Airports seek improvement dollars elsewhere as federal fiscal woes deepen

10/14/2013 3:21 PM

10/15/2013 5:36 PM

The nation’s airports once counted on billions of dollars in federal grants to upgrade their facilities, but in an increasingly uncertain fiscal environment, some would prefer to leave the money on the table and leverage their own resources instead.

For three decades, the federal Airport Improvement Program has helped airports build new runways, make safety improvements and pay for planning and environmental studies, funded by taxes on airline tickets and aviation fuel.

But Washington’s erratic approach to budgeting has tested airports’ traditional dependency on federal funds, and some airport directors have had enough.

“We want the government out of this,” said Mark VanLoh, the director of the Aviation Department in Kansas City, Mo.

He’s planning a $1.2 billion remake of Kansas City International Airport, but he doesn’t want to wait for the federal government to get its act together. Instead, he wants Congress to raise a per-ticket fee to pay for the improvements, a move that lawmakers and airlines oppose.

“The airlines have been very successful as characterizing it as a tax or a tax increase,” said Joel Bacon, the vice president of federal affairs at the American Association of Airport Executives, an industry group. “It’s a local fee.”

Airport megaprojects such as the one planned for Kansas City are partly financed with the Passenger Facility Charge, which each traveler pays with every ticket purchase. The fee has lost value to inflation since Congress capped it at $4.50 in 2000, according to the Airports Council International-North America, an industry group.

“With inflation, we’re not getting any money out of it to construct anything,” VanLoh said. “It’s really worthless.”

VanLoh said that if Congress allowed airports to charge $7 to $8 per ticket, he wouldn’t need any federal airport improvement funds. “We’re not looking for a very large amount,” he said.

VanLoh said he expected to receive no more than $30 million to $40 million from the Airport Improvement Program, money that would help pay for infrastructure around a new terminal. That’s far less than other airports have received in recent years for similar projects.

Sacramento International Airport in California got $59 million for a $1 billion makeover that was finished in 2011. Indianapolis International Airport got twice that much for its $1 billion project, completed in 2008.

As recently as 2011, the program made $3.5 billion a year in grants available to airports.

“In general, there’s a frustration on being dependent on the government for infrastructure dollars,” Bacon said. “You’ve just got this constant crisis to crisis.”

The Federal Aviation Administration shut down temporarily in 2011 after Congress couldn’t agree to authorize funding for the agency. Lawmakers passed 23 stopgap funding bills for the FAA until they finally agreed on longer-term legislation last year. But it expires in 2015, and the uncertainty makes it harder for airports to plan.

“That’s the one that really puts airports on hold,” VanLoh said.

Then sequestration – the across-the-board spending cuts enacted by Congress – kicked in last spring, leading the FAA to furlough air traffic controllers. Amid a backlash from the very lawmakers who approved the law, the FAA brought the controllers back to work by paying them with $253 million in funds intended for airport improvements.

“They took money that passengers paid for airport improvements and used it to essentially plug that hole in the FAA budget,” said Debby McElroy, the interim president of Airports Council International-North America. “We are very concerned that it might happen again.”

The FAA furloughed 15,000 employees – a third of its workforce – on Oct. 1 as the federal government partially shut down.

Groups that represent airports want the next FAA bill to give airports the freedom to collect higher passenger fees and spend the money how they see fit.

“We have advocated providing more local empowerment for airports,” McElroy said.

Congress has shown little willingness, however, to change the fee, with the airlines leading the opposition.

Raising the passenger charge “will drive up the cost of flying for millions of Americans who rely on air travel,” said Vaughn Jennings, a spokesman for Airlines for America, an industry group.

VanLoh noted that airlines collected $7 billion in checked-bag and ticket-change fees last year. Such ancillary fees have become a major source of revenue for airlines.

“When they charge somebody a $200 change fee or a $45 bag fee, I don’t get any of that,” he said. “The government doesn’t, either.”

Air carriers are finally becoming profitable after weathering years of recessions, terrorist attacks and soaring fuel prices, McElroy said, and they want to keep their costs low. But airports need to modernize aging facilities.

“There’s always a disconnect between what airlines want and what airports want,” said Tom Reich, the director of air service development at AvPORTS, an industry consulting firm.

VanLoh also has to convince residents that they need a new airport. In Missouri, voters must approve the bond measure that’s needed to finance the project, though none of the money would ultimately come from local taxpayers.

Many travelers like the 40-year-old airport just the way it is. It has three separate terminals that give fliers a very short walk from their cars to their gates. But the facility wasn’t designed for the kind of passenger security screening that’s become standard since the Sept. 11, 2001, terrorist attacks, resulting in greater expense.

“It’s terribly inefficient,” VanLoh said.

The airport also lacks food vendors and retail outlets, which serve two functions in modern airports: providing comfort to passengers and revenue the airport can use to pay down construction bonds. VanLoh said the Kansas City airport earned only 63 cents per passenger on such sales when it could be earning $3.

He said the airport could spend money renovating its “functionally obsolete” terminal instead of building a new one but that it would be back to the drawing board again in 10 years.

“We cannot maintain this facility and continue to attract flights,” he said. “God forbid we lose it to St. Louis.”

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