ATA: $2 Billion More In PFCs Does Not Make Sense
James C. May
President and CEO, Air Transport Assn.
In today's tough economic climate, unfairly raising taxes on airline passengers to produce $2 billion more for airports doesn't make sense. But that's exactly what HR915, the FAA Reauthorization Act, would allow.
This increase of passenger facility charges (PFCs) comes despite the fact that PFC collections have been at record levels the past two years and are expected to rise again in 2009. PFCs are a direct tax on passengers and it's time our airports break their addiction to them. Airports must resist treating air travelers as the equivalent of an ATM.
In the short history of PFCs, passengers already have been taxed nearly $70 billion. With the proposed increase, a roundtrip ticket with one stop - which most passengers traveling from small and mid-sized communities purchase - could cost each passenger $28 in PFCs, meaning a family of four could pay upward of $112 just to airports.
Airports already receive billions in tax money. According to the Government Accountability Office, airports received an average $13 billion per year in PFCs, federal grants and bonds from 2001-2005 for capital improvements, in addition to billions more from airport concessions and other nonaeronautical sources. The proposed increase is not needed and ignores current economic realities and the effect of the downturn on aviation. In asking for more, airports seemingly want Congress to ignore their holding of more than $27 billion in unrestricted financial assets.
While some airports may be feeling pressure from credit markets, this temporary situation does not justify a permanent change in PFC funding, which will cost billions in additional taxes. Indeed, several airports have issued bonds after the American Recovery and Reinvestment Act (ARRA) provided them special relief from the Alternative Minimum Tax (AMT) for new private activity bonds, as well as allowing the refinancing of certain outstanding AMT bonds. Although credit markets are tight, airports continue to maintain extremely high credit ratings, and of the 77 airports rated by S&P, all enjoy investment-grade credit. Historically, airports have no trouble making successful bond offerings for critical, viable projects. That is by far the best way to assure real project scrutiny.
Airports, of course, have legitimate capital needs to be able to handle expected increases in passengers and operations. The issue is just how much money they need for these essential projects, as opposed to how much they want for their wish lists. Unfortunately, because approval of PFC-funded projects is relatively easy (only four proposals have been turned down by the Federal Aviation Administration in 17 years), they too often have been used to support controversial projects of questionable value - like "bike racks," which would also be eligible for PFC spending under the bill. There is no justification for adding more tax dollars to the pile.
The best and most certain way to reduce flight delays and make legitimate airport improvements is not to increase the PFC tax to fund airports' pet projects, but instead to modernize our air traffic control system to alleviate airspace congestion and make better use of existing airport facilities. That is what will provide real improvements, not more money for airports to spend on "nice to have," but nonessential projects. The U.S. economy and the commercial airline industry cannot afford policies that hamper economic growth or add additional fees and costs, and airports do not need a PFC increase.
Photo credit: Air Transport Assn.
