Passenger Facility Charges

Since the early 1990s, most of the nation's passenger service airports have been able to charge passengers a boarding fee of between $1 and $3, called a passenger facility charge, to help pay for their capital development projects. The charges total about $1.4 billion a year. Of the 529 airports eligible to levy passenger facility charges, 52 percent are participating in the program. GAO found that passenger facility charges provided about 18 percent of the funds available to commercial service airports to pay for capital development in 1996. Proposals to change the passenger facility charge program fall into three main categories: increasing the maximum charge, changing the types of projects eligible for funding, or adding project election criteria.

GAO noted that: (1) passenger facility charges provided about 18 percent of the funds available to commercial service airports to pay for capital development in 1996, the most recent year for which data for all sources are available; (2) 52 percent of the 529 eligible airports are levying the fee; (3) the larger the airport, the more likely it is to participate; (4) as of September 1998, the Federal Aviation Administration had approved the collection of nearly $22 billion in passenger facility charges overall; (5) because the amount of funds an airport receives is based on the number of passengers, over 90 percent of those collections will go to the large airports; (6) 44 percent of the funds have been approved for projects such as the construction of aircraft gates and access roads, while 29 percent have been approved to pay the interest on bonds issued for eligible development projects; (7) 20 percent of the funds have been approved for projects related to areas such as runways and aprons, while 7 percent have been approved to reduce airport-related noise; (8) proposals to change the passenger facility charge program fall into three main categories: (a) increasing the maximum charge; (b) changing the types of projects eligible for funding; or (c) adding project selection criteria; (9) airports' receipts total about $1.4 billion a year, with all but one participating airport charging the maximum $3 fee; (10) GAO's analysis indicates that with a $1 increase, if all airports raise their fee, airports would receive close to $500 million in additional revenues; (11) GAO developed a model to estimate the potential impact of higher fees on passenger levels, using historical data on the relationship between prices and passenger levels; (12) GAO's model estimates the effect of changing the passenger facility charge independently of other factors that may occur simultaneously; (13) these and other factors could enhance or offset the effect of changing the passenger facility charge, making the net effect difficult to determine; and (14) increasing the maximum fee from $3 to $7 would generate about $1.63 billion more for large airports charging the fee, thereby eliminating an annual $1.5 billion funding difference, on average, that GAO identified between large airports' future planned development costs ($7.1 billion a year on average) and the funding they had available in 1996.