Thrown into legislation likely to tackle the role of drones
in aviation and NextGen air traffic control funding, the Passenger Facility
Charge (PFC), a tax that funds airport improvements, is not likely to garner
many national headlines. But within the industry, two sides are engaged in a
heated exchange over whether it should be raised.
The PFC, a federally regulated tax, is currently capped by
Congress at $4.50 per passenger per flight. Whether to raise that cap will be
decided as part of reauthorizing the Federal Aviation Administration (FAA)
budget, which expires in September.
The current FAA budget authorization was introduced in 2007
but was not passed until 2012. Five years and 23 short-term FAA operating
extensions later (a record), President Obama signed it into law.
Understandably, the administration and the House
Transportation and Infrastructure Committee, chaired by Bill Shuster (R.-Pa.), are
eager to see the bill pass on time. But within the aviation industry, two
competing sides of the PFC debate, airports and airlines, are vying to see it passed
in their favor.
Though it is a local tax, the PFC is federally regulated;
airports decide whether or not to propose a project to be funded by PFCs and
how much money the project would need. The FAA then reviews and approves the
project.
Airports and other groups, including the U.S. Travel
Association, are pushing for a PFC cap increase to be included in the FAA
reauthorization in order to fund airport infrastructure improvements. The
Airports Council International-North America (ACI-NA), recommends that the cap
be increased to $8.50, noting that the $4.50 cap, set in 2000, has not been
indexed for inflation and in 2015 dollars is worth about $2.50. The Obama
administration’s 2016 budget released in February proposes raising the cap to
$8.
Airlines, which collect PFCs at the time of the ticket
purchase, have lobbied to keep the cap at its current level on the grounds that
higher fees would make air travel more expensive. Groups like Airlines for
America (A4A) argue that airports have adequate resources to fund any needed
improvements without asking passengers to pay additional taxes.
As part of lobbying efforts, each side has produced surveys
indicating that Americans support its position. U.S. Travel released one in
March saying that U.S. flyers are willing to pay up to $4 more per ticket for a
better travel experience, while A4A, the trade organization for U.S. airlines,
found that registered voters “overwhelmingly oppose an increase” to PFCs.
The difference between the two studies is the sample: U.S.
Travel surveyed only flyers, while A4A surveyed registered voters.
During the last FAA reauthorization debate, Congress
rejected raising the cap on PFCs, but some analysts said this might be the year
the airports are successful.
“There is more chance of it going through than there were on
previous occasions, quite simply because the airlines have some money,” said
Kenneth Button, professor of public policy at the George Mason School of
Policy, Government and International Affairs in Fairfax, Va.
“Their operating margins have basically been zero since
1980, [but] they have more money now so it’s difficult to say they can’t afford
[the increase in ticket price].”
And because airlines have added so many of their own
charges, from baggage and change fees to charges for food, drink and
entertainment, they don’t have as strong a leg to stand on when they assert
that the public won’t pay more fees.
“Customers are complaining they have to pay for bags and
sandwiches and whatever else,” Button said. “And then they arrive at the
airport and find the airport scruffy.”
According to a recent report from the ACI-NA, U.S. airports
need an estimated $75.7 billion in infrastructure investment through 2019 in
order to accommodate growth in passenger and cargo activity, rehabilitate
existing facilities and support aircraft innovations.
George Kelemen, the ACI-NA’s senior vice president of
government and political affairs, also argued that because no airport has to
collect PFCs and because there is no minimum set within the cap, “it’s the
epitome of local control and free market.”
“Airlines have the option to weigh in at the local level,
with the airport and the county commissioners, etc.,” he said. “It’s not like
you’ll see airports overnight jump to $8.50. They have to present a project to
justify it. … It will be gradual as it is needed. The decision is made at a
local level.”
A4A, on the other hand, argues that U.S. airports are
creating a sense of urgency around their infrastructure that doesn’t exist.
“We and others have been very clear that airlines support
infrastructure investment, as evidenced by the $70 billion in projects either
completed, underway or approved at the 30 largest airports since 2008,” said
A4A spokeswoman Jean Medina. “We believe airports have adequate resources
without further burdening passengers.”
A4A also said that additional PFCs are an unnecessary
additional tax when air travelers are already “overburdened by a staggering
number of government-imposed taxes and fees.” The group said that taxes
currently total 21% of a typical $300, one-stop, roundtrip domestic ticket.
“The airports’ proposed increase would hike the taxes paid
on that same ticket to 26%,” according to A4A.
Concerns about higher ticket prices were shared by other
travel industry groups.
“Travelers don’t need to be the piggy bank,” said Global
Business Travel Association Executive Director and COO Michael McCormick.
“Beyond the investments made by airlines, airports have more than $11 billion
in unrestricted cash and investments while bringing in more revenue every year
— a record-high $24.5 billion in 2013.”
Button thinks the side with strongest lobbyists ultimately
will win.
“The four major airlines are very powerful; the airports are
very powerful,” he said. “It’s the traveling public that is in the swim and can
get carried away with the tide.”