Airports Seek Higher Fees, Ticket Surcharges Would Finance Upgraded Facilities

May 31, 2007
Coalition of industry organizations, backed by major airports, continue to spearhead efforts to increase passenger facility charges

Think flying is a hassle now?

The tide of airline delays, crowded concourses and overall congestion could swell if airports fail to keep up with an expected crush of passengers in coming years.

To meet that demand, airports say they'll need to spend tens of billions of dollars on upgrades and expansions. And they're looking to Congress - and ultimately passengers - for financial help in the face of inflation and soaring construction costs.

A coalition of industry organizations, backed by major airports that include DIA, is spearheading efforts to increase the ceiling on passenger facility charges, known as PFCs, assessed when travelers purchase airline tickets. The group proposes boosting the cap by $3 per leg of a flight, which could lift the cost of a round-trip ticket by up to $12.

Airports use passenger facility charges to help fund projects such as concourse expansions and airfield upgrades.

Without the hike, airports could face a shortfall of several billion dollars for needed improvements, leaving them "ill-prepared to identify and respond to the needs of the traveling public," says the Airports Council International-North America, which represents organizations that own and operate commercial airports.

"The main reason that we need to adjust this now is to accommodate an increase in passengers and cargo," said Debby McElroy, ACI-North America's senior vice president of government affairs. "Or else we're going to see more delays and problems."

But some industry groups, including airlines, oppose an increase, saying it will lead to higher fares that could put a damper on travel. They argue that airports should rely more on other methods of funding for expansions.

And while the government must approve projects that use money from passenger facility charges, the oversight is somewhat lax, giving airports too great a say in how the funds are spent, said John Meenan, executive vice president of the Air Transport Association, an industry group representing 18 airlines.

"Airports have very sound and legitimate needs that must be met," Meenan said. "The best way to meet those is working hand in hand with airports and airlines to identify projects. We see no crying need for a massive increase in passenger facility charges."

Some legislators also aren't convinced that increasing passenger facility charges is the way to go. A Senate subcommittee recently approved a bill that keeps the cap at its current level, though it would allow six airports to charge unlimited passenger facility fees under a test program.

Legislators have until the end of September to extend or modify the fees as part of a broader Federal Aviation Administration re-authorization bill.

The current cap of $4.50 - in effect since 2000 - allows airports to collect a maximum of $18 in passenger facility charges for a round-trip ticket involving connections. The airport groups have proposed hiking the cap to $7.50, or up to $30 a ticket.

The ACI-North America estimates that airports will need $17.5 billion in annual capital development projects through 2011 to keep up with demand.

"Today we have a $4.50 charge in place per segment, and that hasn't been raised since 2000," McElroy said. "The ravages of construction costs and inflation mean it's now only worth $2.86."

DIA had generated $809 million in PFCs from the time it opened in 1995 through the third quarter of last year, according to the latest financial report on its Web site. It has used nearly $700 million of that to service debt related to the original construction of the airport. Today, DIA generates about $100 million in passenger facility charges a year.

The charges "assisted us greatly in keeping landing costs down," said Woods Allee, DIA's assistant manager of aviation for maintenance and engineering. "Without these, the money would have had to come from increased rates to the airlines or through federal grants, which are notoriously uncertain."

Southwest has said DIA's ability to lower its costs was one of the key factors in the airline's decision to return to Denver last year.

DIA is now posting record passenger numbers and is planning future expansions to meet demand. It put off numerous projects after the 2001 terrorist attacks, but now must move forward with them.

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