# Issues in the Reauthorization of the Federal Aviation Administration (FAA) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/crs%3AR43858 ## Record - **Collection:** Congressional research report - **Document type:** CRS Report - **Published:** January 29, 2015 - **Citation:** R43858 ## Text Issues in the Reauthorization of the Federal Aviation Administration (FAA) (name redacted) Specialist in Aviation Policy (name redacted) Analyst in Transportation and Industry January 29, 2015 Congressional Research Service 7-.... www.crs.gov R43858 Issues in the Reauthorization of the Federal Aviation Administration (FAA) Summary The funding authorization for the Federal Aviation Administration (FAA), included in the FAA Modernization and Reform Act of 2012 (P.L. 112-95), expires on September 30, 2015. In addition to setting spending levels, FAA authorization acts typically set policy on a wide range of issues related to civil aviation. This report considers topics that are likely to arise as the 114th Congress debates reauthorization. Most FAA programs are financed through the Airport and Airway Trust Fund (AATF), sometimes referred to as the Aviation Trust Fund. The financial health of the AATF, which is funded by a variety of taxes and fees on air transportation, has been a growing concern. Although the trust fund balance is projected to grow in the near term—as AATF revenue continues to rise and airport capital needs are projected to decline—reductions in general fund appropriations to FAA have increased the proportion of FAA funding that is derived from the trust fund. In addition, changes in airline business practices pose a risk to the AATF revenue structure: trust fund revenue is largely dependent on airlines’ ticket sales, and airlines’ increasing use of fees charged for options that may once have been included in the base ticket price, such as checked bags and onboard meals, has reduced the amount of money flowing into the fund. Other major issues likely to arise during the reauthorization debate include the following:     Unmanned aerial vehicles. FAA has failed to issue rules for commercial and government use of drone aircraft within the time directed by the 2012 law, frustrating potential commercial operators. Meanwhile, large numbers of drones have come into use, and there have been numerous reports of near-collisions between drones and manned aircraft. Air traffic control privatization. Many commissions over the years have recommended moving responsibility for air traffic control from FAA, a government agency, to either an independent government-owned corporation or a private entity controlled by aviation stakeholders. Delays in implementing the satellite-based NextGen air traffic control system have renewed interest in this possibility. Essential Airline Service (EAS). In 2012, Congress attempted to limit the number of localities eligible to participate in this program to subsidize flights to communities that would otherwise lose all commercial airline service, as well as to limit the amount of subsidies per passenger. These efforts were largely unsuccessful. Airfare disclosure. The House of Representatives approved a bill in 2014 that would reverse an FAA regulation requiring airlines and website operators to give greater prominence to the final price, including fees and taxes, than to the “base airfare” charged by the carrier. The Senate did not approve this legislation, but the issue is likely to reappear in the context of FAA reauthorization. This report does not attempt to be comprehensive. Many issues debated prior to passage of the FAA Modernization and Reform Act of 2012 are not discussed unless further congressional consideration appears probable. Additional issues, not discussed in this report, may arise as Congress moves forward with reauthorization. Congressional Research Service Issues in the Reauthorization of the Federal Aviation Administration (FAA) Contents Introduction ..................................................................................................................................... 1 Aviation Funding ............................................................................................................................. 1 FAA Funding Accounts ............................................................................................................. 2 Airport Financing ............................................................................................................................ 3 Evaluating Capital Needs .......................................................................................................... 4 Airport Improvement Program (AIP) ........................................................................................ 5 AIP Funding ........................................................................................................................ 6 Funding Distribution ........................................................................................................... 8 Entitlements (Formula Funds) ............................................................................................ 8 Discretionary Funds .......................................................................................................... 10 State Block Grant Program ................................................................................................ 11 The Federal Share of AIP Matching Funds ....................................................................... 12 Distribution of AIP Grants by Airport Size ....................................................................... 12 Grant Assurances .............................................................................................................. 13 Passenger Facility Charges...................................................................................................... 15 Airport Privatization ...................................................................................................................... 16 Types of Airport Privatization ................................................................................................. 17 The Interests at Stake .............................................................................................................. 18 The Airport Privatization Pilot Program (APPP) .......................................................................... 19 Participation in APPP .............................................................................................................. 20 Stewart International Airport ............................................................................................ 21 Luis Muñoz Marín International Airport .......................................................................... 21 Hendry County Airglades Airport ..................................................................................... 22 Chicago Midway Airport .................................................................................................. 22 Why Has the APPP Not Stimulated Privatization? ................................................................. 22 APPP Application Process ................................................................................................ 23 Regulatory Conditions and Obligations ............................................................................ 23 Adequate Access to Funding ............................................................................................. 24 Policy Issues Related to Privatization ............................................................................... 25 Aircraft Noise Issues ..................................................................................................................... 26 The Next Generation Air Transportation System (NextGen) ........................................................ 27 NextGen Evolution.................................................................................................................. 28 Elements and Funding ............................................................................................................. 29 Current Status .......................................................................................................................... 31 Aircraft Equipage .............................................................................................................. 31 Anticipated Benefits.......................................................................................................... 32 Policy Concerns ................................................................................................................ 33 FAA Organizational Issues ............................................................................................................ 34 Facility Consolidation ............................................................................................................. 34 The Federal Contract Tower (FCT) Program .......................................................................... 35 Technological Developments Affecting Potential Safety Impacts of Possible Future Tower Closures or Facility Consolidations .......................................................................... 36 Facility Security ...................................................................................................................... 37 Air Traffic Control Privatization ............................................................................................. 37 Controller Selection and Hiring .............................................................................................. 38 Congressional Research Service Issues in the Reauthorization of the Federal Aviation Administration (FAA) Aviation Safety Issues ................................................................................................................... 39 Airline Safety .......................................................................................................................... 39 Pilot Fatigue ............................................................................................................................ 40 Airline Pilot Qualifications and Pilot Supply .......................................................................... 40 Commercial Aircraft Tracking and Flight Data Recorders ..................................................... 41 Satellite Tracking .............................................................................................................. 41 Deployable Recorders ....................................................................................................... 42 Oversight of Maintenance and Repair Stations ....................................................................... 42 Safety and Reliability Issues ............................................................................................. 44 Regulatory Oversight ........................................................................................................ 45 The Role of Foreign Regulatory Agencies ........................................................................ 47 English Language Concerns ............................................................................................. 47 Drug and Alcohol Testing and Substance Abuse Programs .............................................. 48 Airport Surface Movement Safety .......................................................................................... 48 Integration of Unmanned Aircraft Operations ........................................................................ 49 Enforcement Authority...................................................................................................... 50 Oversight of Commercial Space Activities ............................................................................. 50 Aircraft and Parts Certification ............................................................................................... 51 Research and Development ........................................................................................................... 52 Airline Issues ................................................................................................................................. 54 Essential Air Service (EAS) .................................................................................................... 54 EAS Funding..................................................................................................................... 55 Subsidies ........................................................................................................................... 55 Small Community Air Service Development Program ................................................................. 55 Metropolitan Washington Airports Authority (MWAA)................................................................ 56 Airline Consumer Issues................................................................................................................ 58 Ongoing Airline Passenger Rights Issues................................................................................ 59 War Risk Insurance........................................................................................................................ 62 International Aviation Issues ......................................................................................................... 63 Customs and Immigration Preclearance Facilities .................................................................. 63 “Open Skies” Agreements ....................................................................................................... 63 Foreign Ownership in U.S. Carriers ........................................................................................ 65 Figures Figure 1. FY2014 AIP Distribution: Entitlement and Discretionary Grants .................................. 11 Figure 2. FY2014 AIP Grant Distribution by Airport Type ........................................................... 13 Figure 3. Allocation of NextGen Funding, FY2013-FY2015 ....................................................... 30 Figure 4. Major Components of Airline Operating Costs ............................................................. 43 Figure 5. FAA Research Funding by Account ............................................................................... 53 Tables Table 1. Aviation Taxes and Fees .................................................................................................... 1 Table 2. Reauthorization Funding Levels for FAA Accounts .......................................................... 3 Congressional Research Service Issues in the Reauthorization of the Federal Aviation Administration (FAA) Table 3. Annual AIP Authorizations and Amounts Made Available for Grants, FY1992FY2013 ......................................................................................................................................... 7 Table 4. Distribution of PFC Approvals and AIP Grants by Project Type, FY2014...................... 16 Table 5. Full Airport Privatization Under the APPP vs. Outside the APPP ................................... 19 Table 6. Participation in the APPP................................................................................................. 20 Table 7. Funding for NextGen Programs....................................................................................... 29 Table 8. Regulatory Differences Between Domestic and Foreign Repair Stations ....................... 45 Contacts Author Contact Information .......................................................................................................... 66 Congressional Research Service Issues in the Reauthorization of the Federal Aviation Administration (FAA) Introduction The funding authorization for the Federal Aviation Administration (FAA), included in the FAA Modernization and Reform Act of 2012 (P.L. 112-95), expires on September 30, 2015. In addition to setting spending levels, FAA authorization acts typically set policy on a wide range of issues related to civil aviation. This report considers topics that are likely to arise as the 114th Congress debates reauthorization. It does not attempt to be comprehensive. Many issues debated prior to passage of the FAA Modernization and Reform Act of 2012 are not discussed unless further congressional consideration appears probable. Additional issues, not discussed in this report, may arise as Congress moves forward. Aviation Funding Most FAA programs are financed through the Airport and Airway Trust Fund (AATF), sometimes referred to as the Aviation Trust Fund. The AATF was established in 1970 under the Airport and Airway Development Act of 1970 (P.L. 91-258) to provide for expansion of the nation’s airports and air traffic system. Since FY2009, the AATF has provided between 66.6% and 71.4% of FAA’s total annual funding, with the remainder coming from general fund appropriations.1 Revenue sources for the trust fund include passenger ticket taxes, segment fees, air cargo fees, and fuel taxes paid by both commercial and general aviation aircraft (see Table 1). Table 1. Aviation Taxes and Fees (CY2014 rates) Tax or Fee Rate Passenger Ticket Tax (on domestic ticket purchases and frequent flyer awards) 7.5% Flight Segment Tax (domestic, indexed annually to Consumer Price Index) $4.00 Cargo Waybill Tax 6.25% Frequent Flyer Tax 7.5% General Aviation Gasolinea 19.3 cents/gallon General Aviation Jet Fuela (Kerosene) 21.8 cents/gallon Commercial Jet Fuela (Kerosene) 4.3 cents/gallon International Departure/Arrivals Tax (indexed annually to Consumer Price Index) (prorated Alaska/Hawaii to/from mainland United States) $17.70 (Alaska/Hawaii = $8.90) Fractional Ownership Surtax on general aviation jet fuel 14.1 cents/gallon Source: Federal Aviation Administration, Current Aviation Excise Tax Structure, updated January 2015. a. Does not include 0.1 cents/gallon for the Leaking Underground Storage Tank (LUST) trust fund. In addition to excise taxes deposited into the trust fund, FAA imposes air traffic service fees on flights that transit U.S.-controlled airspace but do not take off from or land in the United States. These overflight fees partially fund the Essential Air Service (EAS) program.2 1 Federal Aviation Administration, Airport and Airway Trust Fund (AATF) Fact Sheet, http://www.faa.gov/about/ office_org/headquarters_offices/apl/aatf/media/AATF_Fact_Sheet.pdf. 2 See CRS Report R41666, Essential Air Service (EAS): Frequently Asked Questions, by ( name redacted) . Congressional Research Service 1 Issues in the Reauthorization of the Federal Aviation Administration (FAA) In 2013, the AATF had revenues of almost $12.9 billion and maintained a cash balance of more than $13 billion. However, the uncommitted balance has declined considerably since 2001, when it exceeded $7 billion. Following the onset of the global economic crisis in 2008, the AATF uncommitted balanced dropped to $299 million at the end of FY2009, but has since rebounded; it was estimated to be $1.3 billion at the end of FY2014.3 The trust fund balance is projected to grow in the near term, as AATF revenue continues to rise and airport capital needs are projected to decline over the next five years. In the longer term, however, the vitality of the AATF remains a concern, as reductions in general fund appropriations to FAA have increased the proportion of FAA funding that is derived from the trust fund. Changes in airline business practices pose a risk to the AATF revenue structure. Trust fund revenue is largely dependent on airlines’ ticket sales, and the spread of low-cost air carrier models has held down ticket prices and therefore AATF receipts. In addition, airlines increasingly impose fees for a variety of options and amenities, such as checked bags and onboard meals, rather than including them in the base ticket price. Generally, fees not included in the base ticket price are not subject to federal excise taxes. The U.S. Government Accountability Office (GAO) estimated that the trust fund could have received $186 million in FY2009 from untaxed baggage fees alone, had these fees been subject to the 7.5% excise tax.4 Airlines have long contended that general aviation operators, particularly corporate jets, should provide a larger share of the revenues supporting the trust fund. General aviation interests dispute this, arguing that the air traffic system mainly supports the airlines, and that nonairline users pay a reasonable share given the relatively small incremental costs arising from their flights. Proposals in 2012 to increase the general aviation jet fuel tax were not adopted. The Clinton, George W. Bush, and Obama Administrations all proposed per-flight user charges; President Barack Obama has proposed a $100-per-flight charge on commercial and general aviation jets and turboprops that fly in controlled airspace each year since 2011. In the 110th Congress, the Senate voted to impose a $25-per-flight fee on all commercial and general aviation flights (see S. 1300, 110th Congress) as an additional revenue source for the AATF.5 None of those proposals has been enacted into law. FAA Funding Accounts In recent years, FAA funding has totaled between $15 billion and $16 billion annually. FAA funding is divided among four main accounts. Operations and Maintenance (O&M) makes up the largest portion of the FAA budget, receiving slightly more than 60% of total FAA appropriations. It is the only FAA account that is funded, in part, by general fund contributions. The O&M account principally funds air traffic operations and aviation safety programs. The Airport Improvement Program (AIP) provides federal grants-in-aid for projects such as new runways and taxiways; runway lengthening, rehabilitation, and repair; and noise mitigation near airports. The Facilities and Equipment (F&E) account provides funding for the acquisition and maintenance of air traffic facilities and equipment, and for engineering, development, testing, and evaluation of 3 The uncommitted balance consists of funds that have not been expended or obligated through current or prior-year activities, whereas the cash balance includes funds that have been obligated but not expended. See U.S. Government Printing Office, Balances of Budget Authority: Budget of the U.S. Government (Fiscal Year 2014), available at http://www.gpo.gov/fdsys/pkg/BUDGET-2014-BALANCES/pdf/BUDGET-2014-BALANCES.pdf. 4 U.S. Government Accountability Office, Commercial Aviation: Consumers Could Benefit from Better Information about Airline-Imposed Fees and Refundability of Government-Imposed Taxes and Fees, GAO-10-785, July 2010. 5 Office of Management and Budget, Living Within Our Means and Investing in the Future: The President’s Plan for Economic Growth and Deficit Reduction, September 2011, pp. 22-23. Congressional Research Service 2 Issues in the Reauthorization of the Federal Aviation Administration (FAA) technologies related to the federal air traffic system. The Research, Engineering, and Development account finances research on improving aviation safety and operational efficiency and on reducing environmental impacts of aviation operations. Authorizations and appropriations for these accounts are shown in Table 2. Table 2. Reauthorization Funding Levels for FAA Accounts ($ in millions) Account FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 Authorized Levels — — 9,653 9,539 9,596 9,653 Appropriated/Requested Amounts 9,350 9,533 9,653 9,148 9,651 9.741 Authorized Levels — — 3,350 3,350 3,350 3,350 Appropriated/Requested Amounts 3,515 3,515 3,350 3,343 3,480 3,350 Authorized Levels — — 2,731 2,715 2,730 2,730 Appropriated/Requested Amounts 2,936 2,736 2,731 2,588 2,600 2,600 Operations and Maintenance (O&M) Airport Improvement Program (AIP) Facilities and Equipment (F&E) Research, Engineering, and Development Authorized Levels — — 168 168 168 168 Appropriated/Requested Amounts 191 170 168 159 133 157 — — 15,902 15,772 15,814 15,901 15,992 15,439 15,902 15,238 15,864 15,848 TOTALS Authorized Levels Appropriated/Requested Amounts Source: CRS analysis of P.L. 112-95, P.L. 111-8 (FY2010 Appropriations), P.L. 112-10 (FY2011 Appropriations), P.L. 112-55 (FY2012 Appropriations), P.L. 113-6 (FY2013 Appropriations), P.L. 113-76 (FY2014 Appropriations), and P.L. 113-235 (FY2015 Appropriations). Note: FY2014 amounts are reported post-sequester operating amounts. Airport Financing6 The federal government supports the development of airport infrastructure in three different ways. First, the AIP provides federal grants to airports for planning and development, mainly of capital projects related to aircraft operations such as runways and taxiways. Second, Congress has authorized airports to assess a local passenger facility charge (PFC) on each boarding passenger, subject to specific federal approval. PFC revenues can be used for a broader range of projects than AIP funds, including “landside” projects such as passenger terminals and ground access improvements. Third, federal law grants investors preferential income tax treatment on interest income from bonds issued by state and local governments for airport improvements (subject to compliance with federal rules). Airports may also draw on state and local funds and on operating revenues such as lease payments and landing fees. 6 For a more extensive discussion of airport financing issues, see CRS Report R43327, Financing Airport Improvements, by (name redacted) and (name redacted) . Congressional Research Service 3 Issues in the Reauthorization of the Federal Aviation Administration (FAA) Different airports use different combinations of AIP funding, PFCs, tax-exempt bonds, state and local grants, and airport revenues to finance particular projects. Small airports are more likely to be dependent on AIP grants than large or medium-sized airports. Larger airports are much more likely to issue tax-exempt bonds or finance capital projects with the proceeds of PFCs. Each of these funding sources places various legislative, regulatory, or contractual constraints on airports that use it. The availability and conditions of one source of funding may also influence the availability and terms of other funding sources. In a 2007 study, GAO found that bonds financed 50% of airports’ capital spending, AIP 29%, PFCs 17%, state and local contributions 4%, and airport revenue 4%.7 Evaluating Capital Needs The assessment of airport capital needs is fundamental to determining the appropriate federal support needed to foster a safe and efficient national airport system.8 The federal government’s interest goes beyond capacity issues to include implementation of federal safety and noise policies. The U.S. passenger airline industry has seen a wave of bankruptcies and several major airline mergers since 2000, including the merger of American Airlines and U.S. Airways in 2013. Consolidation led to a reduction in the number of commercial flights between 2005 and 2009. Since that year, the number of commercial flights has been fairly steady, but at a level 15% to 18% lower than in 2005, as carriers have consolidated operations and eliminated some duplicative hubs and routes.9 Government data indicate that domestic airlines have shown considerable capacity discipline; instead of adding flights, they have been flying fuller planes, with an average load factor over 83% in the first 10 months of 2014.10 The reduced number of flights may ease the pressure on airport and air traffic control facilities. On the other hand, airlines’ on-time performance does not appear to have improved with industry consolidation, suggesting that capacity issues continue to affect carrier performance in some geographic areas.11 Both FAA and the Airports Council International-North America (ACI-NA) have issued projections of airports’ long-term financial needs. FAA estimated in its report that the national system’s capital needs for FY2013-FY2017 will total $42.5 billion (an annual average of $8.5 billion). The ACI-NA capital needs survey resulted in an estimate of $71.3 billion over the same years (an annual average of $14.3 billion).12 The main reason for the widely differing estimates was disparate views on what kinds of airport projects to include. 7 U.S. Government Accountability Office, Airport Finance: Observations on Planned Airport Development Costs and Funding Levels and the Administration’s Proposed Changes in the Airport Improvement Program, GAO-07-885, 2007, p. 8. 8 49 U.S.C. §47103. See FAA, Report to Congress: National Plan of Integrated Airport System (NPIAS) 2013-2017, http://www.faa.gov/airports/planning_capacity/npias/. 9 U.S. Government Accountability Office, Airline Competition, The Average Number of Competitors in Markets Serving the Majority of Passengers Has Changed Little in Recent Years, but Stakeholders Voice Concerns about Competition, GAO-14-515, June 2014, http://www.gao.gov/products/GAO-14-515. 10 U.S. Department of Transportation, Bureau of Transportation Statistics (BTS), “Load Factor—“passenger-miles as a proportion of available seat-miles in percent (%),” http://www.transtats.bts.gov/Data_Elements.aspx?Data=5. Note: data for 2014 not complete. 11 U.S. DOT, BTS, “On-Time Performance—Flight Delays at a Glance,” http://www.transtats.bts.gov/ HomeDrillChart.asp. Note: data for 2014 not complete. 12 Airports Council International, Airport Capital Development Needs: 2013-2017, http://www.aci-na.org/sites/default/ files/2013_capital_needs_survey_report.pdf. Congressional Research Service 4 Issues in the Reauthorization of the Federal Aviation Administration (FAA) The FAA estimate was based on information taken from airport master plans and state system plans, but FAA planners screened out planned projects not justified by aviation activity forecasts or not eligible for AIP grants. Only designated airports were included in the FAA study. Implicit in this methodology is that the planning has been carried through to the point where financing is identified. The ACI-NA study casts a substantially wider net. It includes projects funded by PFCs, bonds, or state or local funding; airport-funded air traffic control facilities; airport or Transportation Security Administration (TSA)-funded security projects; “necessary” AIPineligible projects such as parking facilities, hangars, revenue portions of terminals, and offairport roads/transit facilities; and AIP-eligible projects for which AIP funding was not requested. These additions cause the ACI-NA estimate of capital needs to be far higher than the FAA estimate. FAA has devoted particular attention to evaluating capital needs at the largest airports, which handle the vast majority of commercial passenger boardings. The agency has undertaken three studies to determine which improvements at major airports are most critical to increasing system capacity. The most recent such study, called FACT3, was released in January 2015.13 FACT3 concluded that the nationwide air traffic system is more reliable and that congestion has been reduced, due to the combined effects of structural change in the airline industry as well as the addition of 18 new runways and 7 extended runways at the busiest hub airports since 2000. FACT3 indicated that while NextGen is helping to manage delays caused by airport congestion, new capacity and other solutions are still necessary to address traffic growth and reduce delays at some of the largest and busiest airports. The study also projects interim airport capacity needs in 2020 and long-term needs in 2030 among the nation’s busiest airports. While it found that capacity constraints across the aviation system may not be as dire as in previous analyses, even with the latest improvements, several of the busiest airports would continue to be capacityconstrained in the near term, including all the New York City-area airports, Philadelphia International Airport, and Hartsfield-Jackson Atlanta International Airport.14 Airport Improvement Program (AIP) The AIP provides federal grants to airports for airport development and planning. Participants range from very large publicly owned commercial airports to small general aviation airports that may be privately owned but are available for public use.15 AIP funding is usually limited to construction of improvements related to aircraft operations, such as runways and taxiways. Commercial revenue-producing facilities are generally not eligible for AIP funding, nor are operating costs.16 The structure of AIP funds distribution reflects congressional priorities and the objectives of assuring airport safety and security, increasing airport capacity, reducing congestion, helping fund noise and environmental mitigation costs, and financing small state and community airports. 13 FACT3 is short for Future Airport Capacity Task, study 3. The previous reports are called FACT1 and FACT2. FAA, FACT3: Airport Capacity Needs in the National Airspace System, January 2015, http://www.faa.gov/airports/ planning_capacity/media/FACT3-Airport-Capacity-Needs-in-the-NAS.pdf. 15 General aviation airports do not serve military (with a few Air National Guard exceptions) or scheduled commercial service aircraft but typically do support one or more of the following: business/corporate, personal, instructional flying; agricultural spraying; air ambulances; on-demand air taxies; charter aircraft. 16 For detailed guidance on allowable costs under the AIP, see Chapter 3 of the AIP Handbook, at http://www.faa.gov/ airports/resources/publications/orders/media/aip_5100_38c.pdf. 14 Congressional Research Service 5 Issues in the Reauthorization of the Federal Aviation Administration (FAA) The main financial advantage of the AIP to airports is that as a grant program, it can provide funds for capital projects without the financial burden of debt financing, although airports are required to provide a modest local match to the federal funds. Limitations on the use of AIP grants include the range of projects that the AIP can fund and the requirement that recipients adhere to all program regulations and grant assurances. Federal law requires the Secretary of Transportation to publish a national plan for the development of public-use airports in the United States. This appears as a biannual FAA publication called the National Plan of Integrated Airport Systems (NPIAS).17 For an airport to receive AIP funds, it must be listed in the NPIAS. AIP Funding The AIP program structure and authorizations are set in FAA authorization acts. AIP spending authorized and the amounts made available for grants since FY1992 are illustrated in Table 3. 17 According to FAA, 3,355 of the 19,786 airports in the United States are listed in the NPIAS. Congressional Research Service 6 Issues in the Reauthorization of the Federal Aviation Administration (FAA) Table 3. Annual AIP Authorizations and Amounts Made Available for Grants, FY1992-FY2013 ($ millions) Fiscal Year Authorization Grant Amounts Available 1992 $1,900 $1,900 1993 $2,025 $1,800 1994 $2,970 $1,690 1995 $2,161 $1,450 1996 $2,214 $1,450 1997 $2,280 $1,460 1998 $2,347 $1,700 1999 $2,410 $1,950 2000 $2,475 $1,851 2001 $3,200 $3,140 2002 $3,300 $3,223 2003 $3,400 $3,295 2004 $3,400 $3,294 2005 $3,500 $3,384 2006 $3,600 $3,424 2007 $3,700 $3,402 2008 $3,675 $3,471 2009 $3,900 $3,385 2010 $3,515 $3,378 2011 $3,515 $3,378 2012 $3,350 $3,199 2013 $3,350 $3,192 2014 $3,350 $3,194 2015 $3,350 Sources: FAA, AIP Annual Report of Accomplishments, 2009, and data from FAA Airports Branch. Amounts made available for grants do not include obligations used for administration expenses, the Small Community Air Service Program, and some research funding. After trending upward from FY1982 to FY1992, grant funding approved in annual appropriations declined through the mid-1990s as part of federal deficit reduction efforts, leaving large gaps between authorized AIP spending levels and the amounts the program was actually allowed to expend. This occurred despite provisions in place since 1976 designed to ensure that federal capital spending for airports is fully funded at the authorized level (see Text Box, “Current AIP Funding Guarantees”). The Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (AIR-21; P.L. 106181), enacted in 2000, provided major increases in the AIP’s authorization, starting in FY2001. During FY2001-FY2006, the AIP was funded near its fully authorized levels. The amount Congressional Research Service 7 Issues in the Reauthorization of the Federal Aviation Administration (FAA) available for grants peaked at $3.47 billion in FY2008. From FY2008 through FY2011, when the AIP was authorized by a series of authorization extension acts, appropriators set the program’s annual obligation limitation at $3.515 billion.18 The FAA Modernization and Reform Act of 2012 authorized funding through FY2015 at an annual level of $3.35 billion. Current AIP Funding Guarantees Historically, FAA authorization acts have included provisions designed to compel appropriators to both fully expend annual trust fund revenues and fully fund FAA’s capital programs: the AIP and Facilities and Equipment (F&E). 19 The current guarantee requires that total budget resources made available from the trust fund in any year (including appropriations and obligation limitations) for the AIP, F&E, research and development, and the trust fund share of FAA operations must be equal to the sum of 90% of the revenues for the year plus the amount calculated by subtracting the amount made available from the trust fund from the actual revenues received, based on the data from the fiscal year two years prior to the current fiscal year. This guarantee is enforced by making it out of order in both the House and the Senate to consider any provision that does not adhere to the guarantees. Point-of-order enforcement provisions have had limited success in the past. This is largely because points of order may be waived by the Rules Committee in the House, and points of order are rarely raised against conference reports in the Senate. Funding Distribution The distribution system for AIP grants is complex. It is based on a combination of formula grants (also referred to as apportionments or entitlements) and discretionary funds.20 Each year, the entitlements are first apportioned by formula to specific airports or types of airports. Once the entitlements are satisfied, the remaining funds are defined as discretionary funds. Airports apply for discretionary funds for projects in their airport master plans. Formula grants and discretionary funds are not mutually exclusive, in the sense that airports receiving formula funds may also apply for and receive discretionary funds. Grants are generally awarded directly to airports. Entitlements (Formula Funds) Entitlements are funds that are apportioned by formula to airports, and may generally be used for any eligible airport improvement or planning project. These funds are divided into four categories: primary airports, cargo service airports, general aviation airports, and Alaska supplemental funds. Each category distributes AIP funds by a different formula. Most airports have up to three years to use their apportionments. Nonhub commercial service airports have up to four years. The formula distributions are contingent on an annual AIP obligation limitation of $3.2 billion or more. If this threshold is not met in a particular fiscal year, most formulas revert to prior authorized funding formulas. Primary Airports. The apportionment for airports that board more than 10,000 passengers each year is based on the number of boardings (also referred to as enplanements) during the prior 18 The obligation limitation or limitation on obligations is used to control annual AIP spending in place of an appropriation. The obligation limitation is a limit on the total amount of AIP contract authority that can be obligated in a single fiscal year. For practical purposes, the obligation limitation is analogous to an appropriation. 19 See CRS Report RL33654, Aviation Spending Guarantee Mechanisms, by (name redacted) . 20 See U.S.C. 49 Chapter 471 and FAA, Airport Improvement Program Handbook, http://www.faa.gov/airports/ resources/publications/orders/media/aip_5100_38c.pdf. Congressional Research Service 8 Issues in the Reauthorization of the Federal Aviation Administration (FAA) calendar year.21 The amount apportioned for each fiscal year is equal to double the amount that would be received according to the following formulas:      $7.80 for each of the first 50,000 passenger boardings; $5.20 for each of the next 50,000 passenger boardings; $2.60 for each of the next 400,000 passenger boardings; $0.65 for each of the next 500,000 passenger boardings; and $0.50 for each passenger boarding in excess of 1 million. The minimum allocation to any primary airport is $1 million. The maximum is $26 million.22 Cargo Service Airports. Some 3.5% of AIP funds subject to apportionment are apportioned to airports served by all-cargo aircraft with a total annual landed weight of more than 100 million pounds. The allocation formula is the proportion of the individual airport’s landed weight to the total landed weight at all cargo service airports.23 General Aviation Airports. General aviation, reliever, and nonprimary commercial service airports are apportioned 20% of AIP funds subject to apportionment. From this share, all airports, excluding all nonreliever primary airports, receive the lesser of the following:   $150,000 or one-fifth of the estimated five-year costs for airport development for each of these airports as listed in the most recent NPIAS. Any remaining funds are distributed according to a state-based population and area formula. FAA makes the project decisions on the use of these funds in consultation with the states. Although FAA has ultimate control, some states view these funds as an opportunity to address general aviation needs from a statewide, rather than a local or national, perspective.24 Alaska Supplemental Funds. Funds are apportioned to airports in Alaska to assure that Alaskan airports receive at least twice as much funding as they did under the Airport Development Aid Program in 1980.25 Forgone Apportionments. Large and medium hub airports that collect a passenger facility charge of $3 or less have their AIP formula entitlements reduced by an amount equal to 50% of their projected PFC revenue for the fiscal year until they forgo or give back 50% of their AIP formula grants. In the case of PFC above the $3 level, the percentage forgone is 75%. A special small airport fund, which provides grants on a discretionary basis to airports smaller than medium hub, gets 87.5% of these forgone funds. The discretionary fund gets the remaining 12.5%. 21 Passenger enplanements are the total number of passengers boarding aircraft, including originating passengers as well as those changing aircraft. 22 In a year in which the amount made available is below $3.2 billion, the amounts apportioned to primary airports are not doubled, the minimum apportionment returns to $650,000, and the maximum apportionment is $22 million. 23 In a year in which the amount made available is below $3.2 billion, not more than 8% of cargo service apportionment may be apportioned to any one airport. Landed weight is the weight of the aircraft and its contents at landing. 24 In any year in which the amount made available under Section 48103 is less than $3.2 billion, the formula reverts back to the amounts determined by the area and population formula set forth in Section 47114 (d) (1) and (2). 25 In any year in which the amount made available under Section 48103 is less than $3.2 billion, Alaska Supplemental funds will be apportioned based on the way in which amounts were apportioned in the fiscal year ending September 30, 1980. Congressional Research Service 9 Issues in the Reauthorization of the Federal Aviation Administration (FAA) Discretionary Funds The discretionary fund includes the money not distributed under the apportioned entitlements, as well as the forgone PFC revenues that were not deposited into the small airport fund. AIP discretionary funding for FY2014 was about 15% of total AIP funding. Discretionary grants are approved by FAA based on project priority and other selection criteria. Figure 1 illustrates the composition of both apportioned and discretionary grants, based on FY2014 data. Despite its name, the discretionary fund is not allocated solely at FAA’s discretion. Allocations are subject to the following three set-asides and certain other spending criteria:    Airport Noise Set-Asides. At least 35% of discretionary funds are set aside for noise compatibility planning and for carrying out noise abatement and compatibility programs. Military Airport Program. At least 4% of discretionary funds are set aside for conversion and dual use of up to 15 current and former military airports. The program allows funding of some projects not normally eligible under the AIP.26 Grants for Reliever Airports. There is a set-aside of two-thirds of 1% of discretionary funds for reliever airports in metropolitan areas suffering from flight delays.27 26 The program is commonly referred to as MAP; see http://www.faa.gov/airports/aip/military_airport_program/. Reliever airports are high-capacity general aviation airports meant to provide general aviation pilots with alternatives to using congested hub airports. Reliever airports must have 100 or more based aircraft or 25,000 annual itinerant operations. These airports average 230 based aircraft. In total, 28% of the general aviation fleet in the United States is based at reliever airports. 27 Congressional Research Service 10 Issues in the Reauthorization of the Federal Aviation Administration (FAA) Figure 1. FY2014 AIP Distribution: Entitlement and Discretionary Grants Source: Data from FAA Airports Branch. Notes: Carryover is also referred to as Protected Entitlement Funds. C/S/S/N = Capacity, Safety, Security, and Noise Abatement. Amounts may not add to 100% due to rounding. The Secretary of Transportation is also directed to see that 75% of the grants made from the discretionary fund are used to preserve and enhance capacity, safety, and security at primary and reliever airports, and also to carry out airport noise compatibility planning and programs at these airports. From the remaining 25%, FAA is required to set aside $5 million for the testing and evaluation of innovative aviation security systems. Subject to these limitations and the three set-asides, the Secretary of Transportation, through FAA, has discretion in distribution of grants from the remainder of the discretionary fund.28 State Block Grant Program29 Under this program, FAA provides funds directly to participating states for projects at airports classified as other than primary airports. Each participating state receives a block grant made up of the state’s apportionment (formula) funds and available discretionary funds. A block grant program state is responsible for selecting and funding AIP projects at the small airports in the state. In making the selections, the participating states are required to comply with federal priorities. Each block grant state is responsible for project administration as well as most of the inspection and oversight roles normally assumed by FAA. The states that currently participate in 28 For a description of FAA’s process for selecting projects, see 26th AIP Annual Report of Accomplishments, http://www.faa.gov/airports/aip/grant_histories/media/26th_AIP_Annual_Report_of_Accomplishments.pdf. 29 49 U.S.C. §47128. For program requirements, see 14 C.F.R. Part 156. Congressional Research Service 11 Issues in the Reauthorization of the Federal Aviation Administration (FAA) the state block grant program are Georgia, Illinois, Michigan, Missouri, New Hampshire, North Carolina, Pennsylvania, Tennessee, Texas, and Wisconsin. The Federal Share of AIP Matching Funds For AIP projects, the federal government share differs depending on the type of airport.30 The federal share, whether funded by formula or discretionary grants, is as follows:       75% for large and medium hub airports (80% for noise compatibility projects); 90% for other airports; “not more than” 90% for airport projects in states participating in the state block grant program; 70% for projects funded from the discretionary fund at airports receiving exemptions under 49 U.S.C. Section 47134, the pilot program for private ownership of airports; airports reclassified as medium hubs due to increased passenger volumes may retain eligibility for up to a 90% federal share for a two-year transition period; certain economically distressed communities receiving subsidized air service may be eligible for up to a 95% federal share of project costs. This cost-share structure means that smaller airports pay a lower share of AIP-funded project costs than larger airports. The airports themselves must raise the remaining share from other sources.31 Distribution of AIP Grants by Airport Size Although smaller airports’ individual grants are of much smaller dollar amounts than the grants going to large and medium hub airports, the smaller airports are much more dependent on the AIP to meet their capital needs. This is particularly the case for noncommercial airports, which received over 30% of AIP grants distributed in FY2012. Figure 2 shows the share of AIP grants awarded in FY2014, by value, broken out by airport type. 30 31 49 U.S.C. §47109. Higher federal shares are available to airports in states with large amounts of federal land; see 49 U.S.C. §47109(b). Congressional Research Service 12 Issues in the Reauthorization of the Federal Aviation Administration (FAA) Figure 2. FY2014 AIP Grant Distribution by Airport Type Source: Data from FAA Airports Branch. Grant Assurances Airports’ grant applications are conditioned on assurances regarding future airport operations. Examples of such assurances include making the airport available for public use on reasonable conditions and without unjust economic discrimination (against all types, kinds, and classes of aeronautical activities); charging air carriers making similar use of the airport substantially comparable amounts; maintaining a current airport layout plan; making financial reports to FAA; and expending airport revenue only on capital or operating costs at the airport.32 Within the AIP context, assurances are a means of guaranteeing the implementation of federal policy. Obligations derived from airports’ assurances extend beyond the formal closure of AIP grantsupported projects. Obligations related to the use, operation, and maintenance of an airport remain in effect for the expected life of the improvement, up to 20 years. In the case of the purchase of land with AIP funds, the federal obligations do not expire.33 Airports may request that FAA release them from their AIP contractual obligations. Typically, as a condition of the release, the airport sponsor must either reimburse the federal government for the AIP grants (in the case of 32 49 U.S.C. §47107. The layout plan must be approved by the Secretary of Transportation, as must any revision or modification. This, in effect, means that any AIP project must be written into the airport’s plan. The nondiscrimination provision protects a wide variety of users including, for example, nighttime users and cargo carriers. 33 Assurances that no carrier will receive exclusive rights, that airport revenue will be used at the airport, and that the airport will comply with civil rights protections continue in perpetuity. Congressional Research Service 13 Issues in the Reauthorization of the Federal Aviation Administration (FAA) land grants, the federal share of the fair market value of the land) or reinvest the amount in an approved AIP project.34 Decisions about which airport expansion projects are most justified have implications for the reauthorization of the AIP in 2015. Large runway projects can require long lead times—10 or more years from concept to initial construction is not unusual. At large and medium hub airports, runway projects are usually paid for, in part, by AIP funds. Therefore, some projects needed by 2025 may require AIP funding in earlier years. Because large and medium airports must forgo either 50% or 75% of their AIP formula entitlement funds if they levy passenger facility charges (see below), most federal funding for their runway projects will probably need to take the form of AIP discretionary funds. If the AIP budget is constrained in the future, either under a reauthorization bill or during the annual appropriations process, and the entitlement formulas remain as they are, the discretionary portion of the AIP budget may be squeezed, limiting large airports’ ability to draw on AIP funds for major capacity expansion projects. There are several ways Congress might shift AIP funds if it wishes to give priority to enhancing capacity at large and medium hub airports. One would be to eliminate the requirement that large and medium hub airports that impose the maximum PFCs forgo 75% of their entitlement. This change would give larger airports a greater share of entitlement funding, but at the cost of depleting the discretionary small airport fund and reducing AIP grants to small airports. Alternatively, changes in the statutory set-asides of discretionary funds could give FAA more flexibility to use that money for capacity enhancement, but might reduce funding for noise mitigation and other purposes. Changes in the last several FAA authorization acts increased entitlements and broadened the range of landside projects eligible for AIP grants. These changes generally benefitted airports smaller than medium hub size. In particular, the increased amount of apportioned funds has limited the availability of funds for discretionary grants, such as those for operational evolution plan projects at major airports. Further changes giving airports increased flexibility in the use of their entitlements might benefit smaller airports not served by commercial aviation, in line with the national goal of having an “extensive” national airport system,35 but this use of funds might conflict with the goal of reducing congestion at major commercial airports. One way to reduce the amount of trust fund revenue needed for the AIP would be to allow large and medium hub airports to opt out of the AIP and rely exclusively on PFCs to finance capital projects. This would require raising or eliminating the federal cap on PFCs. These “defederalized” airports could then be released from some or all of the AIP grant assurances under which they now operate, such as land use requirements and airport revenue use restrictions.36 If airports exit the program, AIP spending could be reduced or redirected to other airports. 34 For a listing of the grant assurances, see http://www.faa.gov/airports/aip/grant_assurances/. NPIAS, p. 4. The NPIAS includes the attribute that “the airport system be extensive, providing as many people as possible with convenient access to air transportation, typically by having most commuters with no more than 20 miles of travel to the nearest NPIAS airport.” Also see http://www.faa.gov/airports/planning-capacity/ga_study/. 36 This approach is backed by the American Association of Airport Executives, Eliminate Federal Cap on Local Passenger Facility Charges, http://www.aaae.org/?e=showFile&l=GRSRWZ. 35 Congressional Research Service 14 Issues in the Reauthorization of the Federal Aviation Administration (FAA) Passenger Facility Charges In 1990, concerns that existing sources of funds for airport development would be insufficient to meet national needs led to authorization of a new user charge, the passenger facility charge (PFC). The PFC was seen as a complementary funding source to the AIP. The Aviation Safety and Capacity Expansion Act of 199037 allowed the Secretary of Transportation to authorize public agencies that control commercial airports to impose a fee on each paying passenger boarding an aircraft at their airports. Initially, there was a $3 cap on each airport’s PFC and a $12 limit on the total PFCs that a passenger could be charged per round trip. The PFC is a state, local, or port authority fee, not a federally imposed tax deposited into the Treasury.38 Because of the complementary relationship between the AIP and PFCs, PFC provisions are generally folded into the sections of FAA reauthorization legislation dealing with the AIP. The money raised from PFCs must be used to finance eligible airport-related projects. Unlike AIP funds, PFC funds may be used to service debt incurred to carry out projects.39 Legislation in 2000 raised the PFC ceiling to $4.50, with an $18 limit on the total PFCs that a passenger can be charged per round trip. To impose a PFC above $3, an airport has to show that the funded projects will make significant improvements in air safety, increase competition, or reduce congestion or noise impacts on communities, and that these projects could not be fully funded by using the airport’s AIP formula funds or AIP discretionary grants. Large and medium hub airports imposing PFCs above the $3 level forgo 75% of their AIP formula funds. PFCs at large and medium hub airports may not be approved unless the airport has submitted a written competition plan to FAA, which includes information about the availability of gates, leasing arrangements, gate-use requirements, controls over airside and ground-side capacity, and intentions to build gates that could be used as common facilities. The FAA Modernization and Reform Act of 2012 included minor changes to the PFC program. The act made permanent the pilot program that authorized nonhub small airports to impose PFCs. The act also required GAO to study alternative means of collecting PFCs without including the PFC in the ticket price.40 Unlike AIP grants, of which over 70% in FY2014 went to airside projects (runways, taxiways, aprons, and safety-related projects), PFC revenues are heavily used for landside projects such as terminals and transit systems on airport property, and for interest payments. Table 4 shows the AIP grant awards and PFC approvals by project type in FY2014. Annual system-wide PFC collections grew from $85.4 million in 1992 to $2.9 billion in 2014.41 37 P.L. 101-508, Omnibus Budget Reconciliation Act of 1990, Title IX. Air carriers collect the PFCs for airports and are paid a small administrative fee. 39 49 U.S.C. §40117. 40 GAO identified three alternative means of collecting PFCs, but found that none of the alternative methods was better than the existing collection method. See GAO-13-262R, Alternative Methods for Collecting Airport Passenger Facility Charges, February 14, 2013, http://www.gao.gov/products/GAO-13-262R. 41 For PFC collections by year, see http://www.faa.gov/airports/pfc/monthly_reports/media/stats.pdf. 38 Congressional Research Service 15 Issues in the Reauthorization of the Federal Aviation Administration (FAA) Table 4. Distribution of PFC Approvals and AIP Grants by Project Type, FY2014 Type of Project Percentage of PFC Percentage of AIP Airside 13.7 72.9 Landside 30.2 11.0 Noise 0.5 3.8 Roads/Access 12.8 1.0 Interest on Bonds 42.8 — Unclassified, State Block Grants, Misc. — 11.3 Total 100.0 100.0 Source: FAA, Airports Branch. The PFC statutory language lends itself to a broader interpretation of “capacity enhancing” projects, and the implementing regulations are less constraining than those for AIP funds. Air carriers, which historically have preferred funding to be dedicated to airside projects, must be notified and provided with an opportunity for consultation about airports’ proposals to fund projects with PFC revenues. They are generally less involved in the PFC project planning and decision-making process than is the case with AIP projects. The difference in the pattern of project types may also be influenced by the fact that larger airports, which collect most of the PFC revenue, tend to have substantial landside infrastructure, whereas smaller airports that are much more dependent on AIP funding have comparatively limited landside facilities. The central legislative issue related to PFCs is whether to raise the $4.50 per enplaned passenger ceiling or to eliminate the ceiling altogether. In general, airports argue for increasing or eliminating the ceiling, whereas most air carriers and some passenger advocates oppose higher limits on PFCs. A GAO study released in January 2015 modeled several scenarios of higher PFCs, and found that raising the cap would significantly increase PFC collections available to airports. However, the GAO report suggests that higher PFCs could also marginally slow passenger growth, and therefore the growth in revenues to the Airport and Airway Trust Fund.42 The permissible uses of revenues are an ongoing point of contention. Airport operators, in particular, would like more freedom to use PFC funds for off-airport projects, such as transportation access projects, and want the process of obtaining FAA approval to be streamlined. Carriers, on the other hand, often complain that airports use PFC funds to finance proposals of dubious value, especially outside airport boundaries, instead of high-priority projects that offer meaningful safety or capacity enhancements. The major air carriers are also unhappy with their limited influence over project decisions, as airports are required only to consult with resident air carriers instead of having to get their agreement on PFC-funded projects. Airport Privatization43 Almost all commercial service airports in the United States are owned by local and state governments, or by public entities such as airport authorities or multipurpose port authorities.44 In 42 Commercial Aviation: Raising Passenger Facility Charges Would Increase Airport Funding, but Other Effects Less Certain, GAO-15-107, December 2014, http://www.gao.gov/products/GAO-15-107. 43 For more complete discussion of this subject, see CRS Report R43545, Airport Privatization: Issues and Options for Congress, by (name redacted). Congressional Research Service 16 Issues in the Reauthorization of the Federal Aviation Administration (FAA) 1996, Congress established the Airport Privatization Pilot Program (APPP)45 to explore the prospect of privatizing publicly owned airports and using private capital to improve and develop them. In addition to reducing demand for government funds, privatization has been promoted as a way to make airports more efficient and financially viable. Participation in the APPP has been limited. Two airports have completed the privatization process, and one of them later reverted to public ownership. Owners of other airports considered privatization, but eventually chose not to proceed. The lack of interest in privatization among U.S. airports could be the result of (1) readily available financing sources for publicly owned airports; (2) barriers or lack of incentives to privatize; (3) the potential implications for major stakeholders; and (4) satisfaction with the status quo. Privatization refers to the shifting of governmental functions, responsibilities, and sometimes ownership, in whole or in part, to the private sector. With respect to airports, “privatization” can take many forms up to and including the transfer of an entire airport to private operation and/or ownership. In the United States, most cases of airport privatization fall into the category of “partial privatization”; full privatization, either under or outside the APPP, has been rare. Types of Airport Privatization Airport privatization has taken four generic forms:     Service Contracts. Many U.S. airports outsource some noncore operations to private firms that specialize in those functions. Examples of operations that are frequently outsourced are cleaning and janitorial services, airport landscaping, shuttle bus operations, and concessions in airport terminals. Outsourcing of service contracts is probably the most common type of privatization among U.S. airports. Management Contracts. Some airports engage the management expertise of the private sector by contracting out specific facilities or responsibilities such as parking, terminal concessions, terminal operations, airfield signage, fuel farms, and aircraft refueling. In a few cases, a private management company has been awarded a contract to manage an entire airport for a specified term. Developer Financing/Operation. A wide range of contracts has been used to involve the private sector in providing financing, development, operation, and maintenance services. This is also known as the Design-Build-Finance-OperateMaintain (DBFOM) model. Airport DBFOM examples include passenger terminals (notably Terminal 5 at Chicago O’Hare International Airport and Terminal 4 at New York John F. Kennedy International Airport), parking garages, and rental car facilities.46 Long-Term Lease or Sale. Full privatization involves the sale or long-term lease of an airport to a private owner or operator. Under a long-term lease or concession agreement, the airport owner grants full management and (...continued) 44 Commercial service airports are publicly owned airports that receive scheduled passenger service and board at least 2,500 passengers a year. Branson Airport in Branson, MO, is the only privately funded, privately developed, and privately operated commercial passenger airport in the United States. 45 49 U.S.C. §47134; Section 149 of the Federal Aviation Reauthorization Act of 1996; P.L. 104-264. 46 Airport Cooperative Research Program (ACRP) Report 66, “Considering and Evaluating Airport Privatization,” p. 4. Congressional Research Service 17 Issues in the Reauthorization of the Federal Aviation Administration (FAA) development control to the private operator in exchange for capital improvements and other obligations such as an up-front payment and/or profit-sharing arrangements. Under a full sale, ownership and full responsibility for operation, capital improvements, and maintenance would be transferred to a private buyer. Several airports in Europe have been privatized in this way, but there have been no sales of commercial service airports in the United States. The Interests at Stake Airport privatization, especially in the case of long-term lease or sale, involves four major stakeholders: airport owners, which in the United States are mostly local or regional governments or public entities; air carriers; private investors; and the federal government. These stakeholders ultimately decide whether a privatization deal goes forward, but they tend to have different objectives and, in many cases, divergent interests. Airline passengers may experience the effect of privatization via, for example, airport concession offerings, operational efficiency, and changes in prices and fees, but passenger interests are usually not represented formally in discussions of privatization. Airport owners, who are usually local governments, might embrace privatization as a source of revenue, but federal regulations generally require that lease or sale revenue from airport privatization be used only for airport purposes (unless the majority of airlines agrees otherwise, under the APPP). On the other hand, privatization involves surrendering control of an economically important facility. Reducing or eliminating responsibilities of the public agency or authority that owns the airport may lead to the loss of public-sector jobs. Hence a public-sector owner may see few benefits from selling or leasing an airport to a private operator unless the facility is losing money—and in that case, private investors might not find the airport an attractive investment. The APPP encourages privatization by granting certain exemptions to public-sector owners with regard to revenue diversion and other obligations. Air carriers, including both scheduled passenger airlines and cargo airlines, would like to keep their costs low. They also want to have some control over how airport revenues are used, especially to ensure that the fees paid by themselves and their customers are used for airportrelated purposes. Their interest in low landing fees and low rents for ticket counters and other facilities may be contrary to the interest of potential private operators in increasing revenue. At the same time, however, air carriers have an interest in ensuring that the airports they use are well maintained and carefully managed. They might have reason to support a proposed privatization if they thought it would result in lower charges, better airport services, or increased efforts to promote the airport. Private investors and operators expect a financial return on their investments. They will be looking above all at growth potential such as opportunities to bring additional flights to the airport, to earn additional lease revenue by improving amenity offerings such as shopping and dining for passengers, or to draw more freight traffic by offering lower fees or improved facilities. If they attempt to increase profitability by raising landing fees or rents, that may bring them into conflict with air carriers using the airport. The federal government, represented by FAA, has been directed by Congress to engage private capital in aviation infrastructure development and reduce reliance on federal grants and subsidies. However, FAA also has statutory mandates to maintain the safety and integrity of the national air transportation system and to enforce compliance with commitments, known as “grant assurances,” that airports have made to obtain grants under the AIP. Thus FAA is likely to carefully examine privatization proposals that might risk closures of runways or airports or Congressional Research Service 18 Issues in the Reauthorization of the Federal Aviation Administration (FAA) otherwise reduce aviation system capacity, or that appear to favor certain airport users over others. The divergent interests of stakeholders are a significant issue in privatization. Striking a balance among these interests while facilitating privatization is one of the purposes of the APPP. The Airport Privatization Pilot Program (APPP) Section 149 of the Federal Aviation Reauthorization Act of 1996 (49 U.S.C. §47134; P.L. 104264) authorizes the FAA Administrator to exempt participating airports from all or part of the requirements to use airport revenue for airport-related purposes, to repay federal grants, or to return airport property acquired with federal assistance upon the lease or sale of the airport deeded by the federal government.47 The law originally limited participation in the APPP to no more than five airports. The FAA Modernization and Reform Act of 2012 (P.L. 112-95) increased the number of airports that may participate from 5 to 10. Only one large hub commercial airport may participate in the program, and that airport may only be leased, not sold. Only general aviation airports can be sold under the APPP. Table 5 provides a comparison of the requirements and regulations governing airport privatization under and outside the APPP. Table 5. Full Airport Privatization Under the APPP vs. Outside the APPP Full Privatization Under APPP Full Privatization Outside APPP Eligible Airports A maximum of 10 airports may participate, among which only one may be a large hub airport. One slot is reserved for a general aviation airport. Commercial airports may only be leased; general aviation airports may be sold. No restrictions on number or type of airports. Use of Sale/Lease Proceeds Airports can request U.S. Department of Transportation (DOT) approval to use sale/lease proceeds for nonairport purposes. For commercial service airports, this also requires consent of 65% of airlines. For general aviation airports, this requires consultation with owners of aircraft based at the airport. Sale/lease proceeds are considered airport revenue, and must be used for airport purposes. Grant Repayment DOT may grant exemptions from existing repayment obligations. Airports must abide by other grant assurance obligations. DOT cannot grant exemptions from grant assurance obligations or existing repayment obligations. AIP Formula Grants Private operator is eligible for grants from AIP formula funds, but at a lower federal share. Private operator may be eligible for grants from AIP formula funds under certain conditions such as when a privately owned airport is used for public purpose as a reliever or provides at least 2,500 passenger boardings a year. 47 For a primary airport, the use of airport revenue for airport-related purposes requires approval by 65% of the scheduled air carriers serving the airport and by the scheduled and unscheduled air carriers representing 65% of the total landed weight of all aircraft serving the airport in the preceding calendar year. For more information about the APPP, see http://www.faa.gov/airports/airport_compliance/privatization/. Congressional Research Service 19 Issues in the Reauthorization of the Federal Aviation Administration (FAA) Full Privatization Under APPP Full Privatization Outside APPP Rates or Charges on Airlines Rates on airlines may not rise faster than the inflation rate without consent of 65% of airlines. Rate increases for general aviation aircraft owners may not exceed percentage rate increase for airlines. Rates and charges must be reasonable and not unjustly discriminatory, pursuant to grant assurances. Charges on Passengers Private operator is authorized to impose, collect, and use revenue from passenger facility charges (PFCs). Private operator is authorized to impose charges on passengers (subject to reasonableness and nondiscrimination requirements of the grant assurances), but not to impose, collect, or use PFCs. Source: Federal Aviation Administration. Participation in APPP The APPP has had limited success in increasing the number of privately run airports. Since its inception, 10 airports have applied to enter the APPP; two have completed the entire privatization process. One of these later reverted to public ownership. Table 6 lists the APPP applicants and their status. Table 6. Participation in the APPP (as of December 2014) Status Airport Location Application Results Inactive Brown Field Municipal Airport San Diego, CA Application withdrawn in 2001. Inactive Chicago Midway International Airport Chicago, IL Application withdrawn in 2013. Inactive Gwinnett County Briscoe Field Airport Lawrenceville, GA Application withdrawn in 2012. Active* Hendry County Airglades Airport Clewiston, FL In August 2014, FAA approved management contract between county and private operator, pending submission of final APPP application by the county. Inactive Louis Armstrong New Orleans International Airport New Orleans, LA Application withdrawn in 2010. Privatized* Luis Muñoz Marín International Airport San Juan, Puerto Rico Preliminary approved in December 2009; final application approved in February 2013. Privatized under long-term lease. Inactive New Orleans Lakefront Airport New Orleans, LA Application terminated in 2008. Inactive Niagara Falls International Airport Niagara Falls, NY Application withdrawn in 2001. Inactive Rafael Hernandez Airport Aguadilla, Puerto Rico Application withdrawn in 2001. Inactive Stewart International Airport Newburgh, NY Airport privatized in 2000 after FAA approval; reverted to public operation in 2007. Source: Federal Aviation Administration; U.S. Government Accountability Office, Airport Privatization, GAO-1542, November 2014. Congressional Research Service 20 Issues in the Reauthorization of the Federal Aviation Administration (FAA) Notes: The rows marked with an asterisk represent the two active participants as of December 2014. FAA terminated New Orleans Lakefront Airport’s application when the airport missed the deadline to submit additional materials. Stewart International Airport In 2000, Stewart International Airport in Newburgh, NY, became the first commercial service airport privatized under the APPP. National Express Group PLC, a U.K.-based transportation company, made an initial $35 million up-front payment to the owner, the State of New York, for a 99-year lease, and agreed to pay the state 5% of the airport’s gross income on the lease’s 10th anniversary or after 1.38 million passengers used the airport, whichever occurred first. National Express Group also made $10 million in capital contribution during its operation of the airport.48 Unable to obtain airline approvals to use airport revenue for general purposes, the airport owner, the State of New York, agreed to use the lease payments for airport purposes and to recoup past subsidies for Stewart Airport and other state-owned airports in accordance with FAA’s revenue use policy.49 National Express apparently was unsuccessful in increasing passenger traffic at Stewart; according to FAA data, the airport registered 274,126 enplanements in 2000, the year National Express assumed management, but only 156,638 six years later.50 The company’s attempt to make the airport more attractive to passengers going to and from New York City by renaming it “New York-Hudson Valley International Airport” was abandoned amid local opposition.51 In 2006, National Express decided to focus its U.S. efforts on school bus operations, and moved to dispose of its lease on Stewart.52 The following year, the Port Authority of New York and New Jersey purchased the remaining term of the lease for $78.5 million. Although National Express never disclosed the profitability of its operation at Stewart, the Port Authority reported a $0.8 million loss in 2007, when it ran the airport for part of the year, and a $5.5 million loss in 2008, its first full year of operation.53 This suggests that the operation may not have been profitable for the private owner. However, National Express booked a profit of £16.2 million (approximately $33 million at the time) on the sale to the Port Authority, suggesting that it earned a significant return on its investment.54 Luis Muñoz Marín International Airport Luis Muñoz Marín International Airport, a medium hub airport in San Juan, Puerto Rico, is the only commercial service airport operating under private management after privatization under the APPP. FAA approved the final privatization contract in February 2013. 48 Airport Cooperative Research Program (ACRP) Report 66, “Considering and Evaluating Airport Privatization,” pp. 43-44 and pp. 86-87. FAA, Report to Congress on the Status of the Airport Privatization Pilot Program, 49 U.S.C. §47134, August 2004, p. 7. 49 New York Department of Transportation, “Governor Pataki Hands Stewart Airport Keys to National Express (Orange County),” press release, March 31, 2000. 50 See http://www.faa.gov/airports/planning_capacity/passenger_allcargo_stats/passenger/. 51 See http://ulstercountyny.gov/sites/default/files/documents/143-06.pdf. 52 National Express Group, Interim Report 2006, p. 6. 53 Port Authority of New York and New Jersey, Annual Report 2007, p. 94, and Annual Report 2008, p. 90. 54 National Express Group, Annual Report and Accounts 2007, p. 66. Congressional Research Service 21 Issues in the Reauthorization of the Federal Aviation Administration (FAA) The private operator, Aerostar Airport Holdings,55 paid $615 million in up-front proceeds to the Puerto Rico Ports Authority, and is to pay a further $600 million from revenue sharing over the 40-year lease. Aerostar also agreed to a $1.2 billion capital plan including a $200 million terminal reconfiguration within the first two years. Hendry County Airglades Airport The only airport currently seeking approval for privatization under the APPP is Hendry County Airglades Airport in Clewiston, FL. This general aviation airport received preliminary approval from FAA in October 2010. In August 2014, FAA approved a management contract between Hendry County and Airglades International Airport LLC, pending Hendry County’s submission of the final APPP application. Airglades International Airport LLC is controlled by owners of adjacent sugar plantations who intend to build an additional runway and construct a perishable air cargo complex, factories, warehouses, and housing on land near the airport.56 Chicago Midway Airport The APPP slot reserved for a large hub commercial airport was once taken by Chicago Midway Airport, but its privatization efforts never materialized. The City of Chicago received airline approval to lease its city-owned Midway International Airport to private investors. On October 3, 2006, FAA authorized the city to select a private operator, negotiate an agreement, and submit a final application under the pilot program.57 On October 8, 2008, the Chicago City Council agreed to a $2.52 billion, 99-year lease with Midway Investment and Development Corporation (MIDCo), a consortium led by Citigroup Inc., John Hancock Life Insurance Co., and a unit of Vancouver (British Columbia) International Airport. The deal was delayed due to the inability of the consortium to secure financing during the global economic crisis. The lease agreement was terminated when the group missed the April 6, 2009, payment deadline. MIDCo had to pay a $126 million penalty to the city.58 A renewed effort to lease Midway was abandoned in 2013 after one of the two bidding groups dropped out. The city then announced that it would suspend plans to lease the airport. On September 9, 2013, the City of Chicago withdrew its preliminary privatization application. This opened up the APPP slot reserved for a large hub airport. Why Has the APPP Not Stimulated Privatization? Over its 18-year history, the APPP has not been successful in stimulating wide interest in airport privatization. The program’s modest results appear to have several causes. 55 Aerostar Airport Holdings LLC is jointly owned by Aeropuerto de Cancún S.A. de C.V. and Highstar Capital. Aeropuerto de Cancún S.A. de C.V. is a subsidiary of Grupo Aeroportuario del Sureste S.A.B. de C.V. of Mexico. It operates the Cancún Airport. For more information on the lease, see FAA Docket 2009-1144, “Record of Decision for the Participation of Luis Muñoz Marín International Airport, San Juan, Puerto Rico, in the Airport Privatization Pilot Program,” February 25, 2013. 56 http://www.airgladesea.com/wp-content/uploads/2013/08/Display-Boards-Airglades-EA-Scoping-Meeting.pdf. 57 See FAA, “Fact Sheet: Chicago Midway Airport Pilot Privatization Program,” FAA News, April 2008. 58 Airport Cooperative Research Program (ACRP) Report 66, Considering and Evaluating Airport Privatization, p. 44. Congressional Research Service 22 Issues in the Reauthorization of the Federal Aviation Administration (FAA) APPP Application Process Applying to privatize an airport under the APPP, as reported by FAA, makes the transfer from public to private ownership too “time consuming” and presents risks that could cause a potential deal to fail.59 The process may take years to complete. In the cases of Luis Muñoz Marín International Airport and Hendry County Airglades Airport (see “Application Results” in Table 6), more than three years will have elapsed from preliminary application to final FAA approval, and informal discussions with FAA may have consumed additional time prior to the filing of the preliminary applications. The application process begins with an airport filing a preliminary application for FAA approval, upon which one of the 10 slots available under the APPP is reserved for that airport. The preliminary application must include a summary of privatization objectives, a description of the process and a timetable, current airport financial statements, and a copy of the airport owner’s request for potential private operators to submit proposals. FAA has 30 days to review the preliminary application. Once an airport receives preliminary approval, it then may select a private operator from among those offering proposals, negotiate an agreement, and submit a final application to FAA. There is no timeline as to how quickly FAA must complete its review of the final application. After FAA gives notice of its proposed approval of the final application and lease agreement in the Federal Register, there is a 60-day public review and comment period. After that, FAA completes its review and prepares its Findings and Record of Decision (ROD), in which it addresses the public comments and publishes the details of its decision.60 Regulatory Conditions and Obligations Airport privatization under the APPP has a number of regulatory requirements. These requirements may have lessened airport owners’ and/or investors’ interest in privatization. They include the need for 65% of air carriers serving the airport61 to approve a lease or sale of the airport; restrictions on increases in airport rates and charges that exceed the rate of increase of the Consumer Price Index (CPI); and a requirement that a private operator comply with grant assurances made by the previous public-sector operator to obtain AIP grants.62 In addition, after privatization, the airport will be eligible for AIP formula grants to cover only 70% of the cost of improvements, versus the normal 75%-90% federal share at publicly owned airports. This serves as a disincentive to privatize an airport because it will receive less federal money after privatization. 59 U.S. Department of Transportation, Federal Aviation Administration, Report to Congress on the Status of the Airport Privatization Pilot Program, United States Code, Title 49, Section 47134, August 2004, p. 1; Matthew Hummer, “Airport Privatization: A Plan to Help Fill a $50 Billion-Plus Investment Gap,” Bloomberg Government, December 20, 2011, p. 13. 60 For details of the APPP application procedures, see http://www.faa.gov/airports/resources/publications/ federal_register_notices/media/obligation_private97.pdf. 61 Approval must be granted both by 65% of the air carriers using the airport and by carriers collectively accounting for 65% of the landed weight during the previous year. 62 Examples of grant assurances include making the airport available for public use on reasonable conditions and without unjust economic discrimination (against all types, kinds, and classes of aeronautical activities); charging air carriers making similar use of the airport substantially comparable amounts; maintaining a current airport layout plan; making financial reports to FAA; and expending airport revenue only on capital or operating costs at the airport. For a listing of the AIP grant assurances, see http://www.faa.gov/airports/aip/grant_assurances/. Congressional Research Service 23 Issues in the Reauthorization of the Federal Aviation Administration (FAA) Adequate Access to Funding In surface transportation, a key purpose of privatization is to attract private capital to supplement public spending that is insufficient to provide the desired level of construction and maintenance.63 In general, lack of resources has been a far less important issue for airport operators than for highway and public transportation agencies. Publicly owned airports have access to five major sources of funding. The AIP provides federal grants to airports for planning and development, mainly of capital projects related to aircraft operations, such as runways and taxiways.64 Local passenger facility charges of up to $4.50 per boarding passenger, imposed pursuant to federal law, can generate revenue for a broad range of projects including “landside” projects on airport property such as passenger terminals and ground access improvements, and for interest payments. Tax-exempt bonds, often secured by airport revenue, offer less costly financing than is generally available to private entities. Tenant leases, landing fees, and other charges are important revenue sources at some airports. Many airports, especially smaller ones, also benefit from state and local grants.65 These financing arrangements have important implications for airport privatization.   If a publicly owned airport were to be privatized outside the APPP, its private operator may not be eligible to receive AIP formula funds and may have to draw on its own resources to improve runways and taxiways. The operator would not be entitled to issue bonds with federal tax-exempt status, and would therefore have to pay higher interest rates on its bonds than a public-sector operator. On the other hand, the private operator would have relative freedom to impose passenger usage fees and to increase landing fees, rents, and other charges, so long as this was not done in a discriminatory fashion. An airport privatized under APPP would continue to have access to federal AIP grants, although the private operator would have to provide a 30% match, considerably more than the 10%-25% matches required of publicly owned airports. The operator would not be entitled to issue bonds with federal taxexempt status, and would therefore have to pay higher interest rates on its bonds than a public-sector operator. It could continue to collect passenger facility charges, but could not impose charges higher than those authorized by federal law. Its ability to raise fees paid by air carriers would be constrained. These limitations are largely the consequence of federal laws. They may explain why airport privatization has been less attractive in the United States than in Europe and Canada. Several European countries and Canada have undertaken notable steps in airport privatization. Two factors that have facilitated privatization in other countries do not exist in the United States. First, many of the major airports that have been privatized in Europe and Canada were previously owned by national governments, not by local or provincial governments, so the decision to privatize did not need to be taken at multiple levels of government. Second, the tax-favored status 63 See CRS Report R43410, Highway and Public Transportation Infrastructure Provision Using Public-Private Partnerships (P3s), by (name redacted). 64 For more discussion of the AIP and airport financing, see CRS Report R43327, Financing Airport Improvements, by (name redacted) and (name redacted) . 65 U.S. Government Accountability Office, Airport Finance: Observations on Planned Airport Development Costs and Funding Levels and the Administration’s Proposed Changes in the Airport Improvement Program, GAO-07-885, 2007, p. 8. Congressional Research Service 24 Issues in the Reauthorization of the Federal Aviation Administration (FAA) of debt issued by U.S. state and local governments has no analogue in most other countries, so the shift from public to private ownership did not necessarily entail higher borrowing costs, as it would in the United States. Policy Issues Related to Privatization Congress has been interested in airport privatization as a way to save money by making airports less dependent on federal assistance while also, in the long run, increasing the nation’s aviation capacity to meet growing demand for air travel. However, under current federal law, privatization has struggled to achieve these goals. Privatization outside the framework of the APPP is generally unattractive to both airport owners and potential investors, as it is likely to result in higher financing costs and loss of federal AIP grants, and will not provide the public-sector owner with revenues that can be used for other purposes. Privatization within the framework of the APPP may generate minor reductions in federal outlays due to the requirement for a privately run airport to match a larger share of federal AIP grants, but it is not clear that privatization serves the interests of public-sector owners or air carriers, except in cases where the airport is losing money or the owner can channel the proceeds of privatization into capital projects at other airports. Private investors’ ability to earn money from an airport privatized under the APPP is limited by restrictions on passenger facility charges and limitations on increases in other airport fees. Streamlining the APPP application and review process might make privatization somewhat more attractive by reducing the risks arising from a long application period, such as changes in economic and capital market conditions. However, significantly increasing interest in airport privatization is likely to require structural change to the existing airport financing system. Options might include the following:     Offering the same tax treatment to private and public airport infrastructure bonds. This could be done by eliminating the current federal income tax exemption of interest on bonds issued by public-sector airport owners or by extending tax-exempt or tax-preferential treatment to airport infrastructure bonds issued by private investors. Either change would eliminate a major disincentive to shift airports from public to private ownership. On the other hand, removing the tax exemption on public-sector airport bonds would raise airports’ financing costs, while extending it to private-sector bonds could have consequences for federal revenues. Changing AIP requirements. Reducing the percentage match private operators must provide to obtain AIP grants to the level of comparable public operators would make privatization more attractive to private investors, but would increase their share of federal funding. Relaxing AIP grant assurances. If private investors were freed from some of the requirements agreed to by the public owner in order to obtain AIP funding, privatization might become more attractive to investors. However, some of the changes that might be most attractive to investors, such as allowing the sale of airport property, might interfere with the federal interest in maintaining aviation system capacity and safety. Liberalizing rules governing fees. Allowing privatized airports more flexibility to impose passenger facility charges and to raise rents and landing fees would make privatization more attractive to investors. However, this might increase Congressional Research Service 25 Issues in the Reauthorization of the Federal Aviation Administration (FAA)  airline opposition to privatization and could lead to higher costs for passengers and air cargo shippers. Easing limits on the use of privatization revenue. Reducing the obstacles for public-sector owners to use privatization revenue for nonairport purposes would stimulate local and state government interest in privatization. On the other hand, it could potentially lead to a lower level of investment in aviation infrastructure. Aircraft Noise Issues Noise from aircraft taking off and landing is an issue at many airports. Under the National Environmental Policy Act (NEPA), FAA and airport operators are required to assess environmental impacts, including noise impacts, associated with federally funded airport projects and airspace redesigns. Noise has been a contentious issue in the redesign of airspace in the New York City, New Jersey, and Philadelphia region. Similarly, noise concerns have been raised regarding a number of airport expansion projects, including the completion of a new runway at Chicago’s O’Hare International Airport in 2013. The number of residents in the United States exposed to significant amounts of aircraft noise has declined precipitously, from about 7 million in 1975 to an estimated 320,000 in 2012.66 Major reductions in aircraft noise levels have been achieved over the past 30 years. Louder Stage 2 airliners over 75,000 pounds were phased out in the 1990s, and a provision in the FAA Modernization and Reform Act of 2012 required that all jet airplanes, regardless of size, meet quieter Stage 3 or Stage 4 noise standards by the end of 2015. Newly introduced aircraft types must meet Stage 4 noise standards, and FAA plans to issue rules for even more stringent Stage 5 noise standards.67 Noise reductions have been achieved through quieter engine technologies, greater use of lightweight aircraft materials, and advances in aerodynamics. FAA, in cooperation with the National Aeronautics and Space Administration and industry, has invested in the research and development of quiet aircraft technologies. While reducing aircraft noise emissions has been highly successful and new aircraft are significantly quieter than their predecessors, the volume of air traffic, particularly around major airports, has increased over the past 30 years. Historically, Congress has addressed airport noise concerns by setting aside 35% of discretionary funding under the AIP for noise mitigation and abatement. Generally, these funds may be used only within the Day Night Average Sound Level (DNL)68 65 decibel (dB) noise impact area around an airport. Proposals to grant FAA the flexibility to fund noise mitigation projects in areas with lower DNL levels would enable it to support additional abatement projects, but could divert resources from capacity and safety projects. A related issue is whether to make the planning for noise-mitigating air traffic control procedures at individual airports eligible for AIP funding. 66 https://www.faa.gov/about/office_org/headquarters_offices/apl/noise_emissions/airport_aircraft_noise_issues/. https://www.faa.gov/about/office_org/headquarters_offices/apl/noise_emissions/airport_aircraft_noise_issues/levels/. 68 Day Night Average Sound Level (DNL) is the standard federal metric for determining cumulative exposure to noise. DNL is the 24-hour average sound level in decibels (dB), with a 10-dB adjustment (penalty) added to each aircraft operation occurring during nighttime hours (10 p.m. to 7 a.m.). 67 Congressional Research Service 26 Issues in the Reauthorization of the Federal Aviation Administration (FAA) The Next Generation Air Transportation System (NextGen) NextGen refers to the Next Generation Air Transportation System, a large-scale modernization of air traffic technologies and procedures intended to expand national airspace system capacity to meet future demand. NextGen is a multiyear initiative to modernize and improve the efficiency of the national airspace system, primarily by migrating to technologies and procedures using satellite-based navigation and aircraft tracking. Initiated in legislation in 2003 (see P.L. 108-176), the NextGen system targets full-scale implementation by 2025. With regard to air traffic management, the goals of NextGen include      reduced air traffic separation; flexible spacing and sequencing of aircraft, both in the air and on the ground; increased utilization of airspace, airports, and runways, particularly those that are currently underutilized; improved and tailored weather forecasts; and reductions in environmental impacts of noise and emissions.69 In 2003, Vision 100—Century of Aviation Reauthorization Act (P.L. 108-176) established an interagency Joint Planning and Development Office (JPDO) within FAA to develop and implement an integrated plan for the Next Generation Air Transportation System (NGATS, now known as NextGen) capable of meeting the needs associated with projected air traffic demands in 2025. The act also established a senior policy committee to consult with industry stakeholders and advise the Secretary of Transportation on goals and strategic objectives for transforming the national airspace system to meet future needs and provide policy guidance to the JPDO. In 2004, the JPDO released its first iteration of the Integration National Plan for NextGen. The NextGen integrated plan, as envisioned, seeks to ensure that the NextGen system meets air transportation safety, security, mobility, efficiency, and capacity needs by 2025. It contends that if steps are not taken to alleviate air travel congestion through NextGen in concert with airport capacity expansion, the annual cost to consumers related to air traffic delays and flight cancellations could be as high as $20 billion by 2025.70 The FAA Modernization and Reform Act of 2012 refined and expanded several facets of NextGen implementation. It established the position of Chief NextGen Officer within FAA, and redesignated the JPDO director as Associate Administrator for NextGen Planning and Development and Interagency Coordination. The act required the NextGen Senior Policy Committee to submit annual progress reports to Congress. It also ordered a U.S. Department of Transportation Office of Inspector General (DOT OIG) review of the Automated Dependent Surveillance (ADS-B) ground system installation and deployment of ADS-B services, and a National Research Council review of the enterprise architecture for NextGen. The act directed FAA to accelerate the deployment of NextGen technologies and procedures at airports with implementation schedules to complete the process by July 2015 at the nation’s busiest airports, and by July 2016 at other airports. The legislation defined specific national airspace performance 69 U.S. Department of Transportation. Integrated National Plan for the Next Generation Air Transportation System, December 12, 2004. 70 Ibid. Congressional Research Service 27 Issues in the Reauthorization of the Federal Aviation Administration (FAA) metrics that FAA must track. Other provisions required FAA to evaluate the role of airport surveillance technologies in the implementation of NextGen airport surface operations management; authorized the establishment of a NextGen research and development center of excellence; and authorized public-private partnerships to leverage and maximize private-sector capital for the purpose of equipping general aviation and commercial aircraft with NextGen avionics. FAA is to report to Congress on its initiatives to encourage NextGen equipage, including policies that give priority handling to ADS-B-equipped aircraft. The Consolidated Appropriations Act of 2014 (P.L. 113-76) defunded the JPDO for FY2014 and directed FAA to absorb the JPDO’s functions into its operations account under the NextGen and operations planning activity. In May 2014, FAA moved the JPDO functions into a newly created NextGen Interagency Planning Office. NextGen Evolution A report by the Ash Center for Democratic Governance and Innovation at Harvard University described NextGen as “one of the most significant efforts of cross-boundary transformation ever contemplated by the United States government and its industry partners.”71 The report observed that the NextGen concept eliminates the historical delineation between air traffic control infrastructure and aircraft navigation and communications devices by integrating certain elements of the underlying infrastructure into cockpit instrumentation.72 The genesis of core NextGen technological concepts was the effort of the cargo airline industry to develop low-cost collision avoidance and aircraft tracking technologies. In the 1990s, cargo airlines were exempted from regulations requiring transport-category aircraft to be equipped with traffic collision avoidance systems (TCAS). The cargo airlines’ initiatives to develop a low-cost alternative to TCAS that could also provide airline fleet tracking capabilities using Global Positioning System (GPS) technology led to the initial development of core NextGen cockpit technologies. In 1999, express cargo carrier UPS received accolades for its role in developing ADS-B technology, now considered the backbone of the NextGen system. Its subsidiary, UPS Aviation Technologies, played a major part in developing ADS-B avionics that were flight-tested by UPS airplanes under FAA’s Ohio River Valley demonstration project, a component of its Safe Flight 21 research-and-development program in the 1990s. UPS Aviation Technologies was subsequently acquired by Garmin Ltd. in 2003. Garmin has since positioned itself as a major supplier of GPS navigation devices, ADS-B equipment, and advanced avionics, primarily for small to midsized general aviation aircraft. Also, in 1999, FAA initiated the Capstone Program in Alaska to explore the potential safety benefits of GPS, ADS-B, advanced avionics, and flight information service broadcasts for general aviation operations. The research program served as a test bed for technologies that came to form the core of the NextGen initiative. Extensive delays and numerous flight cancellations at commercial airports in summer of 2000 led FAA, in collaboration with aviation industry partners, to closely examine the aviation system’s future capacity needs and develop a systematic strategy for addressing those needs. In 2001, FAA 71 Stephen Goldsmith, Zachary Tumin, and Fred Messina, Assuring the Transition to the Next Generation Air Transportation System: A New Strategy for Networked Governance, Ash Center for Democratic Governance and Innovation, Harvard Kennedy School, March 2010, p. 3, http://www.ash.harvard.edu/extension/ash/docs/nextgen.pdf. 72 Ibid., p. 9. Congressional Research Service 28 Issues in the Reauthorization of the Federal Aviation Administration (FAA) created an Operational Evolution Plan (OEP, now known as the Operational Evolution Partnership) to define airport infrastructure and technology needs to meet future capacity requirements, with a particular focus on the nation’s busiest airports and airspace. The technology solutions proposed in the OEP, including area navigation (RNAV) procedures, augmentation of GPS signal accuracy through the Wide Area Augmentation System (WAAS), controller-pilot data link technologies, and reduced vertical separation, came to be regarded as components of a more comprehensive plan for expanding air traffic control system capacity. This was later reflected in the NextGen initiative. In some regards, NextGen is an evolutionary extension of FAA’s earlier initiatives to develop air traffic management technologies to provide controllers and pilots with increased operating flexibilities and fewer restrictions, thus allowing for more efficient routing of aircraft. In other regards, it is transformative in its approach. Specifically, it differs significantly from past air traffic modernization initiatives in that it is predicated on replacing radar-based tracking of aircraft and ground-based navigational infrastructure with a system that relies on precision navigation and aircraft tracking using the satellite-based GPS. Elements and Funding Funding for NextGen programs totals more than $1 billion annually. The funds primarily come through FAA’s Facilities and Equipment (F&E) account (Table 7). Table 7. Funding for NextGen Programs ($ in millions) Account FY2013 FY2014 FY2015 Operations and Maintenance (O&M) 12 15 14 Facilities and Equipment (F&E) 814 828 774 Research, Engineering, and Development (RE&D) 57 58 48 TOTALS 883 901 836 Source: U.S. Department of Transportation, Budget Estimates Fiscal Year 2015, Federal Aviation Administration. Note: Columns may not sum to totals due to rounding. Core components of the NextGen system include the following:   Automatic Dependent Surveillance-Broadcast (ADS-B). A system for broadcasting and receiving aircraft identification, position, altitude, heading, and speed data derived from onboard navigation systems such as a GPS receiver. “ADS-B Out” functionality refers to a basic level of aircraft equipage that transmits position data. “ADS-B In” incorporates aircraft reception of ADS-B signals from other air traffic and/or uplinks of traffic, weather, and flight information from ground stations. FAA funds support the installation, operation, and maintenance of the ground network and associated infrastructure to receive ADS-B transmissions and relay them to air traffic facilities and other aircraft. Most aircraft will be required to have “ADS-B Out” capability by 2020. System Wide Information Management (SWIM). A system being developed for aviation system data sharing, consisting of a seamless infrastructure for data exchange, similar to the web. As envisioned, SWIM will consist of an extensive, scalable data network to share real-time operational information such as flight Congressional Research Service 29 Issues in the Reauthorization of the Federal Aviation Administration (FAA)     plans, flight trajectories, weather, airport conditions, and temporary airspace restrictions across the entire airspace system. Data Communications (DataComm). A digital voice and data network, similar to current wireless telephone capabilities, to transmit instructions, advisories, and other routine communications between aircraft and air traffic service providers. Collaborative Air Traffic Management Technologies (CATMT). A suite of technologies, including various automation and decision support tools, designed to enhance existing aircraft flow management functions by exploiting other NextGen technologies and capabilities such as SWIM. National Airspace System Voice System (NVS). Upgraded digital voice communications infrastructure that will replace existing analog equipment. NextGen Weather. An integrated platform for providing a common weather picture to air traffic controllers, air traffic managers, and system users. Additionally, NextGen is dependent upon other ongoing modernization initiatives to upgrade FAA facilities and equipment to make them NextGen-capable. Most significantly, completion of the Enroute Modernization (ERAM) program, an upgrade to automated air traffic systems at FAA’s en route centers, is considered by FAA and aviation experts as a necessary milestone toward giving the centers that direct high-altitude traffic the necessary data-handling capabilities to support NextGen. Funding allocations for these various core NextGen components are presented in Figure 3. Figure 3. Allocation of NextGen Funding, FY2013-FY2015 Other NextGen Activities 32% NextGen Weather 1% FAA Operations and Maintenance (O&M) 2% FAA Research Engineering and Development (R,E&D) 6% National Airspace System Voice System (NVS) 2% Automatic Dependent Surveillance Broadcast (ADSB) 30% System Wide Information Management (SWIM) 7% Collaborative Air Traffic Management Technologies (CATMT) 4% Data Communications (DataComm) 16% Source: CRS analysis of U.S. Department of Transportation Budget Estimates, Fiscal Year 2015, Federal Aviation Administration. Note: Does not include related funding for National Aeronautics and Space Administration and National Oceanic and Atmospheric Administration for research and development and NextGen Weather. Congressional Research Service 30 Issues in the Reauthorization of the Federal Aviation Administration (FAA) Current Status The network of ADS-B ground receiver stations in the contiguous 48 states has largely been deployed. FAA has implemented performance-based navigation (PBN) procedures including departures, arrivals, and instrument approaches that improve airport access and operational efficiency. A large majority of the air carrier fleet is equipped with PBN navigation equipment allowing utilization of NextGen procedures such as area navigation (RNAV). A smaller but growing percentage of the airline fleet is ADS-B equipped. In contrast, it is generally believed that a comparatively small percentage of the general aviation fleet is equipped for NextGen, although CRS has been unable to obtain detailed data regarding NextGen equipage. Aircraft Equipage One of the greatest challenges to FAA in implementation of NextGen is overcoming stakeholder reluctance to adopt NextGen technologies. This reluctance is fueled in large part by perceived uncertainties about the technical details and the potential benefits of particular technologies. Users fear that early investments may not yield near-term benefits, and may prove costly if technical specifications change as NextGen evolves. In May 2010, FAA published a notice informing aircraft operators that most aircraft operating in controlled airspace would be required to equip with approved ADS-B Out equipment by 2020.73 In adopting this rule, FAA rejected the no-action alternative, finding that the existing radar-based aircraft system is becoming operationally obsolete and incapable of accommodating projected increases in air traffic. FAA examined alternative technologies as well as exemptions for certain classes of operators, but determined that a uniform equipment mandate was the only alternative that could provide seamless surveillance capabilities to air traffic controllers and the most costeffective solution. A cost-benefit analysis of the final rule identified benefits, including the dollar values of time and fuel savings, carbon dioxide (CO2) emissions reductions, and increased system capacity, totaling $6.8 billion to $8.5 billion over the period from 2009 through 2035. In comparison, the analysis identified costs, including avionics equipage costs incurred by the industry and infrastructure costs incurred by FAA, ranging from $3.3 billion to $7.0 billion over the same period. Of this, equipage costs were estimated to fall between $2.5 billion and $6.2 billion, with a midpoint of $4.4 billion. The rulemaking process also examined impacts to small businesses operating aircraft. FAA found that “small U.S. business operators may bear a disproportionate impact,” and noted that it would be difficult for small operators to recover their compliance costs.74 It estimated that more than 1,500 small operators would incur costs greater than 1% of annual revenues, and, in addition, more than 1,000 would incur costs greater than 2% of annual revenues. FAA estimated that costs to general aviation (i.e., nonairline civil operators) would total $1.2 billion to $4.5 billion. FAA has proposed a “best-equipped best-served” concept to encourage airlines and business jet operators to invest in NextGen technologies. Under this concept, those that equip early with NextGen capabilities would reap some of the benefits of those capabilities through, for example, preferential treatment with respect to flight routing and arrival and departure queuing. In addition, 73 Federal Aviation Administration, “14 CFR Part 91, Automatic Dependent Surveillance-Broadcast (ADS-B) Out Performance Requirements to Support Air Traffic Control (ATC) Service; Final Rule,” 75 Federal Register 3016030195, May 28, 2010. 74 Ibid., p. 30191. Congressional Research Service 31 Issues in the Reauthorization of the Federal Aviation Administration (FAA) ADS-B may provide some intrinsic benefits, particularly to small general aviation aircraft, by providing pilots with robust traffic and weather data that may enhance safety. FAA plans to promote these potential benefits, in conjunction with equipment mandates for ADS-B, to encourage more users to adopt NextGen technologies in the near term. FAA has not adopted a formal policy with regard to how it would implement best-equipped best-served practices, indicating that practices may vary from region to region and from airport to airport. Anticipated Benefits In addition to the potential benefits specifically tied to ADS-B equipage, FAA anticipates that the suite of NextGen technologies would provide substantial benefits to both commercial and general aviation operators by improving efficiency and safety, and thereby reducing time, fuel burn, and environmental impacts associated with aviation operations. Benefits for Commercial Airlines Under NextGen, commercial airlines are expected to benefit significantly from more direct routing and reduced flight delays, which are expected to result in fuel savings. For commercial operators, FAA has implemented a best-equipped best-served model, providing early adopters of NextGen technologies with priority access to certain airports and flight routes. The benefit of NextGen equipage can thus be realized through fuel cost savings, as well as indirect benefits that may include improved customer satisfaction, reduced operational costs due to more efficient operations, and environmental payoffs associated with reduced emissions and noise that could potentially help better market the airline to increasingly environmentally conscious consumers. Benefits for General Aviation FAA argues that general aviation operators will also benefit from improved airspace and airport access available to NextGen-equipped aircraft. One element of improved system access for general aviation is procedures that utilize NextGen technologies to increase navigational accuracy and provide procedures to improve access to thousands of airports under a wider variety of weather conditions. To meet the navigational accuracy, integrity, and availability requirements for civil aviation, FAA developed a system for correcting errors in GPS signals over the entire National Airspace System (NAS). It began working on the Wide Area Augmentation System (WAAS) in 1995. WAAS, which was first activated in 2003 for use by general aviation aircraft, consists of ground reference stations that compute GPS signal corrections. These signal corrections are continuously transmitted to satellites which, in turn, broadcast them to WAAS-enabled GPS devices aboard aircraft. Beginning in 2004, FAA began approving avionics systems and developing procedures that allow aircraft to fly instrument approaches to airports using WAAS and GPS to provide both lateral and vertical guidance. WAAS enables general aircraft to access additional airports in poor weather conditions. FAA has published more than 3,000 approach procedures that use this technology, and plans to publish more than 5,000 in total by 2016. Depending on terrain considerations, these procedures allow instrument-qualified pilots to descend to as low as 200 feet above the ground, in conditions as poor as 1.5-mile visibility, before establishing visual contact with the runway. This can reduce weather-related diversions and associated fuel costs for general aviation operators, and improve accessibility and system capacity. Congressional Research Service 32 Issues in the Reauthorization of the Federal Aviation Administration (FAA) Whereas the annual airport maintenance cost for a precision instrument landing system (ILS) that provides similar capabilities is estimated at $85,000 annually, a WAAS approach can be maintained for less than $3,000 every two years.75 With WAAS, there is no ground equipment to maintain. The main costs to airports consist of the upkeep of runway lighting and markings required for certification of the approach, and any costs incurred from working with local planners to address possible impacts of newly constructed towers and buildings near the approach path. While WAAS is not considered a core NextGen technology, it provides an enabling capability for implementing precision NextGen airport approach procedures. In addition to WAAS-enabled navigation equipment, ADS-B In functionality may provide benefits to general operators that install equipment with this capability. FAA ADS-B ground stations transmit Traffic Information Services-Broadcast (TIS-B) and Flight Information Services-Broadcast (FIS-B). These broadcasts of air traffic, textual and graphical weather data, and aeronautical information, such as temporary flight restrictions and other notices, are provided free of charge to appropriately equipped aircraft with A [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/crs%3AR43858. Public record. Not legal advice.