Governance of Air Traffic

Management:
A National perspective
• The modernization trends that have affected the governance of ANSPs.
• At the national level, there has been a move away from direct provision of ATM
through government departments to the adoption of more commercialized
approaches to the governance of ANSPs, including corporatization and
privatization of ANSPs.
• The increased coopera­tion between the providers of civil and military ATM is
reviewed.
• Agreed principles of good gov­ernance in the context of ATM.
• Elements of good governance practice have evolved from industry experience in
reforming the institutional arrangements applying to the provision of ATM and
other services previously supplied directly through government provision.
 The Trend to Commercialization of Air Navigation Service Providers
• Until the formation of Airways New Zealand in 1987, Air Navigation Services
were typically provided by civil servants working in facilities owned and
operated by the government.
• Airways New Zealand was created as a commer­cialized state-owned enterprise
to take over Air Navigation responsibilities previously Undertaken by a
government department, the Ministry of Transport.

• In the late 1980s Corporatization of New Zealand's ANSP was part of a wide-
ranging reform program that included the corporatization of a number of
government departments that had provided direct services to customers.
• Switzerland was also an early adopter of a commercialized approach for
its ANSP, Swiss Control.
• In 1988 Swiss air navigation services were reorganized into a new company,
"Swiss Control," which became financially independent of the Swiss Government.
• Apart from these two early examples of commercialized approaches, ANSPs were
generally provided by a single government entity responsible for both airport and
air navigation services as well as the necessary regulatory functions.
• Up to the 1990s, the provision of ATM could be described as being undertaken in
"an isolated world with no apparent financial worries".
• There were a number of significant changes in aviation markets in the 1990s.
• Governments liberalized and deregulated airline services. were restructured through
privatizations, mergers, and alliances, and the low-cost carrier concept was developed.
• The competition between airlines increased.
• The institutional structure of airports changed, involving commercialization through
corporatization and privatization of airports and outsourc­ing some airport services, including
some passenger terminals.
• Rapid growth in Air Traffic over the period resulted in increasing air traffic delays.
• The limited capacity of air traffic systems to cope with increasing air traffic was a
source of pressure to improve the performance of ATM.
• In many countries budgetary processes were not able to provide the level of
investment in ATM infrastructure required to support the development of
their national air transport industries.
• Institutional reforms that removed the provision of Air Navigation Services from
government departments were needed.
• A wave of corporatizations and some privatization of services occurred during
the 1990s, and the first decade of 2000s, including the creation of Air services
Australia, Nav Canada, Germany's Deutsche Flugsicherung GmbH (DFS),
and National Air Traffic Services Ltd. (NATS) in the United Kingdom.
• A number of studies have made assessments of the reforms that introduced
commercialization processes of ANSPs.
 Commercialization, Corporatization, and Privatization in the context of ATM provision
• Commercialization: Replacement of the provision of services through a government
department with the introduction of business practices, including the use of fees and charges
paid by users to finance the organiza­tion independent of government budgets, and regulation
using an arm's length approach.
• Corporatization: Establishment of wholly owned government corporation or would-be
government entity. A legal entity outside of the government is created but the ownership of
the entity remains wholly or with the majority owned by the government.
• Functions have been delegated by the government to the entity. A board of directors or a
similar oversight body, generally appointed by the government, manages the entity.
• Corporatization may merely mean changing from a government department to a government-
owned corporation without the introduction of busi­ness practices and other features of
commercialization, such as financial inde­pendence and using an arm's length approach to
regulation.
• Privatization: Involves creation of some form of private ownership and con­trol in the entity
providing Air Navigation Services, generally involving the profit motive and a corporate
culture. The ownership is wholly, or in the majority, held by private entities or individuals.
 Reasons for Commercialization of
Air Navigation Service Providers

• Four main reasons for the Commercialization of ANSPs:

