All their disads are non-unique – a Privatization’s inevitable internationally
ar – airlines good – xt: aerospace
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1ar – airlines good – xt: aerospace Airlines are the lynchpin of global aerospace Shikani et al 12 6/18/12 (Will, Thomas Shyr, Anshuman Bhattacharjee, Sr. Director from Yale University-BA, Economics, Director from University of Pennsylvania '11, Finance, Entrepreurship, Director, Teleflex (TFX), WikiInvest, http://www.wikinvest.com/stock/Teleflex_(TFX)) Teleflex is a manufacturing conglomerate that earns most of its money making disposable medical supplies like catheters and oxygen masks. Although medical devices made up 77% of 2009 revenue of $1.89 billion,[1] the company makes a host of other industrial products, from jet engine blades and airline baggage systems, to boat and commercial truck engine parts. Revenue from Teleflex's aerospace products is dependent on the commercial airline industry demand for aircraft parts. The FAA predicts new commercial aircraft construction will slow in the future[2] because of weakness in the overall economy and among passenger airlines specifically. However, the Aerospace segment only made up 10% of Teleflex's 2009 revenues.[1] Business Financials The company's revenue decreased from $2.1 billion in 2008 to $1.89 billion in 2009.[3] However, its operating profit remained relatively flat, as its operating revenue in 2009 was $336 million in 2009, compared to $340 million in 2008. Medical (77%% of 2009 Revenue) Teleflex’s Medical segment businesses produce devices used in surgeries, critical care, and cardiac care, as well as parts and instruments for other companies’ medical devices. The largest revenue source in this segment is Critical Care Products, which sells under the names Arrow, Rüsch, HudsonRCI, Gibeck and Sheridan. The next largest revenue source in this segment is Surgical Products, which sells under the names Deknatel, Pleur-evac, Pilling, Taut and Weck. The third revenue source in this segment is Devices for Original Equipment Manufacturers, which sells under the names TFX OEM, Beere, Deknatel, KMedic, and SMD. Contents 1 Business Financials 1.1 Medical (77%% of 2009 Revenue) 1.2 Aerospace (10% of 2009 Revenue) 1.3 Commercial (13% of 2009 Revenue) 2 Key Trends and Forces 2.1 Aerospace 2.1.1 Revenue in the Aerospace Segment is Highly Dependent on the Aerospace Industry, Particularly the Commercial Airline Industry 2.1.2 Interest Rates impact Teleflex’s ability to pay off its substantial debt load 3 Competition 3.1 Medical 3.2 Aerospace 3.3 Commercial 4 References The products in the Medical segment are manufactured in the Czech Republic, Germany, Malaysia, Mexico and the United States and sold to hospitals and healthcare providers all over the world. Aerospace (10% of 2009 Revenue) Revenue in the Aerospace segment comes from engine repair products and cargo handling systemst for commercial aviation. Engine Repair produces parts and services for flight turbines through a majority-owned venture with GE Aircraft Engines called AirFoil Technologies International (ATI). Cargo Handling Systems and Equipment acquired Nordisk Aviation Products in November 2007 to improve global market presence and produces cargo systems and spare parts under both the names Nordisk and Telair. Major sites for the Aerospace segment are in England, Germany, Norway, Singapore and the United States. Commercial (13% of 2009 Revenue) The Commercial segment produces driver controls and engine and drive assemblies for boats, as well as fuel management systems for automotive, rail, and industrial vehicles, and rigging products. Manufacturing sites are in Canada, Europe, Singapore, and the United States. The Marine part of this segment sells products under the names Teleflex Marine, SeaStar, BayStar, and Sierra. Fuel Management systems are sold under the names ComfortPro, Proheat, and Teleflex GFI. Rigging systems produces cables and other rigging equipment for applications such as oil drilling and marine transportation. Key Trends and Forces. Aerospace Revenue in the Aerospace Segment is Highly Dependent on the Aerospace Industry, Particularly the Commercial Airline Industry New construction of aircraft from companies like Boeing and Airbus are important sources of revenue for Teleflex because as demand for more aircraft rises, so does demand for more parts. On the other hand, rising costs in the commercial airline industry, driven largely by increases in the price of oil, and the 2007-2008 slowdown of the US economy, led the FAA to predict flat operations growth by airlines for the forseeable future. Such weakness in both operations and consumer demand leads to reduced spending on everything from airplanes and parts to expenditures on airport improvements. This cyclicality of the Aerospace industry affects demand for everything related to the industry, including Teleflex’s airline engine repair parts and cargo handling systems. 2ac – airlines good – econ Airlines are key to the economy Tomer et al 12 – Adie Tomer, Senior Research Associate and Associate Fellow @ Brookings, Robert Puentes, Senior Fellow and Director @ Metropolitan Infrastructure Initiative @ Brookings (October 2012, “Global Gateways: International Aviation in Metropolitan America,” http://www.brookings.edu/~/media/research/files/reports/2012/10/25-global-aviation/25-global-aviation.pdf)//twemchen We live in a global era—and the planet’s metropolitan areas lead this interconnected growth. The world’s 200 largest metropolitan economies account for just 14 percent of world population, but generated over 48 percent of global gross domestic product (GDP) in 2011.8 These metro areas have emerged on every corner of the globe, from the largest economies within developed countries to the fast-growing metro areas in developing markets.9 Taken in concert, the success of metropolitan economies throughout the developed and developing world suggest that the new global economy is much spikier and interconnected than originally thought.10 In this global era, U.S. metro areas must simultaneously collaborate with domestic and international