Airport Privatization Pilot Program: Application Procedures

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

[Docket No. 28895]

Airport Privatization Pilot Program: Application Procedures

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of final application procedures.

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SUMMARY: Section 149 of the Federal Aviation Authorization Act of 1996

establishes an airport privatization pilot program, and authorizes the

Department of Transportation to grant exemptions from certain Federal

statutory and regulatory requirements for up to five airport

privatization projects. A request for participation in the airport

privatization pilot program will be initiated by the filing of either a

preliminary or final application for exemption with the FAA. This

statement identifies the issues the Department will consider in

granting exemptions and approving the transfer of a public use airport

under the program; it also describes the application procedures to be

used by interested public airport sponsors and private parties to apply

for an exemption under the program.

DATES: This policy is effective on publication. With exception noted

below, preliminary and final applications for exemption will be

accepted or after December 1, 1997, and will be handled on a first-come

first-served basis until the limits of section 47134 are reached. An

otherwise qualifying preliminary or final application for exemption

will be accepted before December 1, 1997, if the sponsor has issued, on

or before the date of publication of this notice, a formal solicitation

or request for proposals for the sale or lease of an airport. All

applications will be evaluated in the order of receipt.

FOR FURTHER INFORMATION CONTACT: Benedict D. Castellano Manager, (202-

267-8728) or Kevin C. Willis (202-267-8741) Airport Safety and

Compliance Branch, AAS-310, Federal Aviation Administration, 800

Independence Ave. SW., Washington, DC 20591,

SUPPLEMENTARY INFORMATION:

Introduction and Background

This notice of application procedures to be used by applicants for

an airport privatization project is being published pursuant to section

149 of the Federal Aviation Administration Authorization Act of 1996,

Public Law 104-264 (October 9, 1996) (1996 Reauthorization Act), which

adds a new section 47134 to Title 49 of the U.S. Code. Section 47134

authorizes the Secretary of Transportation, and through delegation, the

FAA Administrator, to exempt a sponsor of a public use airport that has

received Federal assistance, from certain Federal requirements in

connection with the privatization of the airport by sale or lease to a

private party. Specifically, the Administrator may exempt the sponsor

from all or part of the requirements to use airport revenues for

airport-related purposes, to pay back a portion of Federal grants upon

the sale of an airport, and to return airport property deeded by the

Federal Government upon transfer of the airport. The Administrator is

also authorized to exempt the private purchaser or lessee from the

requirement to use all airport revenues for airport-related purposes,

to the extent necessary to permit the purchaser or lessee to earn

compensation from the operations of the airport.

[[Page 48694]]

In addition to identifying the application procedures, this notice

discusses the issues the FAA will consider in determining whether to

approve an application for an exemption under section 47134 and other

Federal requirements for airport operation. The term ``public sponsor''

is used in this document to mean the governmental agency or authority

that currently owns or operates a public airport and proposes to sell

or lease it to a private purchaser or lessee. The term ``private

operator'' is used to refer to a private firm or firms that propose to

purchase or lease a public airport under the program; the term

``applicant'' means all of the parties jointly participating in the

application for privatization of a particular airport.

Requirements for Transfer of a Federally-Assisted Public Airport

A request for transfer of the operation of an airport from an

existing public sponsor to a new operator, whether public or private,

requires FAA approval. The request for exemption under Sec. 47134 would

be considered in conjunction with existing approval requirements and

processes.

Grant/Deed Conditions

Airport sponsors receiving Federal assistance under a grant program

or through donation of surplus property agree as a condition of the

assistance to obtain FAA approval before transferring control or

ownership of the airport to another party. For example, Assurance No.

5.b. in the Airport Improvement Program (AIP) grant agreements provides

that a sponsor will not sell, lease, or otherwise transfer any part of

its title or other interests in the airport property subject to the

grant assurances, for the duration of the term of the grant agreement,

without approval by the Secretary. Assurance No. 5 further provides

that the sponsor and the transferee approved by the Secretary shall

insert in the contract or document transferring the sponsor's interest,

and make binding upon the transferee, all of the terms, conditions and

assurances contained in the sponsor's grant agreement. Similar

conditions are written into the deeds of conveyance for Federal surplus

property donated to an airport sponsor.

The FAA expects that applications will include a statement that the

new owner/operator will assume the obligations of the original sponsor

under existing grant agreements or deeds. The FAA will consider whether

the new owner/operator has the powers and authority to fulfill its

obligations under the assurances.

Regulatory Requirements

An operator of an airport receiving air service by aircraft with

more than 30 passenger seats must hold an FAA operating certificate

under 14 C.F.R. Part 139. Authority to certificate airports served by

aircraft with 9 or more passenger seats was granted to the FAA in the

1996 Reauthorization Act. FAA operating certificates are not

transferable; a new operator of a certified airport must obtain a new

certificate issued by the FAA.

Section 47134

Section 47134 contains specific provisions for issuance of an

exemption in connection with a transfer of airport operation. These

conditions supplement and to some extent overlap the factors that FAA

would consider under Assurance No. 5.b., but do not replace other

requirements for approval of an airport transfer. In summary, section

47134(c) provides that the Administrator may issue exemptions to a

public sponsor and a private sponsor only if the Administrator finds

that the sale or lease agreement contains provisions satisfactory to

the Administrator to ensure that:

(1) The airport will continue to be available for public use on

reasonable terms and conditions without unjust discrimination;

(2) The operation of the airport will not be interrupted if the

private operator experiences bankruptcy or other financial difficulty;

(3) The private operator will ``maintain, improve, and modernize''

airport facilities through capital investments, and submit a plan for

these actions;

(4) Airport fees imposed on air carriers will not increase faster

than inflation unless a higher amount is approved by at least 65

percent of the air carriers using the airport and the air carriers

having at least 65 percent of the landed weight of aircraft at the

airport;

(5) The percentage of increase in fees imposed on general aviation

operators will not exceed the percentage increase in fees imposed on

air carriers;

(6) Safety and security will be maintained ``at the highest

possible levels;''

(7) Adverse effects of noise from operations at the airport will be

mitigated to the same extent as at a public airport;

(8) Adverse effects on the environment from airport operations will

be mitigated to the same extent as at a public airport; and

(9) Any collective bargaining agreement that covers airport

employees and is in effect on the date of the sale or lease of the

airport will not be abrogated by the sale or lease.

In addition, the Administrator must find that the transfer will not

result in unfair and deceptive trade practices or unfair methods of

competition, and that the interests of general aviation users are not

adversely affected.

Number of Participating Airports

In establishing the privatization pilot program, Congress placed

limitations on the number and kind of airports eligible to participate.

Paragraph 4713(d)(1) provides that if the applications of 5 airports

are approved, then at least one must be a general aviation airport.

Paragraph 4713(d)(2) provides that no more than one of the airports

approved may be an airport with more than 1 percent of total passenger

boardings (a large hub airport), as defined in 49 U.S.C. 47102(10).

Notice of Proposed Application Procedures; Discussion of Comments

Received

On April 22, 1997, the Federal Aviation Administration published in

the Federal Register a Notice of Proposed Procedures entitled ``Airport

Privatization Pilot Program: Application Procedures,'' proposing

application procedures for public sponsor participation in the Airport

Privatization Pilot Program (62 FR 19638). The notice also included a

discussion of issues involved in reviewing applications and a notice of

a public meeting. The agency asked for public comment by June 4, 1997.

The FAA also solicited and received comments at the public meeting held

on May 21, 1997. Verbatim transcripts of the meeting have been included

in the docket of this proceeding.

The Agency received more than 22 written comments to the Notice of

proposed application procedures. Comments were received from such

organizations and individuals as; Aircraft Owners and Pilots

Association, (AOPA); Air Line Pilots Association, (ALPA); Air Transport

Association, (ATA); Airport Commission City and County of San

Francisco; Airports Council International-North America, (ACI-NA);

Airport Group International, (AGI); Allegheny County Department of

Aviation; American Association of Airport Executives, (AAAE); BAA USA,

Inc.; Infrastructure Management Group, (IMG); Johnson Controls; Landrum

and Brown; National Air Transportation Association, (NATA); National

Organization to Insure A Sound Controlled Environment, (NOISE); New

York State Department of

[[Page 48695]]

Transportation, (NYSDOT); Sam Stuart of ProAir Partner Inc.; Public

Employees Department, AFL-CIO, Reason Foundation; Scenic Hudson; Mr.

Charles Spence; Stewart Park & Reserve Coalition; Transportation Trades

Department, AFL-CIO (TTD).

The summary of comments is intended to represent the general

divergence of industry views on various issues. It is not intended to

be an exhaustive restatement of the comments received. All comments

received were considered by the FAA even if not specifically identified

in this summary. In addition to specific changes noted in the

discussion of the issues, the FAA has made editorial changes throughout

the application procedures to enhance readability and clarity. The

Notice of Proposed Procedures included a discussion of issues that

would be considered by the FAA in reviewing applications and granting

exemptions (62 FR at 19641-19645). This notice addresses comments on

that discussion, but does not repeat the separate discussion of those

issues.

Application Procedures

Required Report to Congress

Comments: A number of comments suggest changes in the reporting

requirement to Congress. Allegheny County Department of Aviation

suggests the FAA initiate a dialogue with industry groups to identify

potential measures of success to monitor and evaluate the program.

Several commenters suggest that industry comments should be solicited

annually and the FAA report to Congress on the efficacy of

privatization and the pilot program. The Transportation Trades

Department, AFL-CIO suggests that the FAA should address employee and

collective bargaining relationships in the two year report to Congress;

the report should address such issues as the program's effects on wages

and working conditions, retention percentages, contracting out

practices and other factors deemed relevant. The FAA should also

consider a yearly reporting requirement to monitor the long term effect

on employees.

Discussion: The law requires the FAA to provide a report to

Congress on the Progress of implementation of the program no later than

two years after the approval of the initial application. While the

statute requires the FAA to report only on the implementation of the

program, a considerable amount of effort has been undertaken to better

understand the potential impacts of airport privatization. During the

past year, the agency has held a number of meetings with industry

leaders and trade groups, both proponents and opponents of airport

privatization, both domestically and internationally. In May, 1997, the

FAA and DOT conducted a public meeting to obtain public testimony on

the topic.

