[Federal Register: January 17, 2008 (Volume 73, Number 12)]
[Notices]
[Page 3310-3316]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17ja08-110]
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DEPARTMENT OF TRANSPORTATION
Office of the Secretary
Federal Aviation Administration
[Docket No. FAA-2008-0036]
RIN 2120-AF90
Policy Regarding Airport Rates and Charges
AGENCY: Department of Transportation, Office of the Secretary and
Federal Aviation Administration.
ACTION: Notice of proposed amendment to policy statement.
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SUMMARY: This action proposes to amend the Department of Transportation
(``Department'') ``Policy Regarding the Establishment of Airport Rates
and Charges'' published in the Federal Register on June 21, 1996
(``1996 Rates and Charges Policy''). This action proposes three
amendments to the 1996 Rates and Charges Policy (two modifications and
one clarification). These amendments are intended to provide greater
flexibility to operators of congested airports to use landing fees to
provide incentives to air carriers to use the airport at less congested
times or to use alternate airports to meet regional air service needs.
Any charges imposed on international operations must also comply with
the international obligations of the United States.
DATES: Send your comments on or before March 3, 2008.
ADDRESSES: You may send comments [identified by Docket Number FAA-2007-
XXXXX] using any of the following methods:
Government-wide rulemaking Web site: Go to http://www.regulations.gov
and follow the instructions for sending your
comments electronically.
Mail: Docket Operations, U.S. Department of
Transportation, West Building, Ground Floor, Room W12-140, Routing
Symbol M-30, 1200 New Jersey Avenue, SE., Washington, DC 20590.
Fax: 1-202-493-2251.
Hand Delivery: To Docket Operations, Room W12-140 on the
ground floor of the West Building, 1200 New Jersey Avenue, SE.,
Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday,
except Federal holidays.
For more information on the notice and comment process, see the
SUPPLEMENTARY INFORMATION section of this document.
Privacy: We will post all comments we receive, without change, to
http://www.regulations.gov, including any personal information you
provide. For more information, see the Privacy Act discussion in the
SUPPLEMENTARY INFORMATION section of this document.
Docket: To read background documents or comments received, go to
http://www.regulations.gov at any time or to Room W12-140 on the ground
floor of the West Building, 1200 New Jersey Avenue, SE., Washington,
DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal
holidays.
FOR FURTHER INFORMATION CONTACT: Barry L. Molar, Manager, Airports
Financial Assistance Division, APP-500, Federal Aviation
Administration, 800 Independence Avenue, SW., Washington, DC 20591;
telephone: (202) 267-3831; facsimile: (202) 267-5302; e-mail:
barry.molar@faa.gov; or Charles Erhard, Manager, Airport Compliance
Division, AAS-400, Federal Aviation Administration, 800 Independence
Avenue, SW., Washington, DC 20591, telephone: (202) 267-3187;
facsimile: (202) 267-5769; e-mail: charles.erhard@faa.gov.
SUPPLEMENTARY INFORMATION:
Comments Invited
The Department of Transportation invites interested persons to join
in this notice and comment process by filing written comments, data, or
views. The most helpful comments reference a specific portion of the
proposal, explain the reason for any recommended change, and include
supporting data. We ask that you send us two copies of written
comments.
We will file in the docket all comments we receive, as well as a
report summarizing each substantive public contact with Department
personnel about this proposal. The docket is available for public
inspection before and after the comment closing date. If you wish to
review the docket in person, go to the address in the ADDRESSES section
of this preamble between 9 a.m. and 5 p.m., Monday through Friday,
except Federal holidays. You may also review the docket using the
Internet at the web address in the ADDRESSES section.
Privacy Act: Using the search function of our docket Web site,
anyone can find and read the comments received into any of our dockets.
This includes the name of the individual sending the comment (or
signing the comment for an association, business, labor union). You may
review DOT's complete Privacy Act Statement in the Federal Register
published on April 11, 2000 (65 FR 19477-78) or you may visit http://regulations.gov
.
Before acting on this proposal, we will consider all comments we
receive on or before the closing date for comments. We will consider
comments filed late if it is possible to do so without incurring
expense or delay. We may change this proposal because of the comments
we receive.
If you want the Department to acknowledge receipt of your comments
on this proposal, include with your comments a preaddressed, stamped
postcard on which the docket number appears. We will stamp the date on
the postcard and mail it to you.
Proprietary or Confidential Business Information
Do not file in the docket information that you consider to be
proprietary or confidential business information. Send or deliver this
information directly to the person identified in the FOR FURTHER
INFORMATION CONTACT section of this document. You must mark the
information that you consider proprietary or confidential. If you send
the information on a disk or CD ROM, mark the outside of the disk or CD
ROM and also identify electronically within the disk or CD ROM the
specific information that is proprietary or confidential.
