AAAE Questions Airline Opposition to Local PFCs as Bag Fee Collections Skyrocket

With airline fee collections reaching historic highs – and now far surpassing the amount of annual federal investment in airport infrastructure improvements – according to data released by the Department of Transportation, the American Association of Airport Executives (AAAE) is questioning the continued opposition of U.S. carriers to an increase in local passenger facility charges (PFCs), which have proven extremely effective in providing resources to fund critical airport infrastructure upgrades.

"It’s ironic and disappointing that our friends in the airline industry continue to oppose giving airports the self-help they desperately need to address local infrastructure needs given their own increasing reliance on baggage fees and other ancillary charges to support their operations," AAAE Gov President Todd Hauptli said. "The approach of the airlines of saying no to any and all proposals to increase PFCs may serve their needs in the near-term by padding the bottom line, but the carriers, their customers, and the traveling public will unfortunately pay the price as necessary safety, security, and capacity improvements get pushed further and further into the future."

In 2012, U.S. carriers collected nearly $3.5 billion in baggage fees and $2.55 billion from reservation change fees according to DOT. The staggering $6 billion in fees collected does not include billions in other airline ancillary fees such as pet transportation, sale of frequent flyer award miles to airline business partners and standby passenger fees.   To put those figures in perspective, federal investment in airport infrastructure through the Airport Improvement Program (AIP) for fiscal year 2013 will total around $3 billion.

In contrast to the dramatic increase in the collection of ancillary fees by U.S. carriers, the federal cap on PFCs has not been adjusted in more than a decade. Adding to the problem for airports is the decline in purchasing power that those revenues produce because of construction cost inflation.  AAAE has asked Congress to lift the PFC cap from $4.50 to give airports the tools they need to meet current and future demands. AAAE reiterated its support for a PFC increase in a letter to Congress today, which can be viewed here.   

Hauptli added that the federal budget situation makes it even more imperative that Congress approve a PFC increase, pointing to the recently approved Reducing Flight Delays Act of 2013, which diverted $253 million in AIP funds to pay for controller salaries and other items affected by budget sequestration.  

"In the face of growing federal budget constraints, PFCs offer critical, local self-help to build the infrastructure that is necessary to serve the airlines and the traveling public now and into the future," Hauptli said.   

Hauptli also noted the impact that the increased reliance by airlines on ancillary fees, is having on revenues flowing to the Airport and Airway Trust Fund, which supports aviation system upgrades including airport improvements.  Historically, airline tickets have been taxed to help finance the aviation system, but baggage fees and other ancillary revenues are not taxed in the same manner.  The shift in the airline pricing model away from ticket price increases to a greater reliance on ancillary fees effectively shortchanges the Airport and Airway Trust Fund of revenue that would otherwise support airport and aviation system improvements. AAAE has asked Congress to tax baggage fees to ensure that adequate resources flow to the Trust Fund for necessary aviation system improvements.