HR 2881, the FAA Reauthorization Act of 2007, includes a provision that would increase the maximum passenger facility charge (PFC) from $4.50 per segment to $7 per segment. According to the Government Accountability Office (GAO), increasing the PFC from $4.50 to $6 means that an additional $1.2 billion-$1.4 billion each year could be collected from passengers. Extending the GAO analysis, a $7 maximum PFC could mean $2.2 billion more each year. The Air Transport Association and its member airlines oppose this needless $2.2 billion tax increase on U.S. passengers.
Increasing the maximum PFC to $7 per passenger, per segment would be a 55 percent increase, and would add $28 to the price of most round-trip connecting tickets. On an average ticket price of $300, this means that taxes and PFCs would comprise 31 percent of the ticket price. That means that a family of four could pay an astonishing total of $112 in PFC taxes instead of using that money for a one-night hotel stay or a three-day car rental.
Passenger facility charges are special taxes Congress allows airports to collect from individual airline passengers. A PFC is imposed each time a passenger passes through an airport eligible to collect a PFC (only a small number of airports in the United States do not collect a PFC). The PFC is actually added to the price of an airline ticket, and airlines are forced to collect the tax for airports at the time the passenger pays for their ticket.
An eligible airport can use PFC revenue to preserve or enhance the safety, security or capacity of the national air transportation system; to reduce or mitigate noise impacts resulting from an airport; or to provide opportunities for enhanced competition among or between carriers. This means that airports are using current PFC revenues to build and extend runways, build taxiways and many other capital improvement projects. As anyone who travels can tell you, airports across the nation are currently engaged in many construction projects, many of these financed with current PFC revenues.
Airports argue that the cost of concrete and steel make it necessary to increase the maximum PFC and that many airport needs will go unfunded. However, the reality is that airports are in better financial shape than their airline partners. Currently, 62 of the 77 U.S. airports rated by Standard and Poor’s enjoy a rating of A-minus or better, and can raise more than enough money from Wall Street at attractive rates. It is important to note that, contrary to claims that airports will use the additional PFC funds to reduce flight delays, only 17 percent of PFC projects relate to runways, taxiways, lighting or other airside improvements. Modernization of the nation’s outdated, inefficient air traffic control system will reduce delays, not more money for airports to spend on “nice to have” but nonessential projects.
GAO estimates that, from 2001 through 2005, airports received on average $13 billion each year for capital improvements funded through: airport bonds which are paid by the airlines in rents and fees ($6.5 billion); Airport Improvement Program projects (AIP)/federal grants ($3.6 billion); state and local contributions ($730 million); and PFCs collected by the airlines from airline passengers ($2.2 billion). In addition, PFC collections are already increasing with the Federal Aviation Administration (FAA) estimating CY07 and CY08 collections over $2.7 billion.
Airports do not need an additional $2.2 billion from airline passengers in order to fund necessary capital improvements. According to the latest financial reports filed with the FAA, commercial airports have more than $24.8 billion in unrestricted financial assets including cash.
Passengers want lower fares, and they want to see results for the billions of dollars that they have already paid. They do not want a $2.2 billion tax increase.
September 2007
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