Airport Capacity Estimate Changes as Battle Over PFC Rages

The number of “capacity constrained” airports the Federal Aviation Administration expects the United States will have by 2020 has fallen dramatically from the agency’s earlier estimates, the Government Accountability Office (GAO) reports. But the prospect of fewer airports with long flight delays has done nothing to blunt the dispute between airlines and airports over paying for mainly “landside” improvements to terminals and other infrastructure.

The GAO released its study “Airport Funding: Changes in Aviation Activity Are Reflected in Reduced Capacity Concerns” on April 23. The same day, U.S. airline and airport industry executives clashed over the hot-button topic of the Passenger Facility Charge (PFC) while testifying before the Senate subcommittee on aviation operations.

For the fiscal year that begins in October, the FAA has proposed raising the federal cap on the PFC, which airports collect to finance capital improvements, from $4.50 per enplaned passenger to $8. This would be the first such cap increase since 2000. At the same time, the FAA proposes reducing the overall amount of grants it makes to airports under the Airport Improvement Program (AIP) from $3.35 billion this year to $2.9 billion. AIP grants fund “airside” projects such as runway, taxiway and apron construction.

The GAO notes that the FAA’s estimate of the number of airports that will be capacity constrained—defined as having an average delay per flight of 15 minutes or more—by 2020, has fallen from 41 airports to just six in the agency’s most recent report in January. The FAA attributes this to changes in overall aviation activity, ATC modernization and the addition of new runways. The number of airline passengers approximates the peak level reached before the 2007-2008 recession, but the number of aircraft departures, particularly at medium hub airports, remained down by 18.5 percent last year due to factors including airline mergers, tighter capacity management and “larger and fuller aircraft.” The FAA’s NextGen ATC modernization promises to improve runway and airspace efficiency, but may require more capacity in other areas, including airport terminals, the GAO says.

The FAA and the airport industry offer different estimates of coming airport development costs. The FAA counts just AIP-eligible projects and places the cost at $33.5 billion through 2019. Airports Council International-North America counts all projects, including for parking facilities, airport hangars and commercial space in terminal buildings. It projects those will cost $72.5 billion in the next four years. According to the GAO, airports use 68 percent of PFC revenue to pay for landside development and interest charges on debt. Many have already committed future PFC collections to pay off debt for past projects.

“We believe it’s absolutely imperative to modernize the passenger facility charge program, last addressed in Congress 15 years ago,” Todd Hauptli, American Association of Airport Executives president and CEO, told the Senate subcommittee. “The PFC has lost over the years half of its purchasing power due to inflation and rising construction costs. We’re talking about giving airports the self-help that they need to build these projects because the federal government can’t do it alone."

Commercial air carriers disagree. Airlines for America (A4A), the trade group representing major U.S. airlines, counters that airports are “flush with cash” from other revenue sources and have $11.4 billion of unrestricted cash and investments on hand. Among the witnesses at the Senate hearing, Michael Minerva, American Airlines vice president of government and airport affairs, said the two sides should work together more closely on airport projects. “Airport by airport, airlines and airports are reaching agreements on capital spending and will continue to do so without any change in the statutory PFC scheme,” he said. “There is no lack of funding for airport improvement projects. Any gaps that exist between an airport’s current conditions and the desired conditions result from the lead times and complexity involved in completing airport projects and not from any lack of funding…The airlines not only support projects to repair and improve airport infrastructure, we demand it and we are willing to pay for it.”

Congress will have to strike a balance between the competing interests in the next FAA reauthorization legislation. “While needs go beyond the airside component, such as gates and runways, the FAA’s most recent capacity report forecasts an overall decline in capacity investment needs through 2030 as compared to prior projections,” said subcommittee chairman Sen. Kelly Ayotte (R-N.H.). “This does not mean we should stop investing in aviation infrastructure, but it should inform our approaches to ensuring that funding mechanisms are tailored to projected needs.”