Monthly Archives: May 2011

ACI-NA Supports New Dem Coalition’s Infrastructure Task Force

By Morgan Dye

Airports Council International-North America (ACI-NA) President Greg Principato has written to Congressman Jason Altmire (PA-4th), Rick Larsen (WA-2) and Congresswoman Laura Richardson (CA-37), Co-Chairs of the New Dem Coalition’s Critical Infrastructure and Manufacturing Task Force, expressing support for their agenda to foster economic growth and job creation.  The proposal was released last week during the Coalition’s meeting with the Chair of the President’s Council on Jobs and Competitiveness.

In his letter to the Task Force Chairs, Principato applauded their aviation proposal stating that “Airports take very seriously their critical role as an economic engine for their community which is why your proposal calling for airports to be given the flexibility to collect the revenue necessary to improve our facilities is a welcome one. US airports are increasingly at a distinct competitive disadvantage when it comes to infrastructure investment compared with facilities in other countries.”

ACI-NA’s letter went on to explain that the pending FAA Reauthorization legislation fails to give airports any flexibility when it comes to the Passenger Facility Charge (PFC) which is a local fee paid by passengers who use the airport.  The PFC has not been raised since 2000.  Principato noted that, “If Congress would lift the ceiling, thereby allowing airports to work with their local community to set the PFC at a figure that ensures they are able to meet their outstanding airside infrastructure needs as well as to plan for future needs, airports’ need for federal assistance, particularly for those classified as large or medium hubs, would lessen significantly.”

Principato also expressed his interest in meeting with the co-chairs to discuss ways ACI-NA could help spread their message of economic growth and job creation.

Meet ACI-NA’s New ‘Green’ Advocate

By Katherine Preston
Happy Thursday everyone! I would like to take this opportunity to introduce myself to all of the ACI-NA members, especially those who sit on the Environmental Affairs Committee.   I have returned for my second week on the job as the Director of Environmental Affairs, after (thankfully) having survived the first week!  All kidding aside, everyone at ACI-NA as well as the members I have communicated with have been incredibly welcoming and helpful.  I look forward to meeting many of you in person at the upcoming Environmental Affairs Conference this June in Cincinnati (if you haven’t already registered, what are you waiting for?).  I also greatly anticipate diving in where my predecessor, Jessica Steinhilber, left off.   As you know, there are many varied environmental issues that our airport members face, and we will no doubt be busy keeping up with all the activity.

I joined ACI-NA after spending about 3.5 years as a policy analyst with The Boeing Co.’s government operations office.  In that capacity I focused on federal regulatory and legislative environmental issues, including climate change, biofuels, chemical policy, the Clean Air Act, as well as international trade and other commercial aviation policy issues.  I gained a lot of valuable experience working at Boeing and have a strong understanding of many aviation environmental issues from a manufacturer’s perspective.

Prior to working at Boeing, I was fortunate enough to start my career in the aviation industry with the International Air Transport Association.  At the time, IATA had just opened their Washington office and I was one of three people working there.  There are many benefits to working in a small office, the largest of which is the chance to do many different things because there is no one else to do them!  I was able to work on a number of policy issues affecting IATA’s airline members, both domestic and international.  In my role as congressional liaison I managed legislative affairs on issues of concern to the commercial aviation industry, and had the opportunity to work with International Civil Aviation Organization and Committee on Aviation Environmental Protection.  It was during this time that I became aware of the challenging environmental issues the industry faces, and decided that this was the area in which I wanted to focus my career.

I am currently pursuing my M.S. in Environmental Science and Policy at the Johns Hopkins University, and am on track to complete the degree next spring.  So far the program has been a challenging yet wonderful educational experience, and an even better networking opportunity.   Many of my classmates are federal employees hailing from many different agencies, including EPA, FAA, Congress, DOT, DOD, as well as consultants to all of the above.  For my undergraduate work, I received my B.A. in Political Science/International Affairs at the University of Florida (Go Gators!).

Before I came to D.C., I worked with the Florida House of Representatives, a small government affairs firm in Tallahassee, and completed a public diplomacy internship with the U.S. State Department in Leipzig, Germany.

I currently reside with my husband and two dogs in Columbia Heights area of Washington, D.C.

No Reason to Oppose Airport Deregulation

By Debby McElroy
I was recently interviewed by Mark Koba, Senior Editor at CNBC.com, who was doing a story about airport finances. Mark, being a business reporter who understands the benefits of the free market, was amazed that airports were so limited by government regulations.  He was also intrigued by the concept of airport deregulation and the benefits to passengers and communities that would come from providing airports more economic freedom.

The article covered the issue well but as you might expect also included three quotes opposing airport economic deregulation.  The first one, from Professor Price at The Metropolitan State College of Denver, was flat out wrong – stating that “Airports are not really economically regulated, with the exception of grant money from the government.”  I would encourage him to read the PFC regulations which significantly limit the infrastructure projects that can be funded by user fees paid by passengers. For example, you cannot use PFCs to build a new parking structure, even though many passengers would strongly support this.  Additionally, he should read the DOT Rates and Charges Policy which limits the ability of airports to impose market-based fees at congested facilities or at busy times, something the airlines do with airline fares. (The reason it costs more to fly at 8 AM on Monday morning versus 3 PM on Tuesday afternoon.)