Under 14 CFR 11.35(b), when we are aware of proprietary information
filed with a comment, we do not place it in the docket. We hold it in a
separate file to which the public does not have access and place a note
in the docket that we have received it. If we receive a request to
examine or copy this information, we treat it as any other request
under the Freedom of Information Act (5 U.S.C. 552). We process such a
request under the DOT procedures found in 49 CFR Part 7.
Availability of Documents
You can get an electronic copy using the Internet by:
(1) Searching the Federal eRulemaking portal (http://www.regulations.gov/search
);
(2) Visiting the FAA's Regulations and Policies Web page at http://www.faa.gov/regulations_policies
; or
(3) Accessing the Government Printing Office's Web page at http://www.access.gpo.gov/su_docs/aces/aces140.html
.
You can also get a copy by sending a request to the Federal
Aviation Administration, Office of Rulemaking, ARM-1, 800 Independence
Avenue, SW., Washington, DC 20591, or by calling (202) 267-9680. Make
sure to identify the docket number, notice number, or amendment number
of this proceeding.
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Authority for This Proceeding
This notice is published under the authority described in Subtitle
VII, Part B, Chapter 471, Section 47129 of Title 49 United States Code.
Under subsection (b) of this section, the Secretary of Transportation
is required to publish publishing policy statements establishing
standards or guidelines the Secretary will use in determining the
reasonableness of airport fees charged to airlines under Section 47129.
Background
This action proposes to amend the Department of Transportation
(``Department'') ``Policy Regarding the Establishment of Airport Rates
and Charges'' published in the Federal Register on June 21, 1996,
(``1996 Rates and Charges Policy''). Portions of the policy were
subsequently vacated by the United States Court of Appeals for the
District of Columbia Circuit in Air Transport Ass'n of America v. DOT,
119 F.3d 38, amended by 129 F.3d 625 (DC Cir. 1997). This action
proposes three amendments to the 1996 Rates and Charges Policy (two
modifications and one clarification). These amendments are intended to
provide greater flexibility to operators of congested airports to use
landing fees to provide incentives to air carriers to use the airport
at less congested times or to use alternate airports to meet regional
air service needs. Any charges imposed on international operations must
also comply with the international obligations of the United States.
First, this notice proposes to clarify the policy by explicitly
acknowledging the ability of airport operators to establish a two-part
landing fee structure consisting of both an operation charge and a
weight-based charge, in lieu of the standard weight-based charge. Such
a two-part fee would serve as an incentive for carriers to use larger
aircraft and increase the number of passengers served with the same or
fewer operations. Second, this action proposes to expand the ability of
the operator of a congested airport to include in the airfield fees of
a congested airport a portion of the airfield costs of other,
underutilized airports owned and operated by the same proprietor.
Third, this action proposes to permit the operator of a congested
airport to charge users of a congested airport a portion of the cost of
airfield projects under construction. Currently, costs of new or
reconstructed airfield facilities may be included in airfield charges
only when the new or reconstructed facilities are completed and in use,
unless carriers at the airport agree otherwise. This proposed
modification would also permit the operator of a congested airport to
include in the rate base the costs of projects under construction. This
notice proposes two alternatives. The first would permit the costs to
be included in the rate base only during periods when the airport
experiences congestion. At some airports, such as Chicago O'Hare or New
York LaGuardia, this could occur throughout the normal operating day.
The second would permit these costs to be included in the rate base of
the congested airport at all times. Because the latter two proposed
amendments would apply only at congested airports, this notice also
proposes to add a definition of ``congested airport'' in the
Applicability section.
Legal Requirements for Airport Rates and Charges
All commercial service airports operating in the United States and
most other airports that are open to the public have accepted grants
for airport development under the Airport Improvement Program,
authorized in Title 49 of the United States Code, Subtitle VII, Part B,
Chapter 471. Under Sec. 47107, in exchange for receiving grant funds,
airport operators must give a variety of assurances regarding the
operation of their airports and the implementation of grant funded
projects. Among other things, airport operators pledge to make the
airport ``available for public use on reasonable conditions and without
unjust discrimination.'' 49 U.S.C. 47107(a)(1). This obligation
encompasses the obligation to establish reasonable and not unjustly
discriminatory fees and charges for aeronautical use of the airfield.
Section 47129 authorizes the Department to review the
reasonableness of airport fees charged to air carriers, upon a
complaint or request for determination and a finding of a significant
dispute, and directs the publication of policies or guidelines for
determining reasonable fees and development of expedited hearing
procedures to resolve airport fee disputes. The Department's procedures
applicable to proceeding concerning airport fees are contained in
Subpart F, Title 14 CFR 302.601--Sec. 302.609.
