal from the county’s Board of Legislators in order to use a down payment on the deal to plug a revenue hole in its 2017 budget. But legislators expressed interest in seeking competing bids in order to maximize proceeds to the County, so the process will end up taking longer.
The proposed lease strongly resembles the 2013 deal that has transformed the San Juan International Airport in Puerto Rico. Oaktree (formerly Highstar) is a principal in the San Juan lease, and both American and JetBlue are major airlines serving that airport. For the Westchester lease, the company has already obtained approvals from all three major airlines. And, under the terms of the Pilot Program, that means lease proceeds can be used by the County for general government purposes. Net payments to the County are estimated at $140 million, with $130 million paid up-front and the balance paid out over the course of the lease. Oaktree has also committed to investing at least $30 million in capital improvements at the airport during the first five years, including a redesign of passenger boarding areas, improving airport parking, and upgrading concessions and restaurants.
Currently, the only other applicant in the Pilot Program is Airglades Airport in Hendry County, FL. The plan calls for converting this general aviation airport into a cargo reliever for Miami International Airport, 80 miles to the south. AIA, the company that seeks to privatize the airport, is already under contract to manage the facility, and the privatization plan has strong support from the County government. In a November presentation to the County Commission, AIA President Fred Ford reported that the FAA-required environmental analysis is nearing completion, preliminary construction plans are being drawn up, and site preparation is scheduled to begin in April.
Since shifting air travelers from time-consuming regular screening to much faster PreCheck screening saves TSA money and (ideally) reduces waiting-in-line time for all travelers, it makes sense that the agency continues working toward a goal of having 25 million members in PreCheck and other trusted traveler programs like Global Entry by 2019. But in the meantime, TSA continues to select non-members, on the day of their flight, based on a superficial review of the information in their passenger name record, for moving through the PreCheck lanes. Not only is this less safe than letting only fully-vetted travelers in, it also leads to inexperienced people slowing down the PreCheck lane by taking off their shoes, removing their coats, etc.
Some claims are now being made that the $85 fee for enrollment (which pays for fingerprinting and the background check) is deterring people from joining. A study released last month by University of Illinois researchers attempted to make a case that TSA should make PreCheck enrollment free of charge from now on, for high-volume travelers. Doing that, they claimed, would achieve the 25 million target and save the agency $459 million per year thanks to faster screening. The foregone revenue would be $425 million, so TSA would almost break even.
But now let’s look more closely at the numbers. The researchers’ calculations were based on giving free membership only to frequent flyers, defined as those making at least 6 round-trips per year (i.e., 12 screenings per year). But do the math: someone flying at that rate would encounter 60 screenings over the five-year membership period. Divide the $85 fee by 60 screenings and you get $1.42 per screening. That’s supposed be an obstacle to signing up? And for people like me who make about 25 round-trips a year, $85 divided by 125 screenings is 68 cents per screening. The time savings and avoided hassle are worth far more than 68 cents to me each time I use PreCheck.
The real barrier to much larger enrollment is not the $85 fee; it’s the hassle of making an appointment and going to get fingerprinted. Avoiding that was one of the aims of big-data companies hoping to get contracts under TSA’s now-abandoned third-party recruitment effort. The idea was that algorithms relying on big data would be subjected to TSA testing to screen out higher-risk applicants, and those that passed would not have to be fingerprinted. According to a Bloomberg article by Justin Bachman (November 30th), “TSA plans a fresh effort next year to secure new PreCheck vendors—and probably hopes it doesn’t draw a legal challenge like the now-defunct RFP did.” That was the procurement that was torpedoed by litigation filed by the sole PreCheck enrollment contractor.
Bachman also pointed out that some companies, on their own, are holding large-scale employee PreCheck enrollment events, and some of them are paying their employees’ enrollment fees. That’s fine to generate interest, but the employees still have to trek to an approved location to have Morpho Trust take their fingerprints and send them in.
Consolidation among major airlines has led to reductions in scheduled service at medium and smaller airports. A study by MIT’s International Center of Air Transportation found that between 2007 and 2014, medium and smaller hubs lost nearly 27% of their scheduled departures. And the smaller airports in rural areas are hurting even worse, as pilot shortages at regional airlines lead to fewer daily flights and in some cases elimination of service altogether. In addition, people living in former large-hub cities, who used to have numerous nonstop destinations, now have to plan on longer trips through a larger hub, which may double the total trip time.
Stepping into this breach are a growing number of start-up air services, with an array of business models. Some have already failed, while others are growing their fleets and raising additional investment capital. A previous revolution—fractional ownership shares in turboprops and business jets—began in the 1980s, typified by market leader NetJets, which today counts as the country’s fifth-largest operator (by number of planes), with 700 planes in its hangars. But a number of other fractionals went belly-up thanks to the Great Recession.