Final Disposition: The FAA will consider the public comments

received from the notice combined with the results of the May 21 public

meeting and the background information provided by the industry in the

development of the report to Congress. The FAA does not plan further

notice and comment on the results of the program at this time, but will

consider a public forum for discussion of experience under the program

at an appropriate time in the future.

Resale or Lease to Third Party

Comments: ATA suggests that the FAA should establish procedures

prohibiting the resale of an airport to a third party and mandating the

reversion of the airport to the original public entity.

Discussion: Approval of a sale or lease under section 47134 would

not eliminate the Federal obligations of the private operator under

grant agreements to obtain FAA approval for a subsequent sale or lease.

Therefore, a prohibition on resale or sublease is unnecessary.

Final Disposition: The final procedures do not include a

prohibition on resale or subleasing of the airport.

Number of Airports in Pilot Program

Comments: Landrum and Brown, a consulting firm, requests policy

clarification on the number and type of participating airports. Landrum

and Brown believes that for the five airports selected for

participation in the program, specific limits should be placed on each

hub classification (e.g., large, medium, and small hub) to permit

participation by all airport hub classifications. FAA should also

provide guidelines and criteria for the development of the sponsor's

request for proposal/qualifications (RFP/RFQ).

Discussion: Congress did not intend for participation in the

airport privatization program to be defined according to airport hub

classifications beyond those specifically identified in section 149.

The conference report, for the bill which became section 149, indicates

that the program should be flexible using neither size or geographical

diversity as factors in the selection of airports. H.R. Rep. 104-848 at

27 (September 29, 1996).

Final Disposition: The final policy retains the original position

as identified in the April 22 Federal Register notice.

Two Year Assessment Period

Comments: Allegheny County Department of Aviation suggests that the

statutory two year assessment period provides as insufficient time to

fully evaluate the impacts of the program. As an example, the county

mentioned a typical capital development schedule can have a longer

horizon than two years. If the generation of new capital and investment

is a measure of performance, the two year reporting period does not

provide sufficient time for determining results. The county suggests

that Congress establish a longer horizon to permit a more realistic

assessment of the program.

Discussion: The statute requires the FAA to submit a report to

Congress not later than two years after the approval of the first

application.

Final Disposition: The report to Congress will be filed 2 years

from the date of the first application.

Selection Process

Comments: A number of comments suggest changes to the selection

process and application submission dates. San Francisco argues that the

FAA's system of ``first come first serve'' is arbitrary and unfair. San

Francisco suggests that the start date of December 1, 1997, should be

delayed for three months to allow applicants sufficient time to prepare

an exemption application. They also suggest that the selection process

be replaced by a lottery of pre-qualified applicants with five airports

selected by a disinterested third party.

Johnson Controls, a private airport operator, has two concerns with

the ``first come first serve'' approach. Their first concern is that

the first five applications submitted may not be the most qualified to

be included in the program. Second, if more than five airports submit

applications for the December 1 deadline, some of those airports

sponsors and their associated parties will be forced to expend a great

deal of preparatory work and expense with no assurance that they will

be able to obtain an exemption. As an alternative, Johnson Controls

suggests a two step process. The first step requires the submittal of a

preliminary application consisting of a description of the procurement

process, a copy of the request for proposal (RFP) and a list of the

airport owner's minimum requirements. The second step would consist of

the FAA granting conditional approval for five airport sponsors to

issue a RFP. A stand-by list would be utilized should one of the first

five

[[Page 48696]]

applicants be unable to complete the process. Airport sponsors would

have to request FAA approval of their final applications. This

selection process is endorsed by Airports Council International North

America (ACI-NA) and the American Association of Airport Executives

(AAAE).

Landrum and Brown wants both the airport sponsor and private

airport operator to be pre-qualified for exemption and participation in

the pilot program. Airport Group International (AGI) proposes that

interested airport sponsors submit an expression of interest by a date

certain. The statement would include basic information about the

facility and a feasibility report demonstrating that the economics of

the airport can support privatization. Based upon this submittal, the

FAA would select five airports best qualified for participation in the

program. Exemptions would be issued upon the completion of the

solicitation process.

The Reason Foundation suggests staggered start dates based upon

airport classification. Under this proposal, applications for general

aviation airports would be accepted from December 1 onward, but

approval would be limited to a maximum of two during the initial 18

months, while awaiting for applications from air carrier airports.

Large and medium hub airports could not submit an application until 18

months later, all other carrier airports would have 12 months. This

type of extended schedule would provide large and medium hub airports a

longer time for preparation due to the complexity of preparing a

request for proposals.

Discussion: We agree with commenters that a revision of the

selection procedures is warranted. The FAA drew on several different

comments for development of the following two-step selection process.

We continue to believe applications should be selected on a first come

first served basis, rather than a selection process based on criteria

not found in section 47134. First, the direction for a report to

Congress within 2 years indicates an interest in early implementation

of the program. A first-come first-served selection procedure is most

likely to meet this objective, as would the December 1 start date for

applications, rather than a date of 12 or 18 months hence. Second,

section 47134 does not provide specific authority or guidance for

comparative selection of eligible applications, should more than five

applications be received, based on their merits as privatization

projects. However, FAA agrees that a two-step process, involving both

preliminary and final applications, would be beneficial because it will

avoid a costly and extensive process by parties that will turn out not

to be among the first five qualifying applicants. Also, the FAA agrees

with the suggestion for a lottery procedure to the extent necessary to

assign priority to applications received on the same day.

Final Disposition: As a first step, interested public sponsors may

submit a summary preliminary application to the FAA for review and

approval on or after December 1, 1997 (with certain exceptions noted

below). The preliminary application will consist of: a summary

narrative of the objectives of the privatization initiative; i.e., what

the sponsor is trying to accomplish; second, a description of the

process and timetable to be employed in selecting an operator; third,

all the information required to be included in Part II of the final

application; fourth, airport financial statements including balance and

income statements for the last two reporting periods; and finally, a

distribution ready copy of the request for proposals (RFP) that the

sponsor will use in seeking a private operator.

The RFP must be specifically for the sale or lease of the airport

under the Sec. 47134 Airport Privatization Pilot Program. The document

should contain references to this notice and the nine statutory

objectives listed in section 47134(c). These preliminary applications

will be accepted for review on a first come first served basis. The FAA

will review each preliminary application and, if the preliminary

application is accepted for review, the FAA will publish the status of

the application in the Federal Register. Filing dates for applications,

for the purposes of determining filing order under this program, will

be the filing date of an approved preliminary application or the filing

date of the final application if no preliminary application is filed.

The FAA may accept up to five applications. If more than five airports

submit applications, the FAA will establish a stand-by list. The FAA

agrees to notify an applicant within thirty days of the filing of the

preliminary application whether the application has been accepted for

review.

Once a preliminary application is accepted for review, an applicant

may issue its RFP, select a private operator, negotiate an agreement

and submit a final application to the FAA for approval without

competing with other applicants for one of the five program slots. The

acceptance for review of the preliminary application is time specific

and based on the time table submitted with the preliminary application.

Extensions may be granted, if the FAA finds that the public sponsor is

making reasonable efforts to complete the process. For applications

received by the FAA on the same business day, the FAA will hold a

public lottery to assign priority.

Final applications and preliminary applications will not be

accepted before December 1, 1997, unless an applicant has issued an RFP

on or before the date of publication of this notice. Applicants that

have already issued an RFP for proposals for the sale or lease of the

airport on or before the date of publication of this notice and have

selected a private operator may submit a final application for review

before December 1, 1997. Applicants that have issued the RFP but have

not selected a private operator may file a preliminary application on

or before that date. When a final application is accepted for review,

the FAA will publish notice in the Federal Register with a 60-day

comment period.

The application procedures will be modified to reflect the changes

to the selection process.

Privately Owned General Aviation Airports

Comments: The State of New York recommends that privately held

general aviation airports be excluded from section 47134(a) because

they will not ``facilitate new forms of airport ownership'' as was

intended by the statute.

Discussion: The statute provides no basis for excluding privately

owned airports. Privately owned airports are currently bound by many of

the same laws, regulations, and grant assurances that govern publicly

owned airports. However, exemptions under the program are granted only

``to the extent necessary'' for the purposes listed in Sec. 47134(b)

(2) and (3). It is likely that no exemption would be necessary for

these purposes in a sale or lease of an airport from one private owner

to another, and the FAA does not anticipate that applications will be

received from private sponsors or that such sponsors would qualify for

an exemption under the standards of section 47134.

Final Disposition: The FAA will issue exemptions only to the extent

necessary for the purposes listed in section 47134(b) (2) and (3).

Public Outreach

Comments: Several commenters requested that additional public

outreach efforts be written into the procedures. NATA supports the idea

of publishing the application in the Federal Register for the

solicition of

[[Page 48697]]

public review and comment. AOPA wants the airport sponsor to implement

measures to improve the opportunity for public comment from the

airport's general aviation community. AOPA suggests that the airport

sponsor be required to contact all general aviation tenants

individually by mail, to the extent practical, and to post a notice in

a prominent location on the airport, to notify all general aviation

tenants of a pending application before the FAA. The FAA should also

conduct a public hearing at each airport being considered for

participation in the pilot program. Scenic Hudson, Incorporated and

Stewart Park and Reserve Coalition, two community organizations with an

interest in Stewart International Airport, Newburgh, New York,

requested the FAA to provide notification by personal mail service to

interested parties regarding the acceptance of a final application with

a copy of the final application provided upon request. They also

suggested that the comment period on each application be for a period

of 90 days.

Discussion: The FAA supports efforts to inform the public of any

expected changes affecting the airport community. However such efforts

to obtain tenant participation and comment are best initiated by the

airport sponsor in conjunction with local pilot groups and airport

tenant and user committees.

The FAA expects that a request for Federal exemption is only one

part of a complex process that will involve a considerable amount of

preparatory work, will generally also require the sponsor to obtain

local government legislative and other types of approval, and in some

cases will require state authorization. Public participation in the

process may be required before the application is submitted to the FAA.

