Policy Regarding Airport Rates and Charges, 40430-40445 [08-1430]

Agencies

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

[Federal Register Volume 73, Number 135 (Monday, July 14, 2008)]
[Notices]
[Pages 40430-40445]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 08-1430]


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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 amendment to policy statement.

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SUMMARY: This action amends 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 adopts 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: This policy statement is effective July 14, 2008.

ADDRESSES: 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: 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:

Availability of Documents

    You can get an electronic copy of this notice and all other 
documents in this docket 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.

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 policy statements establishing standards or 
guidelines the Secretary will use in determining the reasonableness of 
airport fees charged to airlines under section 47129.

Background

    On January 17, 2008, the Department of Transportation published a 
notice in the Federal Register proposing 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'' or ``1996 Policy''). (73 
FR 3310, January 17, 2008). The comment period on the notice was 
extended to April 3, 2008. (73 FR 7626, February 8, 2008). The notice 
proposed three amendments to the 1996 Policy (technically two 
modifications and one clarification). These amendments were 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. The notice noted that any charges imposed on 
international operations must also comply with the international 
obligations of the United States.
    Specifically, the notice first proposed to clarify the 1996 Policy 
by explicitly acknowledging that airport operators are authorized 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, the notice 
proposed 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

[[Page 40431]]

airfield costs of other, underutilized airports owned and operated by 
the same proprietor. Third, the notice proposed 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. Under the existing 
policy, costs of new or reconstructed airfield facilities could 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 notice proposed two alternatives for charges for 
projects under construction. 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 of the day. Because the latter two 
proposed amendments would apply only at congested airports, the notice 
proposed to add a definition of ``congested airport'' in the 
Applicability section of the 1996 Policy based upon 49 U.S.C. 47175(2).

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. 
The Department's rules of practice and procedure for enforcement 
proceedings involving Federally assisted airports are set forth in 14 
CFR Part 16.
    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 a proceeding concerning airport fees are contained in 
Subpart F, Title 14 CFR 302.601-302.609.

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 51836, 
October 12, 1994); an Interim Policy (60 FR 6906, February 3, 1995); 
and a further supplemental notice of proposed policy (60 FR 47012, 
September 8, 1995).
    The Air Transport Association of America (ATA), on behalf of its 
member airlines, and the City of Los Angeles, operator of Los Angeles 
International Airport, both 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 F.3d 38, amended 
by 129 F.3d 625 (D.C. 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. 
However, under paragraphs 2.2, 2.4, and 2.5.1, for other airport 
facilities and services 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. Air Transport, 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. Air Transport, 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 (AIP) grant assurances, 49 U.S.C. 
47107. In particular, a federally assisted airport sponsor must give 
the Secretary of Transportation and the Federal Aviation Administration 
(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 Tax Act, 49 U.S.C. 40116, which 
allows the airport proprietor 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 (D.C. 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 (D.C. 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, 479 F.3d 
21 (D.C. 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.

Rationale for the Proposal

    The January 17 notice offered a two-part justification for the 
proposed policy changes: First, the increasing congestion and operating 
delays at major airports in the U.S., and second, the potential that 
peak period pricing has to address that congestion. Excess demand has 
already resulted in congestion at certain airports to the point that 
the FAA has taken action to limit access. These airports include 
LaGuardia, JFK International, O'Hare International, and Newark Liberty 
International. A recent study,

[[Page 40432]]

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 worsen in the future in these coastal 
regions, primarily concentrated at Operational Evolution Partnership 
(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.
    The January 17 notice noted that 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 
combining 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 aircraft 
operating during periods of congestion. Third, 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 January 17 notice made clear that the proposed actions did not 
represent true congestion pricing because they did not authorize 
airport proprietors to set fees to balance demand with capacity without 
regard to allowable costs of airfield facilities and services. However, 
enabling proprietors at congested airports to assign additional, but 
still appropriate, costs to the airfield could encourage more efficient 
use of these airports. Airport sponsors would still need to assure that 
the airport is available to the public on reasonable terms and without 
unjust discrimination and that fees charged for international 
operations comply with the international obligations of the United 
States.

