Federal Aviation Administration:

Cost Allocation Practices and Cost Recovery Proposal Compared with Selected International Practices

GAO-07-773R: Published: Jun 8, 2007. Publicly Released: Jun 8, 2007.

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Anticipating the expiration of the Federal Aviation Administration's (FAA) current authorization at the end of fiscal year 2007, the administration submitted a proposal on February 14, 2007, for reauthorizing FAA and the excise taxes that fund most of its budget. This proposal would introduce cost-based charges for commercial users of air traffic control services, eliminate many current taxes, substantially raise fuel taxes for general aviation users to pay for their use of air traffic control services, and charge commercial and general aviation users a fuel tax to pay primarily for airport capital improvements. In January 2007, FAA released the results of a recently completed cost allocation study in support of the administration's proposal for transitioning to user fees. FAA and the administration used this study to determine the factors that drive the costs of providing air traffic control services, allocate these costs to various users of air traffic control services, and support the development of alternative methods to recover those costs. On March 21, 2007, we testified before the House Subcommittee on Aviation, providing our observations on selected changes to FAA's funding and budget structure contained in the administration's reauthorization proposal. As requested, we are also providing comparative information to further assist Congress in considering FAA's funding proposal. Accordingly, we addressed the following question: How do the proposed practices for allocating and recovering the cost of FAA's air traffic control operations compare to the practices of other countries?

The practices FAA used to allocate air traffic control costs to users and the administration proposed to recover these costs from users differ somewhat from the practices employed by air navigation service providers (ANSP) in other countries. The International Civil Aviation Organization (ICAO) has established guidance for allocating and recovering costs attributed to air traffic-related services, but member states are not legally bound to follow its principles. In its 2007 cost allocation study, FAA allocated its total air traffic control costs to the three air traffic service categories that drive these costs--terminal services, en route services, and oceanic services. FAA then assigned the costs for providing these services to two types of aircraft--high-performance aircraft, which include all fixed wing turbine-engine aircraft, and piston aircraft, which include fixed-wing piston-engine aircraft and helicopters--because different aircraft types affect costs differently. More specifically, turbine- and piston-engine aircraft fly at different altitudes and speeds, and these differences in operating characteristics lead to differences in the costs of providing air traffic control services. The ANSPs with cost-based charges that we reviewed also allocate costs to each of their service categories--although the percentages allocated to each category vary by country--but none of these ANSPs further allocate costs by the type of aircraft used. To recover costs, the administration proposes charging commercial aircraft users for en route services based on distance traveled and for terminal services based on airport size and aircraft weight. This proposed practice for recovering terminal costs generally resembles the practices of the other ANSPs we reviewed, but the proposed practice for recovering en route costs differs because the other ANSPs also consider aircraft weight--a factor that increases the share of costs recovered from larger aircraft that can carry more fare-paying passengers. To recover costs from general aviation users, the administration is proposing a fuel tax of 56.4 cents per gallon for air traffic control services. By contrast, some other ANSPs currently charge users of small general aviation aircraft an annual fee based on such factors as aircraft weight and number of flight operations.

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