In addition, we assume that industry organizations will make their

membership aware of the opportunity to comment at the appropriate level

of government authority. With respect to Federal action, the names of

public sponsors submitting preliminary applications will be published

in the Federal Register. FAA will institute a 60 day comment period for

public review of sponsor's final application. We believe a 60 day

comment period is reasonable considering the earlier requirement for

publication in the Federal Register of a sponsor's preliminary

application. We encourage airport sponsor to augment our efforts with

their local means of communicating with the general public, and we are

modifying the procedures to require that applicants describe their

public outreach efforts in the final application.

Final Disposition: Upon receipt of a preliminary application, the

FAA will publish a notice in the Federal Register. When a final

application is accepted for review by the FAA, the application will be

published in the Federal Register for public review and comment for a

sixty day period. The application procedures will be modified to

reflect these changes and to require a description of any local public

outreach efforts by the applicant.

Part II of the Application: Airport Property

Comments: Scenic Hudson and Stewart Park and Reserve Coalition

request clarification of what would be considered airport property,

specifically as it pertains to Stewart International Airport. The two

commenters want to know who will define what is to be included as

airport property and the criteria to be employed in this determination.

Discussion: The FAA agrees that property to be transferred must be

clearly identified. Airport sponsors, requesting an exemption under

section 47134, must provide a description of the airport property to be

transferred under the pilot program. They must also provide an

acquisition history of the existing airport property. The airport

sponsor, as property owner, is in the best position to know the

acquisition history of the airport's property and determine what

property will be included as part of the transfer.

Final Disposition: Questions regarding the property of a specific

airport should be directed to the airport operator.

Part III of the Application: Terms of the Transfer

Comments: ATA argues that the parties buying or leasing the airport

will be interested in recouping all or part of the cost of the initial

transaction. ATA recomends that the parties should provide information

on the source of reimbursement for purchase or lease payments and the

projected impact of the fees charged to airport users.

Discussion: We believe this information will be valuable in

evaluating a public sponsor's application. And find the ATA

recommendations to be reasonable.

Final Disposition: The application procedures will be changed to

incorporate a requirement that the source of funds for reimbursement of

the purchase or lease payments be identified, and that the applicants

describe the anticipated impact of the reimbursement on aeronautical

user fees.

Part IV of the Application: Qualifications of the Private Operator

Comments: San Francisco opposes the implementation of a fitness

test, because such a test would tend to discriminate against private

operators. Allegheny County, ATA and AGI believe that a fitness test

could be a valuable exercise for the FAA to perform. Several comments

express the concern that such a test should not be unduly burdensome

and the investigation process should be similar to those investigations

conducted for public operators. Johnson Controls emphasizes the need to

crease a ``level playing field'' for both publicly operated airports

and privately operated airports. FAA should not use the exemption

approval process as an excuse for placing burdens on the private

operator which were not imposed on the public entity previously

operating the airport.

Discussion: Comments supporting the need for a fitness test, raise

two concerns. First, a fitness test should not be discriminatory

against private operators; any investigation process conducted should

be the same for both public and private operators. Second, it should

not be unduly burdensome on the operator.

Section 47134 did not change existing requirements applicable to

public airport sponsors for ownership of airports or eligibility to

receive Federal grants. In contrast, this section did impose new

financial and other requirements for private firms undertaking the

operation of a public use airport under the pilot program. Accordingly,

a fitness test related to the eligibility requirements of the pilot

program cannot be considered discriminatory against private operators

applying for participation in the program. FAA believes a limited

fitness review of private operators, modeled on information reviewed

for DOT economic certification decisions, would be beneficial in

ensuring that the FAA meets the requirements of section 47134. The

information involved is limited to items related to this program, and

will not be a burden for applicants.

Final Disposition: In addition to the information previously

provided in the proposed application procedures the fitness test will

require the following:

1. A private operator's airport operation and management

experience.

2. The identity, experience, expertise and responsibility of key

personnel.

3. A description of facilities presently being managed by the

company, both domestically and internationally.

4. Copies of the 10K annual reports filed in the past 3 years with

the

[[Page 48698]]

Securities and Exchange Commission. If not filed, balance sheet and

income statement and a cash flow statement prepared in accordance with

Generally Accepted Accounting Principles, with all footnotes applicable

to the financial statements. The above mentioned statement shall be

filed annually, ninety days after the close of the operator's fiscal

year.

A finding of fitness in response to an application under this

program would apply only to that application and not to other

applications filed with the FAA or other offices of the Department of

Transportation.

Part V of the Application: Requests for Exemption

Comments: ATA also recommends that information provided as part of

the request for exemption to permit airport revenue to be used for

compensation of the private operator should include anticipated amount

and source of airport funds involved, and a description of the effect,

if any, on air carrier or other user fees.

Discussion: This request is consistent with ATA's request for

additional information requested in Part III, ``Terms of Transfer.''

Consistent with our action on that request, Part V is being modified to

include this information in the application. No further action is

required.

Part VI of the Application: Certification of Air Carrier Approval

Comments: ATA indicates that statistics for determining landed

weight should be based on the preceding calendar year. According to the

State of New York, the regulation does not address the manner in which

the 65 percent air carrier rule will be calculated in the event one or

more carriers announce a decision to discontinue service after the end

of the year preceding application review.

Discussion: The statistics requested in paragraph B of the

procedures for total landed weight must be based on the preceding

calendar year. This is a requirement of the statute. Section

47134(b)(1)(i)(ii) requires 65 percent approval of the air carriers

serving the airport and 65 percent approval of the total landed weight

of air carriers from the preceding calendar year. Carriers

discontinuing service during or after the calendar year and not

currently serving the airport would not be counted in the total landed

weight for the preceding calendar year. This interpretation is

necessary to permit the 65 percent statutory carrier approval mechanism

to work if a carrier having more than 35 percent of the landed weight

at the airport discontinues service. This issue is further discussed

under the heading ``Issues Considered by the FAA in Granting an

Exemption Under Section 47134.''

Final Disposition: The application procedures have been modified to

reflect the discussion.

Part VIII of the Application: Airport Operation and Development

Five-Year Capital Improvement Plan. Comments: The ATA suggests that

information on the five-year capital plan should include, if

applicable, information on sources and proposed repayment terms of any

borrowed funds.

Discussion: We find this request reasonable and consistent with our

request for disclosure of the source of funds in previously mentioned

comments.

Final Disposition: A request for a description of this information

will be incorporated into the application procedures.

Collective Bargaining Agreements

Comments: Public Employee Department, AFL-CIO requests that the

labor requirements be strengthened. FAA should require the recognition

of collective bargaining rights and an adherence to the collective

bargaining agreement. The details of workforce standards should be

identified in any lease or sale agreement. Transportation Trades

Department, AFL-CIO identified a clerical error in Part VII(A)(10) of

the proposed procedures. According to the statute, this section should

read, ``Any collective bargaining agreement that covers employees of

the airport and is in effect on the date of the sale or lease of the

airport will not be abrogated by the sale or lease''. The commenter

suggests that the FAA should more clearly discuss what defines an

abrogation of a collective bargaining agreement. The FAA should also

include detailed requirements for collective bargaining agreements. The

application should address successorship of existing representatives of

employees, adverse impacts on civil service employees and a requirement

that private operators offer employment to the existing workforce.

Transportation Trades Department recommends an addition to Part

VII(A)(10) requesting the applicant to determine and describe the long

term effects the transfer may have on collective bargaining agreements

and employees. Finally, the Transportation Trades Department suggests

that the FAA should have an oversight role in the treatment of

employees after the agreement is signed.

Discussion: Section 47134(c)(9) requires that any collective

bargaining that covers airport employees will not be abrogated by the

transfer or sale of the airport. The application procedures permit the

applicants to satisfy section 47134(c)(9) by providing a certification

that the collective bargaining agreement has not been abrogated. We

would expect as a part of submitting the exemption application, the

issues raised by labor would be the basis for discussion between the

private operator, the airport owner and the collective bargaining

units. Before issuing an exemption, the FAA would ensure the terms of

the agreement met the requirements of the Act.

After transfer of the airport, we assume that existing federal and

state agencies with responsibility for labor relations, rather than the

FAA, would perform oversight functions on labor agreements at the

airport. FAA's role would be limited to assuring that applicant public

sponsors and private operators, in the transfer of the airport to

private operation, comply with assurances of section 47134. Collective

bargaining agreements and Federal labor laws establish employee rights

and mechanisms for protecting employee interests. Section 47134(c)(9)

is not intended to make FAA oversight an alternative process. Rather,

by requiring assurance that collective bargaining agreements will not

be abrogated, Congress demonstrated an intent to rely on existing

devices to protect employee interests.

Final Disposition: The application procedures will be revised to

more closely conform with section 47134(c)(9).

Issues Considered by the FAA in Granting an Exemption Under Section

47134 65 Percent Carrier Approval

Comments: ATA believes that procedures must be clear that air

carriers approving ``diverted'' funds must constitute 65 percent in

number and 65 percent in landed weight.

Discussion: In order for a public sponsor to recover funds from the

sale or lease of the airport, the dollar amount must be approved by at

least 65 percent of the air carriers serving the airport and at least

65 percent of the total landed weight of the air carriers serving the

airport in the preceding calendar year. As discussed above, carriers

that have ceased operations at the airport at the time of application

will be excluded from the landed weight calculation.

Final Disposition: The final procedures are being modified to

reflect this discussion.

[[Page 48699]]

Comments: Landrum and Brown suggest that the 65 percent carrier

approval requirement is reasonable if obtained in advance of selection

of operator. ATA recommends that general aviation airports be exempt

from the 65 percent carrier provision rule in lieu of a similar test of

the majority of based air craft owners or some other indication of the

users.

The Allegheny County Department of Aviation (Allegheny County)

argues that it is not appropriate to equate Part 135 operators with

Part 121 air carriers, especially at general aviation airports.

Allegheny County argues that air taxi operators at general aviation

airports are typically fixed base operators that provide on-demand air

taxi services as one of a group of aviation related activities.

