With the U.S. Department of Transportation (DOT) on Dec. 12, reporting more than $5.3 billion in baggage and reservation change fees flowing to airlines in the first nine months of 2016, the American Association of Airport Executives (AAAE) once again questioned the continued opposition of U.S. airlines to updating an optional local airport user fee known as the Passenger Facility Charge (PFC) that finances the construction of terminal projects, new runways and other airport improvements.
“While the airlines have much to be jolly about this holiday season with stockings overflowing with billions in bag fees, they continue to say ‘Bah Humbug’ when it comes to giving airports additional local flexibility to improve their facilities to better serve passengers through an updated PFC program,” AAAE President and CEO Todd Hauptli said today. “Airports are eager to bring joy to travelers, and we will be working to convince a new President and Congress to remove the outdated federal restrictions on local PFCs that continue to limit necessary airport development.”
According to data released today by the DOT’s Bureau of Transportation Statistics, airlines collected more than $1.1 billion in baggage fees in the third quarter of 2016, setting another new record. The carriers also raked in more than $730 million in reservation change and cancellation fees in the third quarter. Those gains are on top of the record-level $3.8 billion in bag fees and $3 billion in reservation cancellation and change fees that the airlines collected in 2015.
Since 2008, airlines have collected almost $28 billion in baggage fees and more than $22.3 billion extra in ticket change and cancellation fees. That total of more than $50.2 billion in baggage and ticket change fees does not include other airline ancillary charges such as pet transportation, sale of frequent flyer award miles to airline business partners and standby passenger fees.
In comparison, last year airports collectively received about $3 billion from the PFC, which is an optional charge that must be justified locally, imposed locally and used locally on FAA-approved projects that enhance local airport facilities. The federal cap on the local PFC has not been adjusted since 2000. The $3.8 billion in bag fees airlines collected in 2015 also exceeds the $3.35 billion the federal government provided for airport grants at all eligible airports across the country in FY 2016 through the Airport Improvement Program.
Because bag fees are not taxed at the same 7.5 percent excise tax rate applied to base airline tickets, the Airport and Airway Trust Fund lost more than $236 million in the first nine months of 2016. Since 2008, the $27.9 billion in bag fees that are not taxed have cost the Trust Fund almost $2.1 billion in foregone revenue – money that could have paid for airport capital projects and air traffic control modernization efforts.
