Passenger fee improves airports
Local airports levy and collect “passenger facility charges” to generate the revenue that’s needed to improve and maintain our airports for our passengers. It’s that simple.
A recent guest column in this space suggested that a possible increase in the federally regulated passenger facility charge could endanger Arkansas’ economic growth and prosperity. On behalf of the Northwest Arkansas Regional Airport (XNA), I respectfully disagree.
The charges are simply local-option user fees. Only the people who use airports pay the fees, and the money from the fees goes to improve our local airports.
As Northwest Arkansas residents know, XNA has been an amazing success story. That success is a direct reflection of the growth and development of the businesses and institutions that proudly call Northwest Arkansas home. Since we opened in late 1998, we’ve expanded the terminal building four times and public parking areas seven times, and a parking deck will open in August.
The airport authority was created almost 30 years ago by seven local governments—five cities and two counties. The mayors and county judges of those seven governmental entities appoint representatives to the authority’s board, and those appointments must be confirmed by the city councils, city boards and quorum courts. Over the years, the 14 citizens who make up the airport board have been successful businessmen and women from our region.
In the past 20 years, XNA has completed construction projects totaling over $150 million, and passenger facility charge revenue was one of the sources for those projects. It’s been my privilege to serve on the XNA Board for nine years, the last two as board chairman. I can assure the residents of Northwest Arkansas that the board takes seriously its stewardship of public funds.
The federal government sets the maximum allowable passenger facility charge. But the decision to implement the fee is made at the local level, as are the decisions about spending those funds.
The guest column was correct that airports often maintain fund balances. The XNA Board has set a goal to maintain a fund balance of at least $10 million. Airports often issue revenue bonds to finance long-term capital projects, and the airports get rating agencies to evaluate the airport’s financial position prior to the sale of the bonds. The rating agencies’ guidelines can include provisions that an airport have 400 or 500 days of cash-on-hand to get an investment-grade rating on the bonds. In XNA’s case, that policy decision was made by the board.
The guest column was also correct that airports are now allowed under federal law to levy a fee of $4.50 for each outbound passenger, and that the fee pertains to the first two legs of a trip. At XNA we get $4.39 in that fee revenue for each of our 700,000 annual outbound passengers. (The other 11 cents goes to the airlines for collecting the fees.) For XNA, those fees will generate about $2.8 million this year. Our construction budget usually exceeds $3 million a year.
One of XNA’s current top priorities is to attract a low-cost carrier. We are proud of the fact that the commercial airlines offer direct service to 15 destinations from XNA, and passenger facility charge revenue will help us expand our facilities to accommodate even more airlines and provide passengers with more options.
The American Society of Civil Engineers recently issued an Infrastructure Report Card that put the average investment gap for airports at more than $4 billion a year. By 2025, the infrastructure investment shortfalls could cause the loss of nearly 257,000 jobs and $337 billion in lost GDP. The $4.50 passenger facility charge has remained unchanged for 17 years. Adjusting for inflation, the effective buying power in today’s economy equates to only $2.20.
Also, as airlines have implemented a la carte pricing, federal revenue has suffered because ticket taxes don’t apply to bag fees or other discretionary passenger purchases. Last year commercial airlines collected a combined total of $3.4 billion in bag fees alone.
It should also be noted that the guest column was almost word for word the sales pitch that the commercial airlines have been using for years against a passenger facility charge increase. The airlines know they aren’t the best deliverer of that message. As our passengers know, the airlines have perfected the collection of their own fees.
On behalf of the XNA Board, let me close by saying thank you to the residents of Northwest Arkansas. You have supported regional improvements over the years that have contributed significantly to the quality of life we all enjoy. Please know that we truly appreciate that loyal customer base and are constantly looking for ways to improve our facilities and our services.