In his 100 days of President Ship, Donald Trump has managed to execute various policies. He states that his policies are focused on making America great again. This Monday morning he announced a plan to privatise US air traffic control system. Donald Trump in his typical fashion described the current air traffic control system as horrible, antiquated, ancient and total waste of money!
There is no doubt in the management of the current air traffic control system of America, managed by the Federal Aviation Administration, but the policy proposed has totally shaken up the air traffic control system. As per the policy, a new, private non-profit corporation would be responsible for airlines and aviation interests and it will be capable of managing nations 300 airport towers and flight tracking centres. Trump stated the air traffic control union supports this issue and the airlines wanted to implement this idea since 1980.
Why Go For Privatising the Air Traffic control
The main focus of going privatisation is to reduce wait time, increase in the route efficiency and fewer delays. This will help in providing more reliable, quicker and affordable services to the American citizens. As reported the Federal Aviation Administration spends nearly $10billion per year funded through passenger fee and has already spent $7.5 Billion on reforming the air traffic control system in recent years. In, short it would be the largest transform of the government asset in the US history.
The Federal Aviation Administration has an employ force of 14,000. These professionals are highly trained to monitor the air traffic and are responsible for directing the airline traffic across the United States. Their salaries are generated from the 7.5% excise tax on the airline tickets and are paid by the consumers. The taxes collected goes to the Federal Airport and Airway Trust Fund, which helps in operating different parts of the Federal Aviation Administration.
Respond to this proposal
To activate the proposal requires congressional approval, but it is opposed by many Democrats and Republicans. Opponents, including major airlines, have stated that the US air control system is so large that privatisation will not help in saving the budget; it will lead to higher costs of tickets and services and will eventually create a National Security threat. Small players in this industry have also criticised the execution of this plan.
As per the masses are concerned, a telephonic survey was conducted by the Global Strategy Group on account of the Alliance for Aviation Across America, the Air Care Alliance and the League of Rural Voters. As per the result, 88% of the respondents were in favour of the Federal Aviation Administration’s current air traffic control. Through the poll, it was also found that 43% of the respondents support the idea of privatising the government functions and only 26% were in favour of the current air traffic control system.
How will it work?
According to the Congress Budget Office, the new company will not be exactly a private corporation, but it would act as a quasi-governmental agency. It would act as an agent of the Federal Government which will be responsible for carrying out regulatory functions. Privatisation will allow the more effective system, rapid and cost-effective improvements will be generated in the air traffic control. Let’s have a brief look on merits and demerits of privatisation.
Merits of privatisation:
Improved Efficiency: In a government run industry, the managers usually don’t get any share of profits besides their salary. However, a private firm is more likely to generate profits which help in cost cutting and increasing efficiency. Several privatised organisations have shown degrees of improved efficiency and profitability.
Less Political Interference: Managers often face political pressures rather than sound economic and business environment. Though privatisation, political interference decreases which lead to better efficiency.
Short-term view: Government always focuses on the next election. They are never concerned with the infrastructural improvements which will benefit the firm in the longer run. They always focus on the projects which benefit them before the election.
Stakeholders: Stakeholders build pressure on the private firms to perform well. But on the other case, there is no such pressure on the state-owned firms leading to inefficiency.
Increases Competition: Privatisation increases the competition among different business players. If they don’t perform well they will be overtaken by another firm. In order to stay long in the race, they have to give a better performance.
Demerits of privatisation:
Monopoly: Privatisation may lead to private monopoly which will increase the prices of the services and exploit customers.
Public interest: Privatisation is more focused on making profits rather than serving their customers. But the profit should not be the primary objective of private firms.
Problems of regulating Privatisation: Privatisation may lead to monopolies and they can use the monopoly power in wrong way. Government regulations are required to control the abuse of monopoly power.
Short term profits: To please their shareholders, private companies often go for short term profits rather than investing in long-term projects. This is considered as a huge hindrance in infrastructure development.
For more latest update blogs you can visit here.