1.Funding
2.Government procurement rules
3.Staffing
4.User involvement
 Reasons for Commercialization of Air Navigation
Service Providers
• 1.Funding: Commercialization provides improved ability to fund modernization of ATM
systems, including investment in new technology.
• Financial advantages are gained through the replacement of government budget processes
with user fees and the removal of restrictions on the ability of the institution to borrow
money in capi­tal markets.
• An independent revenue stream provided by user fees facilitates access to capital markets
and enables ANSPs to become financially self-sufficient and have funding that is nonpolitical.
• ANSPs gain enhanced ability to finance infrastructure improvements through investment in
technology that increases capacity.
• 2.Government procurement rules: Commercialization allows for exemption from
government procurement rules, practices, and decision-making policies, which create
bureaucratic inefficiency in acquisition processes for new technology.
An increased ability and a greater readiness to acquire a new technology under
commercialized structures leads to increased efficiency and cost reductions.
• 3.Staffing: Exemption from Civil Service regulations relating to salaries and
staffing levels makes it easier for commercialized entities to attract, manage,
and maintain an appropriately skilled work force.
• 4.User involvement: New governance structures give greater scope for user
involve­ment, including user representation on boards and through the
consultation process involved when funding is through user fees.
• Studies on the commercialization of ANSPs have concluded that initial fears
that adverse safety outcomes would result have not found this to be the case.
• For example:
• US The study of five ANSPs, commercialized between 1987 and 200 I, concluded that
commercialization leads to improved efficiency with no decline in safety.
• Examination of the public-private partner­ship arrangement of Air Navigation Services
in the United Kingdom concluded : The experience of the past eight years for the PPP
(public private partnership) with respect to safety suggests that the fears that many held
that safety would be comprised have not been born out by events.
• Three main strengths identified from Commercialized ANSPs:
• Sensitivity to client needs,
• Quickness in making decisions, and
• Improved ability to execute those decisions.
 Continuation in the Trend to Commercialization
• More than 60 countries are providing ANS under commercialized
approaches.
• In Europe nearly all EU member states have corporate entities to provide air
navigation services.
• India and Jordan provide examples of where the introduction of more
commercial­ized approached are under way.
• In Jordan, the provision of ANS are transitioning to full financial and
operational autonomy and a more business-like approach to service delivery,
although remaining within the Civil Aviation Regulatory Commission.
• India has passed legislation to separate the provision of ANS from the
Airports Authority of India. It has been argued that this will make flying safer
because revenues generated by the ANSP will help improve the
infrastructure of ATM.
 The Variety of Different Organizational Structures

• Governance structure of ANSPs can be grouped into four main

organizational types:
1. Government department, or specialized government agency, which
depends on the state bud­get with staff having the status of civil servants;
2. Government-owned corporatized entity separate from the state but still
wholly owned by the state;
3. Partially or fully privatized entity established on a for-profit basis subject to
economic regu­lation ; and
4. Partly or fully privatized entity established on a not-for-profit basis with
institutional restric­tions on its activities.
 Civil-Military Cooperation in ATM
• States reserve parts of their airspace for military use.
• In many jurisdictions manage­ment of air traffic for civil and military purposes has traditionally
been separated into different organizations involving distinct differences in responsibilities for
different areas of airspace.
• The Chicago Convention (Article 3) expressly excludes State aircraft from its scope of applicability
and requires States to have due regards for the safety of civil aircraft.
• As it is up to an individual State to regulate its military operations in airspace,
• The use of airspace for both military and civilian uses increases the complexity of airspace
arrangements and requires well-defined working arrangements for safe and secure use of airspace.
• As airspace becomes more congested, harmonization of civil and military use of airspace is
required for safe and efficient operation of air services while also protecting both civil and military
aviation requirements.
• In the Middle East, for example, the segregation of a large portion of airspace for military purposes
has contributed to congestion of that airspace.
• Efficient allocation of airspace requires taking a more integrated approach to airspace to cater for a
variety of users.
 Flexible Use of Airspace

