US act on airport passenger facility charges could pave the way to faster airport modernisation

5 August, 2019

US Congressmen Thomas Massie (Republican, Kentucky) Earl Blumenauer (Democrat, Oregon) have introduced an unusual bipartisan legislation - the HR 3791 Investing in America: Rebuilding America's Airport Infrastructure Act - that removes the federal cap on the airport passenger facility charge (PFC), giving airports more local control to finance major construction projects.

"Removing the PFC cap and allowing airports to collect more of their own revenue from users… will reduce airports' dependency on federal grants and taxes… and enable airports to "increase investments to improve passenger experience" explained Mr Massie.

The removal of the cap has long been called for by supporters of private investment into US airports. The 1996 Airport Privatisation Pilot Programme (APPP) having failed to secure more than one leased facility in 23 years, in Puerto Rico (although others are under consideration).

These tended latterly to take the form of public-private-partnerships (P3s as they are referred to) to build or refurbish and operate some of the ageing terminals which populate the landscape. There are at least 12 such P3s which are complete, underway or envisaged, and they are spreading into other aspects of airport operation such as centralised car rental facilities and people movers.

VIDEO - The Los Angeles Int Airport people mover, is one such public-private-partnerships P3 project

Any potential private sector investor will be attracted to the possibility that they will be able to gain more revenues via PFCs from users that can be directed towards better facilities for them in the future.

In 2018 President Trump tried to jump-start the privatisation process with a range of measures in a grand, all-embracing ‘Infrastructure Plan’. That plan needed bipartisan support in Congress which was not forthcoming, there were more timely preoccupations, and the President didn’t really push it. Hence it withered on the vine, being delayed until after the mid-term elections which saw more Democrats elected to the House of Representatives thus making compromise on anything even more difficult.

It has made a return this year though, as the President submitted his 2020 budget request to Congress including a renewed call for a USD1 trillion infrastructure plan although the proposal is a scaled back version of the previous scheme (from USD1.5 trillion), both in the amount of new money the President is looking to spend and in the reforms he's hoping to make.

On the other hand, this latest budget document relies slightly less on the private sector than other proposals had. Separately, a number of changes have already been made to the APPP including the removal of the numerical and categorical limitations on airports which could be privatised. Henceforth, any US airport may be long-term leased, and without limit of number. It was also renamed the Airport Investment Partnership Programme.

The administration's budget request in 2018 did not endorse calls from airports to eliminate the federal cap on PFCs. The Senate version of the FY2018 DoT appropriations bill proposed to raise the PFC cap from USD4.50 to USD8.50 for originating passengers. That would have the effect of potentially almost doubling the income received from passengers and providing the self-help to airports of local dollars they can invest, which might even avoid the need to privatise them. It is this omission which the Massie /Blumenauer bill now seeks to take up.

Unsurprisingly, they have received support from industry organisations. Airports Council International - North America said the act "will revolutionise the way airports do business" through the removal of "the outdated and burdensome federal cap on local airport user fees" and ultimately allow each airport to determine its own user-fee rate based on its own unique infrastructure needs.

“This pro-market approach will give all airports the flexibility they need to address the nearly USD130 billion worth of infrastructure needs they face over the next five years to increase capacity, enhance security, promote competition among the airlines, and improve the overall passenger experience,” adds the regional section of the airports’ group.

ACI-NA habitually refers each year to high estimates of airport infrastructure needs in the US, as was highlighted in this previous The Blue Swan Daily article.

Meanwhile, Robert Poole, the director of transportation policy and founder of the Reason Foundation, a libertarian think tank, says: “The PFC is a local user fee that helps airports expand and modernise their terminals, enabling more airlines to offer services there. Increased competition leads to lower air fares, which is a major benefit of locally funded airport expansion.”

FreedomWorks, Citizens Against Government Waste, Competitive Enterprise Institute, and Taxpayers Protection Alliance have also demonstrated support for the legislation.

As with any government Act anywhere there are still hurdles to cross and opposition to be negotiated. With the US economy in a good place opposition from the public might be tempered but unforeseen events can always upset the applecart. But one does get the feeling that the financing of airport infrastructure in the US is entering a new era and that the ‘Third World’ terminals the incumbent President described only three years ago might soon become a relic of the past.