Typically, according to Allegheny County, these operators have not made

financial commitments to the airport in the form of long-term leases

and they do not commit their credit-worthiness to the financing of the

general aviation airport. Allegheny County argues that the test

proposed--that any Part 135 operator with at least 50 annual operations

be counted in the 65 percent vote--would lead to the unfair result that

an itinerant air taxi with limited financial connections to the airport

would have a right to vote while a fixed base operator (FBO) located at

the airport (but with no Part 135 operations) would have no vote.

Allegheny County suggests that recognition as an air carrier should be

based on one or more of the following tests: (1) A Part 135 operator

lease is cited specifically as a security for the sponsor's financing

of any airport facility; (2) a Part 135 operator is a signatory to a

long term lease with airport; (3) a Part 135 operator paid to the

airport within the last twelve months, landing fees for commercial

flights which constituted a specified percentage of the airport's total

revenues or exceeded a specified dollar amount.

After the comment period closed, Allegheny County filed a request

for a complete waiver of the 65 percent approval requirement for

Allegheny County Airport, on the grounds that Congress did not intend

these airports to be subject to the requirement. The FAA provided the

Part 135 operators with lease or use agreements at the airport with an

opportunity to respond. To ensure a complete record, the FAA is

including in this docket the waiver request and all responses.

The State of New York requested clarification on several aspects of

the 65 percent carrier approval rule. New York believes carriers that

no longer have an agreement with the airport sponsor should not

participate in application approval. They also indicated that landed

weight requirements should not include general aviation. Finally, the

State of New York wants to know how the FAA will handle an airline,

airline holding company, or an affiliate of that airline that becomes

an applicant for private operation of the airport and also has

participatory rights under the 65 percent carrier approval provision.

The state suggests that such an airline would have an inherent conflict

of interest.

Discussion: The statute requires the airport sponsor to comply with

two tests regarding air carrier approval of the amount of funds the

sponsor can recover as a result of the initial transaction. While the

statute makes no reference to the timing of the approval, the amount of

funds to be recovered cannot be determined until the actual business

arrangements between the airport sponsor and a specific private

operator are known. Therefore, the FAA is not adopting the Landrum and

Brown suggestion.

On the question of including Part 135 air taxi operators in the 65

percent approval process, the FAA agrees that the proposed procedure

would have been impractical and could have led to results that are

undesirable from a policy perspective. However, we do not fully agree

with Allegheny County's assessment of Congressional intent regarding

Part 135 operators. Therefore, we are not adopting the modifications

proposed by Allegheny County Airport. Rather, the FAA is modifying the

65 percent approval requirement to limit participation to Part 135

operators with lease and/or use agreements and with aircraft used in

Part 135 operations. Itinerant Part 135 operators, even with 50 or more

flights per year, would not be included.

The FAA has reviewed the provisions of section 47134, and we do not

find strong evidence that Congress intended to distinguish, as a class,

either Part 135 operators from Part 121 operators, or general aviation

airports from commercial service airports receiving scheduled airline

service. Under the terms of the statute, the public sponsor's receipt

of sale or lease proceeds and fee increases exceeding the rate of

inflation must be approved by at least ``65 percent of the air

carriers'' serving the airport, without limitation or qualification.

The term ``air carriers'' as defined in 49 U.S.C. 40102 encompasses

Part 135 operators, as Allegheny County recognizes. The FAA assumes

that if Congress intended to treat Part 135 operators, as a class,

differently, explicit provisions authorizing or mandating different

treatment would have been included.

With respect to the comment that the 65 percent approval

requirement should not apply at general aviation airports, the FAA

notes that section 47134(b)(1) does not expressly exclude general

aviation airports from the 65 percent approval requirement. Based on

the foregoing, the FAA interprets section 47134(b)(1) (and the parallel

provision of section 47134(c)(4)) to reflect a Congressional intent to

give Part 135 operators at general aviation airports voting rights as

air carriers.

Nevertheless, the FAA recognizes that the differences in on demand

Part 135 operators and Part 121 operators justify, on both practical

and policy grounds somewhat different treatment.

The nature of Part 135 operator ``on-demand'' air service would

place an undue burden on the airport sponsor in administering the

proposed certification requirement, especially as applied to non-based

operators. Many Part 135 charter operations may be invisible to airport

surveillance. Many operators conduct their business with no visible

markings. In many cases it may be difficult to ascertain whether an

activity is being done as a commercial flight in air transportation, or

as another activity under Part 91.

In addition, providing itinerant Part 135 operators with voting

rights could give them more of an influence over the terms of a

privatization transaction than other users of a general aviation

airport who will be more substantially affected--fixed base operators

without Part 135 operations. The committee report indicates that the

approval provisions were added because Congress recognized ``that

airport users may be concerned that an airport could use its monopoly

power to increase their fees to unreasonable levels.'' Given this

concern, there is not a strong policy justification for giving

itinerant air taxi operators--who would likely be less impacted by the

increases in airport fees relative to airport tenants--a greater

influence over the terms of the privatization transaction than an

entire category of airport tenants--FBOs without Part 135 operations.

Moreover, an airport operator may have no practical means of

determining whether an itinerant operation is conducted under Part 135

or Part 91.

Therefore, the FAA has decided to limit participation in the 65

percent approval process to Part 135 operators that have lease and/or

use agreements with the airport and have aircraft used in Part 135

operations based at the airport. This resolution provides those Part

135 operators most likely to be

[[Page 48700]]

affected by a privatization transaction with the voting rights Congress

intended, while avoiding the practical and public policy difficulties

associated with extending the voting rights to itinerant operators.

This resolution will provide to FBO tenants with a Part 135 certificate

voting rights not shared by non-Part 135 FBOs. However, this is a

distinction that is clearly contemplated by the terms of the statute.

The FAA also notes that the definition of the term ``air carrier''

in 49 U.S.C. 40102 refers to U.S. citizens, and does not include

foreign air carriers. While section 40102 expressly governs Part A of

Title 49, Subpart VII, and Section 47134 is in Part B of that subtitle,

the FAA generally applies the definitions in section 40102 to Part B if

the terms are not defined to have a different meaning in section 47102,

the definition section for Part B. Section 47102 does not define ``air

carrier,'' but defines ``air carrier airport'' in a manner that refers

to service by U.S. carriers, which is consistent with the section 40102

definition of ``air carrier.'' Accordingly, the FAA concludes that

Congress did not intend the statutory procedure for air carrier

approval to include foreign air carriers in the calculation of either

65 percent of air carriers serving the airport or 65 percent of landed

weight in the preceding year. The application procedures reflect this

conclusion.

However, the FAA notes that this does not in any way affect

existing rights of foreign air carriers with respect to reasonable and

not unjustly discriminatory fees, or to the rights of foreign air

carriers to use the same administrative and legal processes available

to U.S. operators to challenge airport fees. Moreover, applicants are

reminded that bilateral air service agreements provide for consultation

with foreign air carriers. The applicant should conduct timely

consultation with foreign air carriers serving the airport on all

proposals for which approval is requested under section 47134(b)(1) and

section 47134(c)(4), and include a description of the consultation in

Part VI of the application.

Finally, the procedures exclude from the 65 percent approval

process otherwise qualified air carriers that submitted proposals or

that participate in consortia that submitted proposals for the

privatization of the subject airport. The vote of such a carrier,

whether or not it is the successful proponent, could be based on its

interests as a proponent rather than its interests as a user of the

airport. To the extent that it is, such a carrier's vote would not

further the Congressional objective of the 65 percent approval

requirement.

Final Disposition: The application procedures will be modified to

reflect the above discussion. Specifically, in applying the 65 percent

approval requirement, carriers serving the airport will consist of all

carriers conducting operations at the airport under authority of 14 CFR

Part 121 that have a lease and/or use agreement at the airport or that

conducted at least 50 flights under such authority in the preceding

calendar year; all carriers conducting operations at the airport as a

commuter air carrier within the meaning of 14 CFR Part 298 that have a

lease and/or use agreement at the airport or that conducted at least 50

flights under such authority in the preceding calendar year; and all

operators conducting operations at the airport under authority of 14

CFR Part 135 that have a lease and/or use agreement at the airport (or

similar agreement for use and occupancy of airport premises) and that

have at least one aircraft used in Part 135 operations based at the

airport. However, an otherwise qualified air carrier will not be

permitted to participate in the 65 percent approval process, or be

counted in the total landed weight in the previous year, if the air

carrier, air carrier holding company, or affiliate of that air carrier

responds to a solicitation or submits a proposal to serve as a private

operator or participate in a private operator consortium at that

airport. In addition, as proposed, an airport that does not keep

records of landed weight for purposes of calculating landing fees may

seek an appropriate waiver of the landed-weight approval requirement.

Terms and Conditions Required for Approval--General Approach

Comments: The State of New York, San Francisco and AGI believe that

third party beneficiary rights are not necessary and may exceed FAA's

authority. The State of New York believes the FAA has these rights

under existing law. Landrum and Brown suggests the FAA should require

the sale or lease agreement to include provisions that meet the

statutory objectives. Infrastructure Management Group request

clarification as to the standards and conditions under which it might

completely transfer grant obligations to the private sector without

subsequent recourse to the previous public sponsor.

Discussion: Section 47134(c) permits the FAA to approve an

exemption application only if the sale or lease agreement includes

provisions satisfactory to the FAA. The Agency considers the statutory

objectives in section 47134(c) as creating a third party beneficiary

rights for the United States Government. Congress has authorized the

FAA to approve an application for exemption only if the lease or sale

agreement contains terms and conditions that ensure the nine statutory

objectives are met. To assure that these rights are available, we will

require the sale or lease agreement to include provisions explicitly

granting third party beneficiary rights to the FAA. The FAA will accept

as an alternative a suitably structured tripartite agreement among the

FAA, the public sponsor and the private operator in which the three

parties agree that the key grant assurances required by section 47134

may be enforced directly against the private operator by the FAA under

the agreement as well as under applicable grants.

During the course of the application process, the FAA will

determine on a case by case basis, what grant obligations will be

transferred. As a result of the transfer, the public sponsor should not

be obligated for the airport grant assurances assumed by the private

operator. However, the public sponsor may continue to have Federal

obligations under the exemption approval. These Federal obligations may

depend on: (1) The conditions of exemption; (2) third party beneficiary

rights; and (3) specific terms of the transfer agreement.

