PFC redux

A House transportation committee hearing has amped up the
longstanding debate between airports and airlines over increasing the passenger
facility charge (PFC) cap.

The PFC is assessed by airports to finance infrastructure
projects and is included in ticket prices. It has been capped at $4.50 per
flight segment since 2000. Airports have long pushed for a cap increase to
$8.50 per segment, and airlines have fiercely imposed such an increase, saying
that it unnecessary and will depress demand.

Early in the 116th Congress, it’s clear that airports have
the strong backing from House transportation committee chairman Peter DeFazio
(D-Ore.), who convened Tuesday’s hearing on PFCs.

“You might think that the airlines, which want to make
their customers’ travel experience as pleasant as possible, would agree to the
need for more investment in airport infrastructure through PFCs,” DeFazio
said in his opening statement. “But no — they have historically unleashed
all their political capital to defeat any PFC increase, relying on the
implausible argument that even a dollar increase in the cost of air travel will
cause demand to plummet.”

Meanwhile, DeFazio noted, U.S. airlines charged
approximately $4.6 billion in bag fees in 2017.

According to trade group Airport Council International —
North America, airports have $128 billion in infrastructure needs over the next
five years. That figure includes projects that already have a funding source
and is much higher than a September 2018 FAA estimate that airports have $35.1
billion in unmet infrastructure funding needs over the next five years. (The
FAA report doesn’t include parking structures and revenue-producing portions of
an airport, such as retail areas.)

At Tuesday’s hearing, representatives from airports in
Tampa, Cincinnati and Spokane, Wash., emphasized the importance of PFCs for
financing projects. Cincinnati/Northern Kentucky Airport, for example,
estimates capital needs of approximately $1 billion by 2030, said airport CEO
Candace McGraw. An increase in the PFC to $8.50 would allow the airport to fund
an additional $340 million while still meeting debt service requirements. As a
result, the airport would be able to complete its identified projects 2.5 years
faster while saving $83 million in interest costs alone. 

Witnesses at the hearing mainly represented or supported
airports in their push for a higher PFC cap, including U.S. Travel Association senior
vice president for government relations Tori Barnes. U.S. Travel has long
backed an increase.

One exception was Spirit CEO Ted Christie, who told the
committee that he views PFC increases as regressive to low-cost airlines. The
reason, Christie explained, is that PFCs are levied by airports as a flat fee
across its various carriers. Since Spirit’s ticket prices are lower than
traditional carriers’, the increase would be proportionally more.

In addition, Christie said, Spirit gains its cost advantage
over competitors through more efficient use of airport facilities, such as
gates. As such, explained Christie, Spirit prefers to see airports raise funds
for infrastructure projects by increasing fees on airlines, such as gate fees.

Spirit is not a member of the main U.S. airline industry
trade group, Airlines for America (A4A), which did not testify at the hearing.
But A4A has duly engaged the new battle over the PFC cap. The organization’s
Stop Air Tax Now! website highlights ongoing construction projects at airports
around the country. The group has also enlisted the support of anti-tax
stalwart Grover Norquist and airline industry consumer advocate Charlie Leocha.

“All across this country, airport construction is
booming. That’s why with roads and bridges crumbling in America, the idea of a
new tax increase on air passengers is misguided and simply needless,” A4A
senior vice president for policy Sharon Pinkerton said in a statement the trade
group released Monday. “Any fair hearing on this issue would demonstrate
clearly that airports are flush with cash. Unlike the highway trust fund, the
aviation trust fund is running a huge surplus. And airports cannot identify a
single project threatened by a lack of resources. A higher airport tax is
simply a solution in search of a problem.”

Supporters of an increase in the PFC cap emphasize that it’s
a user fee rather than a tax.

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