Airport Pricing Proposal Prompts Protest

The U.S. Department of Transportation in January proposed to allow operators of congested airports to adjust landing fees as a means to encourage airlines to use larger planes, move flights away from peak periods and shift operations to secondary airports. During an extended public comment period, the proposal drew a mixed response from airport authorities and a decidedly negative one from various airlines and industry associations, which expect higher fees for airlines to translate to higher passenger fares without any meaningful improvement in airport congestion.

DOT's proposal would permit affected airport operators to levy on airlines a per-operation charge in addition to the weight-based charge already in effect; include the costs of their less-used airports in the fees at more congested airports; and include the costs of projects under construction (rather than those already completed).

According to DOT, a congested airport "is defined as an airport that accounted for at least 1 percent of all delayed aircraft operations in the United States." Based on 2006 operational statistics, 19 airports meet that criteria.

"The proposed actions do not represent true congestion pricing because they do not authorize airport proprietors to set fees to balance demand with capacity without regard to allowable costs of airfield facilities and services," according to DOT's notice of proposed rulemaking. "Nevertheless, by enabling proprietors at congested airports to assign additional, but still appropriate, costs to the airfield to better reflect the cost of using congested airfield facilities, these proposed actions should encourage more efficient use of these facilities and encourage feasible capacity expansion."

Critics raised several arguments. The National Business Travel Association, for example, wrote that it "strenuously opposes" the proposal, partly due to "the increased costs and likely reduction in flight options for business travelers."

NBTA also noted that DOT's proposal does not include "commensurate reductions" in non-peak fees at congested airports or in fees charged at secondary airports. It suggested that congestion pricing "would merely serve as a tax on those passengers already paying the highest fares due to their business travel patterns."

Furthermore, NBTA highlighted the impact on airport congestion from such uncontrollable elements as weather. "The fact that an airline paid a higher landing fee will not matter to Mother Nature and will be of little help in getting planes airborne during a thunderstorm or blizzard," according to the association. "Therefore, imposing new costs on airlines--costs that will surely be passed along to travelers and especially to business travelers, who tend to fly during peak hours and have the least flexibility in travel planning--will do little to help the system balance the multitude of factors that contribute to delays."

Representing several U.S. carriers, the Air Transport Association said DOT "is attempting an end-run around the limits on its statutory authority" and that its proposal "fails as a matter of law and policy."

ATA added that "congestion pricing has been rejected by virtually the entire U.S. and international airline community" and wouldn't work anyway: "Even a cursory examination of online travel services shows that airlines are already pricing services in accordance with the marketplace, and that passengers already balance cost and convenience when choosing a flight. A relatively minor increase in the costs that an airline incurs to operate a particular flight, which may or may not be reflected in the fare, is unlikely to change this."

American Airlines, Midwest Airlines, United Airlines and US Airways filed individual comments opposing the plan. "Congestion pricing would not be an effective solution to the delay problems plaguing the air traffic system," AA wrote. "This conclusion has generated rare consensus among scheduled airlines and general aviation alike."

AA also noted that "it is manifestly unfair to charge airlines at one airport for facilities at another. This is particularly true where the beneficiaries of facilities at one airport are competing directly with the airlines paying fees at another."

The International Air Transport Association, representing many non-U.S. airlines, raised similar arguments. "Cross subsidization," it wrote, "often results in airlines and their passengers paying for facilities and services that they do not use and will not (or cannot) benefit from. Subsidization of secondary airports via primary airport fees will likely result in competitive distortions between full service carriers (that normally serve the primary hub airports) and low-cost carriers (that often support underutilized secondary airports). It also will distort competition between U.S. carriers (that are not constrained in their ability to fly to secondary airports) and international carriers (whose ability to utilize secondary airports is limited by either bilaterals or market realities)."

Similarly, "pre-financing is unfair to airlines as there is no guarantee that airlines paying for future facilities will be the same as the airlines using the service when it comes online," IATA added.

According to a filing by British Airways, "Requiring BA and other international carriers to subsidize airports which they cannot access would appear to violate the prohibitions on discriminatory treatment."

Other associations filing comments objecting to DOT's proposals included the National Business Aviation Association, the National Air Transportation Association, the National Air Carrier's Association, the Regional Airline Association, the Aircraft Owners and Pilots Association and the Cargo Airline Association.

Airport authorities lined up on both sides of the issue. According to the Washington Airports Task Force, "The economic theory of congestion pricing is fine, but to work ... a substantial differential in price would be required between peak hours and the rest of the day." Any allowable increase in peak-time landing fees, WATF continued, "would simply be absorbed by the airline's cost structure and passed on to the passenger as a tiny increment on their ticket--an increment that would be insufficient to affect their choice of flight."

The San Diego County Regional Airport Authority suggested that "there are many cases wherein the carrier simply cannot adjust its schedule due to the necessity of meeting banks in hub cities. Airlines ... will continue to plan flights during peak times despite additional costs." It also wrote that some low-cost carriers operate a single fleet type--and therefore cannot use larger aircraft--and fly some routes that would become unprofitable with new costs. "While network carriers can absorb such additional charges into their system, many low-cost carriers could not," according to San Diego airport officials. "This leads us to the conclusion that the proposed amendment would put low-cost carriers at a competitive disadvantage."

Airport authorities in Chicago, New York/New Jersey, Philadelphia and San Francisco, however, generally supported DOT's proposal. "Even better, we suggest that any airport operator, regardless of whether its airport is deemed to be congested by the Federal Aviation Administration, should be eligible to implement any permitted charge if, by so doing, the airport operator could reduce delays or otherwise enhance operational efficiency," according to comments filed by Philadelphia airport officials. "We also suggest that if, by whatever definition, an airport is deemed to be eligible to impose charges under the proposed amendment, it should not subsequently lose that eligibility because congestion or delays are reduced."