A second generation approach is membership services, which market primarily to frequent business travelers, offering them nonstop service and fewer hassles for a monthly fee. They generally use business aviation terminals when they operate at major airports, but many operate from secondary airports. One of the largest of these is Jet Smarter, based in Ft. Lauderdale, which claims over 6,700 members. It operates scheduled shuttles on a growing number of U.S. and overseas routes, as well as offering empty-leg seats on business jets. Former Homeland Security Secretary Tom Ridge joined its board last March.
Another growing membership company is New York-based Wheels Up, with 4,000 members and a fleet of 55 turboprop King Airs and a dozen Cessna Citation jets. Other membership companies include Surf Air, offering flights between Southern and Northern California cities in Pilatus PC-12 turboprops; Rise Air offering flights from Dallas Love Field to Austin, Houston, and Midland; and MySky linking Jacksonville, FL with Atlanta and Charlotte.
Two other companies are focused on former hub cities that now lack many nonstop services. OneJet offers nonstop service in 6-7-passenger jets from former US Airways hub Pittsburgh to Cincinnati, Hartford, Indianapolis, Louisville, and Milwaukee, so far, and is starting a comparable service based in Louisville. Ultimate Air Shuttle is based at former Delta hub Cincinnati and uses 30-seat regional jets to serve Charlotte, Chicago, Cleveland, and New York so far.
Another business model is offered by JetSuiteX, offering scheduled flights as a public charter service using business jets and smaller regional jets. It currently serves six California cities (including Burbank, Santa Monica, and San Jose) plus Las Vegas and Bozeman, MT. There are also new attempts at fractional ownership, such as PlaneSense and Executive Air Share.
But the saddest case is a would-be “Uber for planes” called Flytenow. There is a long-established practice of private plane owners posting on airport bulletin boards that they have an empty seat on a planned flight and would be happy to share the flight with someone willing to pay a pro-rata share of the direct operating costs. The FAA has long approved this practice. But when Flytenow’s founders decided to assist pilots by posting such requests online (remember when online platforms were called “bulletin board systems”?), the FAA cracked down, making their business model illegal. In an interview of the company’s founders by Jared Meyer, the founders pointed out that this kind of online flight sharing is legal in Europe. (https://fee.org/articles/how-the-faa-brought-down-uber-for-planes) Two companies similar to Flytenow currently operate within the European Union, with the blessing of the European Aviation Safety Agency. The Goldwater Institute has challenged the court decision that sided with the FAA (Flytenow vs. FAA) and is seeking Supreme Court review.
US Airports Rated; New York’s Score Worst. Travel publication The Points Guy in November released a comparative ranking of the 30 busiest U.S. airports, quantifying things such as flight delays and cancellations, security wait times, travel time from the city center, food options, free wi-fi, etc. The bottom three were LaGuardia, JFK, and Newark, with other low-scorers including Chicago O’Hare, Detroit Metro, Washington Dulles, and LAX. The top-rated airports were Phoenix, Portland (OR), San Diego, Salt Lake City, and Honolulu.
French Airport Privatizations Reach Financial Close. Atlantia and EDF Invest completed their acquisition of the French government’s 65% ownership stake in the airports of Nice-Cote d’Azur (Nice, Cannes, and St Tropez), for $1.4 billion. And sale of the 60% stake in two Lyon airports, by Vinci, Caisse des Depots, and Predica, has also been completed, for $592 million.
Ontario (CA) Reclaims Ownership of Its Airport. At the beginning of November, the recently formed Ontario International Airport Authority took ownership of the Ontario Airport, previously owned and operated by Los Angeles World Airports. The move became official after the authority paid off $55 million in bonds that had been issued by LAWA for airport improvements, and the FAA granted an operating certificate to the authority. The agency hopes that by cutting operating costs and marketing the airport more effectively, it can regain traffic levels that it has not seen in nearly a decade.
Greece Gets Only One Bidder for New Airport Project. Only the single consortium of GMR Airports and GEK Termina ended up bidding for a 35-year concession to design, finance, build, and operate the New Heraklion International Airport in Crete. The project includes the airport itself plus an 18 km. motorway to serve the new facility.
Voters Approve New Terminal for Burbank. In the November election, local voters approved Measure B in Burbank by a two to one margin. That clears the way for the Burbank-Glendale-Pasadena Airport Authority to build a replacement for the antiquated 14-gate terminal at the airport. The old terminal is too close to the main runway to meet FAA standards, but it has taken 29 years to bring about consensus on its replacement.
