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February 9, 2016

Gripes About Airport Malls, Coffee, Bag Fees, and Ticket Increases Liven Up Hearing

A House Transportation and Infrastructure Subcommittee on Aviation hearing turned into a sharp-elbowed debate between the airports – who want Congress to increase the cap on Passenger Facility Charges (PFCs) from $4.50 to $8.50 – and the airlines who say a higher PFC isn’t needed and would be “punishing the passenger.”

Subcommittee members joined the fray with questions and gripes about airline baggage fees, airport parking fees, the price of a cup of coffee at airports, and airports using some of their money to build retail mini-malls.

Rep. Michael E. Capuano, D- Mass., complained that taxpayer dollars were being used “to put another clothing store in a mall” at an airport. “Have either of you gentlemen ever bought a suit at an airport?” he asked two witnesses, FAA official Ben De Leon and GAO Director of Civil Aviation Issues Gerald Dillingham. “I can’t afford them, congressman,” said Dillingham.

“If an airport wants to create a mall, let them do it with their own money,” Capuano fumed. “Never, never … allow taxpayers dollars that are meant to address safety and efficiency be used to sell a suit.”

On the PFC issue, Sharon Pinkerton, senior vice president for Airlines for America told the panel, “There is no current or foreseeable crisis in airport funding — in sharp contrast to the issues you’re dealing with with the Highway Trust Fund today. There is simply no empirical justification to raise airport-related taxes — especially when revenue from other resources is so abundant.”

By “other resources” she meant federal Airport Improvement Program grants, concession fees, parking fees, and the bonds airports use to raise capital.

The airport trust fund “had a record high $12 billion in revenue in 2013, and the highest uncommitted balance in over 13 years, $5 billion at the end of 2013 and it’s projected to be $6 billion in 2014,” she said. She noted that Standard & Poor’s “gives every single airport it evaluates investment grade credit rating … Airports enjoy access to bond financing at very good rates because of their good investment credit ratings. No U.S. airport, to our knowledge, has been unable to secure bind funding for an airport improvement project.”

Air travelers and airlines already “pay $19 billion in taxes and fees – soon to be $20 billion once the TSA fee goes into effect next month. We’re already taxed at a rate higher than alcohol and cigarettes, products that are taxed to discourage their use,” she said.

But Todd Hauptli, president and CEO of the American Association of Airport Executives told the subcommittee that airports need more money to build for the future. Passenger levels are expected to jump more than 55 percent over the next 20 years, he said.

He described the airlines as purely short term in their concerns. “Airlines view the world in a 90-day increments: what is the next financial statement for that shareholder report?” But airport managers, he said, must think about the long term; it sometimes takes 10 years to build major infrastructure projects.

Mark Reis, chairman of the board of directors, Airports Council International, North America and managing director of the Seattle-Tacoma airport, told the panel that his airport has launched a $2.5 billion capital investment program for the next 10 years. It will have to borrow $1.5 billion of that money and “our PFC’s are almost completely maxed out – meaning fully allocated to existing debt service” from earlier projects.

Addressing himself to the panel’s Republicans, Hauptli noted that the last time Congress increased the PFC in 2000 “it was under the watchful eye of Dick Armey as [House] majority leader and Tom DeLay as [House] majority whip – two conservative Republican members who understood the difference between a tax and a user fee, like all of this committee does intuitively.”

He added that while airlines contend that increasing the PFC would lead price-sensitive consumers to not travel by air, “just this morning in the newspaper I saw that in the last month alone airline fares increased six percent, the largest increase in the past 15 years. … And we haven’t even mentioned, of course, the issue of bag fees and a $25 or $30 bag fee and its impact on travel.”

Pinkerton shot back that while airfares have gone up recently “that’s a good thing” because “when carriers are able to recognize revenue from a route, what do they do with that revenue? They plow it back into the route. So they may increase service, which I know all of you are interested in….”

Prodded by ranking subcommittee Democrat Rick Larsen of Washington about bag fees, Pinkerton said that since airlines started making profits again after the recession “you’ve seen us plowing that money back into planes. So we’ve got 255 planes that are going to be delivered in 2014. That’s good for customers.” She added – in a nod to Boeing’s being a huge employer in Larsen’s district –“half of those are Boeing planes.”

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