Additionally, we are requesting sponsors to identify in the

application their approach to handling the protection of the airport's

runway protection zones and the acquisition and retention of avigation

easements, in consideration that a private operator will have neither

condemnation authority nor zoning power for adjacent property.

Final Disposition: The application procedures will be changed to

incorporate the request for information on the airport's runway

protection zones and avigation easements and to incorporate the

requirement for third-party beneficiary rights or a tripartite

agreement. None of the other comments required changes to the

procedures.

Terms and Conditions To Assure Public Access on Reasonable Terms

Without Unjust Discrimination

Comments: Landrum and Brown recommends that a private operator

should operate an airport without discrimination under the same

assurances required of a public sponsor. The State of New York argues

the introduction of requirements that would hold privately operated

airports to a higher than public airports would be contradictory and

deterrent.

[[Page 48701]]

NATA opposes the ability to transfer proprietary exclusive rights

to a private operator. It argues that a private operator exercising a

proprietary exclusive right in an area as fuel sales, for example, will

impact existing fuel operators. A proprietary exclusive operation may

result in the closure of existing fixed base operators or the denial of

market entry by potential new operators.

Discussion: Under existing FAA policy, the owner of a public-use

airport may elect to provide any or all of the aeronautical services

needed by the public at an airport. The statutory prohibition against

exclusive rights does not apply to these airport owners. They may

exercise, but not grant the exclusive right to conduct an aeronautical

activity. Existing policy permits airport owners to engage in these

services using only their employees and resources. Delegation or

subcontracting of the proprietary exclusive right is prohibited. As a

practical matter, public agencies recognize these services are often

best performed by a profit-motivated private enterprise.

Private owners of a public use airport are currently permitted to

exercise propriety exclusive rights on the same basis as public

agencies. The FAA sees no reason to grant a private operator a lesser

right than other operators just because the operator came into control

of the airport under section 47134. However, the FAA may object in

circumstances when the private operator attempts to exercise a

proprietary exclusive right through consortiums, joint or limited

partnerships when the intent is to circumvent the exclusive rights

provision or the limited exception.

Final Disposition: FAA will review each request for proprietary

exclusive on a case by case basis.

Reasonable Rates and Charges Imposed by Airport Operator

Comments: San Francisco believes the FAA lack the authority to

apply the Rates and Charges Policy and that the policy should not be

imposed on the transferee. It proposes that the FAA delete the

provision that subject fees imposed by the private operator to the

Policy on Airport Rates and Charges. San Francisco argues that under

the rule, airlines already have adequate protection against

unreasonable rates and charges. First: 65% of the air carriers must

approve the initial agreement in the form of revenue to be retained by

the airport sponsor; second, air carriers must approve all rates and

charges (except for those rate increases resulting from new capital

improvements). Application of the policy to the agreed upon rates and

charges could result in challenges to the rate structure as new users

enter the market. This could potentially undermine the investment

expectations of the private operator by lowering the level of rates and

charges.

Discussion: Before responding to the comments, it is necessary to

discuss a judicial decision in a challenge to the Rates and Charges

Policy that was pending when the FAA issued the NPP. The Air Transport

Association (ATA) and the City of Los Angeles each petitioned for

judicial review of the Airport Rates and Charges Policy. Los Angeles

challenged the requirement to use historic cost accounting in

establishing fees for the use of the airfield. The ATA challenged the

provisions in the policy that permit the airport operator to: (a) Use

any reasonable method to establish other aeronautical fees; and (b)

charge imputed interest on the airport operator's own funds from

specified sources invested in the airfield. On August 1, 1997, the

United States Court of Appeals issued its opinion, which vacated an

remanded the Airport Rates and Charges Policy to the Department.

The effect of the opinion on the provisions of that Policy that

were not challenged is unclear. Even if the effect of the opinion is to

vacate the entire policy, it is reasonable to expect that readoption of

the unchallenged provisions would not be objectionable. In addition,

the provisions of the policy most directly related to the privatization

pilot program--provisions on airport operator/user consultation,

application of the policy to fees set by agreement, and allowable rate

of return to private equity owners of airports--were not challenged.

Therefore, the FAA has assumed that those provisions continue to be in

effect in the discussion of the comments on this issue. We have made

appropriate editorial changes to the text of the procedures to reflect

the uncertain status of the Airport Rates and Charges Policy.

The comment that the FAA lacks authority to apply the Rates and

Charges Policy to transferees under the pilot program is not supported

by the statutory language authorizing the pilot program. Section 149(d)

of the Reauthorization Act, which established the privatization pilot

program, also included a revision to 49 U.S.C. 47129, the existing

statute which requires adoption of a DOT rates and charges policy and

process for adjudication of disputes. The new provision directs the

Secretary, ``in evaluating the reasonableness of a fee imposed by an

airport receiving an exemption under Sec. 47134 of this title [to]

consider whether the airport has complied with section 47134(c).'' 49

USC 47129(a)(4). This provision does not exempt fees that meet the 65

percent approval requirement from review under Sec. 47129. On the

contrary, the provision contemplates that the fees will be reviewed,

with consideration given to whether the fees meet the 65 percent

approval requirement.

The FAA considers the Airport Rates and Charges Policy, in

particular the first principle and associated guidance, and this policy

to be consistent with the statutory direction discussed above. The

first principle states the Department's preference for direct local

negotiation between the airport operator and aeronautical users. This

principle recognizes a generally held industry wide practice that

produces reasonable results. The Airport Rates and Charges Policy was

amended to avoid the need for investigation of complaints about the

reasonableness of fees set by agreement if filed by parties to the

agreement.

However, as we indicated in the Airport Rates and Charges Policy,

we believe that Congress did not intend to deprive non-signatory

carriers of the opportunity to have their fees reviewed by the FAA,

solely because they were not a signatory to the original agreement.

Section 47129 does not, by its terms, exempt fees set by agreement from

the requirement of reasonableness. Furthermore a difference in rates

between signatory or non-signatory carriers is not necessarily a basis

for a determination of unreasonable fees. Interested parties should

consult the section, ``Charges to Non-Signatory Carriers'' of the OST/

FAA Policy on Airport Rates and Charges for further details.

Final Disposition: The final policy is not modified from the

proposal.

Reasonable Compensation for the Airport Operator

Comments: Several commenters voiced concerns about the compensation

to the private operator. Landrum and Brown suggests that the rate of

return should be subjected to a reasonableness test. This should be

handled on a case by case basis. Compensation is driven by the

``price'' paid for the lease or sale of the airport. The State of New

York believes agreement between equity owner and airport users is most

appropriate to determine charges. Infrastructure Management Group

suggests that the FAA should not directly intervene on the issue of

reasonable rate of return.

[[Page 48702]]

These issues should be left to the three consenting parties in the

privatization process, the airport owner, the private operator and the

airlines. The FAA would still have the authority to exercise remedying

powers under its current Policy on Airport Rates and Charges. ATA

argues that the private operator's rate of return must be evaluated in

light of its impact on user fees, within the context of exemptions

being proposed under section 47134(b)(3). The ATA encourages the FAA to

``look at all payments in the aggregate, not as individual pieces.''

Discussion: A basic premise for determining the reasonableness of

compensation for the airport operator must begin with three consenting

parties in the privatization process, the airport owner, the private

operator and the airlines. As we have indicated, in order to protect

the general public interest, and the interest of airport users affected

by but not a party to the agreement, the FAA has a responsibility to

determine the reasonableness of airport fees paid by aeronautical users

and compensation to the airport operator included in those fees. The

FAA will examine an airport operator's rate of return for

reasonableness on a case by case basis. While we recognize the value of

agreement on compensation to the airport operator by all consenting

parties, the FAA reserves the right to ensure that the rate of return

charged for aeronautical facilities and services meets the applicable

reasonableness requirements.

Final Disposition: The final procedures retain the substance of the

proposed procedures.

Carrier Approval of Fee Increases

Comments: Landrum and Brown recommends private operators should be

allowed rate increases to cover at least their cost of capital. The

definition of capital improvements should be clearly stated so that

both airlines and the private operator can assess the impact on rates

and charges.

ATA and NATA oppose provisions that allow airport fee increases

based solely on new capital investment without approval of 65 percent

of the airport's air carriers. Both suggest that all capital

improvement resulting in fee increases should be subject to air carrier

approval. ATA argues that the provisions allow the proposed private

operator to make unnecessary investments for the sole purpose of

increasing their rate of return, exempt from the revenue retention

requirements. NATA believes that this automatic approval of capital

improvements will raise rates and charges, adversely affect its

membership, which represent many of the aviation businesses servicing

aeronautical users.

ACI-NA, AAAE and the State of New York support the measure that

excludes capital improvements from the 65 percent air carrier rule.

Supporters believe without this provision, few capital improvements

would be made. ACI-NA and AAAE in their joint statement, indicated,

``It would be simply too easy for carriers taking a short-term view of

expenses and profits to veto an airport's more long term assessment of

growing needs for capital investment.''

Discussion: FAA reaffirms its position that the 65 percent air

carrier rule should not apply to new capital improvement. As we have

stated before, Congress, in establishing the program, expressed an

intent to determine if private investment could be employed as an

alternative funding source. Applying the 65 percent air carrier rule to

new capital investment would give carriers undue power over an

airport's capital improvement program and possibly reduce an airport

operator's ability to meet the long term needs of the market.

Carriers are afforded sufficient protection by provisions of

section 47134(b)(1)(A)(i) and (ii). This provision of the statute

effectively requires the consent and participation of the carriers for

the airport sponsor to transfer the airport to a private operator. The

FAA expects that during this time carrier concerns and issues will be

addressed. Additionally, tenants and carriers have the protection of

their leases, an airport's grant assurances and the federal

requirements for airport rates and charges.

Final Disposition: The FAA retains the provisions of the draft

notice. The text is being modified to explicitly state the exclusion of

fee increases attributable solely to capital improvements.