The Policy Regarding Airport Rates and Charges
The Department published the 1996 Rates and Charges Policy in the
Federal Register at 61 FR 31994 on June 21, 1996. The statement of
policy was required by section 113 of the Federal Aviation
Administration Authorization Act of 1994, Public Law 103-305 (August
23, 1994), now codified at 49 U.S.C. 47129. The publication of the 1996
Rates and Charges Policy followed publication of a notice of proposed
policy (59 FR 29874, June 9, 1994). That proposal predated enactment of
section 47129. After enactment of section 47129, the Department
published a supplemental notice of proposed policy (59 FR 51585,
October 12, 1994); an Interim Policy (60 FR 6906, February 3, 1995);
and a further supplemental notice of proposed policy (60 FR 47102,
September 8, 1995).
On behalf of its member airlines, the Air Transport Association of
America (ATA) and the City of Los Angeles, operator of Los Angeles
International Airport, challenged elements of the 1996 Rates and
Charges Policy in the United States Court of Appeals for the District
of Columbia. The court vacated portions of the 1996 Rates and Charges
Policy in Air Transport Ass'n of America v. DOT, 119 F3d 38, amended by
129 F.3d 625 (DC Cir. 1997).
The 1996 Rates and Charges Policy specified that, unless otherwise
agreed to by an airport user, fees for airfield use must be based on
costs calculated using the historic cost accounting (HCA) methodology.
1996 Rates and Charges Policy, paras. 2.2, 2.4, 2.5.1. For other
airport facilities and services, however, the airport proprietor was
free to use any reasonable methodology to determine fees, if justified
and applied on a consistent basis. 1996 Rates and Charges Policy, para.
2.6. Petitioners in the court case challenged the disparate treatment
of airfield fees and other fees. The court determined that this
distinction had not been adequately justified. 119 F.3d at 44. At the
Department's request, the Court vacated only the specific provisions of
the 1996 Rates and Charges Policy that petitioners challenged as
implementing that distinction. 129 F.3d at 625.
Since the court's ruling, the Department has addressed significant
airport-airline fee disputes through case-by-case adjudication. The
Department's decisions are informed by the statutory limitations
imposed on airport fees. One limitation derives from requirements of
the airport improvement program grant assurances, 49 U.S.C. 47107. In
particular, a federally assisted airport sponsor must give the
Secretary of Transportation and the FAA certain assurances, including
the assurance that the airport will be available for public use on fair
and reasonable terms and without unjust discrimination. The other
limitation arises from the proprietor's exception to the Anti-Head
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Tax Act, which allows the airport sponsor to collect only reasonable
rental charges, landing fees, and other service charges from aircraft
operators for the use of airport facilities.
Our past cases have established some guidelines for our analysis of
fees challenged by airlines. Our cases have examined fees and fee
methodologies that we considered reasonable as well as those we
considered not to be reasonable. See Miami International Airport Rates
Proceeding, Order 97-3-26 (March 19, 1997), aff'd sub nom., Air Canada
v. DOT, 148 f.3D 1142 (DC Cir. 1998); Alaska Airlines, Inc., et al. v.
Los Angeles World Airports, Order 2007-6-8 (June 15, 2007) (LAX III),
on appeal to the United States Court of Appeals for the District of
Columbia Circuit).
Additionally, we have established some guidance on unreasonable
airline fees Second Los Angeles Int'l Airport Rates Proceeding, Order
95-9-24 (Sept. 22, 1995, (LAX II), aff'd sub nom, City of Los Angeles
v. DOT, 165 F.3d 972 (DC Cir. 1999); Brendan Airways, LLC v. Port
Authority of New York and New Jersey, Order 2005-6-11 (June 14, 2005),
aff'd in part, Port. Auth. of New York and New Jersey v. DOT, 478 F.3d
21 (DC Cir. 2007).
The Secretary has also determined whether or not certain disputed
fees were unjustly discriminatory. Brendan Airways, op cit., Order
2005-6-11; LAX III.
Airport Congestion in the United States
Currently, the National Airspace System (NAS) handles 750 million
passengers each year. We expect this number to reach one billion by
2015, and forecasts indicate increases in demand ranging from a factor
of two to three by 2025. Market competition spurred by new-entrant,
low-cost carriers and the competitive response by legacy airlines have
generated much of the increase in air travel demand. Among the trends
are new and expanded route networks to lesser-served markets connecting
major hubs with regional jet service. The additional service in some
cases provides no net increase in seats between origins and
destinations but provides more operations in the system with greater
numbers of smaller capacity aircraft.
The majority of the airports in the NAS have adequate airport
capacity with little, if any, delay. Generally, congestion occurs at
the largest airports. The 35 busiest airports, known as Operational
Evolution Partnership (OEP) airports, handle approximately 73 percent
of the commercial air passenger boardings in the system. Runway
construction projects have long served as a primary method to improve
capacity. Since fiscal year 2000, thirteen new runways (more than 20
miles of new pavement) have opened at the 35 OEP airports. In addition,
six more of the OEP airports have airfield projects under construction
(two airfield reconfigurations, three new runways, and one runway
extension), which should be commissioned within the next three years.
These new runways and airfield reconfigurations involve eighteen of the
35 OEP airports, providing these airports with the potential to
accommodate about two million more annual operations.
Nevertheless, the experience of summer 2007 shows that congestion
is a problem today. Airlines at New York JFK International Airport
increased their scheduled operations by 41 percent between March 2006
and August 2007. As a result, the number of arrival delays exceeding
one hour increased by 114 percent in the first ten months of fiscal
year 2007, compared to the same period the previous year. During June
and July 2007, on-time arrival performance at JFK was only 59 percent.
Moreover, delays resulting from operations at New York metropolitan
area airports alone can account for up to one-third of the delays
throughout the entire national system. The congestion in the New York
airspace has ripple effects across the national airspace system,
causing flight delays, cancellations, and/or missed connections. These
delays impose economic and social costs on airline passengers and
shippers; airlines incur extra costs for fuel, flight crews, and
schedulers. Delays are likewise beginning to increase at San Francisco.
At Chicago O'Hare, the FAA implemented voluntary flight restrictions in
2004 to limit congestion and delays. The reconfiguration of the O'Hare
airfield will eventually provide the capacity to overcome congestion.
In the short run, however, congestion would be much worse if not for
FAA intervention.
Most portions of the country have plans and capabilities to meet
projected aviation demand. A recent study, Capacity Needs in the
National Airspace System 2007-2025: An Analysis of Airports and
Metropolitan Area Demand and Operational Capacity in the Future,
conducted by the Federal Aviation Administration as part of the Future
Airport Capacity Task (FACT) 2, indicates metropolitan areas and
regions along the east and west coasts are experiencing large amounts
of growth in population and economic activity that cause chronic
congestion. Based on studies and analyses associated with FACT 2,
conditions are projected to get worse in the future in these coastal
regions, primarily concentrated at various OEP airports. Fourteen of
the 35 OEP airports and eight metropolitan areas are forecasted to be
capacity-constrained in 2025.
Of the fourteen airports identified as capacity-constrained in the
study, several are further constrained by conditions, either physical
(New York LaGuardia) or environmental (Long Beach-Daugherty Field),
that prevent additional runway capacity from being built. To date, even
with planned improvements, no single solution to the congestion at
these airports has been identified. Aside from adding runway capacity,
air traffic operational improvements and airspace redesign are
additional measures that have been considered. In addition, even at
airports where expansion is possible or planned, the lead-time to bring
a planned improvement project from concept to commissioning may be
substantial (10-15 years). Until new facilities are completed and put
into service, these locations may continue to be plagued by congestion
and delays.
To adequately prepare to handle the increasing air travel demand in
the system, it will be necessary to augment tools available to the
local governments which operate these airports to encourage regional
aviation assets to be employed to resolve the capacity issues. In areas
where the metropolitan areas may be served by more than one commercial
service airport, the dispersal or regionalization of traffic can be
encouraged by certain financial incentives, not all of which are
expressly permitted by the current rates and charges policy.
Role of Price in Addressing Congestion
One way of addressing congestion of an airport's airside facilities
is by the pricing of those facilities. By raising the cost of operating
a flight during congested periods, an airport owner/operator can
increase the efficient utilization of the airport in a number of ways.
First, by charging higher landing fees during periods of peak
congestion, the airport proprietor gives aircraft operators the
incentive to reschedule their flights to less congested periods or to
use secondary airports. The degree to which aircraft operators
reschedule will in large part depend on their network structure and
access to secondary airports. Second, if airports structure their
airfield charges to reflect scarcity by incorporating per-operation
charges with weight-based charges, they will provide an incentive for
air carriers to use congested airfield facilities more efficiently by
increasing the size of
[[Page 3313]]
aircraft operating during periods of congestion. Third, properly
pricing scarce airfield capacity will yield a clearer signal as to the
desirability of expansion of capacity at that airfield. Even where
expansion is not feasible, the industry and users benefit if adjustment
of prices during congested periods increases the efficiency with which
congested airfield facilities are used.