• ICAO supports States in harmonizing their military and civil operations and promotes
the Flexible Use of Airspace concept .
• Flexible use of airspace is based on the principle that airspace should not be
designated as purely civil or military, but rather there is a continuum of uses with all
user requirements accommodated to the greatest possible extent.
• Full application of the flexible airspace concept would imply that airspace is no
longer designated as either military or civil but is used flexibly on a day-to-day basis.
• Consequently, any necessary segregation of airspace and air traffic would only be of
a temporary nature.
• Execution of the concept of flexible airspace use involves the establishment of joint
civil/military coordination entities for airspace organization and management.
• The concept includes "consideration of effective communication, cooperation and
coor­dination necessary to ensure a safe, efficient and predictable use of airspace".
 Elements of Good Governance in the Provision of ATM
• The governance arrangements that apply to ANSPs have an important bearing on the
performance of ATM.
• Key elements of governance relevant to the provision of ATM can be identified from the
experience of successfully commercialized ANSPs and gen­erally accepted principles of good
governance.
• The governance princi­ples that follows has been divided into three groupings:
• Organizational framework,
• External relations, and
• Regulatory oversight arrangements.
• Organizational Framework
• Six aspects of governance relating to the corporate framework are:
1. Leadership;
2. Organizational independence;
3. Accountability and transparency ;
4. Financial structure and capacity ;
5. Integrity of processes including effective capital investment; and
6. Performance management.
 Stakeholder Relations
• Stakeholder relations relevant to good governance of ANSPs discussed here
relate to:
• Customer relations
• Other stakeholder relations
• International harmonization
• Customer Relations:
• As ATM directly affects airspace users, the customers of ANSPs have a strong
interest in air navigation services catering for their needs and being provided
efficiently, espe­cially when the ANSP are funded by user fees. The involvement
of customers in ANSP planning and decision-making through industry
consultations and other processes has the potential to lead to improved
performance in these respects. Customer involve­ment is likely to focus on the
benefits to users from investment proposals, rather than the benefit to the
ANSP.
• Other Stakeholder Relations:
• In addition to governments there are a range of other stakeholders that have an interest
in ATM, including the military, employees, and the community.
• Appropriate consultative bodies or other arrangements can facilitate the interface
between ANSPs and these stakeholders.
• Constructive employer/employee relationship involving good communications on work-
related issues, exchanges of opinions, consultation, and negotiation is another aspect
of good stakeholder relations. Commercialized ANSPs can provide more attractive
working conditions for technical experts because they are not constrained by civil
service rules and less likely to be overly bureaucratic.
• The importance of understanding the organizational culture and the adoption of
participatory processes in change management showed that managerial choices and
actions, such as consensus building, communication, and use of participation, can
positively influence attitudes to change.
• A sudden reversal from a participatory process to purely top-down implementation led
to a breakdown in consensus and trust, leading to internal and external resistance, and
the premature collapse of a change process.
• International Harmonization:
• The ability of ATM systems to interact smoothly with adjacent ATM systems, is important
for safety and efficient global operations. Interoperability requires ANSPs to take a global
approach to the choices of procedures, equipment, and technology that they adopt. This
includes meeting ICAO requirements and harmonization of the rules of neighboring
countries so that they are uniform or mutually compatible.
• Promotion of effective communication is one important aspect of ease of interoperability.
English has been established as the standard language of international aviation, and rules
requiring the use of English and standard phrases apply to air traffic controller and
aeronautical station operators.
• Effective global communication is facilitated by proficient use of the common language
and standard phrases.
• For example, variations in phraseology by air traffic controllers, such as "taxi to holding
position" and "taxi into position and hold," can have different meanings.
Radiotelephony and language proficiency cause "communication" issues, which is a
primary factor cited in runway incursions. Implementation of English as the standard
international aviation language has been problematic in some countries.
 Regulatory Oversight
• The traditional model of governance of air navigation service provision was to incorporate
service provision and government oversight (safety and economic) all within a government
department.
• Under commercialized structures the government's role primarily involves,
• Regulation of ANSP safety requirements,
• Economic regulation and arrangements
to ensure that a State's international obligations under the Chicago Convention are fulfilled.
• Under the Chicago Convention , governments have important obligations and, associated
with these,
• To ensure that enabling legislation and regulations governing a commercialized ANSP require
observance of international standards and agreements and compliance with government obligations,
including international security.
• To ensure ANSPs are covered by effective safety and economic regulation. ATM is provided under
monopoly conditions. Airlines do not have choices in their use of particular services on the grounds
of safety record, technologies available, or the costs of using a particular system. Other economy wide
regulations, such as financial regulations, environmental laws, and protection of consumer rights, also
need to be adhered too.
 Safety Regulation

• ATM is "a safety-critical industry" and effective safety regulation is of

primary impor­tance.
• There are multiple dimensions to safety regulation , including the
develop­ment of the rules, policies, and certification requirements;
compliance with safety requirements; and investigation of accidents.
• A clear division of roles between safety regulation and service provision is
required for good governance.
• A criticism of orga­nizational structures where the ATM is provided from
within the same government entity as safety regulation is that the
provision of the service is clearly separated from the regulation , allowing
the potential for conflict of interest.
• Furthermore, to be an effective safety regulator, the safety regulator
needs to have sufficiently qualified staff and to be adequately funded.
Economic Regulation

• Economic oversight is a broad term that includes regulation to ensure that the
monopoly Position of an ANSP does not lead to charges that are excessive to
users, "gold platting" of services, or reduction of service (which may be in terms
of delays or safety considerations).

• There are a number of approaches to the economic oversight of charges to

users, including service providers setting their charges subject to approval by a
regulator or setting charges according to price setting regulations.

• The nature scope, and extent to which economic oversight on an ANSP is

required will depend on the ANSP's governance structure.