Terms and Conditions To Assure Continued Operation in the Event of

Bankruptcy or Insolvency

Comments: AGI believes that existing Federal bankruptcy laws are

adequate to handle leased facilities. Title 11 U.S.C. 365(d)(3) (1995)

was originally enacted to protect a lessor of commercial realty in the

event that the tenant seeks bankruptcy protection and performance of

the contract is essential. This section requires the trustee to meet

the tenant's obligations under the contract. AGI argues that these

provisions could apply to operators of leased airports.

The State of New York suggests that the FAA should require the

parties to enter into an agreement that addresses bankruptcy within the

framework of existing law.

Landrum and Brown and Infrastructure Management Group suggest a

reversion to the public sponsor in the event of bankruptcy along with

reasonable cure provisions in the agreement. The operators or creditors

of a facility should be given time to rectify the problem before the

original public owner steps in. The only lingering issue in such

instances is whether and how the parties must compensate each other.

ATA offers a number of options for addressing bankruptcy. These

include: (1) The transfer agreement should include an automatic

reverter to the public sponsor in the event that the airport ceases

operations due to bankruptcy or reorganization (the transfer agreement

would not be recognized as an executory contract subject to assumption,

rejection or assignment under Section 365 of the Bankruptcy Code); (2)

FAA required contingency plan for sponsor takeover in defined

circumstances; (3) Record as an encumbrance on the airport property the

obligation to operate the property as an airport; (4) establish an

escrow fund or bond fund to ensure funds are available to pay essential

costs of operating the airport; (5) Use Chapter 9 insolvent

municipality provisions instead of Chapter 11 or 7 for airport

bankruptcies.

ATA also suggests that the FAA pursue rigorous auditing of private

operators and impose the requirement for financial fitness similar to

those imposed by the Department of Transportation on air carriers.

Discussion: Given the breadth of suggestions and divergence of

views there is no consensus on a specific requirement. As a part of the

exemption application submittal, the airport sponsor and private

operator should provide a plan that specifically addresses the

requirements of section 47134(c)(2). Because it would involve the

application of bankruptcy law, the plan should include legal

justification and a legal opinion. The proposed approach will assure

continued operation of the airport in the circumstances specified in

section 47134(c)(2). FAA reserves the right to modify, or totally

reject the plan and require the airport operator to submit a new plan.

Final Disposition: The FAA will revise the application procedures

to require the public sponsor and private operator to specifically

address the requirements of section 47134(c)(2).

[[Page 48703]]

Terms and Conditions To Assure Capital Investment and Improvements by

the Airport Operator

Comments: San Francisco questioned whether FAA has the legal

authority to require that the private operator ``exceed or accelerate''

the public sponsor's capital improvement plan (CIP). While San

Francisco recognizes that offering such a five year CIP is one method

of ensuring sufficient private investment, it suggests that this not be

a requirement for obtaining FAA approval. FAA should make it clear that

the private operator's CIP does not have to exceed or accelerate the

public sponsor's CIP. Such a requirement may decrease the

attractiveness of private investment, when the public sponsor has made

high investments in the airport prior to privatization. San Francisco

believes that the air carriers will effectively ensure that the private

sector will invest sufficient amounts in capital projects. FAA should

exercise its role concerning capital investment on a case by case basis

without a predetermined level of investment.

ACI-NA and AAAE support the procedural provisions that require the

transfer agreement to include a provision to assure the airport

operator will maintain, improve and modernize the airport facilities as

specified in the CIP and subsequent updates.

Landrum and Brown suggests that the private operator should be

required to submit a master plan for FAA approval along with the five

year CIP.

ATA raises concerns that the requirement to implement a five year

program could lead to inefficient expenditures of funds for capital

projects. They recommended the FAA require purchaser/lessor to provide

annual documentation showing sources of funds for the projects to be

implemented in next 12 months including, if applicable, information on

borrowed money and proposed means of repayment of borrowed funds.

BAA USA is concerned that the requirement of a ``reasonable rate of

return'' may prove to be a source of controversy and generate wasteful

capital expenditure. Airport operators could be induced to spend more

on capital projects, just to extend the scope of the ``reasonable rate

of return''.

AGI believes that the public sponsor has the greatest incentive to

ensure the private operator's CIP is sufficient for the needs of the

airport.

Discussion: In enacting the airport privatization pilot program, it

was the intent of Congress to determine if new investment and capital

from the private sector can be attracted through innovative financial

arrangements. The FAA and the public have a reasonable expectation that

a private operator will provide new capital and create new investment

opportunities at the airport. A comparison of the public sponsor's

five-year CIP with the private operator's CIP will be useful in

evaluating the private operator's commitment. The example of exceeding

or accelerating the public sponsor's most recent five year CIP is only

one of several examples of means that a private operator can use to

assure a sufficient minimum investment of the private operator's funds.

The FAA will not, however, require the private operator's commitment to

do so.

The final procedures do not identify a predetermined level of

investment. Rather, the private operator is required to provide an

assurance that the operator will provide sufficient resources of its

own funds in conjunction with other financial resources for carrying

out the maintenance, improvements and modernization of the facility as

required by the statute. This should be accomplished on an annual basis

with documentation provided showing the source of all funds.

One commenter suggested that the private operator should be

required to submit a master plan for FAA approval along with the five

year CIP. While there is not requirement for a master plan development,

we would expect all capital development to be performed in accordance

with the airport sponsor's grant assurances.

Final Disposition: The application procedures are modified as

discussed.

Terms and Conditions Relating to Safety and Security

Comments: Both the Air Line Pilots Association and the

Transportation Trades of AFL-CIO recommend that private operators

should conduct public hearings on safety and operational considerations

at the specific airport with an opportunity for input by

representatives of aviation employees. It was also suggested that

private operators conduct monthly or bi-monthly safety meetings.

Discussion: Such mechanisms as tenant advisory committees and

airport safety and security meetings are basic management tools for

ensuring a safe and secure airport. We expect all airports, depending

on their level of activity, degree of complexity and regardless of

whether they are privately or publicly operated to have some program

for addressing the safety and security needs of the airport.

As we have indicated, we will require private operators to obtain a

Part 139 airport operating certificate and comply with Part 107 airport

security requirements at facilities where appropriate. Existing

certificates held by the public operator are not transferable. Private

operators will be required to demonstrate their fitness for approval in

the same manner that public operators are presently required to comply.

For general aviation airports, we will expect the private operator to

provide the same level of safety and security as required of the public

sponsor under the existing grant obligations.

Final Disposition: The FAA believes that existing airport

procedures and practices are adequate to ensure tenant and employee

input on safe airport operating practices and conditions. The

application procedures are modified to encourage the private operator

to maintain the public sponsor's existing mechanisms for communicating

with airport users and the public on safety and security issues. No

other modifications have been made.

Terms and Conditions Relating to Noise Mitigation

Comments: The National Organization to Insure a Sound Controlled

Environment (NOISE), in their comments, asked several questions

regarding the application procedures. First, NOISE wants to know if the

terms and conditions of existing grants applicable to noise mitigation

will be a part of the obligations of the private operator; Second, will

the new airport owner be obligated to comply with the determination of

the existing Part 150 Noise Compatibility Plan. Third, will notice of

the proposed sale of the airport be served on local jurisdictions that

surround the airport or that are located a specified distance from the

airport within a certain number of miles, or within a specified DNL

noise contour. NOISE's concern is that Federal Register notification

may be insufficient to reach many small communities. Finally, NOISE

would like to see a public hearing in the airport community before an

exemption is granted.

AGI indicates that the statute limits AIP grant funding to 40%

Federal share at section 47134 airports. The procedures are unclear as

to whether the reduced Federal share applies to both new applications

and projects approved but not funded.

Discussion: Standard grant assurance No. 5 requires a transferee

approved by the Secretary to assume all of the terms, conditions and

assurances contained in the sponsor's grant agreement. These

requirements are inserted in the contract or document transferring the

sponsor's

[[Page 48704]]

interest, and become binding upon the transferee.

In reviewing a request for transfer, the FAA will consider whether

a proposed private operator under a privatization pilot project will

assume the obligations of the original sponsor under existing grant

agreements or deeds, and whether the new owner has the powers and

authority to fulfill its obligations under the assurances. The FAA

would expect a private operator to assume any existing Part 150 noise

mitigation program for the airport to the extent applicable to a

private firm. However, we note that under Part 150, implementation of

approved noise mitigation measures is voluntary.

With respect to the request for a public hearing, as we previously

indicated, we encourage airport sponsors to actively solicit public

comment. However, we do not intend to dictate to airport sponsors a

single method for conducting public outreach. We believe public

outreach should be conducted at the local level and in accordance with

applicable state and local laws.

On the subject of the applicability of reduced Federal share for

AIP funded projects, it makes no difference whether the application is

pending or in preparation. If a grant of discretionary funds is

approved by the FAA prior to the airport sponsor being granted an

exemption under section 47134, the conventional Federal share would be

used, even if the project is not completed at the time of the transfer.

Any grant of discretionary funds executed after the transfer would be

at the Federal share of 40% for allowable project costs.

Final Disposition: No modification is required to address the

concerns of the commenter.

Unfair Competition Finding

Comments: AGI wanted to know what constitutes ``unfair and

deceptive practices''. The concept is not defined. The commenter

suggests the standard for ensuring reasonable access without unjust

discrimination replace the ``unfair and deceptive practice'' standard.

Discussion: The statute permits the FAA only to approve an

application, if the approval will not result in unfair and deceptive

practices or unfair methods of competition. While there may be some

overlap between this standard and the standard of reasonable access

without unjust discrimination, the FAA is not prepared to treat the

standards as identical. Doing so would make one of the standards

meaningless. This outcome should be avoided in construing statutory

language. We will not further define ``unfair and deceptive practices''

or ``unfair methods of competition'' in the procedures. Ample guidance

on this subject can be found in agency and court decisions interpreting

section 411 of the Federal Aviation Act of 1958, as amended, 49 USC

41712 and Sec. 5 of the Federal Trade Commission Act, 15 USC 16.

However, to assist in making this determination, the final procedures

are being modified to require information on any findings that the

private operator or key personnel have engaged in unfair or deceptive

practices or unfair methods of competition, or are the subject of

pending investigations.

