Airline Competition:

Passenger Facility Charges Represent a New Funding Source for Airports

RCED-91-39: Published: Dec 13, 1990. Publicly Released: Dec 13, 1990.

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Pursuant to a congressional request, GAO provided information on ways to ensure that regulations covering passenger facility charges (PFC) would further congressional goals of enhancing airport capacity, safety, and security and reducing noise.

GAO found that: (1) PFC would help airports fund projects to expand capacity, reduce noise, and enhance safety, security, and competitive access; (2) the ability to expand capacity would give airports more flexibility both in stimulating competition and in reducing congestion and delay; (3) restrictive clauses in airport-airline agreements impeded airport expansion, but their prevalence suggested that airports would benefit from having an independent source of funding; (4) officials at eight airports reported that majority-in-interest (MII) agreements greatly impeded airport improvement projects, discouraged expansion, and reduced competitive access; (5) PFC gave airports more control over expansion decisions by reducing the airports' need for incumbent airline approval of capital projects; and (6) under the aviation act, MII agreements and other restrictive clauses in existing airport use agreements would not prevent the effective use of PFC funds. GAO believes that: (1) PFC-funded projects need to encompass the wide variety of projects that enhance airport capacity, safety, security, and competition and reduce noise; (2) PFC-funded facilities may be needed to ensure that potential entrant airlines have competitive access to those facilities; and (3) as airports begin to implement the PFC, consumers will need information on where and what PFC are charged.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The final rule on PFC, issued May 29, 1991, requires airline price advertising to contain a general statement informing consumers that "up to $12 per round trip in local airport charges may be collected in addition to the advertised price." This is similar to the way other special fees and taxes are currently handled.

    Recommendation: The Secretary of Transportation should consider additional methods of informing consumers about PFC.

    Agency Affected: Department of Transportation

  2. Status: Closed - Implemented

    Comments: The final rule contains assurances that PFC-funded facilities will not be subject to long-term exclusive-use leases or automatic rollover clauses, and that excess, as defined in the final rule, exclusive-use capacity will be made available to other airlines.

    Recommendation: To ensure that PFC-funded facilities increase competitive access, the Secretary of Transportation should require tenant airlines wanting to lease such new facilities to agree to accommodate other airlines at the unused or underused facilities the tenant airlines already lease, when their operations permit.

    Agency Affected: Department of Transportation

  3. Status: Closed - Implemented

    Comments: The final rule contains a clear definition of a "round-trip" and defines all other trips as "one-way." It also clarifies which airports will collect PFC for multiple-airport trips.

    Recommendation: The Secretary of Transportation should establish criteria to clarify which airports will collect PFC on trips that do not easily fit into the legislation's one-way and round-trip limitations, such as open-jaw trips or trips with stopovers in numerous cities.

    Agency Affected: Department of Transportation


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