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[4910-13]
DEPARTMENT OF TRANSPORTATION
Office of the Secretary
Federal Aviation Administration
[Docket No. FAA-2008-0036]
RIN 2120-AF90
Policy Regarding Airport Rates and Charges
AGENCY: Department of Transportation, Office of the Secretary and Federal
Aviation Administration.
ACTION: Notice of proposed amendment to policy statement.
SUMMARY: This action proposes to amend the Department of Transportation
(“Department”) “Policy Regarding the Establishment of Airport Rates and Charges”
published in the Federal Register on June 21, 1996 (“1996 Rates and Charges
Policy”). This action proposes three amendments to the 1996 Rates and Charges
Policy (two modifications and one clarification). These amendments are intended
to provide greater flexibility to operators of congested airports to use landing
fees to provide incentives to air carriers to use the airport at less congested
times or to use alternate airports to meet regional air service needs. Any
charges imposed on international operations must also comply with the
international obligations of the United States.
DATES: Send your comments on or before [Insert date 45 days after date of
publication in the Federal Register].
ADDRESSES: You may send comments [identified by Docket Number
FAA-2008-0036] using any of the following methods:
* Government-wide rulemaking web site: Go to http://www.regulations.gov and
follow the instructions for sending your comments electronically.
* Mail: Docket Operations, U.S. Department of Transportation, West Building,
Ground Floor, Room W12-140, Routing Symbol M-30, 1200 New Jersey Avenue, SE,
Washington, DC 20590.
* Fax: 1-202-493-2251.
* Hand Delivery: To Docket Operations, Room W12-140 on the ground floor of the
West Building, 1200 New Jersey Avenue, SE, Washington, DC 20590, between 9 a.m.
and 5 p.m., Monday through Friday, except Federal holidays.
For more information on the notice and comment process, see the SUPPLEMENTARY
INFORMATION section of this document.
Privacy: We will post all comments we receive, without change, to http://www.regulations.gov,
including any personal information you provide. For more information, see the
Privacy Act discussion in the SUPPLEMENTARY INFORMATION section of this
document.
Docket: To read background documents or comments received, go to http://www.regulations.gov
at any time or to Room W12-140 on the ground floor of the West Building, 1200
New Jersey Avenue, SE, Washington, DC, between 9 a.m. and 5 p.m., Monday through
Friday, except Federal holidays.
FOR FURTHER INFORMATION CONTACT: Barry L. Molar, Manager, Airports Financial
Assistance Division, APP–500, Federal Aviation Administration, 800 Independence
Avenue SW, Washington, DC 20591; telephone: (202) 267-3831; facsimile: (202)
267-5302; e-mail: barry.molar@faa.gov; or Charles Erhard, Manager, Airport
Compliance Division, AAS-400, Federal Aviation Administration, 800 Independence
Avenue SW., Washington, DC 20591, telephone (202) 267-3187; facsimile: (202)
267-5769; e-mail: charles.erhard@faa.gov.
SUPPLEMENTARY INFORMATION:
Comments Invited
The Department of Transportation invites interested persons to join in this
notice and comment process by filing written comments, data, or views. The most
helpful comments reference a specific portion of the proposal, explain the
reason for any recommended change, and include supporting data. We ask that you
send us two copies of written comments.
We will file in the docket all comments we receive, as well as a report
summarizing each substantive public contact with Department personnel about this
proposal. The docket is available for public inspection before and after the
comment closing date. If you wish to review the docket in person, go to the
address in the ADDRESSES section of this preamble between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal holidays. You may also review the docket
using the Internet at the web address in the ADDRESSES section.
Privacy Act: Using the search function of our docket web site, anyone can find
and read the comments received into any of our dockets. This includes the name
of the individual sending the comment (or signing the comment for an
association, business, labor union). You may review DOT's complete Privacy Act
Statement in the Federal Register published on April 11, 2000 (65 FR 19477-78)
or you may visit http://regulations.gov.
Before acting on this proposal, we will consider all comments we receive on or
before the closing date for comments. We will consider comments filed late if it
is possible to do so without incurring expense or delay. We may change this
proposal because of the comments we receive.
If you want the Department to acknowledge receipt of your comments on this
proposal, include with your comments a preaddressed, stamped postcard on which
the docket number appears. We will stamp the date on the postcard and mail it to
you.
Proprietary or Confidential Business Information
Do not file in the docket information that you consider to be proprietary or
confidential business information. Send or deliver this information directly to
the person identified in the FOR FURTHER INFORMATION CONTACT section of this
document. You must mark the information that you consider proprietary or
confidential. If you send the information on a disk or CD ROM, mark the outside
of the disk or CD ROM and also identify electronically within the disk or CD ROM
the specific information that is proprietary or confidential.
