Reps. David Jolly (R-Fla.), Thomas Massie (R-Ky.), and Gus Bilirakis (R-Fla.) have introduced the Restoring Local Control of Airports Act of 2016 (H.R. 5563), which would allow airports to seek passenger facility charges (PFCs) beyond the current federal cap of $4.50 per enplanement. The bill would also reduce the federal airline ticket tax from 7.5 percent to 7 percent and require large hub airports to exchange federal Airport Improvement Program grants if they choose to increase their PFC beyond $4.50, among other improvements.
The PFC is a local user fee alternative to federal grants strongly supported by free-market transportation researchers, which allows participating airports to behave more like businesses. CEI has been a strong supporter of the PFC for years on efficiency, fairness, and federalism grounds, much like we are with other transportation user fees. The hope is that shifting airports away from traditional government subsidies and toward user fees will set the stage for broader reforms, such as privatization, in the future.
Some conservatives have criticized the PFC by demonizing it as a tax. As I’ve explained, this claim is incorrect:
Unlike taxes—such as those that support the PFC’s primary alternative, the federal Airport Improvement Program—user fees can only be imposed on the service beneficiaries. Taxes, in contrast, do not target the provision of specific services. The primary beneficiaries of airports are the passengers who use them. The PFC funds collected by airports may only be used for a very narrow set of airport improvement projects. Charging passengers a facility user fee that will be used solely for specific, statutorily-defined airport improvements cannot constitute anyone’s definition of a tax. Now, if the PFC revenues pooled by individual airports were suddenly diverted to things that don’t benefit the users who paid them—e.g., paying for food stamps—[conservatives] would have a case.
This limited conservative opposition seems to be softening, as I’ve noted, as they learn more about what the PFC actually is and isn’t. The PFC was developed by the Reagan administration and first formally proposed by the George H.W. Bush administration’s 1990 National Transportation Policy, Moving America.
As Dr. Fred Singer, chief scientist at the Department of Transportation during the Reagan administration, noted in a 1990 Cato Institute publication, the PFC was to be about more than just efficient user charging—it was designed to promote airline competition and lower airfares:
To increase revenue for airports, Moving America proposes legalizing the right for airports to collect passenger facility charges. Under this recommendation airports could charge a head tax for passengers who either depart from or arrive at an airport. The funds generated would then be used to expand the airport, increase landing capacity, or improve the airport's amenities. This revenue would also make airports less financially dependent on their tenant carriers and would encourage them to provide more facilities for new carriers, a significant benefit that the document ignored. Competition at airports that are dominated by one or two carriers could thus be enhanced.
Due to the federal government’s stranglehold on local airport financing, airports must often turn to their airline customers to complete needed facility expansions and other enhancements. In return for their financial support, airlines demand that airports grant them long-term exclusive-use gate leases. These leases are then used to prevent competing low-cost airlines from obtaining necessary gate access and this lack of competition results in higher airfares.
Brookings Institution economist Cliff Winston and Steve Morrison, chair of Northeastern University’s economics department, found limited gate availability at airports results in airfares being $4.4 billion higher annually (2005 dollars). That figure dwarfs past claims made by some conservatives that a near-doubling of the PFC “represents a $2.8 billion annual tax increase (sic) on air passengers.”
We applaud Reps. Jolly, Massie, and Bilirakis for their leadership on this pro-consumer piece of legislation. Unfortunately, neither the House nor the Senate included PFC modernization in their dueling FAA reauthorization proposals. CEI strongly supports the House’s AIRR Act, largely for its badly needed air traffic control reform provisions and Chairman Shuster deserves a lot of credit for his steadfast support of air traffic control reform in the face of intense opposition from rent-seeking corporate jet lobbyists. In contrast, the Senate’s proposal is dud that fails to address the most pressing aviation policy issues facing the U.S. It should be opposed by all informed and clear-headed people.
But the House’s bill could still be improved by addressing airport financing needs. Much like how the House’s air traffic control reforms aim to limit the destructive meddling of Congress and federal bureaucrats, adding a PFC modernization provision would allow airports to loosen Washington’s toxic grip on their operations and investments, thereby promoting better quality airports, improved service, and lower airfares. Canada reformed both air traffic control and airport funding and governance in the 1990s. Given that the House’s air traffic control reforms are modeled after the successful Canadian reforms from two decades ago, why not follow Canada’s lead and enact a critical airport policy reform at the same time?