Comments on the Proposals, FAA Docket 2008-0036

    The Department received more than 70 substantive comments on the 
proposals, from U.S. and foreign air carriers, foreign governments and 
airport operators, U.S. airport operators, general aviation aircraft 
operators, local government agencies, trade and nonprofit associations, 
private citizens, an aircraft manufacturer, and a university.
    The comments covered a broad range of subjects, but tended to fall 
within five general issue areas:
    1. Legal authority to adopt the proposed policies.
    2. Adequacy of the guidance contained in the notice.
    3. Effectiveness of the proposals to achieve the stated goals.
    4. Whether the proposed policies are unjustly discriminatory toward 
particular categories of operators and particular markets.
    5. Whether the notice properly acknowledged the discretionary 
authority of airport operators to set rates.
    This summary of comments reflects the major issues raised and does 
not restate each comment received. The Department considered all 
comments received even if not specifically identified and responded to 
here.

1. Legal Authority

    Several airlines argued that the proposed policy is preempted by 
the Airline Deregulation Act's preemption provision, which prohibits 
States or localities from regulating airline rates, routes, or 
services. They contended that airports are thereby preempted from 
pricing airfield access in order to modify airline conduct and that the 
Department accordingly lacks the authority to permit an airport to 
price landing areas to affect airline behavior. They disputed the 
premise that the ``proprietor's exception'' to the preemption provision 
allowed an airport to take congestion into account in formulating its 
charges. They also argued that the Anti-Head Tax Act constrains an 
airport's ability to implement market-based congestion pricing or slot 
auctions.
    Comment: The proposals are in essence congestion pricing, and 
neither the Department nor airport operators are authorized to use 
congestion pricing in establishing airfield charges. Many of the 
carrier comments equated the proposals to market-based congestion 
pricing. One association submitted a legal opinion concluding that 
neither the Department nor airports have the authority to impose such 
congestion pricing.
    Response: The notice made clear that the purpose of the proposed 
policies was to provide an airport operator with greater flexibility to 
allocate new categories of cost to peak hour landing fees, thereby 
providing an additional means to address peak hour congestion. The 
financing of airfield projects under construction and inclusion of 
airfield costs of secondary airports would use new and non-traditional 
cost allocations to achieve some of the effects of congestion pricing. 
The proposals allow an airport proprietor to assign certain costs to 
airfield charges, but not to charge fees that exceed those costs. Thus, 
the proposals represent pricing based upon costs of providing 
facilities and services rather than use of market-clearing rates to set 
prices. Although the intent of applying those costs to peak hours at a 
congested airport is to encourage changes in airline scheduling or use 
of larger aircraft, the fees utilized are cost-based, and therefore are 
not congestion pricing.
    Comment: Even if cost-based, the proposals depart from established 
ratemaking in two general ways: charging carriers for facilities they 
are not using, because the facilities are at another airport or are not 
yet built; and charging fees higher than direct costs for the express 
purpose of achieving the airport operator's goals relating to airline 
scheduling and fleet mix. Some commenters argued that the assignment of 
future costs or the costs of another airport to carriers at a congested 
airport goes beyond the established principles of cost-based 
ratemaking, and the Department cannot, therefore, consider the 
proposals to reflect cost recovery.
    Response: The proposed policies depart from past practice only in 
expanding the ability of an airport proprietor to rate-base certain 
costs in the landing fee and to expressly permit congested airports to 
include a greater portion of those costs in landing fees during 
congested periods. The result is not additional revenue to the airport, 
because fees remain limited to actual, aggregate costs. Clearly, the 
Department has the authority to amend its policy on airport-airline fee 
reasonableness. The Supreme Court has recognized that the

[[Page 40433]]