The proposed actions do not represent true congestion pricing
because they do not authorize airport proprietors to set fees to
balance demand with capacity without regard to allowable costs of
airfield facilities and services. Nevertheless, by enabling proprietors
at congested airports to assign additional, but still appropriate,
costs to the airfield to better reflect the cost of using congested
airfield facilities, these proposed actions should encourage more
efficient use of these facilities and encourage feasible capacity
expansion. Airport sponsors must assure the Department that the airport
is available to the public on reasonable terms and without unjust
discrimination. If we adopt the two proposed amendments targeted for
congested airports, we expect affected proprietors to implement them in
a manner that is consistent with the grant assurance and we expect that
the implementation will lead to a more efficient use of the congested
facilities
Discussion of Proposals
General Discussion
The three specific proposals do not alter one of the fundamental
principles of the 1996 Rates and Charges Policy: that reasonable fees
must be based on the capital and operating costs of the facilities for
which the fees are assessed. Rather, two of the proposals would modify
costs that may be reasonably included in the cost base of landing fees
at a congested airport. The third would clarify the ability of airports
to adopt a ``dual-element'' landing fee with both a per-operation and
weight-based component. This authority exists today for airports with
or without congestion. While the presence or absence of congestion may
affect how an airport may reasonably implement a dual element-landing
fee, as discussed below, the 1996 Rates and Charges Policy is silent on
this point. None of the proposed amendments is intended to permit an
airport to generate revenues in excess of the allowable costs of
providing airfield facilities and services at the congested airport, as
defined in accordance with the 1996 Rates and Charges Policy.
The effect of each of these modifications would be to allow the
airport operator to increase the cost of landing at a congested airport
during periods of congestion, even if congestion lasts through much of
the day. By raising the costs of the congested facilities, the airport
operator would provide an incentive for current or potential aircraft
operators to (1) adjust schedules to operate at less congested times
(if they exist); (2) use less congested secondary or reliever airports
to meet regional air service needs; or (3) use the congested airport
more efficiently by up-gauging aircraft. The three proposals are not
intended to be mutually exclusive. In other words, if the circumstances
justify doing so, an airport proprietor might use a combination of two,
or even all three, proposals in setting landing fees during periods of
congestion. Any charges imposed on international operations, whether
using this proposed flexibility or not, would also have to comply with
the international obligations of the United States, including
requirements that the charges be just, reasonable, and equitably
apportioned among categories of users.
Where additions to airport capacity are financially and physically
feasible and can be accomplished without undue adverse environmental or
social impacts, the Department considers such additions to be the most
appropriate long-term actions to address airport congestion and delay.
The amendments to the 1996 Rates and Charges Policy proposed in this
action are intended to help airports manage available capacity in the
short-run, while additions to capacity are being planned and built and
to help those airports where capacity expansion is not feasible.
Definition of Congested Airport
Two of the three proposed revisions would apply only to congested
airports. Therefore, this action proposes to add a new subsection E to
the Applicability Section of the 1996 Rates and Charges Policy that
would define a congested airport. The subsection would establish two
categories of congested airports--those meeting the statutory
definition of congested airport contained in 49 U.S.C. 47175 or those
identified in the report titled ``Capacity Needs in the National
Airspace System, 2007-2025'' (May 2007), issued by the Future Airport
Capacity Task and commonly referred to as the ``FACT 2 Report.''
Section 47175 is part of an aviation development streamlining program
enacted by Congress in 2003 (Vision-100). That program recognized the
significant negative economic impact on our national economy resulting
from congestion and delays at our major airports. It gave airport
capacity enhancement projects at those airports a national priority
status, and authorized an expedited environmental coordination process
that would protect the environment while ensuring the economic vitality
resulting from the continued growth in aviation. Public Law 108-176,
Title III, Sec. 302 (2003). A congested airport is defined as an
airport that accounted for at least one percent of all delayed aircraft
operations in the Untied States and an airport listed in Table 1 of the
FAA's Airport Capacity Benchmark Report 2001. 49 U.S.C. 47175(2). Under
its general authority to manage airspace, and after a comprehensive
analysis of current and forecasted traffic, demand, and demographic
trends, the FAA published the FACT 2 report identifying airports that
are or will be congested at three milestones--2007, 2015 and 2025. It
would not be appropriate to permit an airport that is not projected to
be congested in 2025 to rely on provisions applicable to congested
airports in setting fees today. Therefore, the proposed amendment would
also exclude airports projected to be congested in 2025 for the first
time from the scope of the definition.
Two-Part Landing Fees
As noted, although most airports rely on a single element weight-
based landing fee, the use of a weight-based landing fee is not
required. This issue was squarely addressed in the Department's
decision in the Massport Pace case, Investigation into Massport's
Landing Fees, Opinion and Order, FAA Docket 13-88-2 (December 22,
1988), aff'd New England Legal Foundation v. Department of
Transportation, 883 F.2d 157 (1st Cir. 1989). In that case, the
Department did not determine that Massport's two-part landing fee for
Boston Logan Airport was unreasonable, per se. Rather, the Department
concluded that ``landing fee structures that vary from the traditional
weight-based approach are permissible so long as the approach adopted
reasonably allocates costs to the appropriate users on a rational and
economically justified basis.'' Opinion and Order at 11. The Department
found the landing fee to be unreasonable because it failed to meet this
standard for allocating costs. Id. This decision followed a previous
ruling in AOPA v. PANYNJ, 305 F. Supp 93 (E.D.N.Y. 1969), upholding a
minimum take-off fee (essentially a per-operation charge) imposed by
the Port Authority of New York and New Jersey at Newark, LaGuardia and
Kennedy airports.
[[Page 3314]]
The proposed amendment would explicitly acknowledge the ability of
an airport to establish a two-part landing fee. The amendment would add
a new paragraph 2.1.4, in the section titled ``Fair and Reasonable
Fees,'' stating that fair and reasonable fees may include a two-part
landing fee consisting of a per-operation charge and a weight-based
charge, so long as the two-part fee reasonably allocates costs to the
appropriate users on a rational and economically justified basis. This
provision would apply to any airport. However, the presence of
congestion and the potential to serve more individual travelers if
larger aircraft are used in the limited number of operations available,
would be the most obvious circumstance for the justification of a dual
component fee.
Carriers may have many reasons to serve routes with smaller
aircraft--regional jets or even turboprops. Smaller aircraft may have
lower operating costs or allow the carrier to offer more frequent
service economically. However, operations of smaller aircraft during
periods of airport congestion reduce the efficiency of the airport.
First, it simply takes more operations to move the same number of
people to and from the airport. Second, these aircraft may have slower
speeds on approach to and departure from the airport than larger jets.
Also, they may require larger separation distances from large jet
aircraft than other large jets.
A purely weight-based landing fee provides no disincentive, and may
actually provide an incentive, for carriers to operate smaller
aircraft. The landing fee for small aircraft will be substantially
lower than the fee for a larger aircraft. If an airport assesses a per-
operation charge as a component of the landing fee, the cost of
operating a smaller aircraft will increase, and the cost per seat of
operating smaller aircraft will increase. The proposed amendment would
make it clear that during periods of congestion the airport proprietor
may take the presence of congestion into account in determining the
proportion of airfield costs to be recovered from the per-operation
charge, so long as the combination of the two elements do not generate
revenues in excess of the allowable costs of the airfield. The flaw
with the Massport ``PACE'' fee was that Massport justified the per
operations fee on the basis of congestion, yet applied it at all times,
even when congestion was not present. Opinion and Order at 9. For a per
operation fee imposed during times when congestion might not be
present, the per-operation charge would need to be justified on other
settled principles of cost allocation.
Costs of Facilities Under Construction
The proposed action would amend the 1996 Rates and Charges Policy
by replacing paragraph 2.5.3, which was vacated by the court of
appeals, with a new paragraph addressing charges for facilities under
construction. The paragraph vacated by the court specified that with
limited exceptions for land acquired for future development, costs of
airfield facilities not yet built and operating could not be included
in the rate base of the airfield unless agreed to by airfield users.
The court's decision to vacate this paragraph did not necessarily
represent a determination that the provision was erroneous, per se.
Rather, as noted, the court identified the provision as one that was
intimately connected to the 1996 Rates and Charges Policy's erroneous
distinction between airfield fees and fees for other facilities.
The court's decision did not vacate the principle that airfield
fees are limited to an amount that recovers the costs of operating and
maintaining the airfield. One of the fundamental principles of this
``cost of service'' approach to setting fees is the principle that only
the cost of facilities ``used and useful'' by the rate-payers may be
included in the rate-base. (A. Priest, 1 Principles of Public Utility
Regulation 174, 178 (1969); J. Bonbright, Principles of Public Utility
Rates 178 (1961); S. Breyer, Regulation and Its Reform 40 (1982); City
and County of Denver v. Continental Air Lines, Inc., 712 F. Supp. 834,
D.CO. (1989)). The vacated paragraph 2.5.3 represented the application
of this principle, which is still accepted practice in ``cost of
service'' fee setting. The Department has applied this principle only
once in a fee dispute adjudication, finding that an airport may
reasonably include, in its landing fee, a debt service charge for
uncompleted capital projects, since the projects were expected to be
completed during the year in which the charges were made. Second Los
Angeles International Airport Rates Proceeding, DOT Order 95-12-33
(Dec. 22, 1995).
With that said, exceptions to the principle that the costs of
facilities not yet built and operating may not be included in the rate
base have been recognized in unusual circumstances (e.g., Consumer
Protection Board v. Public Service Commission, 78 A.D. 2d 65, 434 N.Y.
