With airlines collecting more than $1 billion in baggage fees in the first quarter of 2017, the American Association of Airport Executives (AAAE) once again called on carriers to drop their continued opposition to modernizing a local airport user fee known as the Passenger Facility Charge (PFC) that finances the construction of new runways, terminals and other airport improvements.
“A billion dollars in three months? More than $4 billion a year – good work if you can get it, but what the airlines clearly ‘don’t get’ is that airports need to modernize their facilities and the PFC is the best way of doing that,” AAAE President and CEO Todd Hauptli said today. “PFC revenues build facilities that enhance the passenger experience at airports. Where are these ‘billions and billions’ of bag fee dollars going?”
According to data released today by the Department of Transportation’s Bureau of Transportation Statistics, airlines collected more than $1 billion in baggage fees during the first quarter of 2017, marking the fourth consecutive quarter that bag fees exceeded $1 billion. Airlines collected another $723 million in reservation change or cancellation fees during the first three months of the year. This follows a record $4.2 billion in bag fees and $2.9 billion in ticket fees collected in 2016.
Since 2008, airlines have collected more than $30 billion in baggage fees and $23.7 billion in ticket change and cancellation fees. That total of more than $53.7 billion in baggage and ticket change fees does not include other airline ancillary charges such as pet transportation, sale of frequent flyer award miles to airline business partners or standby passenger fees.
In comparison, airports collectively received about $3 billion from the PFC in 2015, which is a charge that must be justified locally, imposed locally and used locally on FAA-approved projects that enhance local airport facilities. The federal cap on the local PFC has not been adjusted since 2000. The PFC is not a tax and never goes to the federal Treasury, a fact validated by the non-partisan Congressional Research Service.
The more than $7 billion in bag and reservation change fees collected by the carriers in 2016 also exceeds the $3.35 billion the federal government provided for the Airport Improvement Program in FY 2017 – the same funding level that Congress has approved in previous years. Although airline revenue from bag and reservation change fees remains at record levels, airports are trying to finance critical infrastructure projects with an outdated PFC cap and stagnant AIP funding.
Additionally, because bag fees are not taxed at the same 7.5 percent excise tax rate applied to base airline tickets, the Airport and Airway Trust Fund lost more than $313 million in foregone revenue in 2016 alone. Since 2008, the $30 billion in bag fees that are not taxed have cost the Trust Fund more than $2.2 billion in lost revenue. Those are funds that could have otherwise been spent on needed airport and air traffic control upgrades.