peers. This is where aviation plays a critical role—it fosters the inter-metropolitan connections critical to future economic growth. These connections cross both the physical and personal spheres. Metro areas such as New York and London are well connected through many domestic and global partners, which enhances their competitive advantage by offering their businesses greater access to global markets. Metro areas such as Miami or Seattle may have relatively fewer relationships, but nonetheless derive a competitive advantage as critical gateways to the South and West.11 Lessons from Munich and its well-connected airport hub further demonstrate the benefits from such connectivity.12 International aviation puts people within reach of their overseas family, encourages tourism, and empowers businesses with the opportunity for face-to-face meetings.13 The global aviation network also supports the rise of new immigrant gateways across the United States, forging even stronger economic and social connections to world regions.14 The key point is that while a metro area may have a wealth of human and economic capital, they cannot fully exploit those resources without strategic global linkages. These aviation-related connections deliver real benefits to local economies. Aviation’s positive effect on local employment is a major economic benefit.15 Metro areas that serve as destinations for large numbers of people are, implicitly, points of convergence for new ideas and capital. These places have the right mix of human capital and other resources to incubate new business ventures and to stimulate creativity. The net effect is an employment boost throughout local industries, from high-skill services that rely heavily on air travel to more stationary industries like manufacturing.16 The economic effects of aviation are so wide-ranging that they hold potential for spillover effects that benefit other sectors and people. That is not to say local economic effects are equal across all places. Airports specializing in throughtraffic, like Atlanta, generate economic activity in sectors directly related to transportation, but these effects may not always spillover into the broader metro economy. In contrast, cities that serve primarily as destination points or freight hubs enjoy increased economic activity more broadly, experiencing job growth even in non-transportation sectors.17 Metro areas with predominantly leisure-oriented flows see greater job growth in entertainment and recreation industries, while job growth in places with predominantly business-oriented flows comes from management and financial occupations.18 International aviation also directly boosts the U.S. economy by supporting travel and tourism since nearly all foreign visitors from outside North America enter the country via air. These visitors generated $47 billion in real national output in 2011, an increase of 57.7 percent from 2003.19 Overall, U.S. travel and tourism exports grew by 6.1 percent from 2009 to 2011, supported in large part by international visitors.20 Despite these benefits, certain market inefficiencies limit aviation’s total economic impact. One example is when a nonstop flight between two metro areas does not exist even though large numbers of passengers travel between them. Supply and demand mismatches introduce inefficiencies into the aviation system, forcing passengers to “fly where they don’t want to go,” such as the many international travelers that simply pass through Charlotte’s Douglas International Airport.21 These systemic mismatches make certain metropolitan areas harder and costlier to reach, and could stifle their aviation-related economic growth. This may present relatively few challenges for U.S. businesses primarily operating in U.S. cities, where routes are some of the most time- and costefficient in the world.22 But it is a bigger problem for U.S.-based businesses seeking to expand into South American or African markets, where cities may be more costly and time consuming to reach. Thus, the organization of international aviation service directly shapes U.S. businesses opportunities for global expansion and partnering.23 1ar – airlines good – xt: econ Airlines underpin global economic growth AFA 15 (Airlines for America, “Is a Critical Economic Engine,” http://airlines.org/industry/#section-accordian?industry_section=economic)//twemchen Commercial aviation has a direct impact on our nation’s economy, creating more than 11 million well-paying American jobs and driving 5 percent of the U.S. gross domestic product and nearly $1.5 trillion in annual economic activity. Healthy U.S. airlines stimulate the commercial aviation industry, as well as the broader economy through increased connectivity, trade and enhanced mobility of people, cultures, goods and ideas. Airlines significantly improve opportunities for trade and increase productivity for other industries. Many businesses rely on airlines to quickly deliver high-value items, urgent documents, industrial parts needed for repairs and perishables like fresh fish, fruits, vegetables and flowers. Flying reduces time spent traveling, offering greater efficiency for business customers and more leisure time for vacationing families. Weakness in domestic airlines sends ripples through the entire economy Conway 6 (Richard S., Douglas H. Pedersen, “The Washington Aerospace Industry,” January 2006, http://afa-wa.com/Aerospace_Industry.pdf)//twemchen Volatile demand. The demand for aircraft, whether stemming from the military or the world airline industry, is highly volatile. Given that Boeing is a major employer, the fluctuations in aircraft demand have often sent ripples throughout the state economy. The ramp-up in Boeing production during World War II, which led to 40,000 new jobs, helped pull the Seattle area out of the Great Depression. The subsequent lay-offs at the conclusion of the war precipitated a recession. Despite a declining employment share, the aerospace industry can still impart significant fluctuations to the Washington economy (Figure 4). Surging aerospace employment coupled with a strong national economy triggered state economic booms in the late 1970s, 1980s, and 1990s. Spurred by 48,000 new hires in the aerospace industry, the 1983-90 expansion created fully one-fifth of the jobs in the state economy today. Back-to-back aerospace slumps contributed substantially to the last recession. 