Federal Aviation Administration Reauthorization: An Overview of Selected Provisions in Proposed Legislation Considered by the 110th Congress

Congressional research reportJan 27, 2009

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Prepared for Members and Committees of Congress

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Funding authorization for aviation programs set forth in Vision 100—Century of Aviation

Reauthorization Act (P.L. 108-176) and authorization for taxes and fees that provide revenue for

the aviation trust fund expired at the end of FY2007. While Federal Aviation Administration

(FAA) reauthorization legislation was considered during the 110th Congress, the only related

legislation enacted consisted of several short term extensions for aviation trust fund revenue

collections and aviation program authority. The Federal Aviation Administration Extension Act,

Part II (P.L. 110-330) extends these authorizations until March 31, 2009, thus carrying the issue

of FAA reauthorization over to the 111th Congress.

Consideration of FAA reauthorization during the 110th Congress began with the introduction of

the FAA’s reauthorization proposal, entitled the Next Generation Air Transportation System

Financing Reform Act of 2007 (H.R. 1356/S. 1076, introduced by request), which recommends a

new system for financing aviation system costs through direct user fees and increased fuel taxes.

The FAA proposal would also allow airports to increase passenger facility charges (PFC), and

includes initiatives to simplify the apportionment of airport grants. The proposal also seeks to

better integrate development of the Next Generation Air Transportation System (NGATS) into

ongoing planning and acquisition activities, and would allow airport and private investment in

certain aviation facilities and services. The FAA proposal would authorize funding for research on

aviation noise, air emissions, and water quality impacts, and seeks to modify the Essential Air

Service Program (EAS).

The Aviation Investment and Modernization Act of 2007 (S. 1300; S.Rept. 110-144) proposes a

four-year authorization with modest overall budget increases and larger increases specifically for

facilities and equipment (F&E) modernization. S. 1300 proposes a $25 surcharge for certain

flights and retention of existing taxes and fees. S. 1300 would establish a modernization oversight

board and would set up offices at each federal agency supporting NGATS for defining agency

resources and budgetary commitments to air traffic modernization. S. 2345, introduced by the

Senate Finance Committee, may be considered as the revenue title of the overall bill, and

modifies certain aviation taxes and fees as a possible alternative to the $25 surcharge proposal.

The FAA Reauthorization Act of 2007 (H.R. 2881) seeks higher spending authorizations for F&E

compared to S. 1300. While the bill does not propose any direct user-fee mechanisms, it proposes

modest increases to existing aviation fuel taxes. The overall legislation also seeks to increase

accountability and coordination of NGATS planning and implementation. An amendment agreed

to would create a binding arbitration process to resolve labor negotiations impasses, and would

apply this process to settle the current impasse between the FAA and air traffic controllers. This

report will not be updated.

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Introduction ..................................................................................................................................... 1

Overview of the FAA Proposal........................................................................................................ 2

Overview of S. 1300 and S. 2345.................................................................................................... 3

Overview of H.R. 2881 ................................................................................................................... 5

Funding Authorization Levels ....................................................................................................... 10

FAA Proposal .......................................................................................................................... 10

S. 1300 .....................................................................................................................................11

H.R. 2881 ................................................................................................................................ 12

FAA Finance.................................................................................................................................. 14

FAA Proposal .......................................................................................................................... 14

Proposed Tax and Fee Structure........................................................................................ 15

Air Transportation System Advisory Board (Board) ........................................................ 16

Budget and Structural Provisions...................................................................................... 17

Agency Funding................................................................................................................ 18

S. 1300 .................................................................................................................................... 18

Modernization Surcharge.................................................................................................. 19

Leveraged Financing for Next Generation Air Traffic Control System (Bonding

Authority) ...................................................................................................................... 20

Air Traffic Control Modernization Oversight Board (Oversight Board) .......................... 20

S. 2345 .................................................................................................................................... 22

Discussion......................................................................................................................... 23

H.R. 2881 ................................................................................................................................ 23

Registration, Certification, and Related Fees.................................................................... 24

Discussion......................................................................................................................... 24

Airport Financing .......................................................................................................................... 24

AIP Funding ............................................................................................................................ 25

FAA Proposal .................................................................................................................... 25

S. 1300 .............................................................................................................................. 26

H.R. 2881.......................................................................................................................... 26

Formula Funding (Entitlements) ............................................................................................. 26

Elimination of the $3.2 Billion AIP Program Level “Trigger” ......................................... 26

Primary Airport Entitlements............................................................................................ 27

Virtual Primary Airports ................................................................................................... 27

Puerto Rico Minimum Guarantee ..................................................................................... 28

General Aviation Entitlements .......................................................................................... 29

Alaska Supplemental Entitlement..................................................................................... 30

Cargo Service Airport Entitlement.................................................................................... 30

Pilot Program for Redevelopment of Airport Properties .................................................. 30

Discretionary Funds ................................................................................................................ 31

Minimum Discretionary Fund........................................................................................... 31

Noise Set-Aside ................................................................................................................ 32

Small Airport Fund ........................................................................................................... 32

Military Airport Program (MAP) and Reliever Airport Set-Asides.................................. 33

AIP Project Eligibility Changes .............................................................................................. 33

FAA Proposal .................................................................................................................... 33

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S. 1300 .............................................................................................................................. 33

H.R. 2881.......................................................................................................................... 34

AIP Grant Assurances ............................................................................................................. 34

FAA Proposal .................................................................................................................... 34

S. 1300 .............................................................................................................................. 34

H.R. 2881.......................................................................................................................... 34

Federal Share........................................................................................................................... 35

FAA Proposal .................................................................................................................... 35

S. 1300 .............................................................................................................................. 35

H.R. 2881.......................................................................................................................... 36

Passenger Facility Charges (PFCs) ......................................................................................... 36

Project Eligibility.............................................................................................................. 36

Increasing the PFC Cap .................................................................................................... 37

Passenger Facility Charge Pilot Program.......................................................................... 38

Competition Plans............................................................................................................. 38

PFC Grant Streamlining.................................................................................................... 39

Other Airport-Related Provisions............................................................................................ 39

Privatization ...................................................................................................................... 39

Airport Development Rights Pilot Program...................................................................... 40

ADS-B Support Pilot Program.......................................................................................... 40

Airline Passenger Rights Issues..................................................................................................... 41

FAA Proposal .......................................................................................................................... 41

S. 1300 .................................................................................................................................... 41

Airline Contingency Service Requirements...................................................................... 42

Posting Consumer Rights on Website ............................................................................... 42

Publication of Customer Service Data and Flight Delay History ..................................... 42

Expansion of DOT Airline Consumer Complaint Investigations...................................... 42

H.R. 2881 ................................................................................................................................ 42

Monthly Air Carrier Reports............................................................................................. 42

DOT Inspector General (IG) Review of Air Carrier Flight Delays, Cancellations,

and Associated Causes ................................................................................................... 43

Airline and Airport “Emergency Contingency Plans” ...................................................... 43

Advisory Committee for Aviation Consumer Protection .................................................. 43

Denied Boarding Compensation ....................................................................................... 43

Expansion of DOT Airline Consumer Complaint Investigations...................................... 43

Consumer Complaint Hotline Telephone Number............................................................ 43

Insecticide Use on Passenger Aircraft............................................................................... 44

Spending Guarantee Mechanisms ................................................................................................. 44

FAA Proposal .......................................................................................................................... 44

S. 1300 .................................................................................................................................... 44

H.R. 2881 ................................................................................................................................ 44

FAA Management and Organizational Issues................................................................................ 45

Planning and Oversight of Next Generation Air Transportation System Development.......... 45

FAA Proposal .................................................................................................................... 46

S. 1300 .............................................................................................................................. 46

H.R. 2881.......................................................................................................................... 47

Realignment and Consolidation of FAA Facilities and Operations......................................... 48

FAA Proposal .................................................................................................................... 48

S. 1300 .............................................................................................................................. 49

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H.R. 2881.......................................................................................................................... 50

Partnerships for Next Generation Technology Deployment.................................................... 50

FAA Proposal .................................................................................................................... 50

S. 1300 .............................................................................................................................. 51

H.R. 2881.......................................................................................................................... 52

FAA Personnel Management................................................................................................... 53

FAA Proposal .................................................................................................................... 55

S. 1300 .............................................................................................................................. 55

H.R. 2881.......................................................................................................................... 55

FAA Technical Training and Staffing...................................................................................... 56

FAA Proposal .................................................................................................................... 56

S. 1300 .............................................................................................................................. 56

H.R. 2881.......................................................................................................................... 56

System Capacity and Safety .......................................................................................................... 57

Controlling Congestion at New York’s LaGuardia Airport..................................................... 58

FAA Proposal .................................................................................................................... 58

S. 1300 .............................................................................................................................. 58

H.R. 2881.......................................................................................................................... 58

Market-Based Strategies for Alleviating Congestion.............................................................. 58

FAA Proposal .................................................................................................................... 59

S. 1300 .............................................................................................................................. 59

H.R. 2881.......................................................................................................................... 59

Washington Reagan National Airport Slot Controls ............................................................... 59

FAA Proposal .................................................................................................................... 60

S. 1300 .............................................................................................................................. 60

H.R. 2881.......................................................................................................................... 60

Runway Safety ........................................................................................................................ 60

FAA Proposal .................................................................................................................... 61

S. 1300 .............................................................................................................................. 61

H.R. 2881.......................................................................................................................... 61

Aircraft Fuel Tank Safety........................................................................................................ 62

FAA Proposal .................................................................................................................... 62

S. 1300 .............................................................................................................................. 62

H.R. 2881.......................................................................................................................... 63

Pilot Fatigue ............................................................................................................................ 63

FAA Proposal .................................................................................................................... 63

S. 1300 .............................................................................................................................. 63

H.R. 2881.......................................................................................................................... 63

Helicopter Emergency Medical Service Safety....................................................................... 64

FAA Proposal .................................................................................................................... 64

S. 1300 .............................................................................................................................. 64

H.R. 2881.......................................................................................................................... 64

Airline Pilot Age Restrictions ................................................................................................. 65

The Fair Treatment for Experienced Pilots Act (P.L. 110-135) ........................................ 65

FAA Proposal .................................................................................................................... 66

S. 1300 .............................................................................................................................. 66

H.R. 2881.......................................................................................................................... 66

Incorporating Unmanned Aircraft Operations......................................................................... 67

FAA Proposal .................................................................................................................... 68

S. 1300 .............................................................................................................................. 68

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H.R. 2881.......................................................................................................................... 68

Wake Turbulence Prediction, Detection, and Avoidance ........................................................ 69

FAA Proposal .................................................................................................................... 69

S. 1300 .............................................................................................................................. 69

H.R. 2881.......................................................................................................................... 70

Safety of Airline Maintenance Practices ................................................................................. 70

FAA Proposal .................................................................................................................... 70

S. 1300 .............................................................................................................................. 70

H.R. 2881.......................................................................................................................... 70

Occupational Safety and Health.............................................................................................. 70

FAA Proposal .................................................................................................................... 71

S. 1300 .............................................................................................................................. 71

H.R. 2881.......................................................................................................................... 71

Environmental and Energy Issues ................................................................................................. 72

Research Funding.................................................................................................................... 72

FAA Proposal .................................................................................................................... 72

S. 1300 .............................................................................................................................. 73

H.R. 2881.......................................................................................................................... 74

Mitigation Grants .................................................................................................................... 75

FAA Proposal .................................................................................................................... 75

S. 1300 .............................................................................................................................. 75

H.R. 2881.......................................................................................................................... 75

Grants and Procedural Changes to Assist with Environmental Compliance........................... 75

FAA Proposal .................................................................................................................... 75

S. 1300 .............................................................................................................................. 76

H.R. 2881.......................................................................................................................... 76

Requirements to Address Noise Issues.................................................................................... 77

S. 1300 .............................................................................................................................. 77

H.R. 2881.......................................................................................................................... 78

The Air Tour Management Program ....................................................................................... 78

FAA Proposal .................................................................................................................... 78

S. 1300 .............................................................................................................................. 79

H.R. 2881.......................................................................................................................... 80

Airline Industry Issues................................................................................................................... 80

The Essential Air Service Program ......................................................................................... 81

FAA Proposal .................................................................................................................... 81

S. 1300 .............................................................................................................................. 82

H.R. 2881.......................................................................................................................... 82

Airline Ownership................................................................................................................... 82

H.R. 2881.......................................................................................................................... 83

Railway Labor Act Modifications ........................................................................................... 83

FAA Proposal .................................................................................................................... 84

S. 1300 .............................................................................................................................. 84

H.R. 2881.......................................................................................................................... 84

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Table 1. Airport and Airway Trust Fund Funding Authorizations and General Fund Limits

Proposed Under the FAA Bill......................................................................................................11

Table 2. Reauthorization Funding Levels for FAA Accounts........................................................ 12

Table 3. Proposed Aviation Tax and Fee Changes......................................................................... 22

Table 4. Specific Authorizations in H.R. 2881 for Runway Incursion Mitigation ........................ 62

Author Contact Information .......................................................................................................... 85

Key Policy Staff ............................................................................................................................ 85

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The report is intended to provide a brief summary and analysis of major legislative provisions in

bills related to reauthorization of the Federal Aviation Administration and related aviation

programs that were considered during the 110th Congress. While Federal Aviation Administration

(FAA) reauthorization legislation was considered at length during the 110th Congress, and a FAA

reauthorization bill (H.R. 2881) was passed by the House, the only related legislation enacted

consisted of several short term extensions for aviation trust fund revenue collections and aviation

program authority. The Federal Aviation Administration Extension Act, Part II (P.L. 110-330)

extends these authorizations until March 31, 2009, thus carrying the issue of FAA reauthorization

over to the 111th Congress. This report discusses major provisions in the bills and selected policy

issues discussed during the legislative debate over FAA reauthorization that took place during the

110th Congress.

