Airline carriers are reluctant to take on the costs associated with upgrading planes to accommodate the Next Generation Air Transportation System because there is no clear funding stream for the project and there is disagreement about its benefits, according to a study by a Washington, D.C., think tank.
The study by the Eno Center for Transportation, a nonpartisan group that leads professional development in the transportation industry, found four key barriers to implementing the federal program known as NextGen:
n Uncertainty about the program’s benefits;
n Uncertainty about the Federal Aviation Administration’s ability to deliver the program;
n Lack of a clear source of funds for NextGen;
n And operators’ reluctance to invest in NextGen equipment.
NextGen refers to a series of initiatives that will modernize the air traffic control system, transforming it from a radar-based system to a more-efficient satellite-based program. The cost of the upgrades is projected at about $40 billion — with half shouldered by the federal government and half by the airlines — and they are not expected to be complete before 2025.
Much is riding on the federal program for South Jersey. NextGen concepts must be tested at the FAA’s William J. Hughes Technical Center in Egg Harbor Township, which employs 1,500 FAA workers and 1,500 contractors. Plans have existed since 2005 to develop a NextGen Aviation Research and Technology Park on the tech center’s grounds in the hope that major aviation companies would take up residence there.
Progress on the park, however, has been slowed by gaffes made by the South Jersey Economic Development District, which leases the park’s land from the FAA. Slow progress also is attributed to problems with federal funding for the initiative. The FAA has released only $442 million of $7 billion in NextGen funding, and when the rest will come is unknown.
“Operators are unlikely to invest until, at a minimum, the (FAA) is ready to deliver the promised benefits. This leads to a stalemate: Operators are uncertain whether investing in NextGen is worthwhile. When the infrastructure is not yet fully in place and without equipage, the infrastructure by itself is ineffective,” the report reads.
Joshua Schank, president and CEO of the Eno Center, said he couldn’t speak specifically about the prospects of the Egg Harbor Township park. However, he said, given his firm’s research, he would move cautiously if involved in the project.
“To be frank, basing any development of any kind on federal money is pretty risky,” Schank said. “Things like transportation are often the first things to be cut in a federal budget because people take them for granted. If you say, ‘We’re going to cut funding for NextGen,’ what constituency is going to step up and fight that? The aviation industry? Maybe. But probably no one.”
However, the park’s board has said it is now in negotiations with high-profile tenants and firmly believes the project will see momentum this year despite the problems the park has had with the SJEDD. In a watchdog report earlier this year, The Press of Atlantic City reported that SJEDD incurred hundreds of thousands of dollars in debt while leading the park’s infrastructure installation and is unable to pay $495,000 to its contractors. Gordon Dahl, the district’s executive director, has since been removed from his position, and he’s threatened to sue the district and representatives of the park’s board.
“We have met with serious, serious players. We’d love to be able to tell you who,” Atlantic County Executive Dennis Levinson, a member of the NextGen park’s board, said recently at a meeting with the editorial board of The Press of Atlantic City. “We do believe that once that major player comes in, the others will want to be here also.”
New Vistas, the park’s newly designated conditional developer, also has secured one letter of intent from World Wide Technology, a St. Louis-based technology services firm interested in locating in the park. Aside from World Wide Technology, the park’s only other committed tenant is the FAA, which plans to have a federal lab in the first of seven buildings, none of which have been constructed. Despite that, a sign at the park’s entrance on Amelia Earhart Boulevard states that limited research space is available.
“Do I think that park is going to be filled with those seven buildings? I think you’re going to be surprised how that park gets filled. I really believe within the year we’ll have a groundbreaking for the first building,” said Ed Salmon, the park board’s president. “I also believe within five to 10 years, we’ll have that park filled. Out of that ... it is going to expand so many aviation opportunities for Atlantic County.”
Ron Esposito, the park’s executive director, said despite the obstacles listed, he was encouraged by the report.
“I think it gave an independent look at NextGen. What it points to is that NextGen benefits — even at low levels — can be significant and tangible,” Esposito said.
The Eno study commenced in summer 2011 and is based on a mix of first-hand interviews, standing research from the FAA, congressional hearings and other private studies. Eno’s work was reviewed by the FAA, former Department of Transportation officials and academics, Schank said. The study shows that implementing NextGen will reduce fuel consumption and congestion, but calculations of the savings vary.
One of the major obstacles to implementing NextGen is that as the program stands now, airline operators are expected to shoulder the cost of equipping their aircrafts with the technology. Those costs are estimated to amount to $100,000 per jet aircraft and $10,000 per small aircraft, affecting as many as 240,000 planes.
Airlines are reluctant to invest in the technology because it provides no benefit to them unless the FAA puts infrastructure in place that makes it useable, the report states.
“If I go first, I’ll have to bear the cost of updating the software, and when NextGen is turned on, I’ll have the oldest, most obsolete systems out there,” is the general concern from operators, said Russell Chew, of Nexa Capital, a private financing firm for NextGen equipment.
Schank said the Eno Center embarked on its research in part because of concerns relayed through connections in aviation’s private sector.
“The more we talked to them about NextGen, the more this would come up. They’d say, ‘We don’t want to be out there investing tons of money in this technology when we don’t know what the technology is going to be at the end of the day,’” Schank said.
Some of those doubts are the result of a lack of a dedicated funding stream for the program. Recent reports by the Government Accountability Office and the Congressional Budget Office show that revenues from the FAA’s Airport and Airway Trust Fund, which is expected to finance the upgrades, are inadequate to fund NextGen.
Earlier this year, Congress came to a resolution over an FAA reauthorization bill that will fund the authority into 2015. Long-term authority for the FAA previously expired in 2007, leaving the agency to depend on a series of 23 short-term financing extensions and leading to a partial shutdown of the FAA that put 650 William J. Hughes Technical Center employees temporarily out of work last summer.
“Despite recent resolution over the long overdue FAA reauthorization bill, little progress has been (made) regarding securing a full-fledged modernization funding plan. The current bill authorizes a flat amount of $2.731 billion over four years for NextGen, and funding is still subject to annual appropriation,” the report states. “A project that is already endangered by uncertainties regarding its worth would benefit from a stable and adequate funding source.”
US. Rep. Frank LoBiondo, R-2nd, championed the long-term reauthorization bill in February, saying it would bring stability to the FAA and ensure that substantial work on NextGen will be completed. Jason Galanes, a spokesman for LoBiondo, said the congressman stands by those statements and believes a reliable funding stream is critical to advancing the program.
“He believes the passage of the FAA authorization and the bipartisan commitment to NextGen should give the airlines reassurance about the future of the project and encourage their active participation and investment,” Galanes said. “Locally, as NextGen development continues, business and aviation industry leaders who are or will be involved are right to realize that our FAA Technical Center in South Jersey will be the hub of that research, development and implementation.”
Schank, of the Eno Center, said even if money is available, that alone will not crush the obstacles.
“The problem is there has not been the leadership necessary to bring the private sector along effectively and to move forward with the technology from the FAA’s perspective,” he said. “You need someone who will say, ‘Here’s the promises we’re going to make to the private sector. This is how we’re going to meet the deadlines and performance objectives.’ The private sector does not want to invest when it’s not clear who’s in charge or how it’s going to get done.”
Contact Jennifer Bogdan