Aviation Fees:

Review of Air Carriers' Year 2000 Passenger and Property Screening Costs

GAO-05-558: Published: Apr 18, 2005. Publicly Released: Apr 18, 2005.

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The Aviation and Transportation Security Act (ATSA) authorized the Transportation Security Administration (TSA) to impose an Aviation Security Infrastructure Fee (ASIF) on air carriers to help pay for the costs of aviation security services. To impose the ASIF, TSA issued an Interim Final Rule (IFR) and required air carriers to report their passenger and property screening costs incurred in 2000 on an attachment to the IFR referred to as Appendix A. The 2000 screening costs reported by air carriers were going to be used to establish the ASIF. Based on industry estimates of $1 billion, TSA had estimated that the costs incurred by air carriers in 2000 were $750 million, but the amounts reported by air carriers totaled $319 million, significantly less than expected. To provide the Congress with an independent assessment, the Department of Homeland Security Appropriations Act, 2005 required GAO to review the amount of passenger and property screening costs incurred by air carriers in 2000.

We estimate at a 95 percent confidence level that the amount of passenger and property screening costs incurred by air carriers in 2000 for the 3 major cost components were between $425 million and $471 million, with a midpoint estimate of $448 million. The difference between our midpoint estimate and what the air carriers reported on the Appendix A and subsequently paid to TSA is $129 million. Determining exact cost amounts was not feasible and assumptions were required for several reasons including the following: (1) 5 years have passed since the costs were incurred, (2) the air carriers' accounting systems were not designed to capture specific passenger and property screening costs, and (3) certain cost categories required the application of assumptions to identify, categorize, or allocate cost. We focused on estimating for 2000 the three primary screening cost components. Costs associated with the use of private screening contractors (or airline employees if they performed the screening function directly)--these were the most significant costs to the air carriers in 2000. Air carriers typically contracted with private screening companies to perform screening on their behalf, and the rates charged combined costs such as background checks, training, and uniforms. We estimated that air carriers incurred $334 million for this cost component, compared to $293 million reported by air carriers on the Appendix A. Airport costs related to passenger and property screening--the two major screening-related cost categories that airports charged air carriers, were costs for law enforcement officers and real estate costs for security checkpoints. Based on information obtained from a sample of airports, we estimated that air carriers incurred $80 million for this cost component, compared to $5 million reported on the Appendix A. Air carriers' internal costs--these include, among other things, installation, operation, maintenance, and testing of screening equipment; ground security coordinators; security program management and contract administration; and legal and accounting support. Based on an analysis of the Appendix A and on information obtained through interviews, we estimated that the air carriers incurred $34 million in screening costs, compared to $21 million reported in the Appendix A.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendation for Executive Action

    Recommendation: The Secretary of Homeland Security should direct the Assistant Secretary, Transportation Security Administration, to consider the analysis and estimates in this study in determining the limitation on the aggregate air carrier fee consistent with ATSA (49 U.S.C. 44940(a)(2)(B)(i)).

    Agency Affected: Department of Homeland Security: Directorate of Border and Transportation Security: Transportation Security Administration

    Status: Closed - Implemented

    Comments: The Aviation and Transportation Security Act authorized the Transportation Security Administration (TSA) to impose an Aviation Security Infrastructure Fee on air carriers to help pay for the costs of aviation security services. To impose the fee, TSA issued an Interim Final Rule requiring air carriers to report their passenger and property screening costs incurred in 2000 to be used to establish the fee. TSA estimated the costs incurred by air carriers in 2000 were $750 million. The amounts reported by air carriers totaled $319 million; significantly less than TSA's estimate. To provide the Congress with an independent assessment, GAO was mandated to review the passenger and property screening costs incurred by air carriers in 2000. Based on our work, we estimated that the passenger and property screening costs incurred by air carriers in 2000 were between $425 million and $471 million, with a midpoint estimate of $448 million. The difference between our midpoint estimate and what the air carriers reported and paid to TSA was $129 million. Based on our estimate, TSA increased monthly fee assessments to 34 air carriers, resulting in a monthly increase in TSA collections of over $8.3 million. Consequently, GAO claimed an accumulated financial benefit of $628,869,080 (on a net present value basis) based on the additional TSA fee collections in 2007 and 2008, and TSA's projected fee collections for the next three years. Specifically, this financial accomplishment encompasses the net present value of TSA records related to the following five increases in fee collection from 34 air carriers as a result of our work: May 2007 TSA fee collections (including retroactive fee collections associated with air carrier fee increases)of $266,377,327; fiscal year 2008 increased TSA fee collections of $97,966,784; fiscal year 2009 increased TSA fee collections of $92,194,528; fiscal year 2010 increased TSA fee collections of $88,114,812; and fiscal year 2011 increased TSA fee collections of $84,215,629.

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