Secretary of Transportation is responsible for administering the 
aviation laws and in County of Kent, made clear that the Department 
could adopt policies that would change the rules under which the court 
was deciding that case. Northwest Airlines v. County of Kent, 510 U.S. 
355, 366-367 (1994):
    The Secretary of Transportation is charged with administering the 
federal aviation laws, including the AHTA. His Department is equipped, 
as courts are not, to survey the field nationwide, and to regulate 
based on a full view of the relevant facts and circumstances. If we had 
the benefit of the Secretary's reasoned decision concerning the AHTA's 
permission for the charges in question, we would accord that decision 
substantial deference. See Chevron U.S.A. Inc. v. Natural Resources 
Defense Council, Inc., 467 U.S. 837, 842-845, 104 S. Ct. 2778, 2781-
2783, 81 L. Ed.2d 694 (1984).
    The Supreme Court has also called the Department of Transportation 
the ``superintending agency'' for purposes of applying the Airline 
Deregulation Act's preemption provision over state and municipal 
regulation of airline rates, routes and services. American Airlines, 
Inc. v. Wolens, 513 U.S. 219, 229, fn.6 (1995).
    Lower courts have recognized the superintending role of the 
Secretary of Transportation in administering the Anti-Head Tax Act, 
particularly with respect to fees imposed by airports on airlines. See, 
Port Authority of New York and New Jersey v. U.S. Department of 
Transportation, 479 F.3d 21, 27 (D.C. Cir., 2007); Southwest Air 
Ambulance, Inc. v. City of Las Cruces 268 F.3d 1162, 1170 (10th Cir. 
2001); City of Los Angeles v. U.S. Dept. of Transp., 165 F.3d 972, 978 
(D.C. Cir. 1999); Air Canada v. U.S. Dept. of Transp., 148 F.3d 1142, 
1150-1151; (D.C. Cir. 1998); and New England Legal Foundation v. 
Massachusetts Port Authority, 883 F.2d 157, 172 (1st Cir. 1989).
    Commenters also argued that the purpose of the proposed charges--
which they identify as approximating the effect of congestion pricing 
at congested airports--was beyond the proprietary authority of airport 
operators. This is based on judicial opinions-- e.g., Massport--holding 
that local governments may charge fees to defray their airport costs 
but not to regulate air traffic.
    The Anti-Head Tax Act gives airport proprietors clear and express 
authority to charge airline users landing fees and other charges for 
use of their airport. 49 U.S.C. 40116(e)(2). County of Kent, 510 U.S. 
at 365; Wardair Canada, Inc. v. Florida Department of Revenue, 477 U.S. 
1, 15-16 (1986). The proposals would change the way costs are allocated 
but would not depart from a system in which the airport operator 
charged for actual costs.
    Under our policy, an airport proprietor may establish peak period 
landing fees, for the purpose of reducing congestion, provided the fees 
are properly structured and revenue-neutral. (Note: While the terms 
``peak period'' and ``congested hours'' are used interchangeably on an 
informal basis in this preamble and in responding to comments, the 
final policy defines and uses only the term ``congested hours.'') The 
Department has permitted such fees to be charged when they do not 
exceed the aggregate costs of airfield facilities. The Massport case 
upheld the Department Decision finding that ``while it may be 
appropriate to raise fees in order to invoke market responses during 
periods when the airport is congested, to do this during times when 
there is no shortage of runway capacity penalizes smaller aircraft 
users when they are not imposing congestion related costs on other 
users.'' Investigation into Massport's Landing Fees, Opinion and Order, 
FAA Docket 13-88-2 (December 22, 1988). The Massport case stands for 
the proposition that a properly structured peak period pricing system 
could be found reasonable and not unjustly discriminatory. Reasonable 
peak period fees would not be preempted under 49 U.S.C. 41713 
notwithstanding some impact on air carrier rates, routes or services. 
Opinion and Order at 11; New England Legal Foundation at 165.
    The Airline Deregulation Act does not prevent an airport proprietor 
from charging users for use of the airport facilities and services, 
including peak-period charges. The Deregulation Act's preemption 
provision contains a savings clause permitting an airport proprietor to 
exercise its proprietary powers and rights. An airport may use its 
proprietary powers in a manner that is reasonable, is 
nondiscriminatory, is not an undue burden on interstate commerce, and 
is designed not to conflict with the Airline Deregulation Act and its 
policies. Arapahoe County Public Airport Authority v. FAA, 242 F.3d 
1213, 1221-1222 (10th Cir. 2001).
    The policy defines congested airports and contains other safeguards 
to assure that these fees fulfill the Department's priorities for 
alleviating congestion in the national air transportation system. Any 
fees adopted by an airport pursuant to the Department's Policy would 
have to be consistent with the goals of that Policy.
    Several recent rules and policies issued by the Department show 
that it has consistently interpreted Federal law to authorize properly 
structured peak period pricing programs. First, in promulgating 
regulations to implement the 1990 Airport Noise and Capacity Act (ANCