Airport Security

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Terrorism, Airport Security, and the Private Sector

Paul Seidenstat

Abstract

September 11, 2001, led to renewed emphasis on airport security in the United States. Before the tragedy, government policy led to a suboptimal level of security. The fundamental problem was not simply the use of private security firms, but rather the reliance on airline financing and poor Federal Aviation Administration (FAA) oversight. After 9/11 a federalized security system was put in place. The current system of tightened security is substantially more costly and should be evaluated in terms of its cost- effectiveness compared to a public–private approach.

Introduction

In the wake of the tragedy of September 11, 2001, in which hijacked airplanes were crashed into large prominent buildings, renewed emphasis was placed on transportation security in general and airport security in particular. Airport secur- ity had been of great concern in the United States for several decades as sporadic hijackings and bombings occurred.

Airport security had been a joint public–private undertaking. However, after 9/11 and the perceived weaknesses of the security system, emphasis shifted to public operations. If weak security was a function of organizational dysfunction and underinvestment, the blame some attributed to the private sector may have been misdirected. Reconsideration of the optimal organization of transportation security may still be an essential exercise if we are to minimize the threat of terrorist attacks.

The Airport Security System Before 9/11

The airport security system in place in early September of 2001 was fragmented. Security was the joint responsibility of airport operators, airlines, and the Federal Aviation Administration (FAA). The functions of the separate players were as described in the following sections.

Commercial Airports

The more than 400 airports in the United States were responsible for providing a law enforcement presence. They also were charged with controlling access to the secure areas of the airport and for policing the perimeter of the airport. Some airport authorities contracted with private security firms, whereas others operated their own security or used regular police forces.

Commercial Airlines

Airlines, numbering more than 100 carriers, were responsible for security of the aircraft. They were responsible for the screening of passengers, baggage, and other cargo for weapons and explosives. Airlines contracted with private security com- panies to do the screening.

Review of Policy Research, Volume 21, Number 3 (2004) © 2004 by The Policy Studies Association. All rights reserved.

Federal Aviation Administration

This federal agency had regulatory responsibility for airport safety. The agency was responsible for establishing security policies and regulations and evaluating the effectiveness of airport and airline security. It provided limited funding for secur- ity activities. It channeled threat information to the airports and airlines (National Academy of Public Administration, 2000).

Major Components of Security

The various components to the overall security system were as follows:

• Screening of passengers and carry-on luggage for weapons or explosives. Passengers have to pass through a machine, the magnetometer. Carry-on bags are x-rayed as well. Screening takes place at the concourse or gate checkpoints. Private security companies must be certified and require screener training for their employees. Two thousand weapons were seized and one thousand persons were arrested either for carrying weapons or making false statements about weapons in the year 2000.

• Screening of checked baggage and cargo for explosives. The FAA was slowly requir- ing new screening equipment. The law in 2000 required the FAA to establish minimum standards for bag screener training. Screening was tied to passen- ger and cargo profiling. The methods used included explosive detection systems (EDS), explosive tract detection systems (ETD), canines, and baggage matching with passengers.

• Controlling access to secure air operations areas. The focus of this function was to require badges for all personnel. There was a long list of personnel categories including baggage handlers, aircraft and facility management personnel, con- struction workers, cargo freight employees, fueling operations personnel, caterers, and cleaners. Access points had to be controlled and manned to check badges.

• Clearing and badging personnel with access to airport areas and aircraft. This function required the checking of employment history and criminal records.

• FAA Inspections. To perform its oversight function, the FAA conducted announced and unannounced inspections. For violations that were discov- ered, the FAA could levy fines that could range per incident to $4,000 for air- lines and $1,100 for airports.

• Air marshals. The program to station armed air marshals on domestic flights was enacted in 1958. However, very little money was allocated to this program and very few air marshals were employed. On 9/11 the federal government employed only 33 plainclothes air marshals.

Performance of Security Systems

There were major glitches in the security system that persisted throughout the last two decades of the twentieth century. Investigations and reports by the US General

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Accounting Office (GAO), the National Academy of Public Administration, presi- dential commissions, the US Department of Transportation’s Inspector General, and airline safety advocates outlined serious gaps in security procedures, but most of the proposals to tighten security measures were not adopted or rigorously imple- mented (US General Accounting Office [GAO], 2001a, b, and National Academy of Public Administration, 2000).

The security weaknesses included:

• Airport access controls. Gaining access to the tarmac and the aircraft by unau- thorized personnel was relatively easy. The GAO ran a test in the spring of 2000 in which special agents used counterfeit law enforcement badges to access secure areas. They were able to bypass security checkpoints at two air- ports and to walk unescorted to departure gates. In one series of tests, the agents gained access to secure areas 68% of the time and were able to board aircraft 117 times. In tests in late 1999 and early 2000, access to secure areas was gained more than 30% of the time. (GAO, 2001a, p. 5).

• Screening of passengers and carry-on luggage. The FAA ran tests in 1987. They found that screeners missed 20% of the potentially dangerous objects used by the FAA in the tests. By 2000, as testing became more realistic, screener’s per- formance was even worse. As the GAO report put it: “Test data for the 1991 to 1999 period show that the declining trend in detection rates continues.” (GAO, 2001a, p. 6)

The Poughkeepsie Journal examined FAA records concerning security breaches in New York state commercial airports from 1990 to August 2000. John F. Kennedy Airport had 897 breaches and LaGuardia Airport had 252 breaches. The FAA only levied fines of $1.1 million during the decade, with Delta Airlines paying $253,500 as the most heavily fined of air carriers and airports (Pfeiffer, 2001).

Factors Accounting for a Relatively Ineffective Security System

The weaknesses of the security system involving the three partners, the FAA, the airlines, and the airports, made for conditions that would have made it difficult to prevent the hijackings of September 11. Two broad factors have been advanced to explain the existence of a “soft” security system. One explanation was that the laws already in place were not managed effectively and the system’s design was flawed. The other explanation was that the system was underfunded consistent with a sub- optimal investment in airport security.

System Design and Mismanagement

Since there was a tripartite management arrangement, some observers have argued that because no single entity was responsible for operational security activities at the airport, there were gaps or holes in the security network (Poole & Butler, 2001). Thus, rigorous screening of passengers may have made it difficult for

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weapons to be smuggled on board, but weak control of contractor and employee access to the aircraft could allow weapons or explosives to be planted on board.

Theoretically, the FAA oversaw all components of the system. However, it can be argued that the federal agency did not exercise a firm hand and did not set or enforce rigorously clear standards of performance. The National Academy of Public Administration found in its study of airline security on behalf of the American Association of Airport Executives and Airports Council International— North America (National Academy of Public Administration, 2000) that there were a number of weaknesses in oversight and regulatory management by the FAA. These shortcomings were in regulatory policy, inspections and compliance testing, transmission of intelligence and threat information, communications, and standard setting.

The FAA generated much uncertainty among the airports and carriers as to the interpretation and enforcement of the security rules. There was a lack of consul- tation with the airports and the carriers and their participation in rule setting was not encouraged. Confusion was engendered by numerous revisions to the rules. The airports frequently complained about “Friday, 5 pm faxes” (National Academy of Public Administration, 2000, p. 15).

As to inspections and compliance, the FAA acted as both “cop and coach.” However, there was very slow feedback from the inspections. It frequently took from eighteen to twenty-four months before incidents in which rules were broken or inspections failures were detected to resolve the situation or levy fines.

Overall, communication between the FAA and the organizations that it regulated was erratic. This situation was especially present in the dissemination of threat information. Airport and airline executives were not made privy to classified infor- mation, while unclassified information was often too vague or too general to be of much use. As Charles M. Barclay, president of the American Association of Airport Executives put it, “Very little of this critical data is shared with the front line airport and airline personnel responsible for implementing security procedures” (Barclay, 2001).

Moreover, airline executives saw airport security issues and FAA actions as hurting their careers rather than as useful efforts that would insure safety. Airports and airlines were concerned that more intrusive efforts in the security area would escalate costs and antagonize airline customers.

Underinvestment in Security

Although fragmented authority and uneven regulatory management may have rendered the security system increasingly vulnerable to breach, a more funda- mental underlying problem appears to have been that a suboptimal level of secur- ity was being provided. Achieving a greater level of security inevitably requires that a higher level of costs be incurred. From the vantage point of airport and airline managers operating in a competitive environment, the benefits flowing to their organizations from tightened security did not justify the added costs. However, from a social point of view a tighter security regime would have been desirable.

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Using percent successful screening of passenger, baggage, and airport person- nel as a proxy, Figure 1 illustrates the dilemma. To achieve a higher success rate of intercepting prohibited weapons, explosives, or potential weapons at screening stations would require more personnel, better trained or qualified personnel, or more sophisticated and expensive screening equipment. In addition, if more inten- sive screening caused longer waiting time or more inconvenience to travelers, airline ticket demand might fall, reducing revenue for airlines.

The marginal cost curve (MC) shows the additional cost of achieving a higher success rate. The slope of the curve becomes steeper as the security rate goes higher; for example, to move from an 80% rate to a 90% rate becomes increasingly difficult as intensive use of resources becomes necessary with the current technol- ogy. It may not be possible, in fact, to make the system completely infallible with the use of plastic weapons, plastic explosives, and other techniques that the modern terrorist can master. Thus, costs would rise very sharply from beyond a 95% rate and may become vertical at a level below 100% security.

Those responsible for providing security, then, would have to assess the poten- tial benefits of greater security with the costs of achieving it. The benefits would include lives saved, the value of the aircraft, and the intangible benefits associated with the flying public’s perception of safer flying. The marginal benefit (MB) curve shows the additional or marginal benefits of achieving more security and would likely decline as the probability of disaster occurring would recede as security was enhanced. As airline or airport managers saw it, if screening stopped 95% of weapons or explosives from entering the aircraft as compared to 90%, there would be very little difference in the risk of a hijacking or an explosion.

The equilibrium level of security would be achieved at point A where MC = MB. It would not be economically desirable for the airlines to tighten security beyond

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Figure 1. Benefits and Costs Relating to Intensity of Screening.

that point. It appeared that the FAA implicitly understood the situation and appeared to be reluctant to aggressively push the airlines or airports toward a higher level of security. Fines levied were small and were often delayed or rene- gotiated. As disaster occurred, greater emphasis on security would take place only to be followed shortly by a more relaxed attitude. For example, after the crash of TWA Flight 800 in 1996, President Clinton ordered new measures to tighten secur- ity after a period of several years of weak enforcement of the 1990 Airport Security Act. However, by the late 1990s airline security enforcement reverted to a more lenient status.

Since most of the financing for security was required to be made by airlines and airports, they were pressured by profit considerations or budget realities to opt for a level of security that could be achieved at a reasonable cost. Facing strong com- petitive pressures, individual airlines did not want to raise fares. As one travel mag- azine put it in summarizing an interview with a travel expert in 1986: “Security costs may compel airlines to raise fares” (Security Costs, 1986, p. 80). Since few hijackings or bombings occurred during the two decades before 9/11, there was no concerted effort to push for a more aggressive security regime.

The benefit–cost calculus of airline executives became more widely acknowl- edged. In 1989, writer James Bennet (Bennet, 1989) talked about the costs of secur- ity. He argued that since 1976 an annual average of 61 people died in aircraft bombings. Given the 1989 costs of security that would be necessary to have zero or close to zero deaths, he calculated that the world would be spending over $6 million for each life saved.

The murder of 270 innocents (Pan American Flight 301) is a numbing horror, but when you consider that in 1985, the last previous year of air terror, an American was 25 times more likely to choke to death than to die in a terrorist action, you might wonder why the world’s governments should spend an amount more than twice the 1986 gross national product of Gambia to shave off this particular little bump of risk. (Bennet, 1989, p. 18)

What was missing from the benefit–cost analysis was a perspective from the broader society’s viewpoint. Airline and airport decision makers operated in the context of their own narrow interests. What they missed were the benefits accru- ing to the industry and to society that would flow from tighter security.

These additional benefits of more security include preventing the losses to the families of potential victims, to the industry, to unrelated individuals, and to prop- erty owners as well. The disaster of 9/11 vividly makes this point. In monetary terms, the losses to the families, to the victims and business owners of the build- ings hit, and to related businesses were enormous. In the spoke and hub system, a disruption anywhere in the system impacts all parts of the network as flights are delayed or cancelled. The 9/11 disasters, in fact, shut down the entire US com- mercial airline system. The airline industry suffered huge additional losses as demand for flying sharply declined. The losses to the US economy related to 9/11 were in the billions of dollars (Coughlin, Cohen, & Kahn, 2002).

These external or spillover benefits of preventing aircraft incidents were signif- icant even in the case of a hijacking or explosion before 9/11. Thus, in Figure 1 the overall marginal benefit curve is shown as MBs, and lies above the private MB curve, MBp. Taking into consideration all the benefits of various levels of security,

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Figure 1 shows that the optimal social level of security is at point B. Point B rep- resents a tighter screening regime than at the private optimal level of point A.

However, this more stringent security level imposes higher costs on the system. Since many of the benefits do not flow to the individual airlines or airports but rather represent the prevention of collateral damage, some mechanism is neces- sary to have those in charge of security implement a more rigorous inspection struc- ture. The desired position could be achieved by regulatory policy, by government subsidy, or by government operation of the security system. Those alternatives will be explored below.

Production of Screening Services by Private Firms

In the mid-1970s, coincident with airline deregulation, the federal government charged airlines with the responsibility of passenger and baggage screening. Along with the responsibility of providing this service, the airlines themselves had to pay for this activity. Not being in the security business, and being more interested in their core business of transportation, the airlines contracted out the security func- tion to privately-owned security companies.

As indicated above, the airlines looked at this security responsibility from a cost–benefit overview. In the more competitive deregulated industry, raising fares was not good business policy. The individual airline felt that it had to keep secur- ity costs at a relatively low level since, if its competitors had lower costs that could be reflected in lower fares, it would be at a competitive disadvantage. Thus, in selecting a security firm, an airline would place a great deal of weight upon the cost of the contract.

The contractor, therefore, had a cost constraint in producing the service. Since the major operating costs were labor costs and since available technology made it difficult to increase productivity, the contractors hired from the lower segment of the labor force that would be willing to work for minimum wages. The starting salary at most airports was around $6.00 per hour and few, if any, fringe benefits were paid. As a GAO official put it in the year 2000, “It is common for the start- ing wages at airport fast-food restaurants to be higher than the wages the screen- ers receive” (Martin, 2002, p. 3).

The typical screener’s job performance could often be criticized. However, the problem was not only low wages but there was also little chance for improvement, lack of adequate training, tedious and boring work, and other job-related factors. Training was particularly a weak point as the average training time for x-ray machine operators was around twelve hours, but experts maintained that several hundred hours of training may be necessary for an operator to be truly proficient.

With a labor force performing poorly, the quality of screening of the private firms was typically poor, as evidenced by the many failures of screening as men- tioned above. Maintaining quality was a losing proposition in the face of very high employee turnover rates. In the year 2000, turnover averaged 126% annually at nineteen large airports. In one case it was as high as 416%. That meant that the average screener held the job for less than three months (Martin, 2002). To keep the jobs filled, the firms often allowed low-performance screeners to continue to

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operate x-ray machines without additional training. As a GAO official summarized the job performance situation, “Screeners are being placed on the job who do not have the necessary abilities or adequate knowledge to effectively perform the work and who then find the duties tedious and unstimulating” (Martin, 2000, p. 4).

Security companies may have taken other shortcuts to cut costs. Of the five major security companies working at airports in the United States, the largest with 40% of the market was Argenbright, a subsidiary of the British firm, Securicor. Argen- bright failed to do background checks before hiring screening staff, failed to train them to the required standards, and made false submissions to the FAA. Many hires were immigrants whose English-speaking abilities were limited.

In spite of these transgressions, the airlines continued to employ the company without tightening the contract’s provisions relating to the quality of service performed. It was simply placed on probation for three years by the FAA. Even after two of the aircraft involved in the 9/11 hijackings took off from Logan Airport in Boston, where Argenbright was the screener, the company was allowed by the court to continue to operate. Although during 2001, while on probation, Argen- bright was fined one million dollars for violations that included employing con- victed felons.

It is clear that the effective use of private screening companies that would provide high-quality service would require a carefully designed contract that would clearly specify performance standards. To get companies to bid on these contracts, however, would mean, in turn, the willingness of the airlines to pay significantly larger contract fees. Moreover, poor performance by the contractors could have been possible only if the FAA did not enforce tighter security standards. The com- bination of downward pressure on cost by the airlines, by indifferent regulatory policy of the FAA, and the cutting of corners in search of profits by the private companies would seem to explain the level of security that was in place at America’s airport before 9/11.

Airport Security After 9/11

The terrible events of September 11, 2001, galvanized the executive and legisla- tive branches of the federal government to move quickly to develop an airport security system that would provide a higher level of security. There were alterna- tive courses of action available. The nation could upgrade the present system, shift the entire responsibility to airport managers, or federalize the security system.

Upgrade Present System

The simplest course of action was to modify the present system by upgrading the quality of the service. The FAA could take the lead and require the airlines to tighten their contracts with the private security firms to hire fully qualified screen- ers, to run strict background checks, to require more training, and establish a solid internal audit system. The FAA itself could be required to establish and vigorously enforce higher screening standards. Withering fines or dismissal could be levied for failure of the private firms to meet the standards that would be subjected to continuous testing.

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The mood of the Congress, however, was to question the use of private screen- ers, especially Argenbright, whose past performance did not invoke confidence. Moreover, belief in the oversight capacity of the FAA was shaken by the GAO’s and other reports on the agency’s performance. Further, the precarious financial situation facing the airlines immediately following 9/11 did not bode well for their capacity to sustain the much higher costs that tightened screening would entail.

Consequently, this alternative method of increasing the level of airport security was rejected. Others would then have to be considered.

Airport Management of the Security System

Changing the focal point of control to airport managers, in order to establish a fully integrated system, was also a possibility. This alternative likely would have con- tinued the regulatory role of the FAA, but it would deal directly with airports that would be charged with the entire security function.

Airport managers could contract with private security firms or they could develop their own security forces. They would be responsible for screening and for controlling all access to the aircraft and to the airport itself. Airports would have to finance the security operation, with or without federal aid.

Airports, however, would still be likely to consider only the benefits to them of heightened security, rather than the broader social benefits. Their major concern would still be the convenience to their customers and the pleasantness of the airport environment rather than a tighter, more rigid screening system that would inconvenience the traveler. Consequently, airports would likely underinvest in security.

Airport managers did not warmly endorse this alternative method of security. They were concerned about the financial obligations implicit in this method, and with the prospect of even more frequent dealings with the FAA, which likely would be the primary regulatory agency. Apparently, without the strong support of the airports, most of whom are owned by local governments, this alternative was not given serious consideration.

Federalization

A widely favored alternative was the takeover by the federal government of the entire system of airport security. In this case, a federal government agency would be fully responsible for providing security services. There could be two options: operate with federal workers, or contract the operation out to private security vendors. In either case, the federal government would consider the entire range of benefits that were generated from the airport security system. Thus, there would be an incentive to choose a higher level of responsible security than would a system operated by airlines or by airports.

If staffed with federal workers, the government agency could directly determine the quality of the labor force, the level of training, and the commitment to the pre- scribed level of security. The federal government would expend the funds but could assess the airlines or the airports fees for providing the security service.

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Critics argued that the use of federal employees could raise the cost curve above what was technically possible. They argued that the federal operation could become a top-heavy bureaucracy. Pay and fringe benefit levels for the federal workers might exceed the competitive level required. There would be little incentive to innovate and to introduce new labor saving technology. However, there would be a strong incentive to overinvest in security since the federal managers would be judged largely on security lapses and only secondarily on controlling costs.

The use of contracting out to private security firms to operate the system, however, could emphasize cost control at the expense of security. Contracts would have to be carefully drawn and monitored to ensure the agreed upon security level. Federal overseers would have to exercise care concerning the background and the skills of the labor force.

On the other hand, the private security firms would be interested in minimiz- ing the discomfort to travelers to avoid complaints, as well as controlling the cost of operations. Innovation would be rewarded, especially if it reduced operating costs. New technology could be pursued and would spread quickly because there would be a variety of firms in the market at various types of airports with a mixture of security environments.

The Aviation and Transportation Act of 2001

In the wake of the 9/11 disasters and the shock that followed, Congress hastily passed transportation security legislation. Signed by President George W. Bush on November 19, 2001, the law adopted the federalization alternative. It established a new federal agency, the Transportation Security Administration (TSA) in the Department of Transportation (DOT). The TSA was charged with taking over the security of the civil aviation system. The agency assumed all the security functions of the FAA, the airlines, and the airports.

With the exception of five airports, the TSA will operate with its own employ- ees. Not only will TSA screen all passengers and carry-on luggage, it will also screen all checked baggage. The law set a deadline of one year for the complete takeover of passenger screening and a 2002 year-end deadline for screening all checked baggage.

To improve the quality of screening, the law contemplated a higher-quality labor force. Compensation levels were set substantially above what private security com- panies had been paying. All screeners have to undergo criminal background checks and must be US citizens. More extensive training is required. The workers will not be offered the same civil service protections as other federal employees. The TSA had one year to hire and deploy its labor force.

All screening equipment, including large explosive-detection machines for baggage screening will be furnished by the TSA. This will involve large, immedi- ate capital expenditures.

Other security functions were entrusted to the TSA. The air marshal program, to be operated by TSA with the assistance of the Justice Department, was greatly expanded with the right to fly on any domestic flight. Under TSA, federal law enforcement will secure all airport areas including the perimeter of the larger air- ports, and will work with smaller airports to develop security plans.

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The FAA would retain some security-related functions. The law expanded the FAA’s research and development function involving all components of airplane safety. Airports were to be given reimbursements for the additional expenses, such as more law enforcement personnel, access control equipment, and other operat- ing costs incurred as a result of new regulations and security requirements set by the FAA after 9/11.

Because there was a significant minority in the House of Representatives that preferred contracting out the screening function by the new federal agency to private security companies, a compromise was struck; the law established a pilot program in which five airports could contract with qualified private firms for a period of three years. In addition, other airports were given the option to contract with private vendors after three years in the present program.

TSA Operations Since Passage of Act

As a large, start-up government agency, the TSA had an enormous task. It had to organize itself and staff the management group, to hire and train over forty thou- sand onsite managers and workers, order and install new equipment, and oversee the expansion of the air marshal system. During the interim period before it was prepared to take over the screening system, TSA continued to use private security firms, assuming contracts worth well over $1.6 billion (Miller, 2002).

During this interim period, there was little criticism of the private screening con- tractors who were intercepting very large quantities of prohibited items. The items included more than 100,000 knives, 200,000 other cutting devices, more than 4,000 box cutters, nearly 4,000 incendiary devices, and 227 firearms. Overall, from February 2002 to August 2002 more than 2,800,000 prohibited items were seized (US House of Representatives, Subcommittee on Aviation, 2002).

To initiate the test plan of using private contractors, in June of 2002 the TSA selected five airports. These included San Francisco; Kansas City, Kansas; Rochester, New York; Jackson Hole, Wyoming; and Tupelo, Mississippi.

TSA quickly turned to the private sector to design startup strategies and operating plans for the conversion of airport screeners to federal employees. Contracts were awarded to three firms. After having received the plans, TSA then reviewed the plans and schedules and chose two firms, Lockheed Martin and Boeing, to implement the final plan (Federal Airport Security Update, 2002).

The federalization process included a site survey to determine the design of the check- points and what construction may be needed to install explosive detection devices, check- point reconfiguration to improve the security and safety of passengers; and the deployment of a federal screening workforce by November 19, 2002. (Whitman, 2002, p. 8)

Despite some early turmoil as the first agency head was quickly replaced, oper- ations began to run on schedule. The TSA met the November deadline to com- pletely federalize screening and 44,000 screeners were either on the job or in training. Bomb screening systems were in place in all but thirty to forty airports and those airports were given a one-year extension to meet their goal.

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Preliminary Evaluation of the Federalized System

The security model examined above predicts that a decision to upgrade airport security will entail:

1. Higher overall costs, 2. A higher labor-to-passenger ratio, 3. More intensive screening of passengers and baggage, and 4. Continued inconvenience of flying.

Higher Costs

It is estimated that for fiscal year (FY) 2002 the total cost of establishing TSA was $6.5 billion (McFeatters, 2002). The estimated budget for FY 2003 is $4.8 billion. This total represents a significant increase over FY 2001 when security was mainly paid directly by airlines and airports.

The tremendous increase in costs can be illustrated by looking at the screening function. Table 1 compares screening costs before and after 9/11.

Total screening costs rose five-fold and passenger screening costs rose to more than four times the pre-9/11 level. There were three principal reasons for the rapid acceleration of costs. They were increased compensation levels for screeners, con- siderably more resources allotted to security activities, and the undertaking of new functions.

One of the first changes instigated by the TSA was to increase screener com- pensation. From an average hourly rate of $7.00 paid by private security firms before 9/11, the compensation rate was more than doubled. In addition, the air marshal program costs rose by a factor of 6, and other expenditures for airport security doubled.

There was a large increase in the number of screeners under TSA. The pre-9/11 privately employed screener force totaled about 16,200 (Coughlin et al., 2002), but the TSA has hired over 44,000 screeners, almost triple the previous number. Of this total, 33,000 screeners would be used for passenger screening alone. In fact, the TSA wanted to hire a total of 54,600, of which 21,600 would handle baggage screening (Mead, 2002). Congress felt that this number was excessive and imposed a ceiling far below it.