2ac – airlines good – at: resilient No resiliency Thompson 9 – David, President – American Institute of Aeronautics and Astronautics, “The Aerospace Workforce”, Federal News Service, 12-10, Lexis Aerospace systems are of considerable importance to U.S. national security, economic prosperity, technological vitality, and global leadership. Aeronautical and space systems protect our citizens, armed forces, and allies abroad. They connect the farthest corners of the world with safe and efficient air transportation and satellite communications, and they monitor the Earth, explore the solar system, and study the wider universe. The U.S. aerospace sector also contributes in major ways to America's economic output and high- technology employment. Aerospace research and development and manufacturing companies generated approximately $240 billion in sales in 2008, or nearly 1.75 percent of our country's gross national product. They currently employ about 650,000 people throughout our country. U.S. government agencies and departments engaged in aerospace research and operations add another 125,000 employees to the sector's workforce, bringing the total to over 775,000 people. Included in this number are more than 200,000 engineers and scientists -- one of the largest concentrations of technical brainpower on Earth. However, the U.S. aerospace workforce is now facing the most serious demographic challenge in his 100-year history. Simply put, today, many more older, experienced professionals are retiring from or otherwise leaving our industrial and governmental aerospace workforce than early career professionals are entering it. This imbalance is expected to become even more severe over the next five years as the final members of the Apollo-era generation of engineers and scientists complete 40- or 45-year careers and transition to well-deserved retirements. In fact, around 50 percent of the current aerospace workforce will be eligible for retirement within just the next five years. Meanwhile, the supply of younger aerospace engineers and scientists entering the industry is woefully insufficient to replace the mounting wave of retirements and other departures that we see in the near future. In part, this is the result of broader technical career trends as engineering and science graduates from our country's universities continue a multi-decade decline, even as the demand for their knowledge and skills in aerospace and other industries keeps increasing. Today, only about 15 percent of U.S. students earn their first college degree in engineering or science, well behind the 40 or 50 percent levels seen in many European and Asian countries. Due to the dual-use nature of aerospace technology and the limited supply of visas available to highly-qualified non-U.S. citizens, our industry's ability to hire the best and brightest graduates from overseas is also severely constrained. As a result, unless effective action is taken to reverse current trends, the U.S. aerospace sector is expected to experience a dramatic decrease in its technical workforce over the next decade. Your second question concerns the implications of a cutback in human spaceflight programs. AIAA's view on this is as follows. While U.S. human spaceflight programs directly employ somewhat less than 10 percent of our country's aerospace workers, its influence on attracting and motivating tomorrow's aerospace professionals is much greater than its immediate employment contribution. For nearly 50 years the excitement and challenge of human spaceflight have been tremendously important factors in the decisions of generations of young people to prepare for and to pursue careers in the aerospace sector. This remains true today, as indicated by hundreds of testimonies AIAA members have recorded over the past two years, a few of which I'll show in brief video interviews at the end of my statement. Further evidence of the catalytic role of human space missions is found in a recent study conducted earlier this year by MIT which found that 40 percent of current aerospace engineering undergraduates cited human space programs as the main reason they chose this field of study. Therefore, I think it can be predicted with high confidence that a major cutback in U.S. human space programs would be substantially detrimental to the future of the aerospace workforce. Such a cutback would put even greater stress on an already weakened strategic sector of our domestic high-technology workforce. Your final question centers on other issues that should be considered as decisions are made on the funding and direction for NASA, particularly in the human spaceflight area. In conclusion, AIAA offers the following suggestions in this regard. Beyond the previously noted critical influence on the future supply of aerospace professionals, administration and congressional leaders should also consider the collateral damage to the space industrial base if human space programs were substantially curtailed. Due to low annual production rates and highly-specialized product requirements, the domestic supply chain for space systems is relatively fragile. Many second- and third-tier suppliers in particular operate at marginal volumes today, so even a small reduction in their business could force some critical suppliers to exit this sector. Human space programs represent around 20 percent of the $47 billion in total U.S. space and missile systems sales from 2008. Accordingly, a major cutback in human space spending could have large and highly adverse ripple effects throughout commercial, defense, and scientific space programs as well, potentially triggering a series of disruptive changes in the common industrial supply base that our entire space sector relies on. ***NEXT GEN 2ac – next gen – xt: i/l Barowski 10 – J.D. Candidate at Pepperdine University (Justin T. Barkowski, 2010, “Managing Air Traffic Congestion Through the Next Generation Air Transportation System: Satellite-Based Technology, Trajectories, and - Privatization?,” 37 Pepp. L. Rev. 247, Lexis)//twemchen Given the relatively fixed amount of airport facilities available, 13 the fact that the demand from air carriers has continuously outpaced supply has resulted in significant flight delays that have rippled throughout the country. 