Operational Savings
Because today's air traffic control system is so large, old and human-centric, it has become costly to operate. By transitioning from this antiquated system to a more efficient satellite-based, automated system, operational savings can be realized. These savings can then be reinvested in the next generation system.
Creative Financing
Most companies in the United States rely on debt financing in one way or the other. Whether it is a publicly-traded company issuing bonds, or a small business carrying a balance on its credit card, debt-financing has proven to be a sound way to help an organization grow. Today's FAA is essentially a "cash" business, relying exclusively on funds appropriated by the U.S. Congress. Some format of innovative financing such as a lease-to-buy arrangement, a straight bond issuance, or another alternative should be authorized by Congress; FAA should be able to access the capital markets.
General Fund Contribution
Since the current funding mechanism was established in 1970, U.S. General Funds have been used to fund FAA's budget. Over the years, this contribution has ranged from 0% to 100% of the budget. In 2005, U.S. General Funds accounted for 18% of FAA's budget. The nation's airlines believe that the U.S. aviation system represents a "public good," and is therefore deserving of a U.S. General Fund contribution. Though some Americans do not fly, they indirectly benefit from the huge economic impact of commercial aviation.
Cost-Based User Charges
Today’s FAA funding mechanism fails to link the ATC system’s cost with the price it charges users. For instance, a flight today that consumes $500 of FAA's resources might only pay $300 for consumption of those services.
To help understand the problem, consider the fact that FAA is essentially a utility no different from an electric company. FAA provides ATC services, just as the electric company provides electricity. If the electric company’s cost is $100 to provide a home with electricity, the company charges the home-owner $100 in addition to a mark-up for profit. Prices are set depending on two factors: the price to provide service, plus whatever profit mark-up consumers will bear.
Since FAA is a government service, it does not generate a profit, and should therefore just collect revenues needed to cover costs. Due to the existing tax and fee arrangement however, there is no connection between FAA’s cost to operate the system and the revenue it collects from system users. If the electric company operated like this, they would charge certain home-owners $300 for $100 worth of electricity while charging other home-owners $50 for $100 worth of service. This is why it is time for a change.
The nation’s airlines seek a funding mechanism that fairly connects the consumption of system resources with the amount that aviation system users pay.