Speaking of the airlines, the second opposing comment was from Sharon Pinkerton, ATA’s Senior Vice President, Legislative and Regulatory Policy, who said “We’re opposed to raising the PFC because it is like a direct tax on passengers who already pay high taxes.”  While I commend Sharon (a colleague I respect and an effective airline lobbyist) for not labeling the PFC a tax (a lie promulgated by other airline lobbyists), the PFC pales in comparison to both taxes and airline baggage fees.

According to the latest DOT data, the average fare in the fourth quarter of 2010 was $337, pretty low if you have tried to book a flight just about anywhere this summer.  But let’s say that is the fare and you are connecting, so there are four legs to the round-trip flight.  Adding in all federal taxes and assuming the maximum PFC ($18), the total fare would be $405.08. But let’s also be realistic and figure in the cost to check one bag. The average fee for checking a bag on a network airline (excluding Southwest and JetBlue) is $25 each way, so add another $50 to the trip cost, bringing the total to $455.08. Doing the math, you find that federal taxes are 11% of the trip cost, baggage fees are 11% and the PFC is 4%.

The airlines also fail to mention that they are paid to collect PFCs- more than $80 million in 2010.  In contrast they are not paid one cent to collect federal taxes and segment fees.

The third naysayer is Professor Lee McPheters at Arizona State University, who expressed concern that airport deregulation would lead to higher fees for airport users, including passengers and airlines, a point I would also dispute.  Airline deregulation led to lower fares and more competition – why does he assume it would be different for airports? On what basis does he reach this conclusion?  I would argue that passengers would receive similar benefits with airport deregulation and that airlines and airports would work more cooperatively in an environment where both were not constrained by archaic economic regulation.

Reasonable people disagree and I always enjoy a spirited debate.    But let’s use accurate information and real data when discussing airport economic deregulation.

The Airport Privatization Pilot Program: What It Is, and What It Isn’t

By AJ Muldoon
In 1996 Congress created the Airport Privatization Pilot Program. The program allows up to five airports (with certain restrictions on the various classes of airports) to be granted exemptions from certain federal statutory and regulatory requirements that would otherwise discourage private investment in airports. As it is currently constructed, the pilot program has little benefit for airports but is a way for the local government entities which own airports (cities, counties, states, etc.) to get cash in exchange for selling or leasing their airport to a private entity.

Given the dire budget situations being faced by many states and municipalities, such a program is starting to look very enticing. Before the recent economic collapse, Chicago had reached a tentative deal to lease Midway Airport for $2.5 billion. That is quite an attractive number to a city facing billions in unfunded pension obligations and other costs.

The main obstacle to privatization which the pilot program alleviates is the prohibition against revenue diversion or taking money “off airport.” Federal law requires that any airport which accepts federal grants must reinvest all airport revenues back into the airport. Why would an airport sponsor sell or a private investor buy into an asset that could never give them a return? The pilot program provides the necessary exemption from the revenue diversion prohibition to solve this problem but requires that 65 percent of carriers operating at the airport and carriers that constitute 65 percent of the landed weight at the airport approve such a deal. The pilot program also exempts airport sponsors from the requirement that they pay back any federal grants or return any property purchased with federal funds.

The incentive for airport sponsors is clear: the potential for a cash windfall. However, the upside for the airport itself is less clear. ACI-NA’s Capital Needs Survey found that airports in the U.S. will need $80 billion in capital improvements over the next five years. Funds available from the AIP program have fallen in real terms, Congress has not acted on increasing the PFC ceiling, and airlines, perpetually in financial difficulty, have little of their own capital to contribute. Participation in the pilot program changes none of this. The pilot program is not a first step towards airport deregulation. The pilot program does not provide an exemption from the PFC-cap and it does not exempt private operators from the FAA Rates and Charges Policy, safety oversight and regulation, environmental reviews or any other statutes or regulations. The one exemption it does provide, from the revenue diversion prohibition, is one that many airport managers would like to see maintained under any deregulation program. Participation in the pilot program may make sense for a city seeking to fill a budget gap, but in its current form, the benefits for airport operations and improvement are far from clear.

ACI-NA has suggested ideas to make the pilot program better for airports without removing the provisions that make it attractive to the government entities that own airports.  We continue to work with Congress to enact an FAA reauthorization bill that recognizes these and other airport needs.

ACI-NA Joins Coalition Opposing 3% Withholding

By Jane Calderwood
ACI-NA has joined the Government Withholding Relief Coalition which is seeking the repeal of Section 511 of the Tax Increase Prevention Reconciliation Act of 2005 also referred to as ‘3 percent withholding.’  The provision originally required that beginning Jan. 1,  federal, state and local governments spending more than $100 million per year on purchases of goods and services must withhold 3 percent from all payments to contractors and vendors and remit those funds to the IRS to be applied toward the contractors’ and vendors’ federal income tax liabilities. The American Recovery and Reinvestment Act postponed the start date for the provision to Jan. 1, 2012.  Recently the Internal Revenue Service announced they were delaying implementation of this provision until Jan. 1, 2013, but legal questions remain as to whether or not the IRS has the authority to take this action.

The 3 percent withholding provision will require changes in federal regulations as well as state, city, county and municipal regulations, and businesses will need to create new accounting and compliance requirements.  The Coalition has estimated that the compliance costs will be between $75 billion and $15 billion depending on the outcome of the IRS’ implementing regulations.

The House Small Business Subcommittee on Contracting and Workforce is holding a hearing on the subject on this coming on May 26, and ACI-NA is submitting testimony in support of the repeal of this onerous provision.