The report is organized into six major program areas: aviation system finance; airport finance;

FAA management and organizational issues; system capacity and safety; environmental issues;

and miscellaneous programs and provisions. In several cases, provisions that appear in various

unrelated sections of proposed legislation have been rearranged in this report in an effort to group

and discuss related items in an issue-driven or programmatic context. Since this report is

primarily written as a means of communicating key legislative provisions under consideration in

the ongoing FAA reauthorization process, it does not go into detail regarding the specific policy

issues behind these legislative proposals. CRS has prepared two separate reports that provide

discussion of the policy context for the current FAA reauthorization debate. For an overview of

various selected issues related to the current FAA reauthorization debate, see CRS Report

RL33789, Federal Aviation Administration: An Abridged Look at Reauthorization Issues in the

110th Congress; for more detailed background on these issues, see CRS Report RL33698,

Reauthorization of the Federal Aviation Administration: Background and Issues for Congress,

both by (name redacted), et al.

Funding authorization for aviation programs set forth in Vision 100—Century of Aviation

Reauthorization Act (P.L. 108-176, hereafter referred to as Vision 100) expired at the end of

FY2007. Also, authorization of the existing tax and fee structure that provides revenue for the

aviation trust fund expired at the end of FY2007. During the first session of the 110th Congress,

the House passed the FAA Reauthorization Act of 2007 (H.R. 2881). While H.R. 2881, along with

the Aviation Investment and Modernization Act of 2007 (S. 1300) and aviation financing

provisions in American Infrastructure Investment and Improvement Act of 2007 ( S. 2345) have

all been placed on the Senate legislative calendar, they have not yet been debated on the Senate

floor. In early May 2008, the Senate attempted, but failed, to take up consideration of H.R. 2881.

Revenue collections and the operation of the FAA and its programs have continued, however, as a

result of continuing and consolidated appropriations legislation (P.L. 110-92, P.L. 110-116, and

P.L. 110-161). The program was further extended until June 30, 2008, by the Airport and Airway

Extension Act of 2008 (P.L. 110-190). On June 30, 2008, the Federal Aviation Administration

Extension Act of 2008 (P.L. 110-253) was signed by the President, further extending Airport and

Airway Trust Fund (AATF) tax authorization and Airport Improvement Program (AIP)

expenditure authority through the end of FY2008. On September 30, 2008, the President signed

the Federal Aviation Administration Extension Act of 2008, Part II (P.L. 110-330), which provides

a six-month extension for revenue collections, AIP obligation and grant authority, and

authorizations for FAA programs. On September 30, 2008, the President also signed the

Continuing Appropriations Resolution for FY2009, which provides funding for the FAA and

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other federal programs through March 6, 2009. The resolution increases funding for FAA

operations to an annualized rate of $8,757 million, $17 million above the FY2008 level. The law

stipulates that roughly $1,099 million of this must be expended on activities tied to aviation

safety. Under the terms of the resolution, FAA’s other programs are limited to spending at an

annualized rate equivalent to FY2008 appropriations.

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The legislative process toward reauthorizing the FAA began in February 2007 with the submittal

to Congress of a legislative proposal by the Bush Administration and initial congressional

hearings regarding FAA reauthorization. On February 14, 2007, the FAA transmitted proposals to

reauthorize funding of FAA functions and related aviation programs and reform the financing of

the national airspace system. The text of these proposals were introduced as bills in the House

(H.R. 1356) and in the Senate (S. 1076) at the FAA’s request. The FAA’s proposed bill (H.R.

1356/S. 1076, hereafter referred to by bill number or as the FAA proposal),1 entitled the Next

Generation Air Transportation System Financing Reform Act of 2007, proposes a new system for

financing aviation system operations and capital improvements that includes various fee-forservice charges (user fees), directed primarily at commercial system users, and excise taxes

(primarily fuel taxes) for general aviation system users. The FAA proposal also includes several

modifications to airport revenues, including increases in the maximum passenger facility charges

(PFCs) that airports can impose on passengers, and initiatives intended to modify and simplify the

apportionment of grants to airports.

The FAA proposal also recommends several management and organizational reforms, most

notably the proposed establishment of an air transportation system advisory board, and the

authority to create a commission, similar to the military’s Base Realignment and Closure (BRAC)

commissions, to make independent recommendations regarding the realignment and

consolidation of various FAA facilities and services. The proposal also includes proposed

statutory language intended to better integrate the work of the Joint Planning and Development

Office (JPDO) on the Next Generation Air Transportation System (NGATS) design and

implementation into the FAA’s ongoing planning and acquisition activities. Also, the proposal

includes language to increase the flexibility in delivering various air traffic services and

capabilities to system users by allowing airports and private entities to play a more direct role in

acquiring, deploying, and maintaining facilities and services to augment the FAA’s air traffic

communications, navigation, and surveillance capabilities.

With regard to addressing system and airport capacity and safety, the FAA proposal seeks

statutory authority to control congestion at certain airports through market-based mechanisms,

such as slot auctions and peak-period pricing. The proposal would direct the Department of

Transportation (DOT) to study the appropriateness of a market-based system at New York’s

LaGuardia Airport (LGA), and if deemed appropriate, would permit the airport operator to

implement a market-based approach to controlling congestion. The FAA proposal also seeks to

establish a pilot program to evaluate market-based mechanisms to relieve congestion at up to 15

other airports.

Representative Oberstar introduced the FAA proposal (H.R. 1356), by request, on March 6, 2007, and Senator Inouye

introduced an identical Senate bill (S. 1076), by request, on March 29, 2007.

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With regard to addressing the environmental impacts of aviation, the FAA proposal includes

language that seeks to provide funding for research into technology or processes that would

reduce noise, air emissions, and water quality impacts; provide grants for programs or projects

intended to mitigate or minimize regulated environmental impacts; and provide grants or specify

regulatory procedures to assist airports in complying with environmental requirements. The FAA

proposal also recommends establishing a consortium for fostering innovation to develop cleaner,

quieter, and more efficient next-generation aircraft. Further, the FAA proposal seeks to limit the

scope of the Air Tour Management Program, designed to mitigate noise and other adverse impacts

from air tours over national park units, to those parks where air tour impacts have been identified

as a concern or could become a more substantial issue.

The FAA proposal also includes language that would significantly modify the existing Essential

Air Service Program (EAS) that subsidizes air carrier service to small and isolated communities,

primarily by setting more stringent criteria for program eligibility and restricting further

expansion of the program.

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On May 3, 2007, Senator Rockefeller introduced the Aviation Investment and Modernization Act

of 2007 (S. 1300). On May 16, 2007, the Senate Committee on Commerce, Science, and

Transportation convened a markup session and ordered that the bill be reported favorably with

amendments. The reported bill, along with an accompanying committee report (S.Rept. 110-144),

was ordered printed on August 3, 2007 and placed on the Senate Legislative Calendar under

General Orders.

S. 1300 proposes a four-year reauthorization, including modest increases to the FAA’s authorized

spending levels through FY2011. S. 1300, as amended, offers an alternative to the FAA-proposed

user fee structure, proposing to create a separate treasury fund, called the Air Traffic

Modernization Fund, that would be financed through the collection of $25 surcharges imposed on

certain flights for air traffic control costs. The surcharge would be principally collected from

airlines and high-performance business jet operators, as all piston-engine powered aircraft would

be exempt from paying the surcharge. The bill language specifies that more than $400 million

toward the FAA’s Facility and Equipment (F&E) account is to be derived from these surcharges

each year from FY2009 through FY2011. The bill gives the FAA specific authority to collect

these surcharges and impose sanctions upon those who don’t pay, but leaves it up to the FAA to

devise a collection system. The surcharge would be in addition to the existing tax and fee system,

although proposals to modify that tax and fee structure may be considered by the Senate through

separate legislation considered by the Senate Committee on Finance or possible floor action.

To further support the modernization of air traffic facilities and services, S. 1300 authorizes the

Department of Transportation to issue obligations, such as bonds, totaling up to $5 billion. These

instruments would be repaid, with interest through revenues derived from the collection of the

$25 per flight surcharges. Interest yields on these instruments would be set at rates of comparable

treasury obligations.

S. 1300 includes several provisions for FAA management and organizational reform. The bill

includes an alternate to the FAA-proposed board, by creating a smaller seven-member Air Traffic

Control Modernization Oversight Board that would have greater oversight authority over FAA’s

planning, budgeting, and implementation of facilities and equipment modernization. The

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proposed board would have approval authority over large scale acquisition programs (those of

$100 million or greater), and would be responsible for approving the FAA’s capital improvement

program, operational evolution plan, facilities and equipment budget, and key leadership

positions in the Air Traffic Organization (ATO) and Joint Planning and Development Office

(JPDO).

S. 1300 proposes $100 million annual increases to the Airport Improvement Program (AIP)

through FY2011, but does not include any increases to the maximum Passenger Facility Charge

(PFC) that can be levied by airports. The bill does, however, propose a pilot program at up to six

airports allowing airports to collect PFCs directly from passengers without any statutory ceiling

on the amount that could be charged. The bill includes other technical modifications to the AIP

program primarily aimed at increasing the eligibility of smaller passenger service airports to

qualify as primary airports and extend the 95% federal share of airport project funding for

smaller-sized airports.

S. 1300 includes several provisions addressing customer service for passenger airlines. These

provisions endeavor to provide assurances of adequate food, water, and restroom facilities when

flights are substantially delayed. These provisions would also require airlines to provide

consumer rights information and airline customer service policies on their Internet websites, and

would require airlines to publish customer service and flight delay history information. S. 1300

would also expand DOT’s consumer complaint investigations, subject to the availability of

appropriations.

With regard to systems planning for next generation air traffic technologies, S. 1300 would

require all agencies involved in the NGATS initiative to establish implementation offices and

enter into multiagency agreements outlining their respective responsibilities and budgetary

commitments to supporting NGATS. Like the FAA proposal, S. 1300 would make the JPDO

director a voting member of the FAA’s Joint Resources Council (JRC) and the ATO’s Executive

Council. The bill would extend the authorization of $50 million annually to JPDO through

FY2011. However, unlike the FAA proposal, S. 1300 would not establish a BRAC-like

commission to examine FAA facility and services consolidation and realignment. Rather, under S.

1300, the Air Traffic Control Modernization Oversight Board would be tasked with reviewing the

FAA’s recommendations for realignment and proposing alternative recommendations, but gives

the Board no specific power to influence the actions related to FAA realignment in the manner

proposed in the FAA bill.

With regard to the FAA’s personnel management system, S. 1300 includes a provision that would

involve the Federal Services Impasses Panel (FSIP) in cases where the FAA and bargaining units

cannot reach an agreement during collective bargaining. The provision would allow the FSIP to

order binding arbitration in such cases and outlines a specific process for conducting such binding

arbitration proceedings.

S. 1300 includes numerous provisions related to system capacity and safety including provisions

designed to: improve runway safety; expedite progress on rulemaking to improve airliner fuel

tank safety and reduce flammability risk; conduct research and improve regulations pertaining to

pilot fatigue, flight time, and rest requirements; implement several NTSB recommendations

pertaining to the safety of helicopter emergency medical service (HEMS) operations; address

unmanned flight operations in the National Airspace System (NAS); and examine ways to

improve capacity and safety by improving wake turbulence prediction, detection, and avoidance.

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The bill also seeks to expand the number of flights operating to and from Washington Reagan

National Airport.

With regard to environment and energy issues, S. 1300 includes several of the FAA-proposed

provisions regarding research and mitigation grants. Additionally, the bill seeks to establish a

research grant program and center of excellence to examine the development of synthetic jet fuel

from clean coal sources. The bill also includes a provision that would prohibit all aircraft under

75,000 pounds maximum weight that do not conform to Stage 3 noise standards five years after

enactment. Heavier aircraft would be required to conform to Stage 3 noise standards by

December 31, 1999. S. 1300 also seeks changes to the Air Tour Management Program that

include allowing modifications to interim operating authority without further environmental

review; allowing transfers of operating authority to conduct commercial air tours over national

parks; establishing an annual reporting requirement for commercial air tour operators; and

authorizing fee collections from air tour operators tied to the cost of carrying out the Air Tour

Management Program.

S. 1300 also proposes changes to the Essential Air Service Program (EAS) including a

requirement that DOT allow EAS airlines to code share with other carriers, extension of the

existing statutory highway mileage criteria for EAS eligibility through FY2011, the creation of

financial incentives for improvements to EAS service, and a program to aid the conversion of

former EAS airports to general aviation status. The bill would allow additional overflight fee

collections in excess of the $50 million level identified in the FAA proposal to be put toward the

EAS program. Under S. 1300, the additional amount authorized in addition to the $50 million

base, would rise from $77 million to $83 million.

On November 13, 2007, the Senate Committee on Finance reported S. 2345, the American

Infrastructure Investment and Improvement Act of 2007, incorporating the committee’s

recommendations for what is likely to be the revenue title of the Senate FAA reauthorization bill.

Its proposal makes some changes to elements of the existing tax and fee structure, but does not

create new user fees. As can be seen in Table 3, the committee has increased the general aviation

jet fuel tax, increased the international departure/arrival tax, and created a new tax system for a

particular segment of the aviation industry—fractionally owned aircraft. The Senate Finance bill

provides what is viewed by many as a possible alternative to the surcharge proposal contained in

S. 1300.

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Representative Oberstar introduced the FAA Reauthorization Act of 2007 (H.R. 2881) on June 27,

2007. On June 28, 2007 the House Committee on Transportation and Infrastructure held a markup

session on the bill and ordered the bill reported favorably with amendments. While the bill was

ordered to be reported favorably with amendments by the committee, the amended bill and

accompanying committee report has not yet been made publicly available. Also, on June 13,

2007, Representative Udall introduced The Federal Aviation Research and Development

Reauthorization Act of 2007 (H.R. 2698), covering research, engineering, and development

programs of the FAA which fall under the jurisdiction of the House Committee on Science and

Technology. That committee held a markup session on that bill on June 22, 2007, and ordered that

it be reported favorably with amendments. Funding authorization levels for FAA Research,

Engineering, and Development (RE&D) and selected provisions contained in H.R. 2698 were

incorporated into the version of H.R. 2881 considered on the House floor as Title IX of the bill

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(see H.Res. 664; H.Rept. 110-335). Also, the text of H.R. 3539 as ordered reported by the House

Committee on Ways and Means, providing for the extension and modification of Airport and

Airway Trust Fund (AATF) taxes, was adopted and incorporated into the version of H.R. 2881

considered by the House. On September 20, 2007, the House passed H.R. 2881, agreeing to

several miscellaneous amendments to the bill. This report discusses H.R. 2881 as passed by the

House.

