Airport Experience News Fall 2022

Members of Congress have been tough to the convince over the past two decades despite aggressive lobbying from industry trade groups. One key reason is that the other half of the aviation sector – the airlines – vehemently opposed a PFC cap increase. They’ve successfully characterized the PFC as a tax, while airports continue to argue that the PFC is a user fee. The U.S. airlines, through trade group Airlines 4 America, have spent a similar number of years trying to thwart the efforts of the airports. A4A’s “Stop Air Tax Now” campaign calls the PFC a “hidden tax” on airline tickets. Core arguments from the airlines include healthy balance sheets from airports with money that could be used to fund infrastructure, high airport revenues from concessions, parking, rental cars and PFCs, and airports’ ability to finance through the bond market. Airlines also argue that they themselves invest heavily in airports, a point that Delta Air Lines CEO Ed Bastian hit home in a discussion at the recent ACI-NA conference. Bastian pointed to the significant

investments Delta and other airlines have made. “We’re always pushing for more in, in terms of making that investment,” he said. “Delta has invested, over the last five years, $12 billion of its own money. This is part of who we are, in terms of taking ownership.” He added that airline involvement in the funding process is critical, but higher PFCs are not the answer. “You can’t push it on the operators and the operators can’t push it back onto the customers,” he said. “We’ve all got to work together.” Airports, however, argue that while airlines invest heavily in their key hub markets, there is a large number of airports around the country that see little or no direct airline investment. Tweaking The Formula Airports have support from a broad swath of the aviation sector in their pursuit of an increase or elimination of the cap on PFCs. The Reason Foundation , for example, in September released a paper in support of elimination of the cap.

“Two findings support modernizing the passenger facility charge,” writes senior transportation policy analyst Marc Scribner. “First, evidence suggests that PFC use has a positive effect on airport efficiency while AIP use has a negative effect. Legislation introduced in previous Congresses would have uncapped the PFC while proportionately reducing AIP authorized spending, with this change in the PFC/AIP mix expected to result in greater airport productive efficiency. “Second, major non-aeronautical revenue sources, especially revenue from parking and rental car fees, were facing heightened risks and declining prospects prior to the pandemic as travelers opted for new ride-hailing ground transportation services to and from airports,” the paper continues. “Pandemic-related concerns about shared transportation may have temporarily shifted traveler preferences back to driving modes that support parking and rental car revenue, but how long this will persist is highly uncertain. Since the PFC charges airport terminal users regardless of their use of terminal concessions, it represents a lower-risk, predictable, and sustainable revenue source.” Steve Van Beek, a director at Steer , suggests a tweak to the current PFC programmay be in order. Currently, airports can charge up to $4.50 per flight leg, for a maximum of $9 on a one-way trip. For small airports though, the $9 user fee hitting the ticket price for most of their passengers – who typically connect through a larger hub – can be burdensome, and smaller airports already carry higher ticket prices on average. Similar to the approach in Canada, flexibility in fee application might be a solution, Van Beek argues. “Places like Vancouver and Toronto charge a lower fee for regional or connecting traffic and yet have their full [airport improvement fee] for their long-haul traffic,” he says. The point is to give airports some rate setting powers. “This would allow airports to set the rate of the PFC for different markets: international, transborder, domestic and for connecting f lights,” Van Beek says. Because non-connecting passengers will typically pay a higher airfare than connecting passenger, this approach makes sense from a price-impact

U.S. Airports Face A Backlog Of Planned, Essential Infrastructure Projects Totaling $115 Billion.

Airport infrastructure needs, by type of development, $ billion

Updating to FAA ¹ standards

Air eld reconstruction

Safety 3.4

11.7

20.3

New airports 2.1

Air eld capacity

Security 1.3 Environment 1.6

Terminal buildings

11.3

Other ²

Terminal access

40.1

15.5 8.2

$115bn total

¹ Federal Aviation Administration. ² “Other” includes construction and rehabilitation of fuel farms, hangars, parking lots, and utilities. Source: McKinsey & Company and Airports Council International

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