Policy Regarding Airport Rates and Charges, 3310-3316 [E8-815]

Agencies

• Federal Aviation Administration
• DEPARTMENT OF TRANSPORTATION
• Office of the Secretary

[Federal Register Volume 73, Number 12 (Thursday, January 17, 2008)]
[Notices]
[Pages 3310-3316]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-815]



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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 https://
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 
https://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 
https://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 https://
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 (https://
www.regulations.gov/search);
    (2) Visiting the FAA's Regulations and Policies Web page at https://
www.faa.gov/regulations_policies; or
    (3) Accessing the Government Printing Office's Web page at https://
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

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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.

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    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\
---------------------------------------------------------------------------

    \1\ DOT Policy Regarding Airport Rates and Charges, 61 Fed. Reg. 
32018-32019 and 32022 (1996).
---------------------------------------------------------------------------

     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