Under 14 CFR 11.35(b), when we are aware of proprietary information filed with a
comment, we do not place it in the docket. We hold it in a separate file to
which the public does not have access and place a note in the docket that we
have received it. If we receive a request to examine or copy this information,
we treat it as any other request under the Freedom of Information Act (5 U.S.C.
552). We process such a request under the DOT procedures found in 49 CFR Part 7.
Availability of Documents
You can get an electronic copy using the Internet by:
(1) Searching the Federal eRulemaking portal (http://www.regulations.gov/search);
(2) Visiting the FAA’s Regulations and Policies web page at http://www.faa.gov/regulations_policies;
or
(3) Accessing the Government Printing Office’s web page at http://www.access.gpo.gov/su_docs/aces/aces140.html.
You can also get a copy by sending a request to the Federal Aviation
Administration, Office of Rulemaking, ARM-1, 800 Independence Avenue SW,
Washington, DC 20591, or by calling (202) 267-9680. Make sure to identify the
docket number, notice number, or amendment number of this proceeding.
Authority for this Proceeding
This notice is published under the authority described in Subtitle VII, Part B,
Chapter 471, Section 47129 of Title 49 United States Code. Under subsection (b)
of this section, the Secretary of Transportation is required to publish
publishing policy statements establishing standards or guidelines the Secretary
will use in determining the reasonableness of airport fees charged to airlines
under Section 47129.
Background
This action proposes to amend the Department of Transportation (“Department”)
“Policy Regarding the Establishment of Airport Rates and Charges” published in
the Federal Register on June 21, 1996, (“1996 Rates and Charges Policy”).
Portions of the policy were subsequently vacated by the United States Court of
Appeals for the District of Columbia Circuit in Air Transport Ass’n of America
v. DOT, 119 F.3d 38, amended by 129 F.3d 625 (DC Cir. 1997). This action
proposes three amendments to the 1996 Rates and Charges Policy (two
modifications and one clarification). These amendments are intended to provide
greater flexibility to operators of congested airports to use landing fees to
provide incentives to air carriers to use the airport at less congested times or
to use alternate airports to meet regional air service needs. Any charges
imposed on international operations must also comply with the international
obligations of the United States.
First, this notice proposes to clarify the policy by explicitly acknowledging
the ability of airport operators to establish a two-part landing fee structure
consisting of both an operation charge and a weight-based charge, in lieu of the
standard weight-based charge. Such a two-part fee would serve as an incentive
for carriers to use larger aircraft and increase the number of passengers served
with the same or fewer operations. Second, this action proposes to expand the
ability of the operator of a congested airport to include in the airfield fees
of a congested airport a portion of the airfield costs of other, underutilized
airports owned and operated by the same proprietor. Third, this action proposes
to permit the operator of a congested airport to charge users of a congested
airport a portion of the cost of airfield projects under construction.
Currently, costs of new or reconstructed airfield facilities may be included in
airfield charges only when the new or reconstructed facilities are completed and
in use, unless carriers at the airport agree otherwise. This proposed
modification would also permit the operator of a congested airport to include in
the rate base the costs of projects under construction. This notice proposes two
alternatives. The first would permit the costs to be included in the rate base
only during periods when the airport experiences congestion. At some airports,
such as Chicago O’Hare or New York LaGuardia, this could occur throughout the
normal operating day. The second would permit these costs to be included in the
rate base of the congested airport at all times. Because the latter two proposed
amendments would apply only at congested airports, this notice also proposes to
add a definition of “congested airport” in the Applicability section.
Legal Requirements for Airport Rates and Charges
All commercial service airports operating in the United States and most other
airports that are open to the public have accepted grants for airport
development under the Airport Improvement Program, authorized in Title 49 of the
United States Code, Subtitle VII, Part B, Chapter 471. Under § 47107, in
exchange for receiving grant funds, airport operators must give a variety of
assurances regarding the operation of their airports and the implementation of
grant funded projects. Among other things, airport operators pledge to make the
airport “available for public use on reasonable conditions and without unjust
discrimination.” 49 USC § 47107(a)(1). This obligation encompasses the
obligation to establish reasonable and not unjustly discriminatory fees and
charges for aeronautical use of the airfield.
Section 47129 authorizes the Department to review the reasonableness of airport
fees charged to air carriers, upon a complaint or request for determination and
a finding of a significant dispute, and directs the publication of policies or
guidelines for determining reasonable fees and development of expedited hearing
procedures to resolve airport fee disputes. The Department’s procedures
applicable to proceeding concerning airport fees are contained in Subpart F,
Title 14 CFR, §302.601 - §302.609.
