ACI-NA Responds to ATA on PFC

James May, President and CEO of the Air Transport Association recently wrote a column arguing against efforts to raise the cap on Passenger Facility Charges (PFCs). Let’s examine the claims made in the article and compare them to the facts.

First, Mr. May claims that the PFC is a “tax” on passengers and is “set” at $4.50 per passenger. The PFC is not a tax. It is a user-fee paid by passengers who utilize the airport and is directly invested in projects at that airport benefiting passengers by enhancing airport capacity, competition, safety, security and improving the environment. The fee is paid only by those who use the airport and it never goes into a government treasury. Also, the fee is not set at $4.50 per passenger. $4.50 is the current maximum that an airport can charge. Some airports charge nothing; many others charge less than $4.50. The cap has been in place since 2000 with no adjustment for inflation. Airports are seeking a reasonable $2.50 increase in the cap.

Next, Mr. May claims that airport charges have gone up 33% since 2000. This hides the fact that since 2000, airport costs have been only about 5% of airline operating expenses. Think of what an important role airports play in the aviation system and consider that airlines only pay 5% of their costs to use them. Not a bad deal. In 2009, airport rents actually went down about 5%. Airports too, have been cutting their budgets, postponing projects and implementing cost savings. Ask any airport manager who has had to layoff valued employees due to airline cutbacks and they will tell you that airports do in fact live in the real world.

Later, Mr. May claims that of a “typical” $300 airfare (I can’t remember the last time I was able to fly anywhere for $300), 21% goes to airports or the federal government in the form of taxes. As an experiment I priced a sample itinerary from Washington, DC to San Francisco, with a connection over the Fourth of July weekend. All three of the airports happen to charge the maximum $4.50 PFC. The base fare for this itinerary was about $500. Expensive, but not outrageous considering I’m flying coast-to-coast on a busy holiday weekend. However, I found that in addition, there is a “peak travel surcharge” of $18.60 one-way. That’s $37.20 roundtrip! Ok, I guess. After all it‘s a busy weekend for travel. Until you learn that this airline considers almost everyday between now and January a peak-travel day with an associated surcharge. Assuming I bring two bags with me, I would have to pay $120 roundtrip. Baggage, peak travel and other airline fees provide the consumer with nothing. They go directly to the airline’s bank account. The PFC directly benefits consumers through safer, more secure and efficient airport facilities with (that perennial fear of the airlines) more competition in air travel.

Finally, federal taxes, made up of a 7.5% excise tax, segment fees and security fees amount to $68 for the roundtrip. PFCs, at the current $4.50 cap are $18. Added up, the picture looks like this:

As you can see the PFC accounts for only 2% of the cost. Together with federal taxes that’s about 11% (well below the 21% claimed by ATA). It’s also well below the percentage going towards airline-imposed baggage fees. Assuming all three airports go to the proposed $7.00, the PFC cost would increase only $10 roundtrip: less than half of the cost of checking one bag one-way. The share of the cost attributable to the PFC would still only be 3%. Not a bad price for safer, more comfortable, environmentally friendly infrastructure. Not to mention more competition in air travel.

So let’s review. Mr. May claims PFCs are a tax. Not true. Next he tries to insinuate that airports are bilking the airlines. Also not true. Finally he claims that airport and government taxes make up 21% of a typical airfare. Again, false (if Mr. May wants to argue that this is just one random sample, studies have shown that the number for actual itineraries is well below 21%). This is yet another example of airline hypocrisy and putting their interests above those of the industry and the traveling public.
-Greg Principato