	Background

Before commercialization, air navigation services under government  control faced increasing strains. All five ANSPs are responsible  for providing air navigation services to both civil and military aviation. Second,  despite differences in ownership structures, all operate as businesses  rather than as government organizations and are self-financing. Third, all  are largely monopoly providers that are subject to some form of price- setting constraint achieved through economic review or procedural  guidelines. The Five Commercialized ANSPs Continue to Focus on Safely Moving Aircraft

For all five commercialized ANSPs, the safe movement of aircraft remains  the primary goal. All five ANSPs are subject to external safety regulation. The ANSPs Make and Execute Their Own Decisions, Involve Stakeholders, and Follow Corporate Practices

Each ANSP makes and carries out its own strategic, operating, and  financial decisions. The Five Commercialized ANSPs Undergo Some Form of Economic Review or Follow Price-Setting Process Guidelines

Each of the five commercialized ANSPs is its country’s sole provider of en  route services and, as such, functions as a monopoly. Since Commercialization, the Five ANSPs Have Maintained Safety, Controlled Operating Costs, and Achieved Efficiencies

According to information from each of the ANSPs we reviewed, air  navigation safety has not declined since commercialization, and all five  ANSPs have taken steps to control costs. In addition, the ANSPs have  improved the efficiency of their operations by implementing new  technologies and equipment. Similarly, data from  Airways Corporation of New Zealand indicate a downward trend in  incidents involving loss of separation for the years following  commercialization. Airways  Corporation of New Zealand also reportedly reduced its personnel costs by  eliminating some middle management and administrative positions. The Five ANSPs Said They Have Improved Efficiency through Modernization

All five ANSPs said they have improved productivity through  modernization—that is, through investments in upgrading or replacing air  navigation facilities and equipment. 2). Airservices Australia, for example, reported lower unit costs resulting from  the increases in controllers’ productivity that followed the introduction of  TAAATS. For general aviation operators, however, commercialization has sometimes  meant an increase in fees. Some governments have provided for air navigation services at small,  remote general aviation and regional airports, viewing such services as a  public good. Lessons Learned about the Commercialization of Air Navigation Services

We have derived a number of lessons from our research on the  commercialization of air navigation services in the five countries we  selected. The Commercialized ANSPs Must Be Prepared to Mitigate the Effects of an Industry Downturn

Because commercialized ANSPs rely primarily on user fees to cover their  costs, an industry downturn presents a fundamental financial risk for such  ANSPs that they must be prepared to mitigate, whether through a reserve  fund, cost-cutting measures, user fee increases, additional borrowing,  restructuring, or some combination of these or other options that will be  sufficient to offset the decline in air traffic and the concomitant decline in  revenue. Continuing to provide air navigation  services to small or remote locations may require special efforts to balance  community needs and business interests. Appropriately Assessing the Value of Assets Is Essential for Sound Pricing and Cost Accounting

To protect taxpayers’ interests, Canada and the UK needed to have an  appropriate valuation of their facilities and equipment before wholly or  partially selling these assets to their newly established ANSP. CAA managers with  responsibilities for regulating the safety of NATS’s operations also raised  concerns about recruiting staff. Scope and Methodology

We developed a descriptive analysis of selected foreign countries’  commercialized, performance-based air navigation services providers  (ANSP) by reviewing the characteristics and performance of five such  organizations, which we selected as illustrative of similarities and  differences in ownership, length of experience with commercialization, and  size and scope of operations. To describe how the safety, cost, and efficiency of foreign air navigation  services have changed since commercialization, we conducted interviews  and reviewed documents obtained during our site visits.
Why GAO Did This Study

In the past, governments worldwide owned, operated, and regulated air navigation services, viewing air traffic control as a governmental function. But as nations faced increasing financial strains, many governments decided to shift the responsibility to an independent air navigation service provider (ANSP) that operates as a business. As of March 2005, 38 nations worldwide had commercialized their air navigation services, fundamentally shifting the operational and financial responsibility for providing these services from the national government to an independent commercial authority. GAO selected five ANSPs--in Australia, Canada, Germany, New Zealand, and the United Kingdom--to develop, as requested, a descriptive analysis of commercialized ANSPs that illustrated similarities and differences in ownership, length of experience with commercialization, and size and scope of operations. This report addresses the following questions: (1) What are common characteristics of commercialized ANSPs in selected foreign countries? (2) What do available data show about how the safety, cost, and efficiency of air navigation services have changed since commercialization? (3) What are some key lessons learned about the commercialization of air navigation services?

What GAO Found

The five commercialized ANSPs that GAO selected have a number of common characteristics: All five have the safe movement of aircraft as their primary goal and are subject to some external safety regulation. All five operate as businesses, making and carrying out their own strategic, operational, and financial decisions. As businesses, all five are self-financing, assessing fees on users of air navigation services (e.g., major commercial air carriers; regional air carriers; and, in some cases, general aviation operators) and, as necessary, borrowing funds from capital markets. Finally, all five are largely monopoly providers of air navigation services and undergo some form of constraint in setting prices, such as economic review or procedural guidelines. Available data from the five ANSPs indicate that since commercialization, the safety of air navigation services has remained the same or improved; each ANSP has taken steps to control costs; and each ANSP has reportedly lowered costs and improved efficiency through investments in new technologies and equipment. Despite concerns about the possibility that commercialization could potentially compromise safety, data from all five indicate that safety has not eroded. For example, data from New Zealand and Canada show fewer incidents involving loss of separation (the required distance between aircraft). All five ANSPs have taken steps to control their operating costs, whether by eliminating some administrative positions or by consolidating facilities. All five ANSPs have also invested in new technologies and equipment, which the ANSPs say have lowered their costs by increasing controllers' productivity and produced operating efficiencies, such as fewer or shorter delays. However, the ANSPs have also increased fees for general aviation operators. GAO's research points to a number of lessons. For example, commercialized ANSPs must be prepared to mitigate the effects of an industry downturn, whether through reserves, higher fees, cost-cutting, or other measures. Involving stakeholders in modernizing (i.e., upgrading or replacing) ANSP facilities and equipment can benefit both the ANSP and the stakeholders. Special measures may be needed to protect service to small or remote communities. Finally, when a government sells an ANSP's assets, appropriate valuation is necessary to protect taxpayers' interests.