By Kerry O’Hare, Vice President and Director of Policy, Building America’s Future
June 20, 2017
The news coming out of U.S. DOT yesterday certainly caught my attention. The Department’s Bureau of Transportation Statistics reported that in the first quarter of 2017, U.S. airlines collected more than $1 billion in baggage fees. This was the fourth consecutive quarter that bag fees exceeded $1 billion. Additionally, during the first quarter of this year, the airlines collected another $723 million in reservation change or cancellation fees. Since 2008, airlines have collected more than $30 billion in bag fees and $23.7 billion in ticket change and cancellation fees. It is also worth noting that bag fees are not taxed at the same 7.5 percent excise tax rate that is applied to base airline tickets.Let’s put this in perspective. While the airlines are benefiting financially from these untaxed fees (at least when it comes to the bag fees) the Airport and Airway Trust Fund at the Federal Aviation Administration is on the losing end, as more than $300 million in revenue in 2016 alone did not flow into the Trust Fund. This has added up to over $2 billion in lost revenue to the Trust Fund since 2008. The Trust Fund allocates monies to help airports and air traffic control with much needed upgrades.
Meanwhile, facilities at many of America’s airports are in dire need of modernization. In March, the Airports Council International – North America issued a report that outlined nearly $100 billion in needed upgrades at the nation’s airports over the next five years. This is a 32 percent increase in airport infrastructure needs since 2015. It’s no wonder that the quality of America’s airport infrastructure is ranked 9th by the World Economic Forum, putting us behind countries such as Panama and Finland. Very simply, we are falling behind our global economic competitors.
In addition to Trust Fund dollars and local bonding, airports rely on the locally imposed but federally capped Passenger Facility Charge or PFC. This fee has been capped at $4.50 since 2000 –while airports have been struggling to upgrade their runways, terminals and other facilities to accommodate rising numbers of passengers and cargo. Imagine living on the same salary you made in 2000. That’s the dire situation facing our airport infrastructure. We’re supporting our airport infrastructure using outdated budgets that fail to meet the demands of 2017.
Fortunately, there is something that you can do to change the current circumstances. The U.S. Senate Commerce Committee is working on the final details of a bipartisan FAA reauthorization bill that could be marked up and debated as soon as next week. This is the legislation that could unleash modern financing options for our nation’s airports by uncapping the PFC. It is important to reach out to your Senators to let them know that it’s time to build again at our airports.