# Amicus Curiae Brief — Northwest Airlines, Inc. v. County of Kent

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1994
- **Citation:** 510 U.S. 355

## Text

‘Ad09 FIQVTIVAY 1834

TABLE OF CONTENTS

Page
pF ETE iil
INTEREST OF AMICUS CURIAE ........................008 1
SUMMARY OF ARGUMENT ..................:00cseeeeeeeeeeeees 3
(EE crbcnecnteennnnendenesenconssnnescnneenssnsnnesnenenscnennese 4
I. THE COMPENSATORY METHODOLOGY FOR
DETERMINING LANDING FEES IS NOT
ONLY REASONABLE BUT SERVES THE
GOALS OF AIRPORT DEVELOPMENT ......... 4
A. The Comgpunpeny Methodology Charge
Airlines Costs Of Services The Air-
port Provides To The Airlines ............... 4
B. The Compensatory Methodology Is Inher
fA ETS 5
C. Because It Allows To Fund pou
ital eae 4 ith Earnings From
Non-Airline Tenants, The satory
or eh Aly
” eeihiinithiasieiaaaiidihiaiiieaieititaialiieiaaetaces 9

Il. THERE IS NO LEGAL OR POLICY BASIS FOR
FINDING THAT AIRLINES MUST RECEIVE
THE ECONOMIC BENEFIT OF AN AIR-
PORT’S CONCESSION REVENUES ................ 12

A. The Courts Have Deferred To Rate-Mak-
ing Bodies On Issues of Rate-Making

iiaietaaaaialdii ial aiaiiiiataaes 12
B. The Department Of Transportation Has
Accorded Broad Discretion In
AHTA As y Prohibiting Head Taxes
Or Their Bewteenie ... incusiaiendaisdiienemnenensess 13

C. Concession Revenues Do Not Constitute
An Indirect Tax On Air Travelers ......... 14

il iil

| r Requiring That :

py a TABLE OF AUTHORITIES
Airside Operations .........::sssssserseeeeenee 17 - Senin Page(s)

CO a 19 Mite Mites « Divccter of Tesation of Beweil
I renee 13

American Airlines, Inc. v. Massachusetts Port Auth.,
560 F.2d 1036 (1st Cir. 1977) ............ccccceeeees 18

Chevron, U.S.A. v. Natural Resources Defense Coun-
Bly Ge ee Ge COD cccccericcccccccseccccsscccecccees 14

City and County of Denver v. Continental Airlines,
Ine., 712 F. Supp. 834 (D. Colo. 1989) ......... passim

Colorado Interstate Gas Co. v. Federal Power
Comm'n, 324 U.S. 581 (1945) .............cccceceeeee 12

Evansville-Vanderburgh Airport Auth. Dist. v. Delta
Airlines, 405 U.S. 707 (1972) ..............:000000 6,13,18

Federal Power Comm'n v. Hope Natural Gas Co.,
EN 6

Indianapolis Ai Auth. v. American Airlines,
Ine., 733 F.2d 1262 (7th Cir. 1984) .......... 6,12,16-17

Interface Group, Inc. v. Massachusetts Port Auth.,
631 F. jan. 483 (D. Mass. 1986), aff'd in part
and vacated in part, 816 F.2d 9 (1st Cir.
ST icacnereecsgees ctasuninsessensensonsenneroeoecoes 15

National Ass'n of Greeting Card Publishers v.
United States Postal Soule, 462 U.S. 810

EEC SD 12
New England Foundation v. Siesshnadtte
Port Auth., F.2d 157 (1st Cir. 1989) ...... 13

Northwest Airlines, Inc., v. County of Kent, Mich-
igan, 955 F.2d 1054 (6th Cir. 1992), cert.
granted, 113 S. Ct. 2926 (1993) .............ccce+e- passim

Northwest Airlines, Inc. v. County of Kent, Michi-
gan, 738 F. Supp. 1112 (W.D. Mich. 990), aff'd
im part and rev'd in part, 955 F.2d 1054 (6th
Cir. 1992), cert. granted, 113 S. Ct. 2926
STII Siiaiisilisbiiaeenatsenssesesanecscssesesesessescecccoccorcee passim

Raleigh-Durham Airport Auth. v. Delta Air Lines,

ne., 429 F. Supp. 1069 (D. N.C.
STII iil iaiiaasisabeessecescoeresessdeccosescoesccseeeses 6,12,13

iv

Table of Authorities Continued

Page

Reagan v. Farmers Loan & Trust Co., 154 U.S.
Of en 12

Salem Transp. Co. v. Port Auth., 611 F. Supp. 254
ae 15

State ex rel. Arizona Dep't of Revenue v. Cochise
Airlines, 128 Ariz. 432 (Ariz. Ct. App.

