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AIRPORT DESIGN Last modified on January 9, 2020

Terminally challenged

ACI-NA president and CEO, Kevin Burke, outlines the infrastructure development challenges facing US airports over the next five years and beyond.

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Fresh off a chaotic holiday travel season and the busiest summer season on record, 2019 has marked another impressive year in passenger and cargo traffic at America’s airports.

US airports remain some of the busiest in the world, with several airports ranking among the world’s top 20 airports for passengers and, importantly, for cargo. Our airports are busy places, and they are only getting busier each year.

With growing passenger enplanements and aging facilities, there is no doubt that there are tremendous airport infrastructure needs in the United States.

America’s airports are fundamental components of the nation’s transportation infrastructure and powerful engines for economic development in local communities, generating in excess of $1.4 trillion in annual economic activity and supporting more than 11.5 million jobs.

While passenger traffic through airport facilities continues to grow at a record pace – 1.8 billion passengers and 33.3 million metric tonnes of cargo passed through US airports in 2018 – our outdated aviation infrastructure cannot keep pace with this overwhelming demand and far too many airports around the country are overcrowded and cramped.

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The capacity crunch

To meet the capacity demands of the future with safe, efficient, and modern facilities that passengers and cargo shippers expect, US airports need to make new investments to maintain and modernise our nation’s airport infrastructure.

In fact, America’s airports require nearly $130 billion in infrastructure upgrades by 2023, with more than 56% of the needs inside our aging terminals.

Inadequate airport infrastructure that fails to meet the growing needs of local businesses and tourists puts in jeopardy the continued economic growth of American cities, states and regions. From established metropolitan areas to burgeoning growth regions to small communities, sustained economic growth depends on our ability to invest in our airports.

Airport investment also promotes much-needed competition in the airline industry. New investments in airports can be valuable tools in helping local communities attract new air carriers, which increases competition and leads to lower airfares for passengers.

Airports need additional resources to build the terminals, gates and ramps necessary to attract new air carriers and allow existing ones to expand service. The travelling public gets more choices and lower airfares when airports can build the facilities that provide more airline options and more service alternatives.

In addition to the impact on local economies, deferred airport investment over the past two decades has challenged the ability of airports to deal with the evolving threats posed to aviation security.

We live in vastly different times than when most US airports were built, and the airports we have today simply were not designed and outfitted for a post-9/11 world that requires us to maximise both efficiency and security.

Airports have continually called on the US Congress to modernise the outdated federal cap on the Passenger Facility Charge (PFC) in order to give airports more flexibility to self-finance and leverage private investment without the need for additional taxpayer dollars.

Air travellers and shippers would greatly benefit from airports having the ability to generate more local revenue for terminals, gates, runways and taxiways that would increase capacity, stimulate competition, enhance safety and security, and improve the overall passenger experience.

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Addressing the infrastructure funding shortfall

With America’s airports facing nearly $130 billion in new infrastructure needs across the system and a debt burden of $100 billion from past projects, it is time to find the means to rebuild our nation’s aviation infrastructure and improve the passenger experience for millions of travellers.

It is a common misconception that airports are funded with taxpayer dollars or a general tax on all citizens. In reality infrastructure projects at US airports are funded primarily with federal grants through the FAA’s Airport Improvement Program (AIP), the PFC user fee, and airport-generated revenue from tenant rents and fees.

Airports often turn to capital markets to debt-finance projects, using both PFC-revenue and airport-generated revenue to repay the bonds. Traditionally AIP grants – which prioritise safety improvements – have been used on airfield projects, while PFC user fees – with greater funding flexibility – have gone towards terminal, ground-access, and major-runway projects.

In the case of PFCs, airports often have committed this revenue-stream for years or decades into the future to repay past projects, meaning they have no new money coming into the system to fund future projects.

Under the industry’s current financing-funding model, airports lack stable and predictable funding sources that keep pace with travel growth, rising construction costs, and inflation for these intensive capital projects.

The PFC cap – last adjusted in 2000 – has seen its purchasing power eroded by 50% in the past two decades. And federal airport grants through the AIP have been stagnant for nearly a decade, and will remain so for another five years, under the recently enacted FAA reauthorisation legislation.

Moreover, many airports – even those with sterling credit ratings – have reached their debt capacity and either cannot finance new projects or have had to phase in their projects over a longer timeframe, increasing the costs and delaying the benefits for passengers.

Fortunately, we can rebuild America’s airports without raising taxes or adding to deficit spending by modernising the federal cap on the PFC. Modestly adjusting the federal cap on local PFCs would allow airports to take control of their own investment decisions and become more financially self-sufficient.

Airports could build the appropriate facilities to meet the travel demands and customer expectations of their community.

PFCs are imposed by states or units of local government that own or operate airports; so they are not collected by the federal government, not spent by the federal government, and not deposited into the US Treasury. Instead, PFCs go directly to fund local airport projects approved by the FAA with input from airlines and local communities.

At a time of mounting pressure to reduce government spending, modernising the US government’s PFC cap is the simplest and most free-market option for providing airports with the locally controlled self-help they need to finance vital infrastructure projects.

It would allow airports of all sizes to reduce costs and start building essential infrastructure projects more quickly to meet the travel demands of today and challenges of tomorrow.

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