Monthly Archives: July 2010

Principato Responds to Taxing Airline Fees, PFCs

Last Monday, July 26 the National Journal raised the issue of whether or not airline fees should be taxed by the federal government, noting “Airlines made at least $3 billion in service fees last year for things like checking bags and in-flight meals.”

On Thursday, ACI-NA President Greg Principato responded to this issue, saying that while the airlines have the right to charge as many fees as they want, there are consequences in “moving away from a fare-based system and toward a fee-based one that raise at least a few policy questions.” He follows by pointing out the fee’s negative impact on the Airport and Airways Trust Fund, how bag fees can put a strain on throughput at certain checkpoints, and the questionable arguments made by airlines against the PFC.

You can read the full response and the ongoing debate here.

ACI-NA Involved with TSA Over Security Measures

ACI-NA met with Paul Leyh, the new Transportation Security Administration General Manager for Commercial Aviation in the Office of Transportation Sector Network Management (TSNM). Doug Hofsass, Deputy Assistant Administrator for TSNM and Karin Glasgow, Chief of Commercial Aviation Stakeholder Affairs for TSNM also participated in the meeting to discuss key aviation security initiatives, including a process to solicit input from the  industry and seek recommendations on measures to address vulnerabilities prior to the issuance of Security Directives, something that has been working well.

Representing airport interests, ACI-NA President Greg Principato encouraged TSA to continue to coordinate with the industry, particularly airports. In response, Leyh outlined his plan to maintain the strategic partnership with ACI-NA and the collaborative approach of working closely with airports. He also expressed his support for the ACI-NA-initiated In-Depth Security Review to identify duplicative or out-of-date security measures that need to be rescinded and those that are in need of clarification.

TSA advised that subsequent to a previous meeting between ACI-NA, representatives of the Office of Security Technology and the Office of Security Operations, and TSNM to discuss the deployment of Advanced Imaging Technology at airports, a review was conducted to evaluate the process. The review addressed the challenging aspects of the deployment process raised by ACI-NA at the meeting and is expected to result in better coordination with airports.

In addition to ongoing dialogue and partnership with ACI-NA, Hofsass, Leyh and Glasgow will be participating in the upcoming Annual Conference and the Public Safety and Security Conference.

For more information, please contact Christopher R. Bidwell, Vice President, Security and Facilitation.

Principato on Congestion Pricing, PFCs and Blogging

Earlier this week ACI-NA President Greg Principato was interviewed by Paul Plack of  The Aero-News Network to get the airport industry’s reaction to the July 13 federal court decision which upheld a Transportation Department rule that gives airports the flexibility to use congestion pricing as one tool to reduce flight delays.

Download the ANN Podcast.

In the interview, Principato also explained that the airlines position on raising the ceiling on the maximum Passenger Facility Charge to $7 just doesn’t make sense. He noted that that the airlines are better off financially when capital improvements to an airport are financed by PFC-back bonds instead of including the costs of the improvement into the airline’s rate base.

The Government’s Role in Maintaining Airport Infrastructure

By Annie Russo

During the keynote address at a forum hosted by the U.S. Chamber of Commerce on rebuilding American’s transportation through a national infrastructure bank, Pennsylvania Governor Edward Rendell spoke of the transportation infrastructure needs of our country.

Governor Rendell advocated that “the maintenance of American infrastructure has to be done by the government itself” and suggested investing $400 billion in transportation infrastructure. Often when politicians and experts talk about infrastructure they speak to the need for additional infrastructure, however, Governor Rendell makes an important point about maintaining current infrastructure. Airports rely on the federal Airport Improvement Program (AIP) for funding maintenance projects primarily for airside projects. A large need remains, however, for the funding of maintenance related landside projects.

Many airports turn to funding sources other than AIP for these projects such as Passenger Facility Charges (PFC) and private activity bonds (PAB’s). These are not government programs, but rather funds generated by the airport itself through a user fee in the case of PFC’s and through the sale of bonds. Airports are not asking for a government handout for the maintenance of these facilities, but there is something the federal government — and specifically Congress — can do to help airports with both PFC’s and PAB’s to maintain our infrastructure. Congress can raise the PFC from the current cap of $4.50 to the $7 proposed in the House-passed FAA Reauthorization bill, and it can also pass legislation to provide permanent exemption of interest earned on PAB’s from the Alternative Minimum Tax. If Congress approved both of these proposals it would go a long way in helping airports do our part in maintaining our facilities and thus helping maintain our national infrastructure.

GAO Releases Long Anticipated Report on Airline Fees

By Annie Russo
Today, the Government Accountability Office (GAO) released their long anticipated report on airline fees.  The report titled “Consumers Could Benefit from Better Information about Airline-Imposed Fees and Refundability of Government-Imposed Taxes and Fees,” covers a wide variety of topics including the nature of airline imposed fees, the impact on consumers, lost revenues to the Aviation and Airways Trust Fund, and an analysis of which government-imposed fees are refundable.  ACI-NA met with GAO and provided information at the beginning of their investigation on this issue.

The report goes into great detail about the different fees charged by airlines including those for checked baggage, seat selection, food services, and ticket changes.  According to the report, more than half of the most common airline-imposed fees are not subject to the 7.5 percent federal excise tax.  Therefore, the report was not able to answer the question of the total amount of lost revenue to the trust fund.  They did estimate that if only the baggage fees had been subject to this tax in fiscal year 2009 $186 million would have been added to the trust fund.

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Airlines Fees: To Tax or Not?

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Even though the GAO was able to estimate the exact credit to the revenue for the baggage fees for FY 2009, they have not been able to estimate the amount that could possibly go into the trust fund for all of the fees not subject to the 7.5% tax.  The report explains, “As noted earlier, aside from checked baggage, DOT guidance does not require airlines to separately report revenues received from fees for services that have not to date been considered part of the transportation of persons—such as early boarding, seat selection, and standby—and these revenues are also not subject to the 7.5 percent excise tax according to IRS. Thus, we cannot be certain how much additional revenue Treasury might have collected and credited to the Trust Fund if that tax had been applicable to all these fees.”

The House Aviation Subcommittee will further explore the findings in this report as well as hear from airlines and others impacted in the industry at a hearing this afternoon.