TD cécseqscsatecsesnerentreninsnsatnansimenmntniianiaianmnatentios 15

Statutes:

Airport and Airway Improvement Act of 1982, Pub.

L. No. 97-248, tit. V, 96 Stat. 671 (codified,
as amended, at 49 U.S.C. app. 2201 et seg.
CED ccnretuctiisisesisiinsesanadiinedminmnnsaente )

49 U.S.C. app. 2210(aX9) (1988) .........-eeeeeeeeeeeeeeees 10

4B UBC. amp. IBIS (BBB) ...ccccccccccccccccsescscccceccecees 2

Administrative Decisions:

Investigation Into Massport Landing Fees, FAA
Docket 13-88-2 (Dec. 22, 1988) (Decision of the
Deputy Secretary of Transportation), aff'd, New
England Legal Foundation v. Massachusetts
Port Auth., 883 F.2d 157 (1st Cir. 1989) ...... 13

Rules:

Be TOGR, GOB cccccceccccseceserecssssscsecenesessnecensssssssssesoene 3

Legislative Materials:

S. Rep. No. 12, 93d Tt Ist Sess. (1973), re-
printed in 1973 U.S.C.C.A.N. 1434 (accompa-
nying the Anti-Head Tax Act) ............... 10,14,15,16

Other Authorities:

American Ass’n of Airport Executives, 1991-92
Rates and Charges Survey ............::::csseeeeeeeees 7-8

Table of Authorities Continued

Letter from FAA Administrator Donald D. E
to Senator Mark Andrews (Feb. 1, 1985)

seeeee

U.S. Department of Transportation, to
‘ati the

“*
SPPSSHSSSOSSSOOSESSOSO SOO SOCOSCOS OSES OOS ES SES OO OE SOC ECCS SSCCCS

ieee a

14

IN THE

Supreme Court of the Anited States
OCTOBER TERM, 1993

No. 92-97

NORTHWEST AIRLINES, INC., et al.,
Petitioners,
Vv.

COUNTY OF KENT, MICHIGAN, et al.,
Respondents.

On Writ of Certiorari
to the United States Court of Appeals
for the Sixth Circuit

BRIEF FOR
CITY OF LOS ANGELES AS AMICUS CURIAE
IN SUPPORT OF RESPONDENTS

INTEREST OF AMICUS CURIAE

Amicus curiae, the City of Los Angeles, owns and,
through its Department of Airports, operates Los Angeles
International Airport (““LAX’’) and three smaller airports
in the Los Angeles area. LAX is one of the largest in-
ternational airports in the United States. On an average
day, 130,000 passengers and 3.8 million pounds of freight
and mail pass through the airport on 1,700 flights. LAX
serves the residents of the Los Angeles area and millions
of visitors drawn to the region’s business, commercial and

2

tourist enterprises and activities. Visitors arriving at LAX
spend approximately $17.7 million per day in the region.
LAX also is a large hub airport, serving travelers en route
to and from national and international destinations. It is
a major gateway to the Pacific, Asia, and Australia, as
well as to Europe, Canada, Mexico and Latin America.

LAX creates $3.3 billion in aviation activity at or near
the airport, and almost three times this sum in air freight
and visitor expenditures in the region. Approximately
50,000 jobs are directly attributable to LAX.

LAX recently adopted a “compensatory” methodology
to calculate airline landing fees. This methodology charges
to airline tenants only those costs attributable to their use
of airport services and facilities. It does not subsidize air-
line costs with revenues from concessionaires and other
airport tenants, but it does allow an airport to use non-
airline revenues to fund capital projects. In this and other
cases, now including LAX, the airlines are challenging the
right of an airport to use a compensatory methodology to
determine landing fees charged to the airlines.'

Revenues from concession and other non-airline tenants
are critical to allow LAX to become self-sustaining, which,
contrary to the airlines’ assertion in this case, does not
simply mean that an airport’s current operating revenues
must equal its current operating costs. Airports have mas-
sive capital needs, and if airports are unable to fund nec-

‘In a lawsuit filed recently in the United States District Court for
the Central District of California, airlines servicing LAX have sought
to invalidate its landing fees, among other grounds, as unreasonable
under the Anti-Head Tax Act, 49 U.S.C. app. 1513 (“AHTA”). Air
Transport Ass'n of America v. City of Los Angeles, No. CV 93-4539-
AWT (filed July 30, 1993). As in the case before the Court, the airline
plaintiffs in the Los Angeles suit seek a judicial determination requiring
that the airport cross-credit in favor of the airlines the concession and
other revenues the airport earns from non-airline tenants. The City of
Los Angeles has moved to dismiss the complaint on the ground that
the AHTA does not create a private right of action.

essary expansion and improvement j
eae i ww p nt projects, they cannot

The City of Los Angeles wants to manage and develo
its concessions and other sources of non-airline ome
efficiently in order to fund the capital projects necessary
for LAX to maintain and improve its position as a world-
class airport. The City believes that LAX, as a public
——T plays an important role in the economic well-

ing of Los Angeles and the region. Therefore, it is nec-
essary that the City and its citizens have the financial
capability to decide the priorities and direction of LAX
The City submits this brief to provide the Court the per.
spective and experience of one of the nation’s largest air-
ports on the issues of airport rate-setting and capital
funding.* The Court’s resolution of the issues in this case
likely will have a significant effect on the financial con-
dition of LAX and the nation’s other large hub airports.

SUMMARY OF ARGUMENT

The City of Los Angeles urges this Court to a
judgment of the U.S. Court of Appeals for the wy Gn
cuit, which properly upheld the right of an airport to choose
a compensatory methodology for the calculation of rates
and charges. As applied by the City of Los Angeles, the
pare say methodology is a reasonable method for cal-
S ne charges. The methodology attributes to airlines
nly costs of those services the airport provides to the
airlines, and results in fee amounts comparable to those
assessed by airports across the country. The compensatory
methodology also makes available a source of revenue crit-
ical to an airport's ability to be less dependent upon federal
assistance and debt, and thus, more self-sustaining.

* The City of Los Angeles is a political subdivisi

. vision of a State and j
therefore permitted to file, through its authorized law officer, an pe tn
curiae brief without the consent of the parties. Sup.Ct.R. 37.5.

4

No federal statute, regulation or policy, and certainly
nothing in the Anti-Head Tax Act, prohibits the use of a
compensatory methodology by an airport proprietor. To

portation have given broad discretion to airport proprietors
in their selection of a rate methodology and fee structure.
In no sense can concession revenues be found to constitute
a tax on air passengers since no airport user is required
to use the concessions or services offered. Moreover, the
airlines’ contention that they are the true source of airport
concession revenue is demonstrably false and, even if true,
provides no legal basis for requiring that only a residual
methodology be used in calculating airport fees and

charges, or that concessionaires share in the costs of air-
side operations under a compensatory methodology.
ARGUMENT

I. THE COMPENSATORY METHODOLOGY FOR DETER-
MINING LANDING FEES IS NOT ONLY REASONABLE
BUT SERVES THE GOALS OF AIRPORT DEVELOP-
MENT.

A. The Compensatory Methodology Charges Airlines
The Costs Of Services The Airport Provides To

Respondents and LAX use a “compensatory’’ or cost-
of-services methodology to calculate landing fees charged
compensatory methodology is similarly used to determine
landing fees at many of the nation’s other major airports,
including those in Boston, Denver, St. Louis, Phoenix and
New York.

The compensatory methodology is premised on a theory
of cost recovery. It separately charges costs to, and ac-
counts for revenues received from, the airport’s various
classes of tenants. Accordingly, the rates charged to airline
tenants reflect all the costs associated with the airlines’

5

use of airport facilities and services, without crediting to
those airlines revenues derived from other non-airline ten-
ants, such as concessionaires. The airport proprietor is free
airline tenants to fund airport capital projects. As a result,
the airport has an incentive to manage and develop its
non-airline sources of revenue productively.

In contrast, a “residual” methodology provides for the
airport revenues (excluding landing fees from airlines), and
then caleulated to cover the amount by which total ex-
penses exceed total revenues. In addition, airlines typically
permit airports to apply an amount towards the airport's
marked for current or future capital projects. As a result,
airlines exercise control over the amount of total revenues
allocated to the airport's capital fund. Airlines generally
prefer a residual methodology because it subsidizes airline
costs with revenues received from non-airline tenants and

_ gives airlines a degree of control over airport expenditures.

B. The Compensatory Methodology Is Inherent!
sonable. y ee

The compensatory methodology is inherently reasonable
because it charges airlines only those costs properly at-
tributed to the airlines. Charges assessed to the airlines
are not based on the airport’s future capital needs, but
on the current costs of only those facilities and services
ee tne Setines. Vor these seasons, virtuaiiy ait courte

t have considered the compensatory methodology as a
basis for determining landing fees have concluded that the
methodology is reasonable.*

* See Northwest Airlines, Ine., v. County of Kent, Michi 955 F.2d
1054, 1061 (6th Cir. 1008) Gees ase senssndhie ¥ based en @ tate

6

This Court has also held that “it is the amount of the
tax not its formula, that is of central concern.’”’ Evansville-
Vanderburgh Airport Auth. Dist. v. Delta Airlines, Inc.,
405 U.S. 707, 716 (1972) (emphasis added); see also Federal
Power Comm'n v. Hope Natural Gas Co., 320 U.S. 591,
603 (1944) (“it is the result reached not the method em-

ployed which is controlling.”’). The application of the com-
hodc by the City of Los Angeles at LAX

has resulted in landing fees that, even

creases, are reasonable in amount, and are less than or

Respondents, using a compensatory methodology, charge
a landing fee of $0.70 per 1000 pounds of landed weight
at Grand Rapids. At LAX, also using a compensatory

, the City of Los Angeles currently charges
a landing fee of $1.56 per 1000 pounds of landed weight
for signatories to operating permits. The following table
shows 1991-92 landing fees of various major hub airports
in the U.S.:

approximation of cost of providing facilities) (citing Evansville-Vander-
burgh Airport Auth. Dist. v. Delta Airlines, 405 U.S. 707, 712-14 (1972),
cert. granted, 113 8. Ct. 2926 (1993); Northwest Airlines, Inc. v. County
of Kent, Michigan, 738 F. Supp. 1112, 1120 (W.D. Mich. 1990) (rates
and charges based on airlines share of operating expenses found rea-
sonable), aff'd in part and rev'd in part, 955 F.2d 1054 (6th Cir. 1992),
cert. granted, 113 8. Ct. 2926 (1993); City and County of Denver v.
Continental Airlines, Ine., 712 F. Supp. 834, 839 (D. Colo. 1989) (re-
jecting argument that exclusion of concession revenues in consideration
of landing fees is unreasonable); Raleigh-Durham Airport Authority v.

Delta Air Lines, Ine., 429 F. Supp. 1069, 1079 (D. N.C. 1976) (multiple

enepolis Airport Auth. v. American Airlines, I F.2d 1262 (7th Cir.
1984).

PASSENGERS

METHODOLOGY

@e2& £5 RR RR
= &@ £ & RR RB
— ~ ~ N o-

Residual
Residual
Hybrid
Compensatory
Compensatory
Cc .
Compensatory
Residual

19,151,278

18,117,113
26,300,000
19,700,000

21,451,858
48,198,208
20,704,555

22,300,000
59,787,000

)

1.49
0.93
1.98
2.70

(Per 1,000 Ibs.)
y.

1.37
0.93
1.98

2.16

Other

Hybrid

15,041,935
22,140,437
16,313,289
10,970,899

Source: American Ass'n of Airport Executives, 1991-92 Rates and Charges S

Tacoma Int'l
Washington
Dulles

=

————— TT

survey
By mee
Dayton

* This

9
The Air Transport Association of Ameries (“ATA”), pre-
rica as Amicus Curiae

| t 7-8 (“ATA Brief’). However,
figures and chart are misleading. It ro Geey Sp

i
i
if

ion of airline costs) declined by 36% dur-

ing the same period. Jd. at 7. Air fares have also declined

airlines have engaged in fare wars and have

ir fares substantially below costs, resulting in
massive losses for the industry in recent years.

Finally, landing fees constitute only about two percent

of total airline operating expenses. See The Airline Mon-

i

C, Because It Allows Airports To Fund Capital Im-
provements With wavamnge From Non-Airline Ten-
ants, The Methodology Serves
Congress’ Goal Airports Become “As Self-
Sustaining as Possible.”

The compensatory methodology allows airports to use

provements. As a result, the methodology
enables airports to reduce their reliance on federal fund
ing—a goal Congress sought to when enacti

| | ng

. The Airport and Airway Im-
provement Act (AAIA”S specifically requires airport
owners or operators receiving federal grants to ‘‘maintain

* Airport and Airway Improvement Act of 1982, Pub. L. No. 97-248,

10

a fee and rental structure for the facilities and services
being provided the airport users which will make the air-
port as self-sustaining as possible ... .’"* Moreover, Con-
gress has recognized that concession revenues are an
important source of funding for the capital needs of air-
ports, and that airports that generate substantial conces-
sion revenues are more able to be self-sustaining.’

Retained earnings from concession revenues permit air-
ports to be less burdened by local debt. Indeed, as the
district court below observed, prudent management of sur-
pluses “‘allows the Airport to run efficiently and with fore-
sight thereby avoiding the necessity of seeking extra tax
or bond revenues from the citizens of [the community] for
expansion or improvement.” Northwest Airlines, Inc. v.
County of Kent, Michigan, 738 F. Supp. at 1120. While
airlines may have chosen to meet their capital needs by
taking on massive debt, airlines have no right to presume
that airports should place themselves in a similarly vul-
nerable financial position.

The ATA’s amicus brief states that, for the calendar
year 1991, some of the nation’s largest airports earned
substantia] revenues in excess of their operating expenses.
See ATA Brief, at 9. The ATA asserts that airport rev-
enues in excess of operating costs are “windfalls” that
are indicative of ‘unreasonable landing fees.’’* See id. at
tit. V, 96 Stat. 671 (codified, as amended, at 49 U.S.C. app. 2201 et
seg. (1988).

49 U.S.C. app. 2210(ax9) (1988).

‘See S. Rep. No. 12, 98d Cong., Ist Sess. (1973), reprinted in 1973
U.S.C.C.A.N. 1434, 1440 (report accompanying Anti-Head Tax Act)
concession revenues allow them to cover both operational expenses and
to underwrite needed capital investment borrowing).

*On the basis of a press report, the ATA speculated that the City

of Los Angeles seeks to use revenues generated at LAX for the City's
general expenses. ATA Brief, at 5 & n.5. However, the ATA in its

11

8-9. To the contrary, profits from non-airline tenants allow
airports to fund at least part of their improvements and
expansion without burdening federal, state and local tax-
payers, and allow airports to reduce their debt burden. In
addition, revenues in excess of expenses provide reserves
for emergency repairs and replacements. Finally, if air-
ports are unable to retain and use profits from non-airline
tenants, airports will lack incentive to develop new conces-
sions and other non-airline sources of revenue.

The airlines’ argument erroneously assumes that new
capital improvements and expansion of existing facilities
are not needed for operations. The argument ignores the
tremendous growth in airport passengers and the necessity
to accommodate this growth. It is non-airline profits that
allow airports to sustain themselves by becoming increas-
ingly independent of federal funding, local debt and airline
control.*

suit against the City of Los Angeles failed to allege any claim of
iversi . the ATA was forced to concede that “{djefendants
apparently recognize that they may not divert airport revenues to the
City’s General Fund unless and until numerous federal laws, grant
bond covenants are changed.” Complaint for Decla-
ratory and Injunctive Relief ¢ 61, Air Transport Ass'n of America v.
City of Los Angeles, No. CV 93-4539-AWT (filed July 30, 1993).

12

II. THERE IS NO LEGAL OR POLICY BASIS FOR FIND-
ING THAT AIRLINES MUST RECEIVE THE ECO-
NOMIC BENEFIT OF AN AIRPORT'S CONCESSION
REVENUES.

A. The Courts Have Deferred To Rate-Making Bod-
ies On Issues of Rate-Making Methodology.

Historically, federal courts have declined to involve
themselves in issues of rate-making methodology. Rate-
making, including the cost allocation component of rate-
making, “is essentially a legislative function.”’ Colorado
Interstate Gas Co. v. Federal Power Comm'n, 324 U.S.
581, 589 (1945). This is so because “‘{aJllocation of costs
is not a matter for the slide-rule. It involves judgment on
a myriad of facts. It has no claim to an exact science.”
Id., quoted in National Ass'n of Greeting Card Publishers
v. United States Postal Service, 462 U.S. 810, 825 (1983).

Courts considering the AHTA have uniformly observed
that Congress did not intend that courts perform a rate-
making function by deciding what methodology airports
must use in setting landing fees.’ Accordingly, the Sixth

* See, e.g., Northwest Airlines, Inc. v. County of Kent, Michigan, 955
F.2d at 1066 (Nelson, J. concurring in part and dissenting in part) (In
the absence of a statutory cost-allocation formula, the courts have ‘no
warrant to require the use of one acceptable method in preference to
another.”’) (citing Colorado Interstate Gas Co. v. Federal Power Comm'n,
324 U.S. 581, 589 (1945); Indianapolis Airport Auth. v. American
Airlines, Inc., 733 F.2d 1262, 1270 (7th Cir. 1984) (“the powers of a
federal court in regulating rates are more limited than those of an
administrative agency. We can invalidate an unreasonable rate, but we
cannot fix the reasonable rate; that is a legislative or administrative
rather than a judicial function."’) (citing Reagan v. Farmers Loan &
Trust Co., 154 U.S. 362, 397-98 (1894)); City and County of Denver,
712 F. Supp. at 839 (‘Nothing in the history and purpose of [the AHTA]
indicates that Congress intended the courts to act as a public utility
commission and intervene in the setting of airport rates and charges
through the adoption or rejection of any particular type of .
counting methodology.”’).

13

Circuit below properly deferred to airport proprietors ‘‘as
long as they act within a broad range of reasonableness.”
Northwest Airlines, Inc. v. County of Kent, Michigan, 955
F.2d at 1060 (citing Evansville, 405 U.S. at 712-14).
B. The Department Of Transportation Has Accorded
Airports Broad Discretion In Rate Setting And
Has Construed The AHTA As Only Prohibiting
Head Taxes Or Their Equivalents.

As a matter of policy, the Department of Transportation
(“DOT”) has given airports “wide latitude in selecting a
particular rate methodology and fee structure.”’ Brief for
the United States as Amicus Curiae, On Petition for a
Writ of Certiorari to the United States Court of Appeals
for the Sixth Circuit, at 8, Northwest Airlines, Inc., v.
County of Kent, Michigan, United States Supreme Court
No. 92-97. With specific reference to the AHTA, the DOT,
in its decision with respect to landing fees at Boston's
Logan International Airport, found that:

Congress, when it passed the Anti-Head Tax Act

(49 U.S.C. 1513), sought to prevent the imposi-

tion of taxes by local authorities on passengers

traveling in air commerce ... . Both the lan-

guage and legislative history of the Anti-Head

Tax Act indicate that Congress was concerned in

that statute only with prohibiting head taxes or

their equivalents. Cf., Aloha Airlines v. Director

of Taxation of Hawaii, 464 U.S. 7 (1983).
Investigation Into Massport Landing Fees, FAA Docket
13-88-2 (Dec. 22, 1988) (Decision of Deputy Secretary of
Transportation), aff'd, New England Legal Foundation v.
Massachusetts Port Auth., 883 F.2d 157, 170 (1st Cir.
1989).

Similarly, both the DOT and the Federal Aviation
Administration have concluded that fees charged car rental
companies by an airport are not within the purview of the
AHTA, because the statute is

14

limited in application to situations involving car-
riage by aircraft. Since non-aeronautical off-air-
port service providers are not engaged in carriage
by aircraft they are considered outside the pro-
tection of [the AHTA] and, consequently, a gross
receipts fee imposed upon them by an airport
authority is not prohibited.

Letter from FAA Administrator Donald D. Engen to Sen-
ator Mark Andrews (Feb. 1, 1985), contained in “A Review
of The Imposition of Gross Receipts Fees on Off-Airport
Car Rental Companies,” U.S. Department of Transporta-
tion, Report to the Senate Committee on Appropriations,
the Senate Committee on Commerce, Science and Trans-
portation, the House Committee on Appropriations, and
the House Committee on Public Works and Transportation,
App. B. at 84 (Apr. 1989).

Petitioners are, thus, urging this Court to adopt a con-
struction of the AHTA which is contrary to that given it
by the agency charged with its administration. Since the
DOT’s construction of the AHTA prohibits only “head
taxes or their equivalents,’ and that construction is clearly
reasonable, accepted principles of deference to agency
interpretation require rejection of Petitioner’s contrary
construction of the AHTA. See Chevron, U.S.A. v. Natural
Resources Defense Council, 467 U.S. 837, 842-45 (1984).

C. Concession Revenues Do Not Constitute An Indi-
rect Tax On Air Travelers.

The legislative history of the AHTA also makes clear
that, whether direct or indirect, fees do not fall within the

973 U.S.C.C.A.N. at 1451. By using the phrase “indirect”

ee

15

taxes, Congress sought only to prohibit both the airport
and the airlines from collecting a per passenger charge.
Whether the passenger pays the head ,tax, or
whether it is absorbed by the airlines, the end
result is to raise the cost of air travel ... .

If the passenger must pay a local head tax, it
adds directly to the cost of his trip. And if head
taxes are absorbed by the carriers, where law
permits, because of the cost and difficulty of col-
lection, or even refusal of passengers to pay, it
still will lead to increased air travel costs ....
In the end, a fare increase would have to be
implemented. Thus, the air passenger loses either
way on state and local head taxes.

Id. at 1451 (emphasis added).

As was the case with the courts below, courts address-
ing this issue have concluded that non-airline revenues are
not within the scope of the AHTA.”

To interpret “indirect” taxes to include airport conces-
sion revenues would require an extension of the AHTA’s
protections beyond the class of persons the law was de-
signed to protect. It is clear from the legislative history
“that in enacting § 1513 Congress was solely concerned
with the adverse effects local taxes were having on the
public’s right to travel... ."’ Interface Group, Inc. v. Mas-
sachusetts Port Auth., 631 F. Supp. 483, 494 (D. Mass.

* See Northwest Airlines, Inc. v. County of Kent, Michigan, 738 F.
7 at 1117, (“‘nonairine concession revenues are not within the scope
of the AHTA”’), City and County of Denver, 712 F. Supp. at 836-37
(“Read literally, the Anti-Head Tax Act has no application to .
concession revenues.”’), see also Salem Transp. Co. v. Port Auth., 611
F. Supp. 254, 257 (S.D.N.Y. 1985) (phrase “air transportation” does
not apply to ground transportation); State ex rel. Arizona Dep't of
Revenue v. Cochise Airlines, 128 Ariz. 432, 437 (Ariz. Ct. App. 1980)
(phrase “air commerce” does not include transportation of freight).

16

1986), aff'd in part and vacated in part, 816 F.2d 9 (lst
Cir. 1987). Accordingly, the statute and congressional com-
ments are replete with references to air travelers as the
intended beneficiaries of the statute.’

Airport concession revenues do not implicate the right
to travel. These revenues are not derived solely from air
passengers, but also from non-passengers. Both groups use
airport concessions as consumers exercising individual
choices. Concession users can choose public transit, or
taxis, over car rental and parking fees. They can eat, drink
and shop before going to, or after leaving, the airport.
They may choose to do these at the airport because, as
consumers, they are willing to pay a premium for con-
venience.

The AHTA is not designed to shield consumers from
paying the market premium for convenience. As noted by
the Colorado district court, and by the lower courts in this
case, the airport’s decision to operate concessions at a
profit is outside the purview of the AHTA because it “‘is
not an exploitation of airline passengers who have the
freedom of choice to use the amenities [the airport] has
provided.” City and County of Denver, 712 F. Supp. at
838-39; accord Northwest Airlines, Inc. v. County of Kent,
Michigan, 738 F. Supp. at 1118; Northwest Airlines, Inc.
v. County of Kent, Michigan, 955 F.2d at 1061.

In contrast, head taxes by their nature are assessed on
all captive air travelers, and cannot be avoided.”

“ See, ¢.g., 8. Rep. No. 12, supra, 1973 U.S.C.C.A.N. at 1450 (“Con-
gress ... established a uniform national program of taxation and fund-
ing for airport improvements. This Committee never intended that air
travelers would be subject to state and local head taxes as well as to
national user charges. The Committee believed there was no danger of
this because the basic constitutional guarantee of a citizen's right to
unhindered interstate travel, and a U.S. Supreme Court decision which
had prevailed since 1867, indicated that such taxes could not be con-
stitutionally imposed’’).

“ The Seventh Circuit concluded that it should be a matter of indif-

17

D. There Is No Basis For Requiring That Conces-
sionaires Share In The Costs Of Airside Opera-
tions.

Petitioners argue that concessionaires should share in
the costs of airside operations because, in effect, the air-
lines create the market of concession customers. Petitioners
ignore, however, the fact that concession customers include
individuals who are not air travelers. Large airports and
airports in urban areas may attract people who live or
work in the vicinity of the airport to specialty retail fa-
cilities or restaurants and, indeed, airport operators now
increasingly provide retail establishments for surrounding
residents.

At LAX, the 50,000 people who work at the airport also
use its facilities. Business people frequently use its meeting
facilities. Additionally, particularly at hub airports, friends,
relatives, and acquaintances of travelers often u.~ airport
facilities while meeting air passengers.

Nevertheless, even if all concession customers were also
passengers, Petitioner's argument proves too much. In ef-
fect, the airlines are claiming a right to share in the eco-
nomic activity of air passengers before and after they
travel, simply because airline transportation services de-
liver customers to the activity. In fact, the airlines also
deliver passengers to the city’s businesses and tourist at-
tractions. By the airlines’ logic, because the proprietors of

ference to a traveler “whether he pays $100 for the ticket, $10 in head
tax and $30 for parking; or $120 for the ticket and $20 for parking,
with no head tax. What matters to him is the total cost that he must

distributed among the various items he must buy.”’ Indianapolis, 733

i

numerous private off-site parking facilities that are alternatives to the

18

the area's tourist attractions and businesses benefit from

airside operations, they also should be required to share
in the costs of airside operations.

The airlines urge a self-serving notion of market-making
and benefit. If an airport were located in the middle of
the ocean, few passengers would fly there. It is the mu-
nicipality that an airport serves, including its business and
commercial enterprises, tourist attractions and people, that
is responsible for the market of customers for both the
airlines and the concessionaires. Indeed, if all economic
players were required to share costs based on benefits they
confer upon each other, the airlines would have to share
in municipal costs because it is the municipality that cre-
ates, at least in part, a market for airline passengers.

Even if, however, concessionaires benefit from airside
operations in the manner claimed by the airlines, the law
does not require airside costs to be allocated to conces-
sionaires. Cases addressing the proper allocation of costs
under the AHTA require at most that the amounts «
to the airlines not be excessive in light of the benefits
conferred by the airport on the airlines.’* These decisions
do not require an airport to undertake cost allocations
pent mye why weet tantrum day
on another, or other ethereal “‘benefits’’ subjectively de
termined by the airlines.

* See Evansvilie, 405 U.S. at 716-17 (charges may not be “excessive
in comparison with governmental benefit conferred.’’), accord Northwest
Airlines, Inc. v. County of Kent, Michigan, 955 F.2d at 1061; American
Airlines, Inc. v. Massachusetts Port Auth., 560 F.2d 1036, 1037-38 (ist
Cir. 1977); Northwest Airlines, Inc. v. County of Kent, Michigan, 738
F. Supp. at 1120; City and County of Denver, 712 F. Supp. at 839
(rejecting argument that exclusion of concession revenues in consid-
eration of landing fees is unreasonable).

19

en the tenant tentaie, ths tabaiies tai dads
be affirmed.

James K. HAHN

Gary R. NeETZeER
Senior Assistant City Attorney
BRETON K. LoBNEeR

#1 World Way
Los Angeles, CA 90009-2216
(310) 646-3260

STEVEN 8S. ROSENTHAL*
HarRoLp J. McELHMInny
ANTHONY L. PREss
Lorie M. ALEXANDER
Morrison & FOERSTER
2000 Pennsylvania Ave., N.W.
Suite 5500
Washington, D.C. 20006-1812
(202) 887-1500

Counsel for the City of Los

Angeles as Amicus Curiae

"Counsel of Record
September 1993

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385013_0333%3A19. Public record. Not legal advice.