The Policy Regarding Airport Rates and Charges
The Department published the 1996 Rates and Charges Policy in the Federal
Register at 61 FR 31994 on June 21, 1996. The statement of policy was required
by section 113 of the Federal Aviation Administration Authorization Act of 1994,
Public Law 103-305 (August 23, 1994), now codified at 49 USC § 47129. The
publication of the 1996 Rates and Charges Policy followed publication of a
notice of proposed policy (59 FR 29874, June 9, 1994). That proposal predated
enactment of section 47129. After enactment of section 47129, the Department
published a supplemental notice of proposed policy (59 FR 51585, October 12,
1994); an Interim Policy (60 FR 6906, February 3, 1995); and a further
supplemental notice of proposed policy (60 FR 47102, September 8, 1995).
On behalf of its member airlines, the Air Transport Association of America (ATA)
and the City of Los Angeles, operator of Los Angeles International Airport,
challenged elements of the 1996 Rates and Charges Policy in the United States
Court of Appeals for the District of Columbia. The court vacated portions of the
1996 Rates and Charges Policy in Air Transport Ass’n of America v. DOT, 119 F3d
38, amended by 129 F.3d 625 (D.C. Cir. 1997).
The 1996 Rates and Charges Policy specified that, unless otherwise agreed to by
an airport user, fees for airfield use must be based on costs calculated using
the historic cost accounting (HCA) methodology. 1996 Rates and Charges Policy,
paras. 2.2, 2.4, 2.5.1. For other airport facilities and services, however, the
airport proprietor was free to use any reasonable methodology to determine fees,
if justified and applied on a consistent basis. 1996 Rates and Charges Policy,
para. 2.6. Petitioners in the court case challenged the disparate treatment of
airfield fees and other fees. The court determined that this distinction had not
been adequately justified. 119 F.3d at 44. At the Department’s request, the
Court vacated only the specific provisions the 1996 Rates and Charges Policy
that petitioners challenged as implementing that distinction. 129 F.3d at 625.
Since the court’s ruling, the Department, has addressed significant
airport-airline fee disputes through case-by-case adjudication. The Department’s
decisions are informed by the statutory limitations imposed on airport fees. One
limitation derives from requirements of the airport improvement program grant
assurances, 49 U.S.C. § 47107. In particular, a federally-assisted airport
sponsor must give the Secretary of Transportation and the FAA certain
assurances, including the assurance that the airport will be available for
public use on fair and reasonable terms and without unjust discrimination. The
other limitation arises from the proprietor’s exception to the Anti-Head Tax
Act, which allows the airport sponsor to collect only reasonable rental charges,
landing fees, and other service charges from aircraft operators for the use of
airport facilities.
Our past cases have established some guidelines for our analysis of fees
challenged by airlines. Our cases have examined fees and fee methodologies that
we considered reasonable as well as those we considered not to be reasonable. .
See, Miami International Airport Rates Proceeding, Order 97-3-26 (March 19,
1997), aff’d sub nom., Air Canada v. DOT, 148 f.3D 1142 (D.C. Cir. 1998); Alaska
Airlines, Inc., et al. v. Los Angeles World Airports, Order 2007-6-8 (June 15,
2007) (LAX III), on appeal to the United States Court of Appeals for the
District of Columbia Circuit).
Additionally, we have established some guidance on unreasonable airline fees
Second Los Angeles Int’l Airport Rates Proceeding, Order 95-9-24 (Sept. 22,
1995, (LAX II), aff’d sub nom, City of Los Angeles v. DOT, 165 F.3d 972 (D.C.
Cir. 1999); Brendan Airways, LLC v. Port Authority of New York and New Jersey,
Order 2005-6-11 (June 14, 2005), aff’d in part, Port. Auth. of New York and New
Jersey v. DOT, 478 F.3d 21 (D.C. Cir. 2007).
The Secretary has also determined whether or not certain disputed fees were
unjustly discriminatory. Brendan Airways, op cit., Order 2005-6-11; LAX III.
Airport Congestion in the United States
Currently, the National Airspace System (NAS) handles 750 million passengers
each year. We expect this number to reach one billion by 2015, and forecasts
indicate increases in demand ranging from a factor of two to three by 2025.
Market competition spurred by new-entrant, low-cost carriers and the competitive
response by legacy airlines have generated much of the increase in air travel
demand. Among the trends are new and expanded route networks to lesser-served
markets connecting major hubs with regional jet service. The additional service
in some cases provides no net increase in seats between origins and destinations
but provides more operations in the system with greater numbers of smaller
capacity aircraft.
The majority of the airports in the NAS have adequate airport capacity with
little, if any, delay. Generally, congestion occurs at the largest airports. The
35 busiest airports, known as Operational Evolution Partnership (OEP) airports,
handle approximately 73 percent of the commercial air passenger boardings in the
system. Runway construction projects have long served as a primary method to
improve capacity. Since fiscal year 2000, thirteen new runways (more than 20
miles of new pavement) have opened at the 35 OEP airports. In addition, six more
of the OEP airports have airfield projects under construction (two airfield
reconfigurations, three new runways, and one runway extension), which should be
commissioned within the next three years. These new runways and airfield
reconfigurations involve eighteen of the 35 OEP airports, providing these
airports with the potential to accommodate about two million more annual
operations.
Nevertheless, the experience of summer 2007 shows that congestion is a problem
today. Airlines at New York JFK International Airport increased their scheduled
operations by 41 percent between March 2006 and August 2007. As a result, the
number of arrival delays exceeding one hour increased by 114 percent in the
first ten months of fiscal year 2007, compared to the same period the previous
year. During June and July 2007, on-time arrival performance at JFK was only 59
percent. Moreover, delays resulting from operations at New York metropolitan
area airports alone can account for up to one-third of the delays throughout the
entire national system. The congestion in the New York airspace has ripple
effects across the national airspace system, causing flight delays,
cancellations, and/or missed connections. These delays impose economic and
social costs on airline passengers and shippers; airlines incur extra costs for
fuel, flight crews, and schedulers. Delays are likewise beginning to increase at
San Francisco. At Chicago O’Hare, the FAA implemented voluntary flight
restrictions in 2004 to limit congestion and delays. The reconfiguration of the
O’Hare airfield will eventually provide the capacity to overcome congestion. In
the short run, however, congestion would be much worse if not for FAA
intervention.
Most portions of the country have plans and capabilities to meet projected
aviation demand. A recent study, Capacity Needs in the National Airspace System
2007-2025: An analysis of Airports and Metropolitan Area Demand and Operational
Capacity in the Future, conducted by the Federal Aviation Administration as part
of the Future Airport Capacity Task (FACT) 2, indicates metropolitan areas and
regions along the east and west coasts are experiencing large amounts of growth
in population and economic activity that cause chronic congestion. Based on
studies and analyses associated with FACT 2, conditions are projected to get
worse in the future in these coastal regions, primarily concentrated at various
OEP airports. Fourteen of the 35 OEP airports and eight metropolitan areas are
forecasted to be capacity-constrained in 2025.
Of the fourteen airports identified as capacity-constrained in the study,
several are further constrained by conditions, either physical (New York
LaGuardia) or environmental (Long Beach-Daugherty Field), that prevent
additional runway capacity from being built. To date, even with planned
improvements, no single solution to the congestion at these airports has been
identified. Aside from adding runway capacity, air traffic operational
improvements and airspace redesign are additional measures that have been
considered. In addition, even at airports where expansion is possible or
planned, the lead-time to bring a planned improvement project from concept to
commissioning may be substantial (10-15 years). Until new facilities are
completed and put into service, these locations may continue to be plagued by
congestion and delays.
To adequately prepare to handle the increasing air travel demand in the system,
it will be necessary to augment tools available to the local governments which
operate these airports to encourage regional aviation assets to be employed to
resolve the capacity issues. In areas where the metropolitan areas may be served
by more than one commercial service airport, the dispersal or regionalization of
traffic can be encouraged by certain financial incentives, not all of which are
expressly permitted by the current rates and charges policy.
Role of Price in Addressing Congestion
One way of addressing congestion of an airport’s airside facilities is by the
pricing of those facilities. By raising the cost of operating a flight during
congested periods, an airport owner/operator can increase the efficient
utilization of the airport in a number of ways. First, by charging higher
landing fees during periods of peak congestion, the airport proprietor gives
aircraft operators the incentive to reschedule their flights to less congested
periods or to use secondary airports. The degree to which aircraft operators
reschedule will in large part depend on their network structure and access to
secondary airports. Second, if airports structure their airfield charges to
reflect scarcity by incorporating per-operation charges with weight-based
charges, they will provide an incentive for air carriers to use congested
airfield facilities more efficiently by increasing the size of aircraft
operating during periods of congestion. Third, properly pricing scarce airfield
capacity will yield a clearer signal as to the desirability of expansion of
capacity at that airfield. Even where expansion is not feasible, the industry
and users benefit if adjustment of prices during congested periods increases the
efficiency with which congested airfield facilities are used.
The proposed actions do not represent true congestion pricing because they do
not authorize airport proprietors to set fees to balance demand with capacity
without regard to allowable costs of airfield facilities and services.