A similar situation developed in the air marshal program. There were no more than 33 air marshals prior to the TSA takeover. By FY 2004, TSA requires 48,100 Screeners of which 18,300 handle baggage. That number is now estimated to be 2,800 at a cost of $60 million in FY 2004 (Coughlin et al., 2000, p. 21).

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Table 1. Estimated Airport Operational Screening Costs, FY 2003 Compared to FY 2001 (in Millions of Dollars)

FY 2001 FY 2003

Passenger Screening 600 2,532 Checked Bag Screening 0 800 Total Screening 600 3,302

Source: Based on data from De Lollis (2002) and Coughlin et al. (2002).

Checked bag screening for explosives is a massive new task that the Congress mandated. This function requires the use of very expensive explosive-detection machines that cost from $750,000 to $1 million each. Yearly operating and main- tenance costs are also considerable. Approximately 1,100 machines were in oper- ation by early 2003. The TSA also took over security in the airports, requiring over 8,000 federal law enforcement officers and payed for major capital projects asso- ciated with airport security.

More Screeners per Passenger

Thus, one of the major reasons for higher screening costs is the increased size of the labor force. If the number of screeners is tripled, while the passenger load remains the same, it follows that there will be many more screeners per passenger.

There is anecdotal evidence of overabundant federal screening personnel at some airports. For example, the Richmond, Virginia, airport had 80 screeners before TSA. It now employs 140 ( Jones, 2002). At some smaller airports there were several screeners for every passenger. As the chairman of the House Appropria- tions Transportation Subcommittee put it: “It’s wasteful. Anybody that travels knows that we have excessive screeners out there” (Deadline Met on Airport Screeners, 2002).

Tighter Security

With more resources devoted to screening, there is more intensive scrutiny of indi- vidual passengers and their baggage. Since the TSA took over, there are often three screening positions: at the counter, upon entry into gate area, and at the flight gate.

Overcoming the trauma of 9/11, the tighter security regime has reduced the level of fear among travelers. In a survey taken by the online booking site, Travel- ocity, 78% of the respondents were “somewhat” or “not at all” concerned. Eighty percent agree that airport security has improved and that most security measures are “reasonable.” However, 72% say that security is not entirely consistent from airport to airport (Edelstan, 2002).

Inconvenience of Flying

Closer scrutinizing of passengers and checked baggage screening can be irritating to the traveler, especially if it is done in an autocratic, insensitive way. Having to arrive at the airport well before takeoff time is another irritant. Some observers argue that the “security hassle factor” is adversely affecting the demand for airline tickets. In fact, airlines have argued that they have lost billions of dollars in ticket revenue as business travelers have reduced their flying (Sharkey, 2002).

Current Issues

There are several factors at work that will shape the near-term future of airport security. These include checked bag screening, the financing mechanism, and the privatization experiment.

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Bag Screening

There is growing concern about the newly required system of checked bag screen- ing that began in early 2003. Not only are the machines for explosive detection very expensive, but some estimates are that nearly 5,000 more will be needed. To fit these eight-ton machines has also meant expensive remodeling of airports.

The worry is that the system of screening means more delays for the travelers and the potential threat of theft. The current machine technology, at best, can process only 150 to 200 bags per hour. However, for every 100 bags screened, there are 25 to 30 false positives; these bags have to be screened by hand, involving inher- ent theft problems. Supplementing the big machines are 6,000 smaller, hand-held trace detection devices that may take 47 seconds to screen a bag. At large airports, within a given hour there may be several flights preparing to leave and, with several thousand bags to be screened, delays can be forecast (Sharkey, 2002).

There is a serious research effort funded by the TSA to improve the screening equipment in sensitivity, speed, and size. These efforts may pay off in the future to reduce the “wait factor.”

Financing Security

Before 9/11 the airlines and the airports directly financed most of the security appa- ratus. To help finance the new TSA operation, Congress placed a heavy burden on the airlines as well. Congress enacted a new tax, called the security service tax. This is an excise tax on the passenger ticket of $2.50 for each enplanement on flights originating at airports in the United States. There is a $5.00 limit each way, or $10.00 per round trip. Air carriers are required to collect the tax and remit the proceeds monthly to the TSA.

This unit excise tax is likely to be absorbed, in whole or in part, by the airline. Facing a relatively elastic demand, sellers locked into a competitive market have difficulty raising ticket prices to cover the tax. In addition, the airlines are assessed a monthly fee based upon what they paid in 2000 for passenger screening.

The result of current annual expected tax collections and fees at $2.2 billion (Transportation Security Agency, 2002), most of which represents additional costs to the airlines, is an expected worsening of the tenuous financial situation of many US airlines. In fact, the airline industry argues that the tax, coupled with other ele- ments of airport security, has increased airline costs and deprived them of signifi- cant revenues. The president of the Air Transport Association puts the industry’s pretax loss at $9 billion in 2002; and $6.3 billion of that loss was a result of the aftermath of 9/11 (Lewandowski, 2002).

In addition to absorbing security taxes and fees, it is argued that free seats provided to air marshals, additional screening of airline workers, and the “hassle factor” of travel have escalated losses. The airlines have requested that the Congress end the aviation security tax and airline fees. The government’s aviation security efforts were also questioned by suggesting that they were reactive rather than preemptive and not directed at what might happen in the future.

The topic of who should bear the brunt of airport security is likely to become a key issue. Since many of the airlines are either in bankruptcy or on the brink of

288 Paul Seidenstat

bankruptcy, it does not seem sensible for the TSA to place a heavy financial burden on the airlines while the Congress debates the issue of assisting the industry to survive.

Privatization Experiment

The current experiment involving five airports that will use private screening com- panies operating under contract to the TSA should allow a comparison between a government-supervised security program and a government-operated program. After the three-year experiment, we should be able to compare the efficiency and effectiveness of both approaches to security. It is unfortunate that Congress only included five airports in the program, as a larger sample size would add confidence as to the validity of the results.

To maximize the value of the experiment, it is essential that careful data collec- tion be undertaken. Such performance indicators as screeners per passenger, average passenger waiting time, and cost per bag screened should be examined. The “hassle factor” and the perception of an acceptable level of security could be ascertained by surveys of passengers, airport and airline personnel, and screening personnel.

Conclusions: Airport Security and the Evolving Role of the Private Sector

Two fundamental problems were inherent in the airport security system before 9/11. By placing the responsibility and financial burden on the airlines and the air- ports, government policy led to a socially suboptimal level of security. Whether by indifference or poor performance, weak government and airline oversight of the private security firms that operated the system led to the potential for serious secur- ity system breaches. Even though the 9/11 disaster itself did not involve an extreme breach of the existing lax security protocol, the possibility of a major breach was omnipresent.

It could be argued that the public–private partnership approach was not the fundamental problem. Nevertheless, the performance of some of the private screening firms, even having to operate under a difficult budget con- straint, left a lot to be desired. However, the performance of the FAA regulators appeared to have been even more deficient in requiring and enforcing security standards.

Under the pressures resulting from 9/11, Congress changed security policy. There was a broad consensus that the level of security must be raised in light of the broader social calculus. To ensure that the new policy direction would be advanced, Congress created a new federal agency to directly administer the secur- ity program. A choice then had to be made as to the mechanism to operate the system.

Congress weighed whether the potential performance benefits stemming from reliance upon private security contractors, who often are more cost-effective, par- ticularly since contracts would be awarded through competitive bidding, would outweigh the loss of direct federal control. The federal operations path was selected. However, the option of using private screening companies was preserved

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by running a small experimental program and by allowing airports to shift to a public–private arrangement after three years.

The federalized system became operational as required by the Congress. The preliminary results include: much higher costs, an apparent higher level of secur- ity, and a continuation of some traveler discomfort. Eventually, policymakers might reexamine the operational system and choose to use more private screeners. However, once established as a federal agency function, government operations of the security program may be entrenched as political inertia takes hold.

It seems clear, however, that the public commitment to a high level of airport security will be sustained. In the face of terrorism, consideration of efficiency will play a secondary role to security and safety. Unless Congress can be convinced that the public–private approach will yield the same level of security and safety at a lower cost, the status quo will persist.

About the Author

Paul Seidenstat specializes in public finance, public management, and water resources. He is a coeditor of Reinventing Water and Wastewater Systems: Global Lessons for Improving Manage- ment (Wiley, 2002), and America’s Water and Wastewater Industries: Competition and Privatization (Public Utilities Reports, 2000). Professor Seidenstat has also coedited or written six other books and several journal articles on the use of economic incentives to improve the provi- sion of public services. He has conducted several research projects for federal government agencies and served in local government as a finance director and financial advisor. Dr. Seidenstat is an associate professor of Economics at Temple University.

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