H.R. 2881 proposes a boost in F&E spending to support NGATS initiatives. Also, funding

authorization levels specified in H.R. 2698, and incorporated into funding authorization levels

specified in H.R. 2881, would substantially increase the available funding for FAA Research,

Engineering, and Development (RE&D) activities that fall under the jurisdiction of the House

Committee on Science and Technology. The House Committee on Ways and Means reported H.R.

3539, the Airport and Airway Trust Fund Financing Act of 2007, on September 18, 2007. Title X

of H.R. 2881 as passed by the House, adopted from the Ways and Means bill (H.R. 3539), follows

the general intentions communicated by the House Committee on Transportation and

Infrastructure (the T&I Committee), which sought a modest increase in federal aviation fuel

taxes. Specifically, the T&I Committee called for increasing jet fuel taxes from 21.8 cents per

gallon to 30.7 cents per gallon (roughly a 40% increase) and aviation gasoline taxes from 19.3

cents per gallon to 24.1 cents per gallon (about a 25% increase). The House Committee on Ways

and Means, however, agreed to raise the jet fuel taxes even further, to 35.9 cents per gallon

(roughly a 65% increase), while accepting the gasoline tax proposal at the 24.1-cent-per-gallon

level. These levels were included in the House-passed version of H.R. 2881.

With regard to airport financing, H.R. 2881 would fund the AIP program at the same levels

specified in S. 1300. H.R. 2881 would additionally allow for increased passenger facility charge

(PFC) collections, but large hub airports that increase PFCs above the current $4.50 per passenger

level would have their AIP apportionments reduced by an amount equal to the projected PFC

revenue increases derived from the fee increase. H.R. 2881 would allow for PFCs to increase, up

to $7 per passenger and would raise the PFC cap on a round trip ticket from $18 to $28. The bill

also calls for a study to assess the impact of proposing different PFC rates for connecting

passengers versus origin and destination passengers.

H.R. 2881 would set state apportionments for AIP at 10% of total apportioned amounts, with a

$300 million minimum provided total AIP funding remains above $3 billion. Apportionments for

nonprimary airports would remain at $150,000 or one fifth of the estimated five year

development costs. The bill also would raise the required air carrier approval for airport

privatization amounts from 65% to 75% and airports participating in the privatization pilot

program would not be eligible for AIP funds. Like the FAA proposal and S. 1300, H.R. 2881

would exempt proceeds from the sale of a privatized airport to a public authority from AIP

assurances that require all airport revenue be expended for capital and operating costs.

H.R. 2881 includes several provisions regarding passenger airline service, including a

requirement that DOT review and adjust denied boarding compensation regulations every two

years. The bill would establish additional carrier monthly reporting requirements to provide DOT

with data on diverted flights and flights cancelled after leaving the gate. H.R. 2881 would also

require contingency plans for providing food, safe drinking water, restrooms, cabin ventilation,

and medical care to passengers during excessive ground delays to be developed and submitted to

DOT. Airports would also be required to devise plans for sharing facilities and making gates

available for such situations, and would require DOT to set up a consumer complaints hotline.

The bill would also require airlines to inform passengers at the time of ticket purchase of the

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names of any insecticides it intends to use while passengers are on board. The bill requires DOT

to establish an advisory committee for airline passenger consumer protection. The bill also directs

the DOT Inspector General to conduct an audit of air carrier flight delays and cancellations, and

requires a GAO assessment comparing passenger rights in the United States to those in the

European Union.

With regard to next generation modernization initiatives, H.R. 2881, like the FAA proposal and S.

1300, would increase the stature of the JPDO director, and would require each JPDO supporting

agency to designate a senior official and establish an office to oversee agency efforts supporting

the NGATS planning and development initiatives. The bill would also require a multiagency

integrated work plan describing annual objectives, milestones, and delineation of responsibility

among federal agencies, and to tie these plans to the budgetary process. H.R. 2881 would also

require GAO to review the progress and challenges associated with air traffic modernization

initiatives under NGATS. The bill also authorizes additional appropriations specifically

designated for airspace redesign initiatives to enhance aviation system capacity and reduce

delays.

H.R. 2881 proposes to establish an FAA working group on facility and service consolidation,

consisting of the FAA Administrator and representatives from sectors of the aviation industry as

well as labor representatives representing FAA field employees. The working group’s functions,

however, would largely be advisory in capacity, and it could not by itself prevent any FAA

consolidation actions from moving forward. An amendment agreed to and incorporated into

House-passed H.R. 2881 would require that FAA regional office consolidation be included in the

scope of the working group’s oversight, and would require that the working group include

representation for regional office employees.

H.R. 2881 would create a public-private partnership including a university with expertise in air

traffic management to serve as an airport-based test facility for NGATS technologies. The bill

would also establish a NextGen Research and Development Center of Excellence to provide

educational, technical, and analytical assistance regarding NGATS technologies. The bill would

also require the FAA to establish a process for including affected employees, such as air traffic

controllers and airways system specialists, in the NGATS process and other modernization

initiatives.

With regard to FAA personnel management, the House Committee on Transportation and

Infrastructure adopted an amendment offered by Representative Costello that, like S. 1300, would

require binding arbitration to resolve impasses in contract negotiations. H.R. 2881, however,

would invalidate FAA contract actions taken after July 10, 2005, thus appearing to have the effect

of undoing the FAA contract with air traffic controllers adopted June 5, 2006, and subjecting the

prior impasse with controllers to the terms of the binding arbitration provision. Pending the

outcome of the binding arbitration, the provision would allow affected employees to receive

“back pay” of any additional salary increase that may be included in the negotiated settlement,

and it authorizes $20 million for this purpose.

H.R. 2881 includes language requiring a GAO study of FAA technical training of system

specialists that service air traffic and navigation infrastructure, and a study by the National

Academy of Sciences on FAA inspector staffing levels and workload as well as air traffic

controller staffing. The bill authorizes increased funding for increasing inspectors, safety

technicians, and operational support staffing. H.R. 2881 also calls for an FAA study of front line

manager staffing requirements for air traffic control facilities, and would establish a university

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center of excellence for aviation employment. The bill also seeks to create a 12-member task

force to conduct a study assessing the conditions of FAA air traffic control facilities and

recommend steps for rehabilitation, remediation, and programmatic changes to prevent unsafe

building conditions.

H.R. 2881 provides for 10 additional beyond perimeter slots from Washington Reagan National

Airport (DCA), but would reduce within perimeter slots by an equal amount. The bill does not

specifically address slot issues at New York’s LaGuardia Airport where statutory slot controls

have expired, nor at any other congested airports besides DCA. However, the bill includes a

general provision that would allow the FAA to hold meetings among air carriers to voluntarily

negotiate schedule reductions at any airport experiencing arrival and departure rates exceeding

maximum hourly rates that is likely to have a significant adverse effect on a regional or national

level. If air carriers were unwilling to voluntarily agree to schedule reductions, then the provision

would authorize the FAA administrator to take appropriate action to reduce arrivals and

departures to reflect available airport capacity. Also, an amendment agreed to by the House would

require GAO to assess the use of market-based strategies for reducing airspace congestion, such

as peak-period pricing, slots, or quotas, and compare the effects of such initiatives to the

improvements in congestion attainable through airspace redesign initiatives.

H.R. 2881 contains language similar to S. 1300 requiring the FAA to report on its progress to

install systems to mitigate runway incursions. H.R. 2881 would authorize dedicated funds for

runway incursion reduction programs and runway status lights. Additionally, H.R. 2881 would

require the FAA to develop a strategic runway safety plan. H.R. 2881 includes language identical

to S. 1300 calling on the FAA to finalize rulemaking regarding fuel tank flammability reduction

on large transport aircraft. H.R. 2881, like S. 1300, also directs the National Academy of Sciences

to carry out a study of pilot fatigue and requires the FAA to implement recommendations of an

FAA study on flight attendant fatigue. The bill would also require the FAA to rewrite current

flight and duty time regulations for air carrier, commuter airline, and charter pilots to count flight

time accumulated conducting non-revenue flight assignments for the operator toward pilot flight

and duty time totals. The bill would also require the FAA to establish occupational safety and

health standards for flight attendants, and would require flight attendants, as well as gate agents,

to receive specific training in serving alcohol, recognizing intoxicated individuals, and handling

disruptive passengers.

With regard to airline maintenance, H.R. 2881 includes a provision that would restrict the use of

non-certified maintenance providers, allowing only airline employees or employees of FAAcertified repair stations to carry out substantial and routine maintenance and complete required

inspections of aircraft used in airline service. Air carriers would also be required to provide

complete lists of their non-certificated maintenance providers, whose activities would be

restricted to non-routine, non-substantial maintenance and repair work under this provision. The

bill also adopts an amendment agreed to by the House that would extend the requirement for drug

and alcohol testing programs to safety-critical positions at foreign repair stations working on air

carrier aircraft or components.

With regard to unmanned aircraft, H.R. 2881 would require the FAA to develop a comprehensive

plan to safely integrate commercial unmanned aircraft in the national airspace system as soon as

possible but not later than the end of FY2012. It also calls for expediting authorization of publicuse unmanned aircraft, and implementing interim regulations to allow certain commercial

unmanned aircraft to have access to airspace prior to completion of the comprehensive plan.

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H.R. 2881 also would authorize funding for wake vortex mitigation technologies, including

advisory systems. The bill identifies specific funding amounts totaling more than $45 million

over the four year reauthorization period for wake turbulence-related research and development.

An amendment agreed to by the House would also require the FAA to study the feasability of

creating a publicly-searchable Internet database of acceptable height and distance from aviation

sites for the installation of wind turbines. The bill would also require the FAA to update standards

for aircraft rescue and firefighting (ARFF) personnel and equipment at commercial airports based

on national voluntary consensus standards, but does not specifically expand the scope of these

standards to all-cargo operations as some aviation safety experts have argued for.

H.R. 2881 includes a provision, similar to that in the FAA proposal, to establish a consortium to

develop Continuous Low Energy, Emissions and Noise (CLEEN) engine and airframe

technology. The bill includes proposed sense of Congress language asserting that the European

Union’s proposed emissions trading scheme is inconsistent with International Civil Aviation

Authority (ICAO) practices of establishing consensus-based international standards and

recommended practices, and urges the European Union and others to work cooperatively through

ICAO to develop “a consensual approach to addressing aircraft greenhouse gas emissions.”2 The

bill also calls for research to promote development of alterative jet fuels and calls for the JPDO to

establish environmental standards for NextGen technologies. Like the FAA proposal and S. 1300,

the H.R. 2881 also includes a provision to fund environmental mitigation grants under a proposed

pilot program. Unique to H.R. 2881 is a provision for a pilot program for aircraft departure queue

management to decrease fuel consumption and emissions, and a provision requiring the FAA and

the EPA to examine how engine noise and emissions standards development could be better

integrated across the two agencies. Similar to S. 1300, H.R. 2881 includes a provision that would

prohibit operations of non-Stage 3 compliant jets under 75,000 pounds after 2012. An amendment

agreed to by the House also adds language stating that it is the sense of the House of

Representatives that the Port Authority of New York and New Jersey should conduct noise

compatibility planning studies (referred to as Part 150 studies) at John F. Kennedy International

Airport and LaGuardia Airport in New York and Newark Liberty and Teterboro Airports in New

Jersey. Additionally, the bill would increase funding for the Airport Cooperative Research

Program (ACRP) to examine airport environmental issues and calls for an interagency study on

the effects of aviation on climate change. The bill would also require the FAA to study the use of

lead-free fuels for piston aircraft. With regard to the Air Tour Management Program and

curtailing aircraft noise in national parks, the modifications proposed in H.R. 2881 are similar to

the FAA proposal initiatives to streamline and expedite agency actions.

H.R. 2881 reserves $50 million in overflight fees for funding the Essential Air Service (EAS)

program and increases the authorization for additional EAS funds to $83 million. The bill

encourages financial incentives and long-term contracts for EAS, but would eliminate the local

participation program created by Vision 100. The bill would also create an Office of Rural

Aviation within DOT to monitor and improve air service to small communities. The bill also

includes language allowing state and local governments to restore an airport’s EAS eligibility

status by offering proposals, developed in cooperation with the air carrier, to reduce subsidies to

below statutory per passenger maximums and allows DOT to increase negotiated EAS subsidies

to adjust for any significant increases in air carrier fuel costs. The bill also seeks to clarify the

statutory definitions related to the actual control of the operations of U.S. airlines that are owned

H.R. 2881, §512, p. 178.

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in part by foreign entities. The House Committee on Transportation and Infrastructure has also

agreed to an amendment offered by Representative Oberstar to limit express carrier employees

covered under the Railway Labor Act (RLA) to those performing certain aviation-related

functions, leaving other express carrier employees, like delivery truck drivers, to be covered

under provisions of the more broadly defined National Labor Relations Act (NLRA), which allow

them to organize and collectively bargain at the local level and according to less formal standards

for affiliation. The measure is supported by labor unions and United Parcel Service (UPS) whose

employees are already primarily covered under the NLRA, but is opposed by FedEx, whose

employees fall under the RLA guidelines.3

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Funding authorization levels for the FAA have been historically split among four principal

accounts: Operations and Maintenance (O&M); the Airport Improvement Program (AIP) or

Grants in Aid for Airports; Facilities and Equipment (F&E); and Research, Engineering, and

Development (RE&D). However, beginning in FY2008, the FAA proposes a restructuring of

these accounts, largely to separate operational activities carried out by the Air Traffic

Organization (ATO) from FAA’s regulatory functions in the FAA’s accounting structure. S. 1300,

however, proposes to reauthorize the four existing FAA accounts. Therefore, the bills are not

directly comparable with regard to funding authorizations. The FAA also proposes new user-fee

funding mechanisms, under which much of the revenue to be used for air traffic services and

regulatory functions would be determined through fee-setting activities carried out by the FAA

Administrator, rather than through traditional congressional funding authorizations. This further

complicates any effort to make comparisons among the bills with regard to funding levels.

Funding mechanisms and levels identified in the bills are generally described below, and more

detailed treatment of the FAA-proposed revenue system is provided later in the section titled

“Proposed Tax and Fee Structure.”

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Funding authorization levels in the FAA proposal cannot be compared to historical funding in the

FAA’s four accounts—O&M, AIP, F&E, and RE&D. This is because the FAA has proposed to

restructure these accounts, and also because the FAA proposes to establish a user fee collection

authority under which the FAA Administrator would set fees that would be deposited into

separate Treasury accounts as offsetting collections. The proposed new accounts under the FAA

plan include the Air Traffic Organization (ATO) account and the Safety and Operations account.

These would replace the current O&M and F&E accounts, but there is not a one-to-one

relationship between the current accounts and the proposed accounts. Specifically, some O&M

and F&E functions would map into the Safety and Operations account while others would map

into the Air Traffic Organization account. One goal of this new accounting structure is to fully

separate the FAA regulatory responsibilities from its operational functions on the books as has

been done organizationally with the creation of the Air Traffic Organization (ATO). Under the

FAA plan, the proposed Safety and Operations and ATO accounts would be funded primarily

through user fee collections, while RE&D would continue to be funded through a combination of

Ian Swanson, “UPS Works to Hobble Its Rival, FedEx,” The Hill, July 11, 2007.

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Airport and Airway Trust Fund (AATF) and General Fund contributions. The AIP program would

continue to be funded by the AATF.

Table 1 Shows the FAA proposed funding authorizations coming out of the existing Airport and

Airways Trust Fund (AATF) and the proposed limits or caps on General Fund contributions over

the proposed three-year authorization period. Because the proposed fee collection authority would

not fully take effect until FY2009, larger contributions from the AATF would be required in

FY2008 during the transition to the user fee based system. For FY2009 and FY2010, the proposal

assumes that these user fees would cover a large part, but not all, of the FAA’s costs for the ATO

and Safety and Operations accounts. The AIP program account would continue to receive its

revenue from the AATF, and the FAA’s RE&D account would still rely primarily on the AATF for

its revenue source, with additional funding coming from the General Fund contribution.

Maximum General Fund contributions would remain flat at around $2.5 billion under the FAA

proposal. This level of General Fund contribution is particularly troubling to critics of the FAA

proposal because it is lower than contribution levels from recent years, which have already been

declining. Also, because the proposed maximum General Fund contribution is flat across the

proposed three-year authorization period, it will comprise a smaller percentage contribution to the

FAA’s total budget if costs continue to rise. These increased costs would be covered instead by

user fees under the FAA proposal. However, because the FAA proposal would give the FAA

administrator fee setting authority, the anticipated revenue generated from fee collections is not

discussed in the bill or supporting documentation provided by the FAA. This proposal is

discussed in further detail in the section titled “Proposed Tax and Fee Structure.”

. Airport and Airway Trust Fund Funding Authorizations and General Fund

Limits Proposed Under the FAA Bill

Table 1

($ in millions)

Account

FY2008

FY2009

FY2010

Air Traffic Organization (AATF)

Safety and Operations (AATF)

Research and Development (AATF)

Airport Planning and Development

General Fund Contribution (Maximum)

7,916

672

123

2,750

2,618

1,130

174

2,900

2,532

1,126

174

3,050

2,532

Source: H.R. 1356/S. 1076.

Unlike historic tables which show the total revenues for each FAA account, this table only provides

revenues for these accounts coming solely from the AATF.

Note:

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Under S. 1300, the FAA’s O&M account would see an increase of about 7.7% in authorized levels

for FY2008 compared to FY2007 appropriated amounts. This is notable because FY2007

appropriated amounts for O&M already slightly exceed authorized amounts, a situation largely

attributed to unanticipated increases in labor costs within the FAA. Beyond FY2008, increases to

the O&M account are more modest, averaging slightly above a 3% annual rate, which tracks

closely with inflation and employment cost index projections for the broader economy.

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Under S. 1300, the authorized levels for the Airport Improvement Program (AIP) would continue

the trend of $100 million annual increases through FY2011.

Perhaps the most notable increase in S. 1300 would be for the Facilities and Equipment (F&E)

account. While this account would only see about a 3.7% increase in authorized funding levels in

FY2008 compared to FY2007 appropriations, the authorization would then be increased by

slightly more than 13% for FY2009. This would be the largest percentage increase on an annual

basis for this account, and would be followed by more modest percentage increases to F&E of

slightly more than 5% for FY2010, followed by a larger increase of almost 8% for FY2011. This

schedule likely reflects the Senate committee’s views on the needed spending schedule to keep

the acquisition of next generation technologies to modernize the national airspace system on track

to meet stated objectives of fully implementing the next generation or NextGen air traffic system

by 2025.

S. 1300 also proposes a substantial increase to FAA Research, Engineering, and Development

(RE&D) authorized funding levels starting in FY2009. Authorized funding for RE&D would

increase by 36% in FY2009 compared to both the FY2008 request and the proposed FY2008

authorized amount in the bill. Under S. 1300, this would be followed by essentially flat funding

of about $190 million annually for RE&D through FY2011. Like the proposed increase to the

F&E account authorized levels, this proposed increase to RE&D likely reflects the Senate

committee’s views on the increased funding for research and development needed to support

progress on NextGen development efforts.

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H.R. 2881 would provide funding for the FAA’s O&M account and the AIP program at the same

levels specified in S. 1300. With regard to the F&E account, however, H.R. 2881 proposes to set

higher funding levels than specified in S. 1300. H.R. 2881 proposes an increase of almost 25% in

FY2008 authorizations for F&E spending compared to FY2007 appropriated amounts. This

would be followed by smaller annual increases from FY2009 through FY2011.

The House Committee on Science and Technology, which has jurisdiction over the FAA’s

research functions and components, has proposed substantial increases to available funding for

the FAA’s RE&D account. Specifically, H.R. 2881 would triple the available funding for RE&D

activities in FY2008 compared to FY2007 appropriated amounts. Available funding for RE&D

would be further increased by 44% in FY2009. Authorized funding levels for RE&D would

increase over the proposed authorization period to $515 million in FY2011, compared to current

appropriated levels of $131 million.

Table 2. Reauthorization Funding Levels for FAA Accounts

($ in millions)

Account

Operations and Maintenance (O&M)

Administration

Senate (S. 1300)

House (H.R. 2881)

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FY2007 FY2008

FY2009

FY2010

FY2011

8,064

See Note

8,726

8,978

9,305

9,590

8,064

8,726

8,978

9,305

9,590

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Account

FY2007 FY2008

FY2009

FY2010

FY2011

Conference

Enacted Authorization

Appropriated (FY2007)

8,064

8,084

8,104

Administration

Senate (S. 1300)

House (H.R. 2881)

Conference

Enacted Authorization

Appropriated (FY2007)

3,400

4,000

3,700

3,515

2,750

3,800

See Note

3,900

See Note

4,000

See Note

4,100

Administration

Senate (S. 1300)

House (H.R. 2881)

Conference

Enacted Authorization

Appropriated (FY2007)

3,098

3,110

2,481

See Note

2,572

3,120

See Note

2,923

3,246

See Note

3,079

3,259

See Note

3,317

3,353

Administration

Senate (S. 1300)

House (H.R. 2881)

Conference

Enacted Authorization

Appropriated (FY2007)

107

356

131

140

335

+174

191

482

+174

191

487

194

515

Administration

Senate (S. 1300)

House (H.R. 2881)

Conference

Enacted Authorization

Appropriated (FY2007)

14,007

14,196

13,929

14,475

14,231

See Note

15,238

15,981

See Note

15,992

16,606

See Note

16,575

17,051

See Note

17,201

17,558

Airport Improvement Program (AIP)

Facilities and Equipment (F&E)

Research, Engineering, & Development (RE&D)

TOTALS

Sources: P.L. 108-176; S. 1300; CRS Report RL32498, P.L. 108-176, by name redacted, name redacted, and name r

edacted; and Federal Aviation Administration, Budget in Brief: Fiscal Year 2008.

Note: Beginning in FY2008, the Administration has proposed to restructure its accounts creating a new Safety

and Operations account and an Air Traffic Organization account and abandoning the O&M and F&E accounts.

Without detailed analysis, these newly proposed accounts are not comparable to authorization and funding levels

under the historic account structure. Administration requests for AIP and RE&D reflect amounts requested in

the Administration’s FY2008 budget. However, the FAA proposal does not contain specific authorization

requests for these accounts. For RE&D the authorization specifies amounts that may be appropriated from the

aviation trust fund in addition to any general fund amounts set by future year appropriations. These amounts are

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designated with a preceding plus sign (+) in this table, to indicate that this activity may receive additional general

fund contributions above these proposed authorization levels. For FY2008, the Administration requested an

authorization of $123 million in addition to general fund contributions for RE&D. However, the appropriations

request of $140 million, presented in the President’s Budget, is reflected in the table. This table provides overall

funding levels for the four main FAA accounts as specified in the respective bills. It does not, however, include

miscellaneous additional, specifically designated appropriations included in separate provisions of the bills.

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Over the last reauthorization period there has been considerable discussion about the long term

health of the existing trust fund based FAA financing system. The FAA, and others, believe the

existing system will have difficulty providing the funding that the agency will need in the years

ahead and that a new funding system more closely tied to aviation industry activity should be

adopted. Other aviation interests, especially those representing the GA portion of the industry

believe the existing funding system is adequate at least for the next reauthorization cycle. As

Congress considers reauthorization it will likely need to weigh these opposing viewpoints. For a

detailed examination of the existing aviation finance system and the proposed changes to this

system see CRS Report RL33913, Aviation Finance: Federal Aviation Administration (FAA)

Reauthorization and Related Issues, by (name redacted).

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The Next Generation Air Transportation System Financing Reform Act of 2007 (H.R. 1356/S.

1076), proposes the most significant change in FAA aviation finance since the federal program

was created by the 1970 Act. The FAA proposal provides for a three year authorization period

(FY2008-FY2010) during which the FAA would transition from its existing trust fund/general

fund based financing system to a system based on new direct fees and existing excise taxes, as

well as general fund monies. Although the trust fund would be continued, its overall role in

funding the agency is significantly reduced. The proposal uses a mix of direct fees (referred to as

user fees by the FAA and throughout this section), excise taxes, and general funds, to pay for the

FAA’s ATO related activities. The proposal funds the FAA’s safety activities primarily from

general funds, but also allows the FAA to collect user fees related to its registration and

certification activities for this purpose. Excise taxes would be used to support the continued

aviation trust fund which is dedicated primarily toward funding AIP, but also supports part of

RE&D and Essential Air Service (EAS) programs.

The FAA proposal does not set new user fee rates for ATO services. Rather it enunciates a

framework for how fees can be set and creates an Air Transportation System Advisory Board

(Board) to assist the FAA Administrator in establishing appropriate fee levels and mechanisms.

Ultimately, however, the Administrator would be the sole decision maker on fee setting issues.

The proposal adopts a new financial structure for the FAA that would correspond to the new

program funding regime. To facilitate this structure: it would create two new accounts in the

Treasury to receive the newly imposed user fees; allows for the establishment of a reserve fund;

and allows the FAA to issue bonds to speed-up F&E equipment acquisition. Agency funding

would still be subject to annual congressional appropriations.

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The FAA proposal is controversial, and several aviation interest groups came out against it almost

as soon as it was introduced.4 The proposal, however, has supporters, especially the Air Transport

Association (ATA), which views it as a positive step forward.5 Congressional hearings on H.R.

1356/S. 1076, which embodies the FAA proposal, have been held in both the House and the

Senate.

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As mentioned above, the principal feature of the FAA proposal is the creation of a direct user fee

system to pay for the majority of the Agency’s costs associated with its ATO activities. The FAA

proposal, however, does not recommend a specific user fee structure. Instead, it lists the criteria

that must be considered in setting fee levels and leaves it to the Board and ultimately the FAA

Administrator to actually set the fees. The proposal requires that the Administrator consult with

affected parties prior to establishing a fee structure, but gives the affected parties no further role

in the process.6

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Specific ATO user fees can be set for enroute, oceanic, and terminal area flight activity. Enroute

and oceanic fees can be based on “distance traveled or any other method that is consistent with

the treaties and international agreements to which the United States is a party.” Since much of the

rest of the world uses aircraft weight and the distance flown as part of its fee setting process, it

would appear that a similar fee setting regime could be implemented here.7 Overflight fees (for

aircraft transiting U.S. airspace) would be eliminated and these flights would be subject to the

enroute and oceanic fee system.

Fee setting for terminal area activities could be somewhat more complicated because the proposal

would allow for fees to be differentiated at various locations and at different times of the day.

Factors that could be included in the terminal fee structure can include aircraft takeoffs/landings

(at airports with over 100,000 passenger boardings per year), aircraft weight, operations at a large

hub airport (1% of total U.S. enplanements), time of day or day of week at congested large hubs,

and different fees for daytime and nighttime operations.

User fees would be imposed on all commercial users of ATO services irrespective of aircraft type.

For the purposes of determining which tax certain aircraft might pay, the applicability of IRS

regulations would delineate between commercial and noncommercial users. Although GA aircraft

operate outside of the ATO user fee system most of the time, they would be subject to terminalrelated fees at congested large hub airports.

The FAA proposal would require that fees be set in relation to the costs incurred for providing

ATO services. In setting the fees mentioned above the FAA would be prohibited from using flight

Wolfe, Kathryn. “FAA’s Funding Proposal Doesn’t Fly With Entire Aviation Industry, Lawmakers.” CQ Today—

Transportation and Infrastructure. February 16, 2007.

http://www.airlines.org/news/releases/2007/statement_12-14-07.htm?PF=true.

It would appear that the Board, with wide industry representation, is supposed to be part of the consultation process,

although this is unstated in the bill.

The airline industry, and groups such as the air cargo industry, have traditionally opposed weight-based tax structures.

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altitude as a fee setting factor. Under the proposal, it could offer incentives, by way of reduced

fees, for the purchase and use of equipment that enhances an aircraft’s safe and efficient operation

in the air traffic system. In addition, it could seek sufficient user fee revenues to establish a

reserve fund to be available if system revenues fail to reach projected levels.

The ATO would also receive funding from excise taxes. The proposal suggests that a 70-cent-pergallon fuel tax be imposed on all GA users (kerojet or aviation gasoline). Of this, 56.4 cents per

gallon is dedicated to ATO activities and 13.6 cents is reserved for the aviation trust fund. These

fees are to be indexed to inflation beginning in 2009 and can be modified by the Administrator in

future years. The FAA believes that it is no longer necessary to differentiate the tax rate for

turbine (avgas) and piston (aviation gasoline) aircraft users because of the much higher fuel use

rates of turbine aircraft.

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Safety and non-ATO operations activities would be primarily funded by Treasury general funds.

In addition, however, the FAA is to impose registration fees for specified services at rates detailed

in the proposed legislation. By way of example, aircraft registration would be subject to a $130

fee and issuing an airman medical certificate would cost $42. Many of the activities listed here

were previously provided at nominal fee levels.

Fees are also to be imposed for FAA certification activities. Specific fees for activities such as

certification of a large foreign repair station or a maintenance technical school are not enumerated

in the legislation. Rather, the Administrator is to set fees at levels that correspond to the costs

imposed on the FAA for providing the certification service in question.

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The largest source of revenues for the trust fund would come from a 13.6-cent-per-gallon tax on

all aircraft irrespective of fuel type. These taxes are to be adjusted for inflation and can also be

adjusted, up or down, if the FAA cost allocation process so dictates.

The other principal source of funding for the trust fund is by continuation of the international

arrivals/departure fee which is set at $6.39 per event. This tax can also be adjusted for inflation

and/or cost allocation reasons.

Although the FAA proposal is based primarily on direct user fees, there is a transition period

during which the trust fund would continue to provide some funding for ATO and all other FAA

activities, albeit at a diminishing level.

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The FAA proposal would create a 13 member Board charged with advising the Administrator on

user fee and other issues at his or her request. The Board’s membership would include the

Administrator, a Department of Defense representative, three members representing “the public

interest,” an airport member, three airline members representing different size air carriers, a cargo

airline member, a GA member, a business aviation member, and a representative of the aviation

manufacturing industry. Appointment of all members is made by the Secretary of Transportation.

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In addition, the proposal would prescribe the Board members’ terms and provides guidance on its

administrative functioning.

The Board can advise the Administrator on a wide range of FAA programs and activities. At the

outset, however, it would appear that the Board’s principal duty is to help with the creation of the

new user fee system. According to provisions of the FAA proposal, “prior to establishing or

modifying fees ... the Administrator shall consult with and seek the recommendations of the type

and level of such fees.” A procedure is established whereby the Administrator, who has ultimate

fee setting responsibility, can disagree with the Board’s recommendations and establish fees by

publishing the reasons for disagreement in the Federal Register.

It would be up to the Administrator to determine how, and how much, they might wish to use the

Board’s expertise. There is nothing in the legislation as proposed that automatically gives the

Board any power to exercise its advisory role, especially in a public forum. This is because the

Board’s actions would not be subject to the public meeting and other administrative provisions of

Title 5 U.S.C. Further, it is not clear that the Board would have access to information about cost

allocation and other subjects, except to the extent that the Administrator wishes to make this

material available to the Board.

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As suggested by the new tax and fee proposal, the FAA would be reorganized from a budgetary

perspective. ATO assessed user fees are to be deposited into a newly created Treasury ATO

account. Similarly, registration and certification fees are to be deposited in a newly created

Treasury safety and operations account. The trust fund, however, remains intact.

The new user fees would require a new collection system to insure that they are deposited in the

appropriate account. The Administrator would be charged with developing this system, perhaps

with the help of the Board. The FAA proposal would give the Administrator some enforcement

powers to assist in the collection effort long term.

FAA spending would still require annual appropriation by Congress. The relationship between the

FAA and congressional appropriations committees would apparently be unchanged. From a

budgetary standpoint, however, it appears that the offsetting collections process created by the

proposal would remove FAA spending from the discretionary part of the budget. At least one

outside source has suggested that the new funding arrangement could run afoul of the newly

created pay-as-you-go rules adopted by the House of Representatives.8 In short, it is unclear at

this point how the new funding arrangement proposed here would play out as part of the

congressional budget and appropriations process.

Congressional finance committees (House Ways and Means and Senate Finance) could lose their

existing jurisdiction over some aspects of the FAA tax and fee setting. These committees would

likely retain their jurisdiction over the excise taxes to be deposited in the aviation trust fund, but

could have no role or oversight over the newly established user fees. Authorizing committees

normally have jurisdiction over offsetting collection programs of the type that would be created

for the ATO, and for safety and operations. As proposed, however, all fee-setting powers would

Transportation Weekly. “Administration FAA Bill Likely Violates House Pay-As-You-Go Budget Rule.” February

28, 2007, p. 13.

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reside with the Administrator, meaning that a specific oversight role for the authorizing

committees is not defined in the legislation.

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The Secretary of Transportation would have the ability to issue Treasury bonds to facilitate a

rapid implementation of the NGATS program. Up to $5 billion could be issued at interest rates

established by the Treasury. To finance the bonding the Secretary could increase user fees by an

amount needed to repay the bonds with interest. These additional revenues would not go into the

new Treasury accounts mentioned earlier, but would flow directly to the Treasury. Full repayment

would be required by the end of FY2017.

The concept of using bonds to speed up the acquisition of F&E capital items has been discussed

for years. The dedicated revenue stream to the ATO account would make bonding possible as part

of the FAA’s program for the first time. It has been argued that having this authority would allow

the FAA to better program its acquisition requirements over an extended period of time, as

opposed to the potential uncertainty of the annual appropriations process. In addition, access to

additional funds should give the Agency the ability to pursue a number of technology and

equipment upgrades at the same time. The main argument against bonding is that the interest

payments make it a more expensive way to pay for infrastructure than direct appropriations would

be.

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The FAA proposal provides overall authorization levels for the FY2008-FY2010 period of nearly

$28 billion. This number, however, cannot be meaningfully compared to previous legislation

because it excludes much of the funding required by the prospectively user-fee funded ATO, and

safety and operations activities. These activities would now be linked to actual system costs

which cannot be determined this far in advance. To the extent that the authorized levels can be

compared they suggest a significant cut in AIP and EAS funding.

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S. 1300 as reported by the Senate Committee on Commerce, largely ignores the Bush

Administration proposal and maintains the existing funding structure for the FAA with a couple

of important caveats. First, the Commerce Committee lacks jurisdiction over taxes and fees which

are in the domain of the Senate Committee on Finance. This being the case, Commerce

Committee-reported bill does not include tax and fee provisions though, as will be discussed

subsequently, it does include a significant revenue raising element. In addition, the committee has

proposed an oversight Board and provided for bonding authority. In each instance S. 1300 differs

from provisions in the FAA proposal. On September 21, 2007 the Senate Committee on Finance

ordered an original bill to be reported that makes some changes to the existing aviation tax and

fee structure. The Finance Committee proposal declines to adopt a user fee system for aviation

system finance. It is expected that the differing views of the two committees will be reconciled

before or during floor consideration of S. 1300 in the weeks ahead.

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The most contentious element of S. 1300 is a proposal to levy a $25 surcharge on flights9

operating in the national airspace system. The surcharge is designed to pay for a significant

portion of FAA costs associated with the NGATS modernization program. Revenues collected by

the surcharge are to be treated as “offsetting collections” for congressional budgetary purposes

and are to be deposited in a new Treasury created air traffic modernization fund. As an offsetting

collection the surcharge is under the jurisdiction of the authorizing committee, in this case Senate

Commerce. Spending of these funds is subject to authorization and to subsequent annual

appropriation.

Although the bill provides for broad industry collection of the surcharge, it exempts a large

segment of annual flight activity from the fee. The major exemptions are for all piston powered

aircraft, and for all turboprop and turbojet aircraft operating outside of controlled airspace. Other

exemptions are provided for certain intrastate flights (Alaska and Hawaii) where neither a

terminal radar approach control (TRACON) or other FAA ATC facility is involved in servicing

the flight. Other exemptions apply to military and public aircraft (U.S. and foreign), air

ambulance aircraft, agricultural aircraft, and Canada-to-Canada flights.

The surcharge is to be payable to the Administrator of the FAA. The Administrator is also charged

with implementing the surcharge collection process. Limited guidance is provided in the bill as to

how the collection process might work leaving it largely to the Administrator and Treasury to

establish a workable process. The bill provides for penalties for non-payment of the surcharge.

As reported the provision would provide a portion of the annual F&E budget beginning in

FY2009 at a level of $412 million. Funding for the subsequent two years of the authorization

period is provided at $423 million and $436 million respectively.

A related provision in the bill requires that all aircraft filing flight plans with the FAA, including

those exempt from the surcharge, include information as to whether or not the flight is being

operated for commercial purposes (for compensation or for hire). Collecting this information is

apparently directed toward filling what many industry observers see as a large gap in existing

industry data (i.e., determining what portion of GA flights is for commercial rather than personal

purposes).

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The surcharge is viewed by the GA community as a user fee and is opposed for the same reasons

that GA opposes the user fee portions of the Administration proposal (i.e., GA believes that it

creates marginal demands on the ATC system and that its contribution to funding the FAA is best

handled by the already existing fuel tax system). Conversely, the airline industry generally

supports the surcharge proposal and views it as a positive move toward getting all system users,

and especially corporate aviation, to pay for their fair share of ATC system costs.

Within the Senate Commerce Committee support for the surcharge proposal was closely split. An

attempt to strike the surcharge from the reported version of the bill failed on a vote of 12 to 11.

Senator Ted Stevens, having voted initially to abstain on the amendment, later changed his vote in

The bill defines a “flight” as a takeoff and landing by an aircraft.

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order to provide a majority for moving the surcharge provision for future consideration on the

Floor.10

In addition to the philosophical questions about the desirability of user fees the question can also

be raised about whether a $25 surcharge would be sufficient in and of itself to provide the amount

of designated modernization funding authorized in S. 1300. The answer, based on a simple

analysis of industry data is that this might not be the case.11 As a result, supplemental revenues for

the modernization fund may be considered by the Senate Committee on Finance. There has

already been an open discussion in industry circles about the need to consider possible fuel tax

and/or other fee increases in order to meet both modernization needs and additional funding needs

for other FAA activities.

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S. 1300, like the FAA proposal, would provide the FAA with up to $5 billion in bonding authority

to facilitate expedited spending for NGATS-related capital projects. Other administrative aspects

of the bonding proposal differ, however. For example, funds would be available for the period

FY2009 through FY2025, instead of FY2009 through FY2017. Bonds could be used to pay for

NGATS projects listed as part of the FAA’s Capital Improvement Program (CIP) at the discretion

of the Secretary of Transportation, with the approval of the Office of Management and Budget

(OMB). Interest rates would be set by the Treasury. Repayment would be made from the

surcharges deposited in the modernization fund, on which repayment would have priority over

other types of modernization spending. Bonding, for capital improvements, as opposed to using

appropriated funds, remains a controversial concept for the same reasons enunciated in the earlier

discussion of the Bush Administration’s proposal.

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The Oversight Board that would be created by this bill, unlike the Board proposed by the

Administration, has real power and, some might argue, some unusual powers as well. S. 1300

creates a seven member Oversight Board appointed by the President and confirmed by the Senate.

Membership consists of: the Administrator of the FAA, a representative of DOD, a representative

of the “public interest,” the chief executive officer (CEO) of an airport, the CEO of an airline, a

representative from one of the FAA’s labor organizations, and a representative of the GA segment

of the industry.

The Oversight Board is assigned a number of functions, some advisory in nature and some that

give the Oversight Board approval authority over FAA actions. As stated in the bill these

functions are as follows:

•

Review and advise on FAA modernization, budget, and cost accounting activities.

“Senate Committee Approves FAA Reauthorization,” Transportation Weekly, Legislative Services Group, Vol. 8,

Issue 22, May 23, 2007, p. 6.

According to the FAA there were over 18 million total flights in the U.S. in 2005. If each of these flights were to be

taxed, which would not be the case since a large segment of these flights would be exempted from the surcharge, $450

million might be raised. In addition to paying for the modernization fund contribution to F&E, the surcharge would also

be used to pay for up to $5 billion in bonds, plus interest, issued in accordance with another provision of the bill.

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•

Review the FAA strategic plan. Provide recommendations on non-safety

elements and advice on safety elements.

•

Review ATC efficiency and make recommendations based on its performance.

•

Approve all capital expenditures of over $100 million related to the ATC system

modernization.

•

Approve the FAA’s F&E budget prior to its submission to OMB.

•

Approve the CIP prior to its submission to Congress.

•

Annually approve the Operational Evolution Plan (OEP).

•

Approve the Administrator’s choice of a chief operating officer (COO) for the

Air Traffic Organization (ATO).

•

Approve the selection of the Head of the Joint Planning Development Office

(JPDO).

The bill requires that Oversight Board members have certain types of expertise in aviation and

organizational subject areas. They also must not have a pecuniary or financial interest (defined by

the provision), and not be a member of a group that lobbies on aviation-related legislation. From

an administrative perspective the bill allows the Oversight Board to choose its own chairman and

vice chairman, makes a simple majority of members a quorum, and allows a majority vote of

members present to be sufficient for Oversight Board action. Also, Oversight Board members are

exempt from personal liability laws as concerns their official activities.

The proposed make-up of the Oversight Board and its role in the NGATS implementation process

are likely to raise several questions during further congressional consideration of this

reauthorization proposal. One very notable provision here is that the bill gives equal status vis-avis Oversight Board activity to the FAA Administrator and to the representative of FAA’s labor

unions. This arrangement certainly raises questions about executive branch authority. Given the

proposed structure of the Oversight Board, given its ability to choose its own Chairman, it is not

out of the realm of possibility that the FAA labor representative could have certain powers that

are normally associated with the executive branch, especially as regards budget issues.

Another unusual provision is the requirement that the Administrator seek Oversight Board

approval before submitting the F&E portion of the annual FAA budget to OMB. This provision

can be viewed as an extra step that could potentially slow down the annual agency budget

approval process. Hence, the Oversight Board sign-off is likely to require certain

accommodations in terms of deadlines, etc.

Questions can be raised about the desirability/likelihood of certain of the conditions to be met by

potential Oversight Board members. For example, it seems unlikely that the CEO of an airline

would not have a disqualifying financial interest in his/her airline. The same type of question

could certainly be raised for the airport CEO member and potentially for the GA member. Further,

the member representing the public interest is to have a “fiduciary responsibility” to represent the

public, although how this charge is defined is not detailed in the proposed legislation.

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The bill allows the Administrator to withhold certain information and documents from the

Oversight Board if they reveal proprietary or commercial information. The members of the

Oversight Board, having gone through the congressional confirmation process, would normally

be viewed as officers of the United States in the same manner as other FAA employees. Certain

FAA, and other designated federal employees, routinely deal with this type of information in the

normal performance of their duties. It, therefore, seems unusual that such an exclusion of

information, especially if it provided substantive information relevant to capital improvement

projects, could be denied to the Oversight Board.

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On November 13, 2007 , the Senate Committee on Finance reported an original bill, S. 2345, the

American Infrastructure Investment and Improvement Act of 2007, incorporating the committee’s

recommendations for what is likely to be the revenue title of the Senate FAA reauthorization bill.

Its proposal makes some changes to elements of the existing tax and fee structure, but does not

create new user fees. As can be seen in Table 3 the committee has increased the general aviation

jet fuel tax, increased the international departure/arrival tax, and created a new tax system for a

particular segment of the aviation industry—fractionally owned aircraft. At the moment,

passengers on fractionally owned aircraft are treated by the tax code in the same manner as airline

passengers, subject to the airline ticket tax, the segment fee, and international departure/arrival

tax. The Committee bill would instead treat this industry segment as if it were part of the general

aviation industry for the purposes of the aviation jet fuel tax, but would also impose a flat fee

departure tax on the aircraft, rather than on the passenger. All of the additional revenues collected

by the changes in taxation would be deposited in a newly created account within the Treasury and

reserved for NGATS related activities.

Table 3. Proposed Aviation Tax and Fee Changes

S. 1300—

Senate

Commerce

Existing Tax or

Fee Rate

Tax or Fee

(2007)

H.R. 2881

S. 2345—

Senate

Finance

General Aviation

Gasolinea

General Aviation Jet

Fuel (Kerosene)a

19.3 cents/gallon

24.1 cents/gallon

no change

21.8 cents/gallon

35.9 cents/gallon

Commercial Jet Fuel

(Kerosene)a

International

Departure/

Arrival Tax

4.3 cents/gallon

no change

35.9 cents/gallon

Applies to fractional

ownership aircraft

no change

$15.10 international

departure tax

(indexed to

CPI)(prorated

Alaska/Hawaii to

mainland)

No change

$15.10 International

Arrivals Tax

(indexed to

CPI)(prorated

Alaska/Hawaii from

mainland)

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$16.65 (indexed to

CPI)

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Tax or Fee

Surcharge

Existing Tax or

Fee Rate

(2007)

No provision

H.R. 2881

No provision

S. 1300—

Senate

Commerce

$25 per departure

for non-exempt

aircraft

S. 2345—

Senate

Finance

No provision

Fractional Aircraft

No provision

$58

Ownership per

Departure Tax

a. Does not include 0.1 cents/gallon for the Leaking Underground Storage Tank (LUST) trust fund.

The Finance Committee bill does not deal exclusively with airline financial issues. Provisions in

the bill seek to remedy an expected FY2009 shortfall in the highway trust fund and creates a new

bonding authority program for intercity passenger rail service. It remains to be seen whether the

Senate will consider these provisions as part of the FAA reauthorization bill or consider them

separately.

There is a difference of opinion as to the need for a surcharge between Members of the Finance

Committee and the Commerce Committee that will need to be resolved before work on the FAA

reauthorization bill is completed in the Senate. The two bills can be viewed as competing

proposals on how additional financing of the FAA should be accomplished. The leadership of

Commerce’s Aviation Subcommittee strongly favors the surcharge approach to increasing FAA

modernization financing and is opposed to the idea of stripping this provision out of the final bill,

which is the position favored by several Members of the Finance Committee.12 In effect, the

Finance Committee has largely taken the GA industry position against user fees. The full Senate,

therefore, will decide the ultimate fate of the surcharge proposal.

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Like the Senate Commerce and Finance Committees, the House bill rejects the Bush

Administration’s financing proposal outright. H.R. 2881, as reported by the House, increases the

general aviation gasoline tax to 24.1 cents-per-gallon and the general aviation jet fuel tax to 35.9

cents-per-gallon, Table 3. The existing 4.3-cent-per-gallon tax on commercial jet fuel is

unchanged by the bill, as are all other existing aviation taxes and fees. The bill also reserves the

increased revenue to be collected by the fuel tax increases for funding of NGATS-related

programs.

The bill also includes a provision calling for the adjustment of existing overflight fees (flights that

do not take off or land in the U.S.) (these fees are currently used primarily to fund a portion of the

EAS program). The FAA is to adjust these fees by expedited rulemaking to insure that the fees are

reasonably related to the cost of providing air traffic services for overflights. The bill, however,

specifically excludes altitude as a factor that can be used in the adjustment of the overflight fees.

National Journal’s Congress Daily AM. Senate Standoff Prompts Move to Extend Aviation Taxes. September 26,

2007.

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The bill includes fees for aircraft registration, airman certificates, and other types of FAA

provided documentation at the same levels proposed by the Administration. It also provides that

these fees may be adjusted over time if the FAA’s cost accounting system indicates that the cost

of providing these services to the aviation sector are higher/lower than the fee levels established

in the bill. The House bill does not, however, follow the lead of the Administration bill and

impose a new fee structure for FAA’s new large aircraft certification programs and for other

activities such as certification of foreign repair stations.

Unlike the FAA proposal and S. 1300, H.R. 2881 is notable primarily for what it does not do. The

House ultimately decided not to recommend major tax and fee changes to the existing aviation

finance system. The modest increases in fuel taxes suggested by the bill, indicates that a majority

of the House Members believe that the existing tax system needs only minor tweaking in order to

support more robust FAA spending in the years ahead. This view is largely shared by the GA

industry, but not by other sectors of the industry, especially the airlines and airports.

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The Airport Improvement Program (AIP) provides federal grants for airport development and

planning. AIP funding is usually limited to capital improvements related to aircraft operations.

Commercial revenue-producing portions of airports and airport terminals are improvements that

are generally not eligible for AIP funding. AIP money cannot usually be used for airport

operational expenses or bond repayments. AIP funds are distributed either as formula grants or as

discretionary grants. Small airports are much more dependent on AIP grants than large and

medium hub airports. The larger airports can more easily generate revenue from user fees and

have historically had the financial wherewithal to successfully access the bond market. For

background and legislative history of federal aid to airports, including a description of the AIP

program, as well as an overall discussion of AIP issues, see CRS Report RL33891, Airport

Improvement Program: Issues for Congress, by (name redacted).

The Passenger Facility Charge (PFC) program provides a source of non-federal funds intended to

complement AIP spending. The PFC is a local tax imposed, with federal approval, by an airport

on each boarding passenger. PFC funds can be used for a broader range of projects than AIP

grants and are more likely to be used for “ground side” projects. PFCs can also be used for bond

repayments.

The AIP and PFC programs are the sources of funds for airport capital development that have the

most federal involvement. Other sources are bonds, state and local grants, and airport revenue.

The FAA proposal (H.R. 1356/ S. 1076), would make major changes in both the AIP and PFC

programs. In effect, the proposal would reduce the size and scope of the AIP program, while

increasing the role of PFCs in airport finance. The proposal would broaden allowable costs under

both programs. The distribution of AIP grants would undergo major changes and the local

matching share for AIP grants would be changed for some airports.

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S. 1300, as reported, retains the basic AIP program size, structure, and funding distribution. It

would increase the program’s overall year-over-year authorization level by $100 million for each

of the four years covered by the bill. S. 1300 does not raise the PFC cap. Consequently, under S.

1300, the significance of the AIP and PFC programs relative to each other’s role in airport finance

would remain roughly the same as it is under current law.

H.R. 2881 also retains the basic AIP program size, structure, and funding distribution. As does S.

1300, it would increase the program’s overall year-over-year authorization level by $100 million

for each of the four fiscal years covered by the bill. Unlike S. 1300, however, H.R. 2881 would

raise the PFC cap to $7. Consequently, the bill would raise the significance of the role of the PFC

relative to that of AIP within the context of airport finance.

Neither S. 1300, as reported, nor H.R. 2881, as passed, restructure the AIP or PFC programs

substantially but they do make a significant number of what may be seen as perfecting changes.

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The authorization for FY2007, the final year of funding under Vision 100 was $3.7 billion, the

amount actually made available through the appropriations process (i.e., the obligation limitation

under P.L. 110-5) for AIP was $3.515 billion.

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The funding levels for AIP, under the FAA proposal, reflect a reduction of AIP’s role in airport

finance. The proposal recommends $2.75 billion for FY2008, $2.9 billion for FY2009, and $3.05

billion for FY2010. The FAA’s section-by-section analysis suggests that the recommended

increase in the PFC ceiling and the elimination of the AIP entitlements for large and medium

airports (discussed later in this report) reduces the need for AIP funding. In recent years, the

George W. Bush Administration annual budget proposals have consistently recommended

reduced spending on AIP only to have it just as consistently restored to near its authorized level

by Congress. Some observers in the transportation community have suggested that cutting the

popular AIP program is also a way of keeping down the annual totals set forth in the FAA’s

reauthorization proposal. Given that the Administration’s financing proposal for the Airport and

Airway Trust Fund would support AIP spending directly through aviation fuel taxes, the lower

spending for AIP, meant that the Administration could propose a smaller increase in their aviation

fuel tax proposal than they would have had to if they had supported continuing the funding of AIP

at the higher current FY2007 authorized level of $3.7 billion.13 Over time, the link of the AIP

spending level to the fuel tax could make it difficult to increase the program’s funding because

this could require raising the fuel taxes that support the program. Also, should AIP be authorized

at the current authorization level or higher it could change the implications of the programmatic

changes in AIP proposed by the Administration, should they be enacted.

See FAA, Next Generation Air Transportation System Financing Reform Act of 2007: Section-by-Section Analysis,

37.

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S. 1300 recommends an increasing authorization for AIP over the life of the bill, as follows: $3.8

billion for FY2008; $3.9 billion for FY2009; $4.0 billion for FY2010; and $4.1 billion for

FY2011. The $100 million per year growth in the program extends the pattern of funding growth

in Vision 100. Over the four-year life of the bill’s authorization this would provide an aggregate

additional authorization of $1 billion for AIP (i.e., compared to freezing the AIP authorization for

FY2008-FY2011 at the $3.7 billion level authorized for FY2007, the final year of Vision 100).

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H.R. 2881, as passed, would provide the same amounts as recommended in S. 1300.

ȱȱǻǼȱ

The FAA proposal would make a number of changes in the distribution of AIP funds that airports

are entitled (hence the term entitlements) to based on administrative formulas. S. 1300 would

make few changes to the AIP entitlements.

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Under current law the formula apportionments (also referred to as entitlements) fund two levels

of entitlements: a lower entitlement level when the overall AIP funding is below $3.2 billion and

a higher level when the program is funded at $3.2 billion or more.

ȱȱ

Basically the FAA proposal eliminates the lower entitlement level in favor of the higher formula

distribution levels and higher minimum and maximums (the general aviation apportionment is

treated somewhat differently, see below). The proposal would also eliminate the $3.2 billion

trigger itself. The trigger mechanism was designed, in part, to encourage funding of AIP above

the $3.2 billion level. Since the FAA proposes funding AIP below the $3.2 billion level, not

making this change would, in effect, cut most primary airports’ entitlement funding in half and

would reduce general aviation entitlements also. During the life of the trigger, AIP funding has

always been above $3.2 billion, making the lower entitlement formulas existence a moot point

since FY2001.

ǯȱŗřŖŖȱ

S. 1300 does not include a provision to eliminate the $3.2 billion trigger. Given that the bill’s

recommended authorization levels would be from $600 to $900 million above the trigger, some

would argue that the trigger would continue to be a moot issue. On the other hand, the increasing

gap between the recommended authorizations and the trigger provides more room for possible

AIP reductions during the appropriations process (i.e., reductions that would not trigger the

distribution of entitlements based on the lower below-trigger formula levels).

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As is true with S. 1300, H.R. 2881 does not include a general provision to eliminate the $3.2

billion trigger.

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The FAA proposal would phase out the formula funding that is provided for large and medium

hub airports under current law by FY2010. To provide a transition period for these airports, their

formula funding is continued at 50% of the calculated level for FY2008 and FY2009. The FAA’s

section-by-section analysis of the FAA proposal notes that this reduction is more than offset by

the increase in the PFC ceiling (discussed later in this report). In addition, large and medium

airports that impose PFCs above the $4.50 level are to forego or “turnback” 100% of their AIP

entitlement funding during FY2008-FY2009. In FY2010, large and medium hub airports would

receive no entitlement funds and therefore the turnbacks would end.

ǯȱŗřŖŖȱ

S. 1300 does not include provisions altering the primary airport formulas.

ǯǯȱŘŞŞŗȱ

H.R. 2881 also does not include provisions altering the primary airport formulas. Unlike S. 1300,

the bill does, however, include a provision related to the reduction of apportionments at large hub

airports that charge PFCs above the $4.50 level. These airports would have their formula

apportionments (entitlements) reduced by 100% of the projected PFC revenues for the fiscal year,

but not more than 100% of the amount that otherwise would be apportioned.

ȱ¢ȱȱ

A special rule, enacted after the September 11, 2001 terrorist attacks, allowed some airports

(referred to as virtual primary airports), whose annual passenger boardings fell below the required

minimum passenger levels needed to maintain their primary airport status, to continue receiving

their annual primary airport entitlements (generally $1 million vs. the GA entitlement, which is

generally $150,000). Earlier, the FY2006 Transportation/Treasury Appropriations Act (P.L. 109115) extended the virtual primary airport eligibility through FY2006 but at a reduced entitlement

of $500,000. The explanatory language in the conference report expressed the Appropriations

conferees’ intent that FY2006 be the last year for virtual primary airport entitlements. Paying the

higher entitlements to the virtual primary airports reduces the amount of funding remaining

available for discretionary spending after all the entitlement requirements are satisfied.

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ȱȱ

The FAA proposal would repeal the special rule. The FAA’s section-by-section analysis argues

that seven years after the attack it is unlikely that these airports (currently 44) will again attain

primary airport status.

ǯȱŗřŖŖȱ

S. 1300 would authorize the special rule for FY2008-FY2011, in effect, extending the virtual

primary category with some modifications. The virtual primary determination would be made

based on the airports having an average annual passenger boardings for calendar years 2004-2006

below 10,000 but passenger boardings that were 10,000 or above in calendar year 2003.

S. 1300 also includes provisions that could, in effect, also include a new group of virtual primary

airports. The bill does this by amending the provision in 49 U.S.C. 47114(c)(1) that deals with

using the previous year’s apportionment level to retain primary airport status. S. 1300 would drop

the provision that limits the determination of eligibility to airports where passenger boardings fell

below 10,000 boardings to airports had a “temporary but significant interruption of service due to

an employment action, natural disaster or other event unrelated to demand for air transportation at

the affected airport,” and allow it for: Essential Air Service airports whose passenger boardings

fall below 9,700; commercial service airports that can meet the 10,000 boardings by counting

nonscheduled service; or single carrier airports that suffer from a 4% decline in scheduled flights

due to severe weather conditions. The bill also includes a related provision that for FY2009FY2011 would allow DOT to use the last year that an airport’s passenger boardings exceeded

10,000 to determine its primary status for these years. The bill also includes a provision that

appears to be written for an unnamed airport that is served by a large certificated carrier that

began scheduled service at the airport in May 2006 and ceased scheduled service at the airport in

October 2006. Under the bill this airport would retain its primary airport entitlement.

As of this writing, CRS has been unable to determine the number of airports that would be

eligible under S. 1300 for virtual primary entitlements. However, the difference for an airport

between primary and GA entitlement funding is usually $850,000, so the provisions could have a

significant impact on entitlement spending as well as the amount left over for discretionary grants

once all the required entitlement distributions are satisfied.

ǯǯȱŘŞŞŗȱ

H.R. 2881 includes no provisions regarding virtual primary airports.

ȱȱȱ ȱ

The House bill provides a minimum entitlement for Puerto Rico which guarantees that Puerto

Rico shall receive at least 1.5% of the total amounts apportioned to all airports under 49 U.S.C.

47114 (c) and (d) for commercial service and general aviation airports.

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There are two components of the general aviation entitlements: the State Apportionment and the

General Aviation apportionment (sometimes referred to as the Nonprimary Entitlement). Under

current law 20% of AIP funds are to be apportioned for both components.

ȱȱ

The FAA proposal would separate the underlying funding sources of the two components and

make a number of other changes. Under current law the nonprimary entitlement is apportioned

from the designated 20% of AIP funds first and then the remaining funds are used for the State

Apportionment.

State Apportionment. The FAA proposal would provide 10% of the amounts made available for

apportionment under AIP for the state apportionment distribution only. The state apportionment

distribution would be determined as they are now (according to a state-based population and area

formula). The proposal would also provide for a $300 million minimum apportionment. If the

$300 million minimum could not be met, the nonprimary entitlements (see discussion below)

would be reduced on a prorated basis to make funds available for the state apportionment.

The Nonprimary Entitlement. Under current law all nonprimary airports receive the lessor of

$150,000 or one fifth the estimated five year development costs estimated in the most recent

NPIAS. The FAA proposal would change this to providing three tiers of entitlement funding

distribution based on the number of registered aircraft based at the airport:

•

$400,000 for airports having 100 or more based aircraft;

•

$200,000 for airports having 50 to 99 based aircraft or three or more jet aircraft;

and

•

$100,000 for airport having 10 to 49 based aircraft.

NPIAS airports with fewer than 10 aircraft would not be eligible for a nonprimary entitlement but

could still qualify for state apportionment funds and could compete for discretionary grants and

these grants would retain a 95% federal share. The nonprimary entitlements would not be funded

from the 10% of available funds reserved for the state apportionment but would be funded from

the general amounts available for apportionment under AIP (these amounts also fund the primary

airport and cargo entitlements). The below-trigger language is eliminated.

ǯȱŗřŖŖȱ

S. 1300 does not include a similar provision. GA entitlements would remain essentially the same

as under current law.

ǯǯȱŘŞŞŗȱ

The general aviation entitlements provision of H.R. 2881 is a combination of the FAA proposal

on the state apportionment and current law on nonprimary entitlements. The state apportionment

would be 10% of the amounts available for apportionment under AIP with a $300 million

minimum. The nonprimary airport entitlement would remain $150,000 or one fifth the estimated

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five year development costs published in the most recent NPIAS. Should the 10% of amounts

available for apportionment to the states fall below $300 million in a fiscal year (for this to

happen the amounts available for apportionment for all of AIP would have to fall below $3

billion) the nonprimary entitlements would be reduced on a prorated basis to provide the funds to

bring the state apportionment up to its $300 million minimum.

ȱȱȱ

ȱȱ

Under the FAA proposal, the “above trigger” level of funding would be provided.

ǯȱŗřŖŖȱ

S. 1300 does not address the Alaska entitlement.

ǯǯȱŘŞŞŗȱ

H.R. 2881 does not address the Alaska entitlement.

ȱȱȱȱ

ȱȱ

Cargo service airports would continue to receive 3.5% of AIP funding (the existing, above-trigger

percentage) and the landed weight-based formula would be retained. The below-trigger provision

is eliminated.

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Cargo Service Airports apportionment would increase to 4% of AIP funding.

ǯǯȱŘŞŞŗȱ

H.R. 2881 makes no changes in the Cargo Service Airport apportionment.

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No provision.

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S. 1300 requires FAA to establish a pilot program allowing local airport operators that have

submitted a noise compatibility program to FAA to use their AIP formula funds, in partnership

with neighboring jurisdictions to support planning and site preparation for the consolidation and

redevelopment of property purchased with noise mitigation funds or passenger facility charges

(PFCs), to encourage airport-compatible land uses and “generate economic benefits” to the local

airport authority and adjacent community. The grant could only be made if it were made to

expedite redevelopment efforts and if the grant is subject to a requirement that the local

jurisdiction governing the property has adopted zoning regulations that permit airport compatible

redevelopment.

ǯǯȱŘŞŞŗȱ

As passed, the House bill includes a provision of similar intent. Section 818 of the house-passed

bill establishes a pilot program for redevelopment of airport properties. This would allow for AIP

grants to up to four airports to support joint planning, engineering design, and environmental

permitting for the assembly and redevelopment of real property purchased with AIP or PFC noise

mitigation funds to encourage compatible land uses with the airport and to generate economic

benefits to the airport operator and an affected local jurisdiction.

¢ȱȱ

The discretionary fund includes the AIP funding that is not distributed under the apportioned

entitlements as well as the forgone PFC revenues that are not directed to the small airport fund.

Related PFC changes are discussed later in this report.

ȱ¢ȱȱ

49 U.S.C. 47115 requires that a minimum amount ($148 million plus any outstanding pre-January

1, 1997, letters of intent) remains available for the discretionary fund after all apportionments and

set-asides are satisfied. If less money remains, the apportionments are reduced pro rata to bring

the discretionary funding up to the required level. Because AIP has been funded since FY2001 at

historically high levels, the minimum discretionary fund provision has not recently been a factor

in AIP funding.

ȱȱ

The FAA proposal would set the minimum that can be made available for discretionary grants at

$520 million per year (the letter of intent language is dropped).

ǯȱŗřŖŖȱ

S. 1300 also sets the minimum amount to be credited to the discretionary fund at a flat $520

million per year and drops the letter of intent language.

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H.R. 2881 also sets the minimum amount to be credited to the discretionary fund at $520 million

per year and drops the letter of intent language.

ȱȬȱ

ȱȱ

The FAA proposes to replace the discretionary fund 35% noise set-aside with a broader

environmental set-aside that would be 8% of all AIP apportioned funds. Examples of projects that

would be eligible are water quality mitigation projects and environmental research. Based on

FY2005 AIP funding distribution the a set-aside based on 8% of apportioned funds would have

provided less than the 35% discretionary fund set-aside.

ǯȱŗřŖŖȱ

S. 1300 would provide for a flat $300 million annual discretionary set-aside for AIP noise

program costs. It would, however, also make water quality mitigation projects eligible under the

set-aside.

ǯǯȱŘŞŞŗȱ

H.R. 2881‘s provision is the same as S. 1300.

ȱȱȱ

ȱȱ

The FAA proposal would eliminate the small airport fund. The revenues supporting the fund are

derived from the forgone entitlement funding from medium and large hub airports that they

forego in return for permission to impose PFCs. Since the FAA is proposing to phase out the

entitlements for these airports, the funding source for the Small Airport Fund would no longer

exist in FY2010. Small Airport Fund monies are used in a manner similar to discretionary funds.

Instead the FAA proposal would set-aside 20% of discretionary funds for small hub, nonhub,

nonprimary commercial service, reliever, or general aviation airports. The set-aside is to

compensate for the loss of the Small Airport Fund.

ǯȱŗřŖŖȱ

S. 1300 does not include a similar provision. The small airport fund would continue.

ǯǯȱŘŞŞŗȱ

H.R. 2881 does not include a similar provision.

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Both of these set-asides would be eliminated. The special AIP eligibilities for MAP would

continue.

ǯȱŗřŖŖȱ

S. 1300 includes no proposal similar to the FAA proposals. Adds whether or not a grant to the

airport would be critical to the safety of commercial, military, or general aviation in trans-oceanic

flights to MAP program selection considerations.

ǯǯȱŘŞŞŗȱ

H.R. 2881 retains the MAP program and reliever set asides as they are under current law.

ȱȱ¢ȱȱ

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The FAA proposal would redefine “revenue producing aeronautical support facilities” in a way to

make “fuel farms, new hangar buildings, self-service credit card aeronautical fueling systems,

airplane wash racks, major rehabilitation of a hangar owned by a sponsor, or other aeronautical

support facilities” clearly AIP-eligible for nonprimary airports. The construction of mobile

refueler parking within a fuel farm at a non primary airport would be made eligible on condition

that it meets the EPA’s requirements regarding oil spill prevention, control, and countermeasures

under 40 CFR 112.8. Up to $10 million in AIP grants could be made to make grants for

commercial space infrastructure development. The cost of environmental review of airportproposed environmentally-beneficial aircraft flight procedures would be AIP eligible. Relocation

of airport-owned facilities that must be moved because of design standards beyond the sponsor’s

control would be eligible for AIP funding. The required passenger aircraft size required to meet

the eligibility requirements for purchasing firefighting and rescue equipment would be reduced

from aircraft designed for more than 20 passenger seats to aircraft designed for more than nine

passenger seats. The proposal also includes language consolidating the definition of terminal

development. In addition, “general aviation airport” is defined as a public airport that does not

have scheduled service or has scheduled service with fewer than 2,500 passenger boardings each

year.

ǯȱŗřŖŖȱ

S. 1300 includes language identical to the FAA proposal on eligibility of the cost of

environmental review for environmentally-beneficial (i.e., mostly noise-related) aircraft flight

procedures and also for the relocation of airport-owned facilities. It does not include most of the

other FAA proposed changes, including provisions similar to the FAA proposal’s regarding

revenue producing aeronautical support facilities and does not include language for commercial

space infrastructure development grants.

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H.R. 2881 makes a number of definitional and other changes that would impact AIP project

eligibility. The bill includes the FAA proposed provisions regarding eligibility of “revenue

producing aeronautical support facilities” at nonprimary airports and the lowering of the

passenger aircraft size required to meet the eligibility requirements for purchasing firefighting

and rescue equipment. Terminal development is redefined to include development of an airport

passenger terminal building, including gates and access roads and walkways servicing exclusively

airport traffic that leads directly to or from the airport passenger terminal building. It also

includes the FAA’s proposal regarding the construction of mobile refueler parking and the

clarifying definitions of general aviation airport and terminal development. As does S. 1300, H.R.

2881 includes the FAA proposed language regarding the relocation of airport-owned facilities.

Under H.R. 2881 repaying borrowed money for terminal development under 49 U.S.C. 47119(a)

is clarified as an “airport development” and made eligible under certain circumstances. Projects to

provide air conditioning, heating or electric power from terminal facilities to parked aircraft to

reduce energy use and “harmful emissions,” would be eligible. Airport planning would be

redefined to include “developing an environmental management system.” The cost of

environmental review of airport-proposed environmentally-beneficial aircraft flight procedures

would also be AIP eligible.

ȱ ȱȱ

ȱȱ

The FAA proposal makes two changes to AIP grant assurances under 49 U.S.C. 47107. The

proposal allows for the use of AIP entitlement funds to replace or move a facility at an airport if

the cause of the need was beyond the owner’s control, for example, a new design standard that

could make the facility a safety hazard.

The second proposed change deals with the disposition of profits made from the sale of land that

was originally acquired for a noise compatibility purpose but is no longer needed for noise

compatibility. Current law requires that the federal share of the proceeds, proportional to the

federal share of the original land acquisition cost, be deposited in the trust fund. The proposed

change would allow the proceeds to be reinvested in another project, for, in preferential order: 1)

an approved noise compatibility project at the airport; 2) an environmentally related project at the

airport; 3) another eligible AIP project at the airport; 4) transfer to another airport for a noise

compatibility project; or 5) payment to the trust fund.

ǯȱŗřŖŖȱ

S. 1300 includes the same two grant assurance proposals as described above.

ǯǯȱŘŞŞŗȱ

H.R. 2881 includes language similar to the two grant assurance proposals in the FAA proposal

and S. 1300.

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Under current law, the federal government share for AIP projects is as follows:

•

75% for large and medium hub airports (80% for noise compatibility projects);

•

95% for other airports; and

•

“not more than” 95% 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.

Vision 100 included a sunset clause that returns the federal share of the projects eligible for 95%

share to 90% after FY2007. The increase in share to 95% was established to provide relief to

operators of small airports after the 9/11 terrorist attacks.