Protection of General Aviation Interests

Comments: AOPA recommended that each private operator should

specifically address in the application how proposed changes at the

airport will impact general aviation.

Discussion: Congress intended that general aviation users not be

adversely impacted as a result of the transfer of the airport from

public to private operation. This is demonstrated by the provisions in

the statute governing fee increases, section 47134(c)(5) and the

protection of general aviation interests, section 47134(f). In order

for the FAA to fulfill its responsibility under the statute, we would

expect to see what actions the airport sponsor and private operator

plan to take to comply with the requirements of these provisions. At a

minimum, we would expect to see how the proposed changes in the

management and operation of the airport would affect general aviation

users. Additionally, we would expect to see some effort by the airport

sponsor and private operator to undertake reasonable consultations with

affected parties using the airport. The requirements of this section

could also be addressed by providing a description of the operator's

plans for the development of general aviation.

Final Disposition: The application procedures will be revised to

request that the applicant private operator provide information on its

plans for consulting and communicating with the general aviation users

regarding the planned privatization of the airport, and on the

applicants' projections of the impact of the proposal on general

aviation.

Revocation Procedures

Comments: Several commenters argue that the FAA should not require

automatic reversion of the airport to the public sponsor. Automatic

reversion should be one of many options available. The FAA should

retain discretion to take appropriate action. ACI-NA and AAAE request

that revocation procedures should be crafted in such a way that they

are not an impediment to the bond issuing ability of the airport

sponsor. The Transportation Trades Department of the AFL-CIO suggests

that the FAA consider revocation procedures for termination of the

program when privatization has been found to be contrary to the public

interest.

Discussion: The FAA did not propose to require reversion to the

public sponsor in the event of default or violation of the exemption

conditions, as a condition of granting an exemption, and the final

procedures do not add a requirement for reversion. However, the

application must provide for continued operation of the airport and

compliance with other obligations in the future under all foreseeable

circumstances. The provisions will vary according to the circumstances

of the airport privatization proposed. For example, where a public

sponsor does not operate any other airports and will no longer maintain

a capability to assume operation of an airport on short notice, the

applicants may provide means other than reversion to the former public

sponsor as a first recourse for correction of problems in the private

operation of the airport.

The FAA is aware of effect that the potential enforcement action,

even if the probability is very small, can have on the predictability

of a future revenue stream for purposes of determining investment risk.

As the ACI-NA and AAAE comments noted, the FAA has developed

enforcement procedures for passenger facility charge (PFC) collection

requirements that permit underwriting of bond issues based on PFC

collections alone. While the FAA does not intend to prescribe separate

procedures for agency enforcement of grant assurances and exemption

conditions involved in a privatization project, we can give assurance

that in the unlikely event any enforcement action was necessary in such

a case, the agency will be sensitive to the financial commitments and

covenants associated with the financing of the project. Moreover, by

requiring a three-way agreement or the inclusion of third-party

beneficiary rights for the FAA as part of the original transaction, the

FAA has provided means for limited, targeted correction of deficiencies

without relying on the revocation for the underlying exemption.

Termination of the pilot program, as opposed to action to correct

deficiencies

[[Page 48705]]

in a specific privatization project, is not within the FAA's authority.

Final Disposition: As discussed previously, the FAA will require

the parties to provide third party beneficiary rights to the FAA or to

execute tripartite agreements. These remedial options in addition to

revocation will assure that the FAA's compliance program is effective.

Administration of AIP Grants

Comments: The State of New York, Landrum and Brown, and AGI argue

that the system of prioritization of discretionary AIP funds should

continue to make no distinction between public or private airports.

Projects should be selected solely on their merits.

Final Disposition: Discretionary AIP funds will be awarded in

accordance with existing policy on priority of projects. Private

ownership per se will not affect grant priority or eligibility, but the

FAA will continue to consider the availability of other sponsor

resources and the sponsor's use of available funds in granting

applications for discretionary grants.

Process for Applying for an Exemption Under Sec. 47134

Exemption Application and Review Process: Overview

The FAA will apply the following policies and procedures for filing

and review of requests for privatization of a public airport under 49

U.S.C. 47134:

1. A request for participation in the airport privatization pilot

program will be initiated by the filing of a preliminary application

for exemption under section 47134(a). A public sponsor may also elect

to file a final application without the prior filing of a preliminary

application, if the public sponsor has selected a private operator.

2. With the exemption noted below, preliminary and final

applications for exemption will be accepted on or after December 1,

1997, and will be handled on a first-come first-served basis until the

limits of section 47134 are reached. An otherwise qualifying

preliminary application for exemption will be accepted before December

1, 1997, if the sponsor has issued, on or before the date of

publication of this notice, a formal solicitation or request for

proposals for the sale or lease of an airport, but has not selected an

operator. If the sponsor has selected the operator on or before the

date of publication of this notice, the FAA will accept only a final

application before December 1, 1997. All applications will be evaluated

in the order of receipt.

3. Participation in the program is limited to five airports. The

maximum of five participants in the program will be considered to have

been reached based on applications under review, not exemptions

granted, so that an airport with an application on file will not be in

a race for inclusion in the program. A standby list will be established

for airports not selected.

4. An application received by the FAA will be considered to be

filed on the date received. Application packages will be date-stamped

on receipt in Room 600 East, FAA headquarters building. The FAA will

not determine order of filing based on the time of day received. If

multiple applications are received on the same day, their order of

filing will be determined by public lottery rather than by time of day

received.

5. FAA will review the application to determine if it meets the

procedural requirements stated in this notice.

6. The FAA will accept preliminary applications filed before the

applicant has commenced the procurement process for the selection of an

operator. The preliminary application must contain the information

listed under the section titled ``Contents of Applications''. The FAA

will notify applicants of its decision on the acceptance of the

application for review within thirty days of the filing of the

preliminary application.

7. If the preliminary application meets the procedural requirements

described in this notice, the applicant will be notified that the

application is ``accepted for review.'' The FAA may request additional

information before accepting the application for review, but the

original filing date will remain in effect. The applicant is authorized

to select a private operator, negotiate an agreement and submit a final

application to the FAA.

8. If the preliminary application does not meet the procedural

requirements described in this notice, and cannot be brought into

compliance with those requirements with information requested by the

FAA during its 30-day review, the preliminary application will be

rejected. The FAA will notify the applicant that the application is

rejected and that the application is no longer on file. The applicant

may file a new application at any time, and receive a new ``on file''

date at that time.

9. The FAA will publish in the Federal Register a notice that a

preliminary application has been received under 49 U.S.C. 47134, and

that the FAA has accepted the application for review.

10. Applicants may file a final application after the public

sponsor has selected a private operator and reached substantial

agreement on the terms of the privatization transaction. If an

application cannot reasonably be brought into compliance with the

requirements of section 47134 and other applicable Federal statutes

with current information in accordance with the time schedule submitted

during the preliminary application, the FAA will notify the applicant

that the application is rejected and that the application is no longer

on file. The applicant may file a new application at any time, and

receive a new ``on file'' date at that time.

11. The FAA will publish in the Federal Register, a notice of

receipt of the final application, establish a docket, and accept public

comment on the application for a period of 60 days. Selection as one of

the 5 airports eligible to participate in the program will be evidenced

by the issuance of an exemption under section 47134(b). If an

application is approved, an exemption will be issued after the

execution of all documents necessary to fulfill the requirements of

section 47134 and other laws and regulations within the FAA's

jurisdiction (e.g., issuance of a Part 139 certificate to the private

operator; FAA approval of a security program under Part 107). FAA

representatives will be available to meet with parties interested in an

airport privatization project both before and after the filing of a

preliminary application for exemption to discuss the Federal statutory

requirements and policies that apply to applications under section

47134.

Filing an Application

1. Applicants must submit one original application package and four

copies containing the information described under ``Content of

Applications'' in this notice to: Susan L. Kurland, Associate

Administrator for Airports, ARP-1, Room 600 East, Federal Aviation

Administration, 800 Independence Avenue, SW., Washington, DC 20591.

2. All preliminary and final applications may be delivered or

mailed, but will not be considered to be ``on file'' with the FAA until

received and date stamped in the Office of the Associate Administrator

for Airports, Room 600 East.

3. There is no required form for an application. However, the

application package must be submitted with a cover letter, signed, in

the case of the preliminary application, by appropriate officials of

the current public sponsor or in the case of the final application,

jointly by appropriate officials of the current public sponsor and the

private operator proposing to buy or lease the

[[Page 48706]]

airport, requesting an exemption pursuant to 49 U.S.C. 47134 for the

purpose of the privatization of an airport. Please title each section

according to the appropriate sections of the application. Officials

signing for the public sponsor must provide evidence of their authority

to file the application.

Contents of the Preliminary Application

The preliminary application should consist of:

1. As much of the information required by Part I, ``Parties to the

Transaction,'' for the Final Application, as is available.

2. Summary narrative of the objectives of the privatization

initiative; what the public sponsor wants to accomplish by the

solicitation.

3. A description of the process and a reasonable, realistic

timetable to be employed in selecting an operator and completing

transfer of the airport. This should include the identification of all

local approvals and the time frame when the FAA can anticipate the

final application will be submitted for review.

4. All of the information required by Part II. ``Airport

Property,'' from the Final Application

5. Financial statements including balance, income and cash flow

statements for the last two reporting periods.

6. A distribution ready copy of the request for proposals for the

management and operation if the airport under section 47134. The

document should contain references to this notice and the nine

statutory objectives listed in section 47134(c).

The Final Application

The following statements and information must be included in the

final application. The FAA realizes that some documents, figures, and

other information will not be available until shortly before the

execution of the transfer transaction. The final application must be

filed after the public sponsor has selected a private operator and

reached sufficient agreement with the operator on the terms of the

transaction to represent these terms in an application. The FAA will

not require that all information listed below be provided at the time

of the application, however. For each item below for which information

is not available, the applicant may substitute a description of the

expected response and the date by which the final information will be

available. Information not provided with the application should be

submitted to the FAA as soon as it becomes available.

Part I. Parties to the Transaction

A. Name of the airport proposed for sale or lease.

B. Name and address of the public sponsor of the airport; name,

address, telephone number and fax number of the person to contact about

the application.

C. Name and address of the private operator proposing to purchase

or lease the airport; name, address, telephone number and fax number of

the person to contact about the application.

D. If the private operator proposing to purchase or lease the

airport is a partnership, jointly venture, or other consortium of

multiple interests, the name and address of each of the participating

members.

E. Citizenship of the private operator and/or each member of the

private operator consortium, and percentage of interest of each such

member.

F. A statement of the public sponsor's authority to sell or lease

the airport, with a citation to legal authorities.

Part II. Airport Property

A. A description if the airport property to be transferred.

Applications should describe property in sufficient detail to identify

the parcels of property and facilities to be transferred; a map and a

legal description of the property may be included but are not required.

B. A history of the acquisition of existing airport property:

applicants should include information on grants, types of deeds, the

dates and means of conveyance, e.g. Surplus Property Act other Federal

conveyance of donated property, parcels purchased with Federal funds

and parcels purchased with only local funds.

Part III. Terms of the Transfer

A. A detailed description of the terms of the transfer, other than

financial, including:

The form of the transaction (sale, lease, other);

Term of the lease or other transfer agreement;

Description of any rights, authority, or interests retained by the

public sponsor, including reversion of title to facilities;

If the private operator is a consortium, a description of the

respective rights and responsibilities of each member;

B. Financial terms of the transaction:

Amounts and timing of payments to public sponsor.

Amounts of payments to sponsor to be used, respectively, for

airport purposes (including recoupment of public sponsor investments

not previously recovered) and other purposes.

Financial arrangements, including source of the funds used by the

private operator for purchase payment or initial and future lease

payments.

Projected impact of the initial transaction on the fee structure

for charges to airport users.

Projected impact of future purchase or lease payments to the public

sponsor on the fee structure for charges to airport users.

Other relevant financial terms of the transfer.

C. Copies of all documents executed as part of the transfer, to be

provided as they are executed or are in sufficiently final form to

indicate the substantive nature of the expected final document.

D. If applicable, a request for confidentiality of any particular

document or information submitted, with supporting information.

E. Provisions in document conferring third party beneficiary rights

on behalf of the FAA to enforce key obligations, or the alternative

tripartite agreement among the FAA, the public sponsor and the private

operator giving the FAA the right to enforce directly against the

private operator key obligations contained in AIP grant agreements and

the assurances required by Section 47134..

Part IV. Qualifications of the Private Operator

A. Complete description of airport management and operations

experience. The identity, experience, expertise and responsibility of

key personnel. A description of the facilities and airports presently

being managed by the company, both domestically and internationally. If

the private operator is a newly formed entity, describe the experience

of the constituent members and the proposed management structure to

integrate operations functions.

B. Financial resources for operating/capital expenses of the

airport. Copies of the 10K annual reports filed in the past 3 years

with the Securities and Exchange Commission, if not filed, balance

sheet and income statement prepared in accordance with Generally

Accepted Accounted Principles, with all footnotes applicable to the

financial statements.

C. Timing/details of application for Part 139 certificate, if

applicable.

D. Plan for compliance with Part 107, if applicable.

E. A description of the private operator's capability of complying

with the public sponsor's existing grant assurances, including the

assurance of compatible land use around the airport; the protection of

navigation aids, approach lights, runway safety areas, and runway

protection zones; and the

[[Page 48707]]

continuation and extension of aviation easements.

F. Affiliations with air carriers or other persons engaged in

aeronautical business activity at an airport (other than airport

management).

G. A description of all charges of unfair or deceptive practices or

unfair methods of competition brought against the private operator,

private operator's key personnel and in the case of a private operator

that is a joint venture, partnership or other consortium, the separate

members of the entity in the past 10 years. The description should

include the disposition or current status of each such proceeding.

Part V. Requests for Exemption

A. Describe the specific exemption requested by the public sponsor

under 49 U.S.C. 47134(b)(1), from the prohibition on use of airport

revenue for general purposes, including the amount of funds involved.

The description should include sale or lease proceeds as well as funds

in existing airport accounts that would be transferred to general

accounts.

B. Describe the specific exemption requested by the public sponsor

under 49 U.S.C. 47134(b)(2), from the requirement to repay Federal

grants funds or return property.

C. Describe the specific exemption requested by the private

operator under 49 U.S.C. 47134(b)(3), from the prohibition on use of

airport revenue for general purposes. The description should include

the anticipated amount of airport revenue to be used for compensation

of the private operator, the source of airport funds involved, and a

description of the effect, if any, on air carrier or other aeronautical

user fees.

Part VI. Certification of Air Carrier Approval

A. Provide a certification that air carriers meeting the

requirements of 49 U.S.C. 47134(b)(1)(A) approve the exemption

described in Part V.A. above.

B. Provide (1) a list of all U.S. air carriers serving the airport,

to include all carriers conducting operations at the airport under

authority of 14 CFR Part 121 that have a lease and/or use agreement at

the airport or that conducted at least 50 flights under such authority

in the preceding calendar year; all carriers conducting operations at

the airport as a commuter air carrier within the meaning of 14 CFR Part

298 that have a lease and/or use agreement at the airport or that

conducted at least 50 flights under such authority in the preceding

calendar year; and all operators conducting operations at the airport

under authority of 14 CFR Part 135 that have a lease and/or use

agreement at the airport and that have at least one aircraft used in

Part 135 operations based at the airport; but excluding any carrier

that is not currently serving the airport or that has responded to a

solicitation or submitted a proposal to serve as a private operator or

participate in a private operator consortium at that airport; (2) a

list of the air carriers that have approved the exemption; (3) the

total landed weight of all operations by air carriers listed under

VI.B.1 above at the airport for the preceding year; (4) the total

landed weight of each air carrier listed under VI.B.1 above that has

approved the exemption; and (5) a list of carriers serving the airport

in the previous or current year but excluded from the list in VI.B.1,

with the reason for exclusion.

C. Provide a copy of each document indicating air carrier approval

of or objection to the exemption requested.

D. Provide a description of consultation with foreign air carriers

serving the airport on proposals for air carrier approval under 49

U.S.C. 47134(b)(1)(A).

Part VII. Airport Operation and Development

A. Provide a description of how the private operator, the public

sponsor, or both will address the following issues with respect to the

operation, maintenance, and development of the airport after the

proposed transfer.

1. Part 139 certification. A request for Part 139 certificate

should be filed with the local FAA regional Airports Division. The

exemption application needs only to reflect the private operator's

intentions and the status of a certificate application, if applicable.

2. Continuing access to the airport on fair and reasonable terms

and without unjust discrimination, in accordance with section

47134(c)(1).

3. Continued operation of the airport in the event of bankruptcy or

other financial or legal impairment of the private operator, in

accordance with the specific terms of section 47134(c)(2). The

application should include any provision for reversion to the public

sponsor. The application should include a legal opinion and

certification that the proposed plan will be effective under operation

of all applicable law, including but not limited to bankruptcy law, in

assuring the continued operation of the airport.

4. Maintenance, improvement, and modernization of the airport, in

accordance with section 47134(c)(3), including the public sponsor's

most recent 5-year capital improvement plan (CIP) and the 5-year CIP

proposed by the private operator. Applicants should identify the

sources of funds to be used for capital development, including any

continuing contributions by the public sponsor. If funds are to be

borrowed, applicants should identify the expected sources, anticipated

repayment terms of any borrowed funds, and the source of revenue to be

used for repayment. Applicants should also include any financial

security provisions, such as a letter of credit or performance bond,

for the accomplishment of the maintenance, improvement, and

modernization projects committed to by the private operator.

5. Compliance with the limitations on air carrier fees, pursuant to

section 47134(c)(4), not imposed for funding of new capital development

undertaken after the transfer to the private operator.

6. Compliance with the limitation on general aviation fees

described in section 47134(c)(5).

7. Maintenance of safety and security at the airport, in accordance

with section 47134(c)(6). The application should note the applicant's

contacts with the Airports District Office on Part 139 and the Office

of Aviation Security on Part 107, but does not need to duplicate

information filed in connection with those actions. The application

should include planned efforts by the private operator to maintain the

public sponsor's existing mechanisms for communicating with airport

tenants and users and the public on safety and security issues.

8. Mitigation of adverse effects of noise from airport operations,

in accordance with section 47134(c)(7). The applicant should

specifically describe its intentions with respect to an existing or

future Part 150 noise compatibility program for the airport, with

respect to the public sponsor's commitments under past records of

decisions on airport development projects, and other measures the

private operator intends to take in the future.

9. Mitigation of adverse effects on the environment from airport

operations, in accordance with section 47134(c)(8).

10. Recognition that section 47134(c)(9) provides that any

collective bargaining agreement that covers employees of the airport

and is in effect on the date of the sale or lease of the airport will

not be abrogated by the sale or lease.

11. The private operator's intentions regarding consultation with

general aviation users regarding the planned privatization of the

airport, and the projected effect on general aviation of the proposed

changes in operation and management of the airport.

[[Page 48708]]

12. Private operator's plans (if known) for development of general

aviation.

B. The private operator's acceptance of the grant assurances

contained in the public sponsor's grant agreements with the FAA.

Assurance 25 need not be addressed. In addition, either (1) the

applicants' agreement that the grant assurances and the assurances

required for granting an exemption under section 47134 create third-

party beneficiary rights enforceable by the FAA in an administrative or

judicial legal proceeding, or (2) a proposed tripartite agreement among

the FAA, the private operator and the public sponsor granting to the

FAA the right to enforce directly against the private operator the

grant assurances and the assurances required for granting an exemption

under section 47134.

C. Provide a description of the parties' efforts to consult with

airport users about the proposed transaction and of the parties'

community outreach efforts.

Part VIII. Periodic Audits

Section 47134(k) provides that the FAA may conduct periodic audits

of the financial records and operations of an airport receiving an

exemption under the pilot program. Applicants should indicate their

express assent to this provision in the application.

Issued in Washington, DC, on September 9, 1997.

Susan L. Kurland,

Associate Administrator for Airports.

[FR Doc. 97-24430 Filed 9-15-97; 8:45 am]

BILLING CODE 4910-13-M