14 Yet Congress continues to impose regulatory control over municipally-owned airports across the country, forcing them to provide non-discriminatory access to the airfield. 15 With the non-discriminatory access [*252] requirement, airports are not allowed to use pricing as a method of allocating ground facilities, which, in turn, renders them unable to control access to the national airspace system. 16 Solely focusing on NextGen and expanding airspace capacity without corresponding corrections in these demand-management policies will only provide greater incentive for airlines to over-schedule in order to fill in the marginal increases in capacity. To avoid this escalation of congestion, the socially efficient solution is for local governments to transfer these "high-density airports" to the private sector on the condition that private owners focus on eliminating congestion. 17 The societal gains from eliminating congestion would outweigh any societal costs incurred from potential airport discrimination against airlines. 18 As a result, airport privatization may be the proper catalyst for exploiting the full potential of NextGen. This Comment explores the advantages of NextGen in expanding airspace capacity and the potential problems that may arise without a reform in FAA accountability. Recognizing NextGen as merely part of the solution, the Comment argues that airport privatization is a critical supplement to avoid the federal regulatory policies that dampen efforts to control airport resource demand. Part II breaks down the transformation of the air transportation system since its inception and constructs the landscape for existing air traffic congestion. 19 Part III examines Congress's attempts to expand capacity through NextGen, identifies and suggests solutions to the accountability obstacles, and argues that NextGen's efficient routing structures and added capacity are overrun by the inability to manage competition and congestion at the country's high-density airports. 20 Parts IV.A and IV.B criticize the current approach to regulation of the nation's airports by illustrating the damaging effects it has on efforts to manage demand for critical ground facilities. 21 Part IV.C demonstrates the problems mounting with the FAA's policies on regulating access to congested airports while IV.D provides critical [*253] insight to the future outlook under Secretary of Transportation, Ray LaHood. 22 Part V presents an argument that privatization of high-density airports may lead to a more socially efficient solution and provides suggestions for reforming current privatization laws. 23 Finally, Part VI concludes this Comment. Barowski 10 – J.D. Candidate at Pepperdine University (Justin T. Barkowski, 2010, “Managing Air Traffic Congestion Through the Next Generation Air Transportation System: Satellite-Based Technology, Trajectories, and - Privatization?,” 37 Pepp. L. Rev. 247, Lexis)//twemchen [*293] Any organizational structure designed to accomplish the future purpose of ATM must consider three primary goals: avoiding the current funding debate with diversified sources of capital for investing in NextGen, 216 safety and security of the airspace system, and the ability to easily adapt to changing technology that may one day make NextGen-based systems obsolete. 217 The relatively recent ATO formation was a modest move towards more alienability, 218 [*294] but given the evolving roles under NextGen, a government incorporated ATO would compliment these changes more effectively. In 1994, the Executive Oversight Committee's report proposed a "United States Air Traffic Services Corporation" (USATSC), capable of many functions, including: managing operations of the ATC system, purchasing advanced technology, hiring and firing employees free of civil service regulations, borrowing funds both from the treasury and commercial markets, and most importantly, being sued in tort for its operations. 219 Although the political reaction was unfavorable at the time, this forgotten proposal could resolve many of the ongoing administrative debacles. 220 Though the mixed private-public corporation bears similarities to the current ATO, the main differences are precisely what the ATM system needs for successful implementation of NextGen. In a USATSC, the FAA would retain protection over ATM security functions and raise alternative forms of financing for NextGen, operating as much like a "business-run enterprise" as possible. 221 Although theoretical observations could arguably overestimate the benefits of increased efficiency for implementing new technologies, the above stated benefits certainly outweigh the current system, which is funded by passengers and a trust fund with limited accountability from its users. But along with nearly any policy recommendation, the biggest obstacle for ATC commercialization is Congress. 222 Indeed, the public tends to disfavor privatization efforts when there has been a backlash in the private sector, especially one as remarkable as the recent economic recession. Barowski 10 – J.D. Candidate at Pepperdine University (Justin T. Barkowski, 2010, “Managing Air Traffic Congestion Through the Next Generation Air Transportation System: Satellite-Based Technology, Trajectories, and - Privatization?,” 37 Pepp. L. Rev. 247, Lexis)//twemchen Airport privatization has numerous potential benefits that cannot be understated. Those most commonly identified include diversified sources of private capital for development, 343 greater efficiency in airport operations, 344 and increased customer satisfaction. 345 However, private operators could also [*320] more effectively fight congestion than a government-run airport by conditioning the transfer on the elimination of congestion, measured by monthly or quarterly performance results. 