Supp. 2d 820, 822 (1980) (inclusion of construction work in progress in
rate base is an extraordinary remedy); Mid-Tex Electric Cooperative,
Inc. v. FERC, 773 F.2d 327 (DC Cir. 1985) (decision to allow
construction work in progress in rate base is consistent with the
``used and useful'' principle)). The proposed amendment would represent
a modest departure from this principle. It would permit the operator of
a congested airport to incorporate the costs of airfield facilities
under construction (including costs associated with reconstructing
facilities) into the landing fee. Two approaches are being considered,
and we solicit comment on each. Under the first approach, the costs of
facilities under construction could be included only during periods
when the airport experiences congestion. Under the second approach, the
costs could be included at the congested airport throughout the day.
Any costs recovered for principal and interest during the construction
period would have to be deducted from the amount later capitalized and
amortized for recovery in the rate-base after the facility is put into
use. To qualify for inclusion, the facilities would need to be under
construction, so that availability of the facilities for use would not
be speculative. All planning and environmental reviews would need to
have been completed, a financing plan developed, and financing
arranged. Once construction is under way, the risk that current users
will not benefit from the facility in the foreseeable future is reduced
or eliminated if the user remains at the airport. In addition, allowing
the airport proprietor to begin early recovery of capital and interest
carrying costs of the facility during construction would reduce the
long-term costs of the project by reducing the amount of financing
costs incurred during the construction period that would otherwise be
capitalized and added to the rate base. In any event, it would not
increase the total costs of the project passed on to carriers, and it
could hasten the arrival of capacity expansions which benefit the
carriers by reducing future congestion. The proposed amendment would
also direct international airports intending to charge for projects
under construction to consult the International Civil Aviation
Organization Document 9562, Airport Economics Manual, Second Edition,
Attachment 6. This document sets forth internationally accepted
principles for charging airport users for projects under construction.
This modification would allow the airport proprietor to raise the
cost of using congested airfield facilities during periods of
congestion or alternatively during all periods of the day in the near
term. The increased cost in turn would provide additional financial
incentives to users to consider alternatives to using
[[Page 3315]]
the airfield when congestion is present, including shifting operations
to off-peak periods or to less congested airports that also serve the
market area of the congested airport, or to serving the airfield more
efficiently such as with up-gauged aircraft.
Including Costs of Secondary Airports in the Rate-Base of a Congested
Airport
The 1996 Rates and Charges Policy permits, in paragraph 2.5.4, the
operator of an airport to include in the rate base of that airport
costs of another airport currently in use if three conditions are met:
(1) The two airports have the same proprietor; (2) the second airport
is currently in use; and (3) the costs of the second airport to be
included in the first airport's rate-base are reasonably related to the
aviation benefits that the second airport provides or is expected to
provide to the aeronautical users of the first airport. Subparagraph
(a) further provides that the third condition will be presumed to be
satisfied if the second airport is designated as a reliever airport to
the first in the FAA's National Plan of Integrated Airport Systems
(NPIAS).
The proposed action would amend subparagraph (a) to add another
category of airports to the presumption--those that the FAA has
designated as secondary airports serving cities, metropolitan areas, or
regions served by congested airports. FAA has identified these airports
and tracks development at these airports in the FAA strategic plan or
``Flight Plan.'' The current list of secondary airports is included as
an appendix to this notice. The FAA will post the current list of
designated secondary airports on its website upon publication of a
final amendment to the policy statement and will keep it up to date.
The proposed action would also add a new subparagraph (e) stating
that the proprietor of a congested airport may consider the presence of
congestion when determining the share of the airfield costs of the
secondary airport to be included in the rate base of the congested
airport during periods of congestion. In no event would the airport
operator be allowed to generate more revenue from airfield charges
imposed at the two airports than the costs of operating the two
airfields.
The proposed action would provide incentives to aircraft operators
to shift service away from congested times at congested airports in two
ways. First, it would raise the cost of operating at the congested
airport during times of congestion. Second, by adding costs of the
secondary airport to the rate base of the first airport, the amendment
would reduce the costs of the secondary airport remaining to be
recovered from landing fees imposed at the secondary airport. Thus the
costs of serving the region through a secondary airport would go down.
These proposed modifications to our rates and charges policy do not
affect an airport's requirement to meaningfully consult with airline
users before increasing fees, charging new fees, or changing fee
methodologies. ``Adequate information'' should be provided by the
airport to permit aeronautical users to evaluate the proprietor's
justification for the charge and to assess the reasonableness of the
charge. Each party should give ``due regard'' to the views of the other
and the airport should consider the effects of fee changes on the users
and the users should consider the financial needs of the airports. A
``good faith effort'' to reach agreement should be made. Additionally,
the Department encourages the airport operator to provide certain
historic financial information for the airport, economic, financial
and/or legal justification for change in fee methodology or level of
fees, traffic information, and planning and forecasting information.\1\
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\1\ DOT Policy Regarding Airport Rates and Charges, 61 Fed. Reg.
