Airport Financing

To ensure the safe and continuing operation of the national airport system, airports across the country--from large passenger facilities like Chicago O'Hare to small general aviation airports--plan a wide range of capital development projects, including new runways, passenger terminals, navigational aids, and roadway access. In 1996, the 3,304 airports in this system obtained about $7 billion for capital development, more than 90 percent of which came from airport and special facility bonds, funding made available from the Airport and Airway Trust Fund, and passenger facility charges paid on each airline ticket. However, this amount falls short of the $10 billion that airports anticipate that they will need annually for development planned through 2001. Several proposals have been made in recent years to boost funding for airports, including increasing the size of the federal grant program, raising the ceiling on passenger facility charges, and leveraging existing funding sources. GAO believes that the Federal Aviation Administration's pilot programs to use grants in more innovative ways and to privatize airports are likely to yield only marginal benefits because of limited participation by airports. However, using federal airport grants to capitalize state revolving funds might prove more successful in expanding airport investment.

GAO noted that: (1) in 1996, the 3,304 airports that make up the national airport system obtained about $7 billion for capital development; (2) more than 90 percent of this funding came from three sources: (a) airport and special facility bonds; (b) the Airport Improvement Program (AIP); and (c) passenger facility charges paid on each airline ticket; (3) the magnitude and type of funding varies with each airport's size; (4) the nation's 71 largest airports accounted for nearly 80 percent of this funding; (5) as a group, these airports received only about 10 percent of their funding from AIP; (6) by contrast, the remaining 3,233 smaller airports that complete the national system rely on AIP for half of their funding; (7) airports planned as much as $10 billion per year in development for the years 1997 through 2001, or $3 billion per year more than they spent in 1996; (8) about $1.4 billion per year of that development is planned for safety, security, environmental, and reconstruction projects--the Federal Aviation Administration's highest priorities; (9) another $1.4 billion per year of that development is planned for other high-priority projects, primarily adding airport capacity; (10) other projects of a relatively lower priority, such as bringing airports up to FAA's design standards, add another $3.3 billion per year; (11) airports anticipate another $3.9 billion per year for projects that are not eligible for funding from AIP, such as expanding commercial space in terminals and constructing parking garages; (12) the difference between current funding and planned development is especially acute for smaller commercial and general aviation airports; (13) their 1996 funding would cover only about half of their total planned development; (14) several proposals to increase airport funding have emerged in recent years; (15) these include increasing the amount of funding for AIP, raising or eliminating the ceiling on passenger facility charges, and better leveraging of existing funding sources; and (16) these proposals vary in the degree to which they help specific types of airports.