AAAE Ramps Up the Discussion on Airline Fees versus PFCs ...

... following another report on the billions the carriers are reaping from ad hoc charges to passengers. Comments Chip Barclay, president of the American Association of Airport Executives, “While airports understand and appreciate the need for our airline partners to remain viable financially, the carriers' continued opposition to an increase in the local passenger facility fee is both short-sighted and inconsistent, given the airlines' increasing reliance on ancillary fees to support their own operations.” “With ancillary fee collections growing rapidly and producing billions in airline revenue, it's difficult to understand why the industry opposes the collection of a mere fraction of that amount by local authorities to fund critical airport safety, security, and capacity improvements.” AAAE cites 2010 data from DOT showing U.S. carriers collected $5.7 billion in baggage and reservation cancellation/change fees alone. In contrast, the federal cap on passenger facility charges (PFCs) remains at $4.50 and is not adjusted for inflation, reducing the buying power for airport infrastructure improvements. But it’s not only about PFCs. AAAE and Airports Council International-North America have long argued there’s a bigger picture when it comes to airport finances and investments. In this week’s release, Barclay notes the impact that the increased reliance by airlines on ancillary fees is having on revenues flowing to the Airport and Airway Trust Fund, which supports aviation system upgrades including airport improvements. Historically, airline tickets have been taxed to help finance the aviation system, but baggage fees and other ancillary revenues are not taxed in the same manner, says AAAE. The shift in the airline pricing model away from ticket price increases to a more heavy reliance on ancillary fees effectively robs the Airport and Airway Trust Fund of revenue that would otherwise support airport and aviation system improvements, says Barclay. ACI-NA would like to see PFCs transformed into a model similar to the one that works in Canada – the locally controlled Airport Improvement Fee. The AIF has been central to transforming airports in Vancouver, Calgary, Winnipeg, and beyond. Comments ACI-NA executive VP Deborah McElroy, “What the Canadian airport directors have told us, because you have that economic freedom, you are operating so much like a business, you really have to work more closely with your airlines. “The existing [U.S.] regulatory structure prohibits airports from evolving to more effective business and financing models that have proved to be successful all over the world. And that is the frustration, because airports all over the country are faced with lower federal grants, the inability to raise the passenger facility charge, and, in many cases, reduced airline operations. All of those combined mean it is increasingly challenging just to meet the growing regulatory burden and provide the facilities necessary for the safety and security of the passengers.” Meanwhile, Robert Poole of the Reason Foundation on a report on PFCs calls the airlines’ opposition to increasing the cap a “deceptive campaign” that labels any PFC boost a “huge federal tax increase.” Poole calls this unfortunate and maintains that “the PFC is exactly the kind of devolution of responsibility from the feds to local authorities that fiscal conservatives like those now in charge in the House should be supporting.” Poole adds that “allowing airports to raise a larger fraction of their capital funds themselves, in a decentralized, self-help manner, would not expand federal spending at all, while helping ensure that airports can continue to add needed runways and expand inadequate terminals.” Perhaps a new airline slogan is in order … “Billions for bags; afterthoughts for airports.” Thanks for reading. jfi