346 This technique has been recognized for various forms of privatization, predicated on the notion that "governments should shift their focus from specifying inputs to specifying some desired outcome, leaving private sector providers with the opportunity of formulating means of realizing that outcome in the most cost-efficient way possible." 347 The transfer of interests in airports from government operations to a private regulated monopoly could provide a solution for demand management if three conditions are met: the operator is given the ability to price discriminate against carriers for ground facilities; 348 transparent, periodic slot auctions are held; 349 and efficient regulation of an airport's monopoly power exists. 350 1. Price Discrimination for Ground Facilities Several policies with respect to allocating ground facilities at high-density airports are necessary for the private party to eliminate airport congestion. First, eliminating the availability of long-term leases and majority-in-interest clauses is a requisite for creating more fluid entry and thus, increased competition. 351 Forcing airlines into short-term arrangements will produce a more flexible air transportation system that can adjust to rapidly changing demand. 352 Second, Congress needs to loosen the regulations that [*321] require airport proprietors to equate revenues with their costs of providing the airfield's resources. 353 The current price controls prevent excessive monopoly profits by forcing airports into reasonable investment returns and uniform cost allocation across all carriers. 354 But while regulation seems to ensure that the monopolists' profits are minimal, it allows for an "unknown extent of productive inefficiency." 355 Price controls create inefficiency losses, which result when "economic resources are directed away from [airlines] where those resources have the largest benefit ... and toward [airlines] which value those resources less." 356 Because prices are a necessary mechanism to ensure "resources are used in the most economically efficient fashion," 357 ground facilities should be charged based upon willingness to pay or expected profitability, commonly called "Ramsey pricing." 358 A private [*322] operator will be more capable of determining the carrier's risk of failure, a reflection of each carrier's willingness to pay. 359 For instance, if an airline pays the maximum it is willing to pay for a gate facility, it is forced to extract all of the gate's potential value in order to recover its investment. In essence Ramsey pricing forces the airline to use the gate more efficiently than it had before. The loosening of limitations on discriminatory pricing and prohibiting long-term lease arrangements for ground facilities will enhance a private operator's ability to perfectly price discriminate, which "may be consistent with and even necessary to allocative efficiency" of airport resources. 360 This pricing structure ensures there is limited deadweight loss from the use of scarce airport facilities by forcing unprofitable and wasteful air carriers out of the system. 361 Critics against using a different rate structure argue that airlines will raise their rates on passengers, effectively passing the costs of congestion onto consumers. 362 However, because airport costs are roughly five percent of airlines' total costs it would not be disastrous to raise rates on them. One study suggests that for every one percent increase in the price of airline tickets, more than one percent declines to buy tickets. 363 As a result, airlines will arguably internalize the rising costs and force reductions in other areas. 364 Alternatively though, decreased fuel costs from the implementation [*323] of NextGen may offset increased facility prices as well. But if for some reason the airline cannot handle the increased costs, any potential increases on passengers' rates would only be temporary because an entrant could come in and undercut them, assuming the barriers to entry are more fluid from privatization and short-term leases. 365 Nonetheless, there are several arguments supporting the notion that consumers would be minimally affected under Ramsey pricing. Any concerns about potential collusion between the airport proprietor and an air carrier will be regulated by antitrust legislation. 366 Through modest disclosure requirements, the FAA could require that the private airport proprietors disclose their justifications for the charges upon airlines, creating a more transparent environment that would prevent anticompetitive behavior. 367 Ramsey pricing allows the airport proprietor to get the most profitable airlines within the first barrier to entry - ground facilities - and maximizes the economic value of these resources. Subsequently though, the [*324] airport proprietor must prevent these air carriers from scheduling amounts of flights exceeding the airport's practical capacity. 368 2. Transparent Slot Auctions Realizing that slots are seemingly unavoidable, the private operator will be responsible for configuring the optimal level of slots allowed per hour. 369 Assigning control to the proprietors, subject to extensive safety regulations, will allow them to set an efficient cap that helps meet their mandate of eliminating airport congestion. 370 The FAA's new role is to collaborate with the private airport operator in looking for ways to expand the number of slots per hour while the airport becomes responsible for administering a slot system. 371 Once the airport finds an optimal number of slots per hour, there must be a form of allocating them efficiently. 372 The FAA's slot auction proposal and the airport proprietor's landing fees are duplicative - creating an ineffective system that is currently plagued by redundant fees and stale airline-airport contracts. Slot and landing fees need to be consolidated into one fee that will be determined through auctions [*325] held by the airport proprietor. 