Nevertheless, by enabling proprietors at congested airports to assign
additional, but still appropriate, costs to the airfield to better reflect the
cost of using congested airfield facilities, these proposed actions should
encourage more efficient use of these facilities and encourage feasible capacity
expansion. Airport sponsors must assure the Department that the airport is
available to the public on reasonable terms and without unjust discrimination.
If we adopt the two proposed amendments targeted for congested airports, we
expect affected proprietors to implement them in a manner that is consistent
with the grant assurance and we expect that the implementation will lead to a
more efficient use of the congested facilities
Discussion of Proposals
General Discussion
The three specific proposals do not alter one of the fundamental principles of
the 1996 Rates and Charges Policy: that reasonable fees must be based on the
capital and operating costs of the facilities for which the fees are assessed.
Rather, two of the proposals would modify costs that may be reasonably included
in the cost base of landing fees at a congested airport. The third would clarify
the ability of airports to adopt a “dual-element” landing fee with both a
per-operation and weight-based component. This authority exists today for
airports with or without congestion. While the presence or absence of congestion
may affect how an airport may reasonably implement a dual element-landing fee,
as discussed below, the 1996 Rates and Charges Policy is silent on this point.
None of the proposed amendments is intended to permit an airport to generate
revenues in excess of the allowable costs of providing airfield facilities and
services at the congested airport, as defined in accordance with the 1996 Rates
and Charges Policy.
The effect of each of these modifications would be to allow the airport operator
to increase the cost of landing at a congested airport during periods of
congestion, even if congestion lasts through much of the day. By raising the
costs of the congested facilities, the airport operator would provide an
incentive for current or potential aircraft operators to (1) adjust schedules to
operate at less congested times (if they exist); (2) use less congested
secondary or reliever airports to meet regional air service needs; or (3) use
the congested airport more efficiently by up-gauging aircraft. The three
proposals are not intended to be mutually exclusive. In other words, if the
circumstances justify doing so, an airport proprietor might use a combination of
two, or even all three, proposals in setting landing fees during periods of
congestion. Any charges imposed on international operations, whether using this
proposed flexibility or not, would also have to comply with the international
obligations of the United States, including requirements that the charges be
just, reasonable, and equitably apportioned among categories of users.
Where additions to airport capacity are financially and physically feasible and
can be accomplished without undue adverse environmental or social impacts, the
Department considers such additions to be the most appropriate long-term actions
to address airport congestion and delay. The amendments to the 1996 Rates and
Charges Policy proposed in this action are intended to help airports manage
available capacity in the short-run, while additions to capacity are being
planned and built and to help those airports where capacity expansion is not
feasible.
Definition of Congested Airport
Two of the three proposed revisions would apply only to congested airports.
Therefore, this action proposes to add a new subsection E to the Applicability
Section of the 1996 Rates and Charges Policy that would define a congested
airport. The subsection would establish two categories of congested airports –
those meeting the statutory definition of congested airport contained in 49 USC
§ 47175 or those identified in the report titled “Capacity Needs in the National
Airspace System, 2007-2025” (May 2007), issued by the Future Airport Capacity
Task and commonly referred to as the “FACT 2 Report.” Section 47175 is part of
an aviation development streamlining program enacted by Congress in 2003
(Vision-100). That program recognized the significant negative economic impact
on our national economy resulting from congestion and delays at our major
airports. It gave airport capacity enhancement projects at those airports a
national priority status, and authorized an expedited environmental coordination
process that would protect the environment while ensuring the economic vitality
resulting from the continued growth in aviation. Pub. L. 108-176, Title III, §
302 (2003). A congested airport is defined as an airport that accounted for at
least one percent of all delayed aircraft operations in the Untied States and an
airport listed in Table 1 of the FAA’s Airport Capacity Benchmark Report 2001.
49 USC § 47175(2). Under its general authority to manage airspace, and after a
comprehensive analysis of current and forecasted traffic, demand, and
demographic trends, the FAA published the FACT 2 report identifying airports
that are or will be congested at three milestones – 2007, 2015 and 2025. It
would not be appropriate to permit an airport that is not projected to be
congested in 2025 to rely on provisions applicable to congested airports in
setting fees today. Therefore, the proposed amendment would also exclude
airports projected to be congested in 2025 for the first time from the scope of
the definition.
Two-Part Landing Fees
As noted, although most airports rely on a single element weight-based landing
fee, the use of a weight-based landing fee is not required. This issue was
squarely addressed in the Department’s decision in the Massport Pace case,
Investigation into Massport’s Landing Fees, Opinion and Order, FAA Docket
13-88-2 (December 22, 1988), aff’d New England Legal Foundation v. Department of
Transportation, 883 F.2d 157 (1st Cir. 1989). In that case, the Department did
not determine that Massport’s two-part landing fee for Boston Logan Airport was
unreasonable, per se. Rather, the Department concluded that “landing fee
structures that vary from the traditional weight-based approach are permissible
so long as the approach adopted reasonably allocates costs to the appropriate
users on a rational and economically justified basis.” Opinion and Order at 11.
The Department found the landing fee to be unreasonable because it failed to
meet this standard for allocating costs. Id. This decision followed a previous
ruling in AOPA v PANYNJ, 305 F. Supp 93 (E.D.N.Y. 1969), upholding a minimum
take-off fee (essentially a per-operation charge) imposed by the Port Authority
of New York and New Jersey at Newark, LaGuardia and Kennedy airports.
The proposed amendment would explicitly acknowledge the ability of an airport to
establish a two-part landing fee. The amendment would add a new paragraph 2.1.4,
in the section titled “Fair and Reasonable Fees,” stating that fair and
reasonable fees may include a two-part landing fee consisting of a per-operation
charge and a weight-based charge, so long as the two-part fee reasonably
allocates costs to the appropriate users on a rational and economically
justified basis. This provision would apply to any airport. However, the
presence of congestion and the potential to serve more individual travelers if
larger aircraft are used in the limited number of operations available, would be
the most obvious circumstance for the justification of a dual component fee.
Carriers may have many reasons to serve routes with smaller aircraft – regional
jets or even turboprops. Smaller aircraft may have lower operating costs or
allow the carrier to offer more frequent service economically. However,
operations of smaller aircraft during periods of airport congestion reduce the
efficiency of the airport. First, it simply takes more operations to move the
same number of people to and from the airport. Second, these aircraft may have
slower speeds on approach to and departure from the airport than larger jets.
Also, they may require larger separation distances from large jet aircraft than
other large jets.
A purely weight-based landing fee provides no disincentive, and may actually
provide an incentive, for carriers to operate smaller aircraft. The landing fee
for small aircraft will be substantially lower than the fee for a larger
aircraft. If an airport assesses a per-operation charge as a component of the
landing fee, the cost of operating a smaller aircraft will increase, and the
cost per seat of operating smaller aircraft will increase. The proposed
amendment would make it clear that during periods of congestion the airport
proprietor may take the presence of congestion into account in determining the
proportion of airfield costs to be recovered from the per-operation charge, so
long as the combination of the two elements do not generate revenues in excess
of the allowable costs of the airfield. The flaw with the Massport “PACE” fee
was that Massport justified the per operations fee on the basis of congestion,
yet applied it at all times, even when congestion was not present. Opinion and
Order at 9. For a per operation fee imposed during times when congestion might
not be present, the per-operation charge would need to be justified on other
settled principles of cost allocation.
Costs of Facilities Under Construction
The proposed action would amend the 1996 Rates and Charges Policy by replacing
paragraph 2.5.3, which was vacated by the court of appeals, with a new paragraph
addressing charges for facilities under construction. The paragraph vacated by
the court specified that with limited exceptions for land acquired for future
development, costs of airfield facilities not yet built and operating could not
be included in the rate base of the airfield unless agreed to by airfield users.
The court’s decision to vacate this paragraph did not necessarily represent a
determination that the provision was erroneous, per se. Rather, as noted, the
court identified the provision as one that was intimately connected to the 1996
Rates and Charges Policy’s erroneous distinction between airfield fees and fees
for other facilities.
The court’s decision did not vacate the principle that airfield fees are limited
to an amount that recovers the costs of operating and maintaining the airfield.
One of the fundamental principles of this “cost of service” approach to setting
fees is the principle that only the cost of facilities “used and useful” by the
rate-payers may be included in the rate-base. (A. Priest, 1 Principles of Public
Utility Regulation 174, 178 (1969); J. Bonbright, Principles of Public Utility
Rates 178 (1961); S. Breyer, Regulation and Its Reform 40 (1982); City and
County of Denver v. Continental Air Lines, Inc., 712 F. Supp. 834, D.CO.
(1989)). The vacated paragraph 2.5.3 represented the application of this
principle, which is still accepted practice in “cost of service” fee setting.
The Department has applied this principle only once in a fee dispute
adjudication, finding that an airport may reasonably include, in its landing
fee, a debt service charge for uncompleted capital projects, since the projects
were expected to be completed during the year in which the charges were made.
Second Los Angeles International Airport Rates Proceeding, DOT Order 95-12-33
(Dec. 22, 1995).
With that said, exceptions to the principle that the costs of facilities not yet
built and operating may not be included in the rate base have been recognized in
unusual circumstances (e.g., Consumer Protection Board v. Public Service
Commission, 78 A.D. 2d 65, 434 N.Y. Supp. 2d 820, 822 (1980) (inclusion of
construction work in progress in rate base is an extraordinary remedy); Mid-Tex
Electric Cooperative, Inc. v. FERC, 773 F.2d 327 (D.C. Cir. 1985) (decision to
allow construction work in progress in rate base is consistent with the “used
and useful” principle)). The proposed amendment would represent a modest
departure from this principle. It would permit the operator of a congested
airport to incorporate the costs of airfield facilities under construction
(including costs associated with reconstructing facilities) into the landing
fee. Two approaches are being considered, and we solicit comment on each. Under
the first approach, the costs of facilities under construction could be included
only during periods when the airport experiences congestion. Under the second
approach, the costs could be included at the congested airport throughout the
day. Any costs recovered for principal and interest during the construction
period would have to be deducted from the amount later capitalized and amortized
for recovery in the rate-base after the facility is put into use. To qualify for
inclusion, the facilities would need to be under construction, so that
availability of the facilities for use would not be speculative. All planning
and environmental reviews would need to have been completed, a financing plan
developed, and financing arranged. Once construction is under way, the risk that
current users will not benefit from the facility in the foreseeable future is
reduced or eliminated if the user remains at the airport. In addition, allowing
the airport proprietor to begin early recovery of capital and interest carrying
costs of the facility during construction would reduce the long-term costs of
the project by reducing the amount of financing costs incurred during the
construction period that would otherwise be capitalized and added to the rate
base. In any event, it would not increase the total costs of the project passed
on to carriers, and it could hasten the arrival of capacity expansions which
benefit the carriers by reducing future congestion. The proposed amendment would
also direct international airports intending to charge for projects under
construction to consult the International Civil Aviation Organization Document
9562, Airport Economics Manual, Second Edition, Attachment 6. This document sets
forth internationally accepted principles for charging airport users for
projects under construction.
This modification would allow the airport proprietor to raise the cost of using
congested airfield facilities during periods of congestion or alternatively
during all periods of the day in the near term. The increased cost in turn would
provide additional financial incentives to users to consider alternatives to
using the airfield when congestion is present, including shifting operations to
off-peak periods or to less congested airports that also serve the market area
of the congested airport, or to serving the airfield more efficiently such as
with up-gauged aircraft.
.
Including costs of secondary airports in the rate-base of a congested airport
The 1996 Rates and Charges Policy permits, in paragraph 2.5.4, the operator of
an airport to include in the rate base of that airport costs of another airport
currently in use if three conditions are met: (1) the two airports have the same
proprietor; (2) the second airport is currently in use; and (3) the costs of the
second airport to be included in the first airport’s rate-base are reasonably
related to the aviation benefits that the second airport provides or is expected
to provide to the aeronautical users of the first airport. Subparagraph (a)
further provides that the third condition will be presumed to be satisfied if
the second airport is designated as a reliever airport to the first in the FAA’s
National Plan of Integrated Airport Systems (NPIAS).
The proposed action would amend subparagraph (a) to add another category of
airports to the presumption – those that the FAA has designated as secondary
airports serving cities, metropolitan areas, or regions served by congested
airports. FAA has identified these airports and tracks development at these
airports in the FAA strategic plan or “Flight Plan.” The current list of
secondary airports is included as an appendix to this notice. The FAA will post
the current list of designated secondary airports on its website upon
publication of a final amendment to the policy statement and will keep it up to
date.
The proposed action would also add a new subparagraph (e) stating that the
proprietor of a congested airport may consider the presence of congestion when
determining the share of the airfield costs of the secondary airport to be
included in the rate base of the congested airport during periods of congestion.
In no event would the airport operator be allowed to generate more revenue from
airfield charges imposed at the two airports than the costs of operating the two
airfields.
The proposed action would provide incentives to aircraft operators to shift
service away from congested times at congested airports in two ways. First, it
would raise the cost of operating at the congested airport during times of
congestion. Second, by adding costs of the secondary airport to the rate base of
the first airport, the amendment would reduce the costs of the secondary airport
remaining to be recovered from landing fees imposed at the secondary airport.
Thus the costs of serving the region through a secondary airport would go down.
These proposed modifications to our rates and charges policy do not affect an
airport’s requirement to meaningfully consult with airline users before
increasing fees, charging new fees, or changing fee methodologies. “Adequate
information” should be provided by the airport to permit aeronautical users to
evaluate the proprietor’s justification for the charge and to assess the
reasonableness of the charge. Each party should give “due regard” to the views
of the other and the airport should consider the effects of fee changes on the
users and the users should consider the financial needs of the airports. A “good
faith effort” to reach agreement should be made. Additionally, the Department
encourages the airport operator to provide certain historic financial
information for the airport, economic, financial and/or legal justification for
change in fee methodology or level of fees, traffic information, and planning
and forecasting information. 1
In the context of considering a fee dispute complaint under 49 U.S.C. § 47129,
the Department has stated that “one of the important goals in the Policy
Statement is the encouragement of airport-airline negotiations in the
establishment of new fees or fee increases” and it encouraged:
all airports to comply with their obligations under the Policy Statement and
applicable bilateral aviation agreements to engage in meaningful consultations
with carriers in advance of increasing fees or establishing new fees. We expect
airports to justify their fees and to exchange appropriate financial information
to enable the carriers to fully evaluate those proposed fees.
British Airways PLC and Virgin Atlantic Airways Limited v. The Port Authority of
New York and New Jersey , Order 2000-5-23 at 10. (May 24, 2000)
The Proposed Amendment
Because of the foregoing, the Department of Transportation proposes to amend the
Policy Regarding Airport Rates and Charges, published at 61 FR 31994 (June 21,
1996) as follows:
POLICY REGARDING AIRPORT RATES AND CHARGES
Applicability of Policy
1. Add a new subsection E, Congested Airports to read as follows:
E. Congested Airports
The Department considers a congested airport to be –
(1) An airport meeting the definition of congested airport in 49 U.S.C. 47175;
or
(2) An airport identified as congested by the Federal Aviation Administration in
the report of the Future Airport Capacity Task entitled Capacity Needs in the
National Airspace System 2007-2025: An analysis of Airports and Metropolitan
Area Demand and Operational Capacity in the Future (FACT 2 Report), or any
update to that report that the FAA may publish from time-to-time, except for
airports that will not become congested until 2025.
Fair and reasonable Fees
2. Amend subsection 2.1 by adding a new paragraph 2.1.4 to read as follows:
2.1.4 An airport proprietor may impose a two-part landing fee consisting of a
per-operation charge and a weight-based charge provided that (1) the two-part
fee reasonably allocates costs to users on a rational and economically justified
basis; and (2) the total revenues from the two-part landing fee do not exceed
the allowable costs of the airfield. The operator of a congested airport may
consider the presence of airfield congestion when determining the portion of
allowable airfield costs to be allocated to the per operation charge during
periods of congestion
3. Add a new paragraph 2.5.3 to read as one of the following two options:
Option One
“2.5.3. The proprietor of a congested airport may include in the rate-base used
to determine airfield charges during periods of congestion a portion of the
costs of airfield projects under construction so long as (1) all planning and
environmental approvals have been obtained for the projects; (2) the proprietor
has obtained financing for the projects; and (3) construction has commenced on
the projects.
“(a) The airport proprietor must deduct from the total costs of the projects any
principal and interest collected during the period of construction in
determining the amount of project costs to be capitalized and amortized once the
project is commissioned and put in service.
“(b) The airport proprietor should consult the International Civil Aviation
Organization Document 9562, Airport Economics Manual, Second Edition, Attachment
6 before taking action to include costs of a project under construction in the
rate-base of an airport with international air service.”;
Option Two
“2.5.3. The proprietor of a congested airport may include in the rate-base used
to determine airfield charges a portion of the costs of airfield projects under
construction so long as (1) all planning and environmental approvals have been
obtained for the projects; (2) the proprietor has obtained financing for the
projects; and (3) construction has commenced on the projects.
“(a) The airport proprietor must deduct from the total costs of the projects any
principal and interest collected during the period of construction in
determining the amount of project costs to be capitalized and amortized once the
project is commissioned and put in service.
“(b) The airport proprietor should consult the International Civil Aviation
Organization Document 9562, Airport Economics Manual, Second Edition, Attachment
6 before taking action to include costs of a project under construction in the
rate-base of an airport with international air service.”
4. Revise paragraph 2.5.4(a) to read as follows:
(a) Element no. 3 above will be presumed to be satisfied if
(1) the other airport is designated as a reliever airport for the first airport
in the FAA’s National Plan of Integrated Airport Systems (“NPIAS”); or
(2) the first airport is congested and the other airport has been designated by
the FAA as a secondary airport serving the community, metropolitan area or
region served by the first airport.
b. Add a new subparagraph (e) to read as follows:
(e) The proprietor of a congested airport may consider the presence of airfield
congestion at the first airport when determining the portion of the airfield
costs of the other airport to be paid by the users of the first airport during
periods of congestion, so long as the total airfield revenue recovered from the
users of both airports do not exceed the total allowable costs of the two
airports combined.
Issued in Washington, DC, on
Mary E. Peters
Secretary of Transportation
Robert A. Sturgell
Acting Administrator, Federal
Aviation Administration
1 DOT Policy Regarding Airport Rates and Charges, 61 Fed. Reg. 32018-32019 and
32022 (1996).