Lazy Summer Days, Lazy Thinking on Airport Fees

Summer travel season is in full swing, with record numbers of Americans hopping on planes to destinations where they can afford to be lazy for just a little while. Unfortunately, if taxpaying travelers relax too much, they will have a different kind of affordability issue on their hands – higher ticket prices brought on by misused fees and a push in Congress to raise other fees higher. 

Even as many strive to get away from the news while vacation, some items can’t help but follow them. Rising passenger volumes, the government’s grounding of the 737 MAX aircraft, and diversion of Transportation Security Administration (TSA) personnel to other security tasks have created logistical headaches for the system and elicited warnings from TSA that Americans should expect long lines at airport screening points.

For their part, airport executives have argued that some of these circumstances, and the need for better terminals, recommend an increase in the Passenger Facility Charge (PFC), a government-mandated fee of $4.50 per enplanement (capped at $18 per round trip) that mainly funds capacity improvements. Some in Congress are proposing to raise this charge by 90 percent or more.

Yet, this argument is not likely to prove persuasive to air travelers, especially when they look just beneath the surface and discover some disquieting facts.

1) The tax and fee burden on a typical airfare can approach or even exceed 20 percent. Making that load even heavier without ensuring those funds are being spent wisely should be unacceptable to anyone boarding a commercial flight. 

2) Long security lines would not be alleviated by forcing passengers to pay a higher PFC. The main reason is that air travel-related TSA services are supposed to be funded by a separate charge – the Passenger Security Fee, or “9/11 Fee.”  As its nickname suggests, this fee was instituted in 2001 and was originally set at $2.50 one-way/ $5.00 round-trip. However, under the Bipartisan Budget Act of 2013, Congress chose to make the fee and those paying it the victims of a gimmick. Lawmakers decided to increase the 9/11 Fee to $5.60/$11.20, and divert most of the resulting revenue for what was termed “deficit reduction.” Today, about one-third of all collections from this fee continue to be siphoned off.

Deficit reduction is a vital and important task, except that here it was nothing more than sleight-of-hand. Chafing under the highly successful spending caps set by the Budget Control Act two years earlier, lawmakers passed the 2013 legislation for the express purpose of spending more. The fee diversion simply masked higher outlays for other government programs. Honest deficit reduction means setting budget priorities, not stealing what are supposed to be user fees.

3) Even as airports warn of massive shortfalls for needed expansion projects, the outlook is not necessarily as dire as they depict. As previous NTU analyses have pointed out, collections under the existing PFC will, by their nature, rise with passenger volumes. At the same time, the Tax Cuts and Jobs Act has preserved a key means of airport financing, while other types of revenue (e.g., concessions from retail establishments) can contribute too. Furthermore, the PFC is not the only source of government funding involved. Though generally used for different purposes, the Airport Improvement Program (AIP) provides large federal sums for items such as runways. Just recently, Transportation Secretary Chao announced the third installment of $3.18 billion in AIP grants this year alone. 

All told, as NTU has noted, “it would appear that airport cash as well as construction is not massively lagging passenger loads.”

4) Of course, the nationwide picture may not reflect the view of individual airports, which may have local needs that simply aren’t being met. For this problem there is a far better solution than raising the PFC: remove federal impediments preventing airports from charging passengers directly for their costs, starting with reform of the Anti-Head Tax Act. This would obviate the PFC and create a true user fee, for which airports would be both responsible and accountable. 

Airports are fond of calling the PFC a user fee, even though the charge is collected by airlines and administered by the federal government -- so airports get the money without the accountability. Now the Passenger Security Fee is suffering from accountability problems of a different kind -- the airlines collect it, the feds get the money, and then the money often goes to functions other than TSA air security.

Before asking travelers for any more of their hard-earned funds, why not require Congress to set spending priorities and require the passenger security fee to be used exclusively for ... passenger security. After a thorough examination of TSA’s budgetary needs – which remain difficult to assess given the agency’s serious oversight lapses – the fee could then be set at a proper and more affordable rate.

Finally, instead of using long security lines as a cover to raise the PFC, airports would do a great public service by lobbying Congress more intensely to make the 9/11 Fee a legitimate user charge again. At the same time, they could ask Congress for modifications to the Anti-Head Tax Act, which would likewise create a true user charge for airports. These steps would be no more radical (and far more beneficial) than saddling Americans with a massive PFC hike that Congress is currently contemplating.