373 The new system will consolidate slot and landing fees into one transparent market. For instance, the airport could hold bi-monthly or quarterly auctions for the rights to takeoff or land at a certain time. 374 By requiring slot auction prices to be publicly listed, increased transparency of airport-facility markets will allow potential new entrants to gauge its costs more easily before entering the market. One possible argument against this potential "two-step pricing method" is that the airport extracts the airline's surplus twice instead of through only an initial charge for gate facilities. However, once airlines have obtained a gate/terminal space, the auction prices will simply reflect the remaining economic value an airline has allocated towards the use of all its necessary ground facilities. 375 With increased amounts of short-term leases, constructing a more transparent market for airport facilities will increase competition for airport resources, and subsequently award them to the airline that can use them most effectively. 376 Not only does the consolidated pricing system allow a private [*326] operator to manage its limited airport facilities efficiently, it is necessary for ensuring a reduction in airport congestion and airline over-scheduling. It does, however, raise the determinative question of monopolistic abuse. 3. Regulating Monopolistic Abuse The main criticism against a "two-step pricing method" or similar pricing structure for ground facilities is that "allowing the unilateral imposition of congestion pricing would end the airlines' regulatory protection against the exercise of monopoly power by airport proprietors and would transfer revenue from airlines and their customers to airport proprietors." 377 The monopolist's potential for ignoring cost-reducing measures and enjoying the advantages of a "two-step pricing method" is the biggest legal issue facing airport privatization in the present time. 378 In any shift towards privatization of airport monopolies, there will always be some economic rents or monopoly profits. 379 Given these realities, the government needs to ensure monopolistic abuse is mitigated enough for the gains from eliminating airport congestion to outweigh any potential costs of monopoly behavior. [*327] a. Modeling Privatization Welfare Effects Modeling each actor's welfare effects can illustrate the government's trouble of eliminating airport congestion through privatization, and provides clearer guidance for dealing with the risk of monopolistic abuse. Suppose the private operator obtains the monopoly profits from the airlines, X, 380 through its "two-step pricing method," and eliminates the social costs of airport congestion, Z, 381 in accordance with its mandate. The result is a transfer of X from the airlines to the airports and an overall net societal benefit of Z and X. 382 Because every actor gains, social efficiency is clearly achieved by the transfer of the airport to the monopolist. 383 But one may perceive this transfer as unfair because "society" - including everyone except for the monopolist - must pay the value of monopoly profits, X, to the airport proprietor (through the airlines) in order to obtain gains from congestion relief, Z. 384 Therefore, public policy must encourage "fairness" by ensuring that society's [*328] gain, Z, outweighs its "fee," X, thereby making privatization the socially efficient outcome from congestion-dominated airports. With the added potential for abuse of monopoly power that could ultimately reduce society's gains, however, what policies could maximize Z by ensuring an airport proprietor's competitive-type behavior? 385 b. Maximizing the Return on Privatization Several policies are available for society in ensuring that its investment, X, will yield a far greater return in Z. 386 First, a tax on the profits of the monopolist in the form of a "surtax," at a rate of sixty or seventy percent for instance, could ensure that any monopoly profits would at least be limited by that respective amount. 387 Another possibility, and potentially the best solution, is for the state or local subdivision managing the airport to hold an auction, accepting bids for the airport's monopolizing capabilities. That way, for example, if the government finds the monopoly profits are worth the value of X, the company pays the government a fee, Y, for rights to collect the monopoly profits in its most efficient manner. The fee, Y, paid to the government would likely be high, such as sixty or seventy percent of X, acting in essence as another form of a tax. Alternatively, the government could incorporate the airport and issue stock as a publicly-held company, subjecting it to numerous requirements and scrutiny that would allow it to be more transparent. 388 By allowing the [*329] local government to retain a minority stake in the airport and have individuals on the board of directors, both the cities' and passengers' interests in ensuring fairness may be heard. 389 Similar to the example above, the government could tax, through a surtax, the dividends of the corporation, in effect acting as a redistributive income mechanism. 390 Lastly, there has been a rise of secondary airports in the main regions where high-density congestion is occurring. 391 This competition could lead to a decrease in the amount of monopoly profits the airport can obtain. 392 Altogether, the prescribed policies create two benefits from the monopoly abuse problem. First, they act as a redistributive measure of the monopolist's eventual profits - which were discriminatorily taken from airlines - in order to restore fairness to the two-step pricing method. Second, it would force private operators to act more efficiently and implement cost-reducing measures in order to profit-maximize and recoup the windfall they lost to the government. By minimizing the potential for monopolistic abuse, transferring interests in high-density airports to the private sector will provide aggregate benefits to society in terms of social efficiency. However, Congress must first address the current federal laws governing airport privatization that are insufficient to yield the potential benefits described. [*330] B. Legal Hurdles: The Problematic Pilot Program In 1996, Congress began a privatization pilot program through the Federal Aviation Reauthorization Act of 1996. 393 Under the program, only five airports across the nation are allowed to be privatized, and only one may be a larger hub airport. 394 The transfer of an airport interest to the private sector may only be done through a lease unless it is only used for general aviation purposes. 395 The eventual private operator, the lessee, will then be exempt from several requirements, including the regulation to use airport revenues for only "capital or operating costs of the airport." 396 However, the airport revenues may only be used for non-airport purposes "to the extent necessary ... to earn compensation from the operations of the airport." 397 If a local government decides to lease its airport, it must first file a preliminary application with the FAA relating to objectives, timetables, and other financial documents. 398 If accepted, the final, rather rigorous, in-depth application [*331] process is the most difficult stage. Upon receiving the final application, 399 the FAA will review it and determine if it meets the nine requirements set forth in § 47134(c). 400 If approved, the proprietor remains bound by certain "regulations." First, the pilot program requires that the airport remain available for public use, and second, "every fee imposed on an air carrier will not [be allowed] to increase faster than inflation unless approved by sixty-five percent of the airlines." 401 Third, the "lessee will maintain, improve, and modernize the ... airport." 402 Notice the main three terms of the transfer are not substantially [*332] different from the current regulatory structure governing publicly-operated airports. 403 The only significant difference is the ability of the private operator to retain its revenues for non-aviation purposes. 404 But as one author correctly notes, the last two requirements are contradictory and discourage infrastructural developments by limiting the airport from raising rates on airlines to achieve a return on its investment. 405 In addition, by empowering airlines during negotiations with airports, the latter is more likely to cave in to potential inefficient demands made by carriers. 406 Without bars on long-term leases, the private operator is also no longer forced to seek out potential entrants. Rather, the "sixty-five percent rule" encourages long-standing relationships and agreements with airlines, a major deficiency in promoting competition. 407 Without the ability to discriminate against air carriers in any form and efficiently limit those that access the airports' limited resources, regulation still prevails. 408 To create a more flexible airport environment that supplements NextGen, Congress needs to amend the pilot program to include broader discretion for airport proprietors to charge based upon the carrier's economic value [*333] of the airport's resources, a limit on long-term lease agreements, and the consolidation of slots-landing fees into periodic auctions. But these mechanisms should only be provided to the private operator if the airport qualifies as a "high-density airport," effectively limiting it to those where significant social benefits may be captured. 409 Therefore, by withholding these powers subject to the condition of eliminating airport congestion and the above-mentioned regulations on monopoly profits, airport privatization can provide substantial societal efficiency gains. 410 C. A Bright Future for Privatization Even beyond the potential congestion savings, several other reasons suggest privatization may be the appealing forecast for local governments. First, dozens of local governments are increasingly considering the sale of their airports in order to decrease growing budget deficits. 411 Second, with [*334] the federal government about to make a multi-billion dollar investment in NextGen, 412 an airport's economic value to the private sector will rise significantly, making the sale even more lucrative for governments looking for corrective budget solutions. 413 Finally, unlike the FAA's trembling slot debacle, Secretary of Transportation Ray LaHood has urged for "the private sector [to have] a bigger role in rebuilding the nation's aging ... infrastructure," 414 which could provide help in reprising answers for congestion relief. But without any reforms to the current pilot program, the optimistic outlook could end hollow and ineffective. VI. Conclusion The nation's air transportation system is nearing insolvency, and with air traffic expected to double or triple in the next fifteen years, the government's attempts to create a more efficient system will have increasing impact. The FAA and local governments' bifurcated approaches in managing airport congestion and fueling competition in the aviation industry have had minimal effect. Congress's ambitious efforts to assist through the implementation of NextGen will promulgate much-needed capacity in many of the nation's airports. However, the FAA's liability-escape maneuvers - throwing the "discretionary function" flag - do not maximize the potential [*335] safety and flexibility needed throughout the airspace system. Without accountability reform within the FAA and ATO, the revolutionary system will fall behind immediately after it clears the starting gates. Even with the proper adjustments to NextGen, a system with the cost of nearly twenty billion dollars in the end still misses the mark in dealing with the core problem: congestion at high-density airports. If the current airport policies are not addressed, the multi-billion dollar taxpayer investment will fail to solve those costly and irritating flight delays. As the social costs proliferate from misallocating valuable airport facilities, a relatively unknown and underutilized privatization pilot program becomes more appealing - and against much opposition, necessary. 2ac – next gen – congestion impact Barowski 10 – J.D. Candidate at Pepperdine University (Justin T. Barkowski, 2010, “Managing Air Traffic Congestion Through the Next Generation Air Transportation System: Satellite-Based Technology, Trajectories, and - Privatization?,” 37 Pepp. L. Rev. 247, Lexis)//twemchen With or without an ATC commercialization debate, the airlines and the new Secretary of Transportation, Ray LaHood, strongly believe that NextGen is the key to solving congestion. 