Real estate, alternative real assets and other diversions

Who owns the sky?

The Analyst

It’s not such a crazy question. For the last hundred years or so – as long as aircraft have been an important part of economies – governments have claimed ownership of the airspace above our heads. Individuals or corporations may own land and use it as they see fit, but the sky belongs to the state. You may travel the airways but you do so at the government’s pleasure, on terms the government decides, and at a price the government sets.

That has been the way of things ever since aviation began. But it may not be the way of the future. Coming changes in demand and new technologies that already exist are picking away at the old order.

Like most things, regulation of airspace goes back further than you might think. Roman law established the first principle – cujus est solum ejus est usque ad coelum – whoever owns soil also owns the airspace above it. That principle held good until the eighteenth century when passenger balloons appeared in the sky and immediately trespassed on this property right. Governments responded with the simple expedient of stripping landowners of their rights to the sky.

It was not until the 1920s that aviation law became fully codified and internationalised, but the direction of travel was already clear. If airspace rights interfered with commerce or national security, they would be transferred to the state. If you didn’t like it, well tough.

Did governments do a good job of managing this new form of real estate? By the 1970s a consensus was emerging that the answer was ‘no’. The US led the way on change with the 1978 Airline Deregulation Act which broke up federal regulation of routes, fares and airline licensing. This was a commercial innovation, designed to break cartels and promote competition. But it was focussed on airlines, and did nothing to undermine the day to day management of airspace through state-controlled air traffic control providers.

It remains the case that while carriers are free to set their own fares, governments have continued to monitor and control air traffic and charge whatever they choose for the service. Most air traffic control managers are either government or quasi-government organisations (as in the UK, where the air traffic manager NATS is a public-private partnership with a government controlling share).

Air traffic control is where change should come next. Demand for airspace access is growing. When that demand is coupled with fast-moving developments in machine intelligence and autonomous aircraft, the result will be to push governments to cede at least some of the total control over airspace management that they have enjoyed. Potentially this is the biggest change in aviation since the invention of the jet engine. But if this revolution is to take place, policy will have to change.

Consider the patterns in airspace use. The last time that demand grew rapidly was in the two decades before the financial crash. From 1985 to 2005 the number of commercial flights doubled worldwide, stretching air traffic control capacity to the limit. Then there was a needed pause, as demand stagnated for the next decade. But since 2015 the commercial aviation industry has kicked back into growth – and it is the kind of growth that current approaches to air traffic management are unlikely to be able to handle.

The body that speaks for the passenger airline industry, IATA, has forecast that global passenger numbers will double over the next 20 years, mainly due to demand growth in East Asia. But passenger numbers are only one measure, and not the most informative. Another set of forecasts from EUROCONTROL which cover the 44 member states of the European Civil Aviation Conference estimate that by 2040 the number of flights in Europe will grow by at least 50%, and perhaps as much as 80%.

Those numbers represent a critical workload increase for an industry that is already under heavy pressure to cut the costs of managing traffic (costs that are passed directly to airlines and then on to consumers). But there is more where that came from.

These forecasts only cover conventional aircraft – the kind with human pilots and usually human cargo. The biggest increase in demand will come from an entirely new direction: unmanned aerial vehicles or drones, some of them under remote human control but many of them autonomous vehicles like delivery drones, pilotless taxis and infrastructure management and inspection craft, often powered by electricity. A recent forecast from the EU’s Single European Sky Air Traffic Management Research project (SESAR) says that in terms of hours flown these flights could outnumber conventional flights by a factor of ten by 2050.

Subscribe to our print magazine now!