ȱȱ

The FAA proposal would make a number of changes in the federal-local matching share

requirements. The proposal would change current law to add the phrase “may not exceed” to all

federal share percentages. Under current law some airports’ project shares were fixed percentage

shares. FAA argues that this change would allow it to “leverage AIP funds more efficiently and

provide support for a broader number and type of projects.”14 Some small airport advocates may

be concerned that this provision could allow FAA to routinely offer discretionary grants at less

than the maximum allowable federal share on some projects. The FAA proposal would also lower

the maximum federal share for runway, taxiway and apron (ramp) projects at large and medium

hub airports from 75% to 50%. Other AIP eligible projects at these airports would retain their

75% maximum federal share. A special rule is proposed for airports recently reclassified a

medium hub because of increased passenger enplanements that allows them to retain their

eligibility for up to 90% federal share for two years. The FAA proposal would allow the 9/11

related increase 95% federal share for AIP grants to small airports to lapse. The federal maximum

share at these airports would be 90%. As mentioned earlier, general aviation airports that have

lost their nonprimary minimum entitlements because they have fewer than 10 based aircraft

(approximately 800 airports) would be allowed an up to 95% federal share on their discretionary

or state apportionment grants.

ǯȱŗřŖŖȱ

S. 1300 would set the federal share for airports smaller than medium hub and state block grant

program states at 95% for FY2008-FY2011, in effect extending the post-9/11 federal share

increase for the life of the bill. It also provides a special rule for small hub airports that because of

passenger growth are becoming medium hub airports (which would drop their federal share to

75%). These airports have for two years a federal share not to exceed 95% of allowable project

costs.

FAA, Section-by-Section Analysis, 9-10.

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As would be the case in the FAA proposal and S. 1300, H.R. 2881 would provide a special rule to

allow airports recently classified as medium hub (which would drop their federal share to 75%) to

retain their eligibility for an up to 90% federal share for a two year transition period.

H.R. 2881 also includes a special rule for “Economically Depressed Communities.” The rule

would maintain the 95% federal share for projects at airports that are receiving subsidized service

under the Essential Air Service (EAS) program that meet one or more of the criteria established in

42 U.S.C. 3161(a) as determined by the Secretary of Commerce. 42 U.S.C. 3161(a) sets forth

three criteria for eligibility: 1) the area has a per capita income of 80 percent or less of the

national average; 2) the area has an unemployment rate that is, for the most recent 24-month

period for which data are available, at least 1 percent greater than the national average

unemployment rate; and 3) the area is an area that the Secretary of Commerce determines has

experienced or is about to experience a special need arising from actual or threatened severe

unemployment or economic adjustment resulting from severe short-term or long-term changes in

economic conditions. Given the variety of eligibility criteria and the rural location of EAS

airports it is likely that many EAS airports could retain their 95% federal share under H.R. 2881.

Non-EAS airports (smaller than medium hub) would revert to 90% federal share under the bill.

ȱ¢ȱȱǻǼȱ

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The FAA proposes to make eligible any capital cost that an airport could pay for with airport

revenue eligible. The proposal would specifically make fixed-guideway ground access-related

projects, including rail mass transit projects (whether publically or privately owned), eligible for

PFC funding. The FAA proposal would also ease the current so called “limitations” on the use of

PFCs (i.e., the requirement that the project would preserve or enhance capacity, safety, or

security, reduce noise, or provide an opportunity for enhanced competition among carriers at the

airport). It also eliminates the limitation that, in regard to surface transportation or terminal

projects, for an airport to impose a PFC above the $3 level for this purpose, that the airport has

made adequate provision for financing the airside needs of the airport. These transit projects

would require DOT approval, however. Airlines may object to this broadening of PFC eligibility.

The FAA proposal also includes a change in the language of the written assurance on the use of

revenues which would appear to allow for use of AIP and PFC grants on facilities that are

“directly and substantially related to the air transportation of passengers or property,” but are not

“owned or operated” by the sponsoring airport, as is now required.

ǯȱŗřŖŖȱ

S. 1300 does not include the FAA language broadening PFC project eligibility to virtually any

capital cost that an airport could pay for with airport revenue. It also does not broaden the

definition of “intermodal ground access” project which, whether publically or privately owned (or

also, not for exclusive airport use), under the FAA proposal would have been eligible for PFC

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funding. S. 1300 also does not change the language of the assurance on the use of revenue as the

FAA proposed. PFCs could be used for planning or redevelopment activities of property acquired

for noise compatibility purposes.

S. 1300 does, however, include language similar to the FAA proposal that would make major

changes to section 40117 (d), which sets certain “limitations on approving applications.” The bill

would restrict the limitations to intermodal ground access projects, thereby freeing PFC

applications for other types of projects from the limitations. The bill then also eliminates some of

the current law limitations that would otherwise still apply to ground access projects. Among the

limitations eliminated for all PFC applications are a finding by the Secretary of DOT that the

project will: preserve or enhance capacity, safety, or security of the national air transportation

system; reduce noise from an airport; or provide an opportunity for enhanced competition

between or among air carriers and foreign air carriers. In addition, the bill would eliminate the

precondition that for an airport to impose a fee above the $3 level the Secretary must find that the

airport has made adequate provision for financing the airside needs of the airport, including

runways, taxiways, aprons, and aircraft gates.

ǯǯȱŘŞŞŗȱ

The bill does not include the changes proposed in the FAA proposal or S. 1300. H.R. 2881 does,

however, include PFC eligibility provisions that are in neither the FAA proposal nor S. 1300. One

provision would make eligible projects to construct secure bicycle storage facilities for use by

passengers at the airport and that are in compliance with applicable security standards. One year

after enactment FAA is to submit a report on progress made by airports to install bicycle parking.

Another provision would make noise mitigation for certain schools in Los Angeles eligible for

PFC funding.

In addition, H.R. 2881 proposes a pilot program that would make available PFC funds for eligible

intermodal ground access projects at 5 airports. The projects do not have to be on property owned

or controlled by the sponsoring airport. The PFC project cost share would be limited to the

projected ratio of airport bound passengers to the total number of passengers using the ground

access facility.

ȱȱȱȱ

ȱȱ

The FAA proposal would increase the maximum charge to $6 per passenger boarding. Any charge

over $4.50 would require medium and large hub airports to forego 100% of their AIP entitlement

funding. Airports participating in the pilot program for the transfer of navigational equipment to

airport control would be able to adopt a $7 PFC.

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The bill does not increase the PFC cap (see pilot program discussion, below).

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The bill would allow for PFCs above the existing $4.50 cap at the $5, $6, and $7 levels. As is true

under current law only two PFCs could be charged for any one-way trip for a round-trip

maximum of $28 (the current maximum is $18). As mentioned earlier, large hub airports

imposing a PFC above the $4.50 level would forego from their AIP formula entitlements an

amount equal to their projected PFC revenues but not more than 100% of the entitlement funding

that, otherwise, would have been apportioned.

H.R. 2881 includes a provision requiring a study of the impacts on airports of accommodating

connecting passengers. The study is to include a recommendation as to whether different levels of

PFCs should be imposed on connecting passengers versus origin and destination passengers.

Some have argued that the PFC structure favors large hub airport’s PFC revenues because the

costs to an airport of a connecting passenger is less than at airports that are primarily originating

airports.

ȱ¢ȱȱȱȱ

ȱȱ

The proposal includes no provision similar to S. 1300.

ǯȱŗřŖŖȱ

Would establish a pilot program at up to six airports that would allow them to collect a PFC with

no statutory ceiling on the fee. The fee, however, must be collected by the airport from the

passenger. Under current law the PFCs are collected for the airports by the airlines during the

ticketing process.

ǯǯȱŘŞŞŗȱ

The bill includes no similar program proposal.

ȱȱ

The FAA proposes changing the requirement that no AIP or PFC grant may be approved for a

large or medium hub airport unless the airport has submitted a written competition plan to the

FAA. The FAA proposal would eliminate the requirement that the competition plans include

information on patterns of air service and comparative airfare levels.

ǯȱŗřŖŖȱ

There is no provision similar to the FAA proposal in S. 1300.

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The bill extends the competition plan requirement.

ȱ ȱȱ

ȱȱ

The proposal includes an extensive provision to streamline the PFC review and approval process.

Instead of seeking approval on a project-by-project basis, for existing projects, an airport would

be required to submit to air carriers at the airport, the FAA, and make available to the public, an

annual PFC status report that sets forth the airport’s PFC revenues, spending, PFC funded

projects, the next year’s projected revenues, and a description of the consultation and public

notice process. Once the status report is submitted no further action is required and

implementation could continue. For new projects, the airport would have to provide for a notice

and comment period for carriers operating at the airport and a public notice and comment period

before they file their PFC status report. Once the report is filed the airport could begin collecting

the new PFC. Stakeholders could, however, file objections and, if the FAA agrees with the

objection, the FAA may terminate the airport’s authority to collect PFC revenues for the project.

The proposal also provides that DOT may investigate whether a PFC charge is excessive or

whether PFC revenue is being diverted to non-allowable uses.

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The bill’s streamlining language closely mirrors the FAA bill. The bill also includes revenue

diversion language.

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The bill does not include language similar to the FAA proposal or S. 1300.

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The FAA proposal would make changes to the Airport Privatization Pilot Program. The number of

airports that could participate would be increased from 5 to 15 and there would be no restrictions

by airport category (the existing program allows for only one large airport to participate and

Chicago Midway airport has reserved that authority).

Since the program was enacted in 1996 (Section 149 of the Federal Aviation Reauthorization Act

of 1996, P.L. 104-264), only one airport has been privatized, Stewart International Airport (New

York). The FAA and others supportive of the pilot program have argued that the current program

gives airlines effective veto power over privatization transactions. Current law requires that the

airport sponsor may only recover from the sale or lease the amount that may be approved by at

least 65% of the air carriers serving the airport; and by air carriers that account for 65% of the

total landed weight at the airport for the year. The FAA proposal would eliminate these

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requirements and only require that the airport show the FAA that they had consulted with: for

primary airports, each air carrier and foreign air carrier serving the airport and, for non-primary

airports, consulted with at least 65 percent of the owners of aircraft based at the airport.

The proposal eliminates the airline approval requirement of airport fee increases that exceed

inflation and eliminates the provision that requires that the percentage general aviation fee

increases not be larger than the percentage increases for air carriers. Also eliminated would be the

existing prohibition on the abrogation of a labor agreement in consequence of the sale or lease of

an airport under the program. Finally, the private operator could set fees to recover all capital and

operating costs except for the sale or lease price, which would require air carrier approval.

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The bill does not include a similar provision.

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The bill would raise the required air carrier approval percentages from 65% to 75%. Airports

participating in the pilot program would not be eligible for AIP funds.

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The FAA proposal would allow this Vision 100 initiated program to expire at the end of FY2007.

The pilot program allows for the purchase of a privately owned public use airport’s development

rights as a means of keeping the airport open and operating. FAA argues that the program has not

been a success and suggests a better strategy would be to find a public sponsor to purchase the

airport rather than just the development rights. Some general aviation supporters may still be

supportive of the pilot program.

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The bill does not include a sunset provision for the Airport Development Rights Pilot Program.

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The bill includes a sunset provision that would end the Airport Development Rights Pilot program

on September 30, 2007.

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This FAA-proposed program would allow for AIP state/insular area formula entitlement funds (at

a 90% federal share) to be used for airport purchase of Automatic Dependent SurveillanceBroadcast (ADS-B) equipment. The ground stations where this equipment would be installed are

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not airport specific (most AIP projects are required to be within airport boundaries). ADS-B is

part of FAA’s air traffic modernization system. The use of AIP funds would supplement other

FAA funding sources for ADS-B ground station deployment. The FAA argues that “states, regions

and airports would benefit because the program would provide ADS-B coverage to areas that

would not be reached under the FAA’s direct procurement.” Project sponsorship would be limited

to states, metropolitan planning organizations (MPOS), or consortiums of two or more airports.

Not more than 10 airports could apply. In the past, the use of AIP funds for air traffic equipment

has met resistance by some program supporters, usually on the grounds that air traffic control

capital costs are not within the AIP’s original programmatic intent and should be paid for

elsewhere in the FAA budget.

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The bill includes language identical to the FAA proposal.

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The bill does not include the FAA proposal.

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Recent incidents where passengers were held in aircraft for eight or more hours awaiting take off,

as well as reports of deterioration of on-time arrival performance by airlines have led to

increasing interest in airline passenger consumer issues. Currently, most passenger rights are set

forth in the airlines’ “contract of carriage” language. The contract of carriage is the legal contract

between the airline and the ticket holder which describes the rights and responsibilities of both

the air carrier and the passenger. Passengers may take legal action in federal courts based on these

contracts. Historically, the Department of Transportation’s (DOT) role in consumer protection is

limited. The existing law does provide procedures and compensation rules for “bumping” and lost

or damaged baggage, however. The main power DOT has to protect consumers is the

department’s power to take action against air carriers for “deceptive trade practices.” The

definition and interpretation of deceptive trade practices can significantly impact the scope of

DOT’s enforcement authority. Staffing of DOT’s Office for Aviation Enforcement and

Proceedings has also been an issue in the past. This DOT office also deals with passenger

discrimination issues.

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No provisions.

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S. 1300 includes several airline customer service provisions. Section 401 would add a new, “Subchapter IV—Airline Customer Service,” to Chapter 417 of 49 U.S.C. The new sub-chapter

includes provisions on contingency services and the posting of consumer rights. An additional

provision directing DOT to investigate certain types of consumer complaints was also added

during committee mark-up.

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Requires that no later than 60 days of enactment each air carrier must provide in any case in

which a flight is substantially delayed, adequate food, potable water, and restroom facilities

during the delay. Each air carrier must develop a plan to ensure that passengers are provided a

clear time-frame under which they will be permitted to deplane. In absence of such a plan, after 3

hours air carriers are to provide passengers with the option to deplane safely before the departure

of the air carrier. Exceptions are provided for a pilot decision that the flight will depart within 30

minutes after the 3 hour limit or if the pilot believes that allowing a passenger to deplane would

jeopardize passenger safety or security. DOT is to promulgate regulations to carry out this

provision within 60 days.

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Air carriers would be required to publish conspicuously and update monthly on their Internet

websites their customer service policies and air carriers’ consumer rights under federal and state

law.

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This provision would require air carriers that provide scheduled service to publish and update

monthly on their Internet website or provide, on request, a list of chronically delayed flights

operated by the air carrier. When customers are in the process of purchasing tickets, air carriers

must prominently disclose, prior to the booking of the ticket on the air carrier’s Internet website,

to the individual, 1) the on-time performance for the flight if it is a chron

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