223 One author even argues that "airside capacity shortages and suboptimal usage/management of airspace" is the underlying cause of air traffic congestion. 224 While these concerns undoubtedly need to be addressed through NextGen, there is a severe problem when airspace capacity increases but corresponding airport resources and infrastructure do not. This will be the case in high-density areas where any room for expansion is nearly impossible. 225 Even the JPDO is skeptical that NextGen is a "cure-for-all," stating that where "airport infrastructure [development] cannot be accomplished using existing resources," the airports will have to implement "market-based mechanisms such as peak period pricing to ease congestion" in times of high demand. 226 Merely increasing the availability of landing and takeoffs at a high-density airport may not have the desired cure-for-all effect that industry participants might expect. For example, in 2004 American and United Airlines agreed with the FAA to voluntarily reduce the number of scheduled flights out of Chicago O'Hare by 12.5% in order to help fight congestion. 227 In effect, this increased the number of potential flights out of that airport during the agreed upon times through its voluntary reduction, just as NextGen [*296] would do. However, the opening up of more space simply resulted in other airlines adding "flights while the hub carriers cut their schedules," providing no relief to the airport congestion problem. 228 NextGen essentially creates this increased capacity without any supplemental FAA policies to address how this extra space in the system will be allocated to air carriers that are continuously demanding more flights than the system can handle. 229 To prevent air traffic congestion from resulting after the implementation of NextGen, like it had in Chicago, effective demand-management policies are therefore critically in need. Given the historical struggles, 230 this may be difficult to accomplish. ***SECURITY RESOURCES PIC 2ac – total removal key Clancy 12 – staff writer @ Legal News (Ambrose Clancy, 5/4/12, “If the TSA ain’t broke, why privatize it,” http://www.legalnews.com/detroit/1304766)//twemchen Bob Mann, an aviation consultant with his own firm in Port Washington, RW Mann & Co., noted that we had a private security system before 9/11. "And it didn't work very well," he understated. "We had minimum-wage people, trained to a minimum standard, hired out of the prevailing wage market like Burger King or Kentucky Fried Chicken employees," Mann said. "And they didn't even get the free meal." Even with privatization, security will be overseen by the TSA, Mann said. "When Mica pushes on this, I ask, 'If there's the same standards, same equipment, same protocols, is the wage rate going to be the only difference? Are they going to be trained better? Are they going to be trained as well?' There's no evidence I can point to that would suggest [privatization] ought to be less expensive." ***PRIZES CP 2ac – concludes aff Can’t solve without resolving TSA overreach Kravitz 10 – Washington Post Staff Writer (Derek Kravitz, 12/31/10, “As Outrage Grows, Airports Consider Ditching TSA,” http://www.cbsnews.com/news/as-outrage-grows-airports-consider-ditching-tsa/)//twemchen Every spring, private security officers at San Francisco International Airport compete in a workplace "March Madness"-style tournament for cash prizes, some as high as $1,500. The games: finding illegal items and explosives in carry-on bags; successfully picking locks on difficult-to-open luggage; and spotting a would-be terrorist (in this case Covenant Aviation Security's president, Gerald L. Berry) on security videos. "The bonuses are pretty handsome," Berry said. "We have to be good - equal or better than the feds. So we work at it, and we incentivize." Some of the nation's biggest airports are responding to recent public outrage over security screening by weighing whether they should hire private firms such as Covenant to replace the Transportation Security Administration. Sixteen airports, including San Francisco and Kansas City International Airport, have made the switch since 2002. One Orlando airport has approved the change but needs to select a contractor, and several others are seriously considering it. The Metropolitan Washington Airports Authority, which governs Dulles International and Reagan National airports, is studying the option, spokeswoman Tara Hamilton said. For airports, the change isn't about money. At issue, airport managers and security experts say, is the unwieldy size and bureaucracy of the federal aviation security system. Private firms may be able to do the job more efficiently and with a personal touch, they argue. ***POLITICS 2ac – no link – at: public The public doesn’t know what’s going on DeSantis 13 – Wydick Fellow and lecturer at the UC Davis School of Law (J. Angelo DeSantis, December 2013, “Engines Turn or Passengers Swim: A Case Study of How ETOPS Improved Both Safety And Economics in Aviation,” UC Davis Legal Studies Research Paper Series, Paper No. 359)//twemchen Passenger opposition to flying a twin-engine plane on an overwater, long-haul flight was non-existent.251 Passengers surveyed for their opinions of the 767 in comparison with other wide-body transports were either positive or indicated they did not fully understand what they were flying on.252 And when the crew announced the historic nature of the flight, it was uninteresting news to most passengers.253 Directory: file -> view view -> Western Europe after wwii view -> Author study: paul fleischman view -> Qpa1 7ela study Guide view -> Arctic Oil/Gas Neg view -> November 1970 Approximately 150,000-500,000 deaths Bhola Cyclone Bangladesh view -> Grade Level: 6 Unit of Study: Caribbean glce view -> Citation: Duffield, Katy view -> Table of Contents Lesson # view -> Chinese Wind Energy Disad Download 1.61 Mb. 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