32018-32019 and 32022 (1996).
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In the context of considering a fee dispute complaint under 49
U.S.C. 47129, the Department has stated that ``one of the important
goals in the Policy Statement is the encouragement of airport-airline
negotiations in the establishment of new fees or fee increases'' and it
encouraged:
All airports to comply with their obligations under the Policy
Statement and applicable bilateral aviation agreements to engage in
meaningful consultations with carriers in advance of increasing fees
or establishing new fees. We expect airports to justify their fees
and to exchange appropriate financial information to enable the
carriers to fully evaluate those proposed fees.
British Airways PLC and Virgin Atlantic Airways Limited v. The Port
Authority of New York and New Jersey, Order 2000-5-23 at 10. (May 24,
2000).
The Proposed Amendment
Because of the foregoing, the Department of Transportation
proposes to amend the Policy Regarding Airport Rates and Charges,
published at 61 FR 31994 (June 21, 1996) as follows:
Policy Regarding Airport Rates and Charges
Applicability of Policy
1. Add a new subsection E, Congested Airports to read as follows:
E. Congested Airports
The Department considers a congested airport to be--
(1) An airport meeting the definition of congested airport in 49 U.S.C.
47175; or
(2) An airport identified as congested by the Federal Aviation
Administration in the report of the Future Airport Capacity Task
entitled Capacity Needs in the National Airspace System 2007-2025: An
Analysis of Airports and Metropolitan Area Demand and Operational
Capacity in the Future (FACT 2 Report), or any update to that report
that the FAA may publish from time-to-time, except for airports that
will not become congested until 2025.
Fair and Reasonable Fees
2. Amend subsection 2.1 by adding a new paragraph 2.1.4 to read as
follows:
2.1.4 An airport proprietor may impose a two-part landing fee
consisting of a per-operation charge and a weight-based charge provided
that (1) the two-part fee reasonably allocates costs to users on a
rational and economically justified basis; and (2) the total revenues
from the two-part landing fee do not exceed the allowable costs of the
airfield. The operator of a congested airport may consider the presence
of airfield congestion when determining the portion of allowable
airfield costs to be allocated to the per operation charge during
periods of congestion
3. Add a new paragraph 2.5.3 to read as one of the following two
options:
Option One
``2.5.3. The proprietor of a congested airport may include in the
rate-base used to determine airfield charges during periods of
congestion a portion of the costs of airfield projects under
construction so long as (1) all planning and environmental approvals
have been obtained for the projects; (2) the proprietor has obtained
financing for the projects; and (3) construction has commenced on the
projects.
``(a) The airport proprietor must deduct from the total costs of
the projects any principal and interest collected during the period of
construction in determining the amount of project costs to be
capitalized and amortized once the project is commissioned and put in
service.
[[Page 3316]]
``(b) The airport proprietor should consult the International Civil
Aviation Organization Document 9562, Airport Economics Manual, Second
Edition, Attachment 6 before taking action to include costs of a
project under construction in the rate-base of an airport with
international air service.'';
Option Two
``2.5.3. The proprietor of a congested airport may include in the
rate-base used to determine airfield charges a portion of the costs of
airfield projects under construction so long as (1) all planning and
environmental approvals have been obtained for the projects; (2) the
proprietor has obtained financing for the projects; and (3)
construction has commenced on the projects.
``(a) The airport proprietor must deduct from the total costs of
the projects any principal and interest collected during the period of
construction in determining the amount of project costs to be
capitalized and amortized once the project is commissioned and put in
service.
``(b) The airport proprietor should consult the International Civil
Aviation Organization Document 9562, Airport Economics Manual, Second
Edition, Attachment 6 before taking action to include costs of a
project under construction in the rate-base of an airport with
international air service.''
4. Revise paragraph 2.5.4(a) to read as follows:
(a) Element no. 3 above will be presumed to be satisfied if
(1) the other airport is designated as a reliever airport for the
first airport in the FAA's National Plan of Integrated Airport Systems
(``NPIAS''); or
(2) the first airport is congested and the other airport has been
designated by the FAA as a secondary airport serving the community,
metropolitan area, or region served by the first airport.
b. Add a new subparagraph (e) to read as follows:
(e) The proprietor of a congested airport may consider the presence
of airfield congestion at the first airport when determining the
portion of the airfield costs of the other airport to be paid by the
users of the first airport during periods of congestion, so long as the
total airfield revenue recovered from the users of both airports do not
exceed the total allowable costs of the two airports combined.
Issued in Washington, DC, on January 11, 2008.
Mary E. Peters,
Secretary of Transportation.
Robert A. Sturgell,
Acting Administrator, Federal Aviation Administration.
[FR Doc. E8-815 Filed 1-16-08; 8:45 am]
BILLING CODE 4910-13-P