New Airport Development in Atlanta?. The Atlanta Journal Constitution has reported a project planned by UPS adjacent to a local airport known as Charlie Brown Field. The company has applied for a permit to develop a 159-acre distribution center on Fulton Industrial Blvd. adjacent to the airport (which is also known as Fulton County Airport). It would include over 1,000 truck trailer spaces and parking for over 1,300 employee cars. The airport’s main runway is just under 5,800 feet, long enough for some of UPS’s cargo aircraft.
Heathrow’s New Runway Will Take Years. Despite the green light from the U.K. government in October, final approval of the third runway at London Heathrow is not yet in hand. Heathrow Airport must now go through community consultations in order to prepare its planning application, which it plans to submit in 2019. While that is going on, the airport has selected seven companies that will comprise its Integrated Design Team for the new runway.
Australian Government OK’s Second Sydney Airport. In December the government announced its approval of a $3.7 billion second airport to serve metropolitan Sydney. It will be located at Badgery’s Creek in the far western suburbs. Under the terms of the long-term lease of the existing airport, Sydney Airport has the right of first refusal to build the new project, or to invest in it. The airport company has four months to decide how to respond.
An Updated Case for Privatizing U.S. Airports. Chris Edwards and I have co-authored a new policy paper for the Cato Institute, making the case for airports to become ordinary businesses funded by their customers. The paper includes some little-known history of pre-World War II airports that were developed and operated by the private sector. “Privatizing U.S. Airports” is available at https://www.cato.org/blog/airport-plan-trump-administration-1.
New Berlin Airport Still Has No Opening Date. The project to create the Berlin Brandenburg International Airport was originally intended as a long-term concession, but ideological opposition led to a conventional government procurement. Construction began in 2006, with the grand opening planned for October 2011. Delay after delay ensued, and in December officials announced that the project was finally 80% completed, but they are still unable to announce an opening date. The new airport is being constructed on the site of the former East German Schoenefeld Airport, which is still in operation amidst ongoing renovations.
Bulgarian Airport Privatization Delayed. The election of a pro-Russia prime minister in November has cast doubt on the planned 35-year concession to redevelop the Sofia Airport. The government had announced procurement plans back in May, and a number of teams were preparing proposals. The airport is one of the last significant state-owned enterprises in Bulgaria.
Heritage Foundation Proposes Sweeping Aviation Policy Changes. In a Backgrounder study released on November 23rd, Michael Sargent of the Heritage Foundation calls for repeal of the 1973 Anti-Head Tax Act and elimination of the federal cap on Passenger Facility Charges. In addition, the paper calls for eliminating the passenger ticket tax and the Airport Improvement Program of federal airport grants, which is unlikely to get very far in Congress. The paper also calls for eliminating the grandfathered exemption to airport grant agreements under which a handful of airport operators, such as the Port Authority of New York and New Jersey, are allowed to divert airport revenues to non-airport uses such as local transit subsidies. The paper is online at: http://report.heritage.org/bg3170.
Vladivostok Airport Privatized. Russia’s far eastern airport Vladivostok International has been purchased by a joint venture of Singapore’s Changi Airports International, Basic Element, and the Russian Direct Investment Fund. The previous owner was Sheremetyevo International Airport.
Peotone Airport “Still Alive”. In November, the Illinois Department of Transportation confirmed that it has acquired all but three parcels of the land needed for the long-planned third Chicago airport near the town of Peotone, south of Chicago. IDOT officials told a quarterly meeting of the Chicago Southland Economic Development Corporation that the project is still alive, and they still hope to develop it as a public-private partnership.
“It has become increasingly clear that the Transportation Security Administration, at the very least, should consider a name change. Specifically, the ‘security’ part again proves to not apply. . . . For a federal agency with as many problems handling its basic responsibilities as TSA, it almost goes without saying that it was caught unaware by these missing badges. In fact, it had asserted to Homeland Security investigators that all was well. As NBC 5′s Scott Freeman reported, the Homeland Security investigators offered guidance that roughly amounts to inspect more and do a better job of it. You could pardon the investigators for skepticism, given TSA’s track record of failing on 67 of 70 individual tests for contraband weapons in 2015. Or allowing 75 airport workers with ‘links to terrorism’ to gain access to sensitive areas of airports. Or interminable security lines that sometimes cause travelers to miss flights. Or wasting money on ‘high-tech’ screening machines that then do not work. This is what travelers—who tend to be air travelers—are getting for $7.6 billion a year, which is TSA’s budget. Congress appropriates that money and has oversight responsibilities, but tends toward the reactive when TSA problems crop up. At some point, the agency or lawmakers had better get proactive. American lives depend on it.”
—Editorial, “Missing Badges Just One More Security Horror for Beleaguered TSA,” Dallas Morning News, Nov. 4, 2016
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