WASHINGTON, May 1 (Reuters) - The U.S. Transportation

Department said on Thursday that it is taking steps to retain

and recruit more air traffic controllers to address a

significant staffing shortage.

The Federal Aviation Administration, which said in March it

planned to hire 2,000 air traffic controller trainees this year,

said it will offer retirement-eligible controllers who are under

the mandatory retirement age of 56 a lump sum payment of 20% of

their basic pay for each year they continue to work.

Transportation Secretary Sean Duffy said on Thursday he was

aiming to unveil his plan next week to ask Congress for billions

of dollars to reform the nation's crumbling air traffic control

infrastructure.

A U.S. House committee on Wednesday approved $12.5 billion

through 2029 as a "downpayment" to address issues.

Duffy, who previously said he would ask for "tens of

billions" in funding, on Thursday cited a series of recent

issues including serious delays in Newark due to equipment

failures and staffing issues.

"You are starting to see cracks in the system and you can

see them in different locations," Duffy said. "It's our job -

all of us working together - to not wait until there's a

disaster."

Calls to modernize the nation's air traffic control system

intensified after a mid-air collision on January 29 between a

U.S. Army helicopter and an American Airlines ( AAL ) plane and

other serious safety incidents including a near miss involving a

Delta plane and several military jets.

The FAA also plans to take steps to improve the retention

of new air traffic controller trainees and provide financial

incentives to graduates and new hires for completing initial

training milestones, including $5,000 awards for academy

graduates completing initial qualification training.

A persistent shortage of controllers has delayed flights and

many are working mandatory overtime and six-day weeks. The FAA

is about 3,500 air traffic controllers short of targeted

staffing levels. Duffy hopes to address that shortfall within

three to four years.

Duffy said the dropout rate for controller trainees is about

35%. They will also give bonuses for hard to staff locations.

President Donald Trump said on Wednesday that IBM ( IBM ) or

Raytheon could get a contract to modernize air traffic control.