Airline Competition:

Passenger Facility Charges Can Provide an Independent Source of Funding for Airport Expansion and Improvement Projects

T-RCED-90-99: Published: Jun 19, 1990. Publicly Released: Jun 19, 1990.

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GAO discussed whether airports needed to have the option of assessing a direct charge on passengers in order to expand and promote a more competitive environment. GAO noted that: (1) passenger facility charges (PFC) could help airports fund needed projects and make room for potential competitors to begin service; (2) airports are often unable to add needed capacity because of agreements that give incumbent airlines significant control over airport expansion decisions; (3) 25 of the 30 largest airports had restrictions in their agreements with airlines that limited the airports' ability to make use of PFC; (4) many airports relied heavily on airlines to fund capital projects for capacity expansion and improvement; (5) PFC could provide a source of revenue independent of airline approval for financing airport expansion projects needed to meet expected growth; (6) previous GAO studies indicated that airline fares were substantially higher when one or two airlines controlled most of the traffic and when there were barriers to new entry; (7) common leasing practices could limit future competitive access to PFC-funded facilities by extending the length of time airlines control exclusively leased facilities; (8) PFC could help close the gap between federal funding and airport needs for funding capital projects; and (9) diversion of PFC funds to nonairport uses could be prevented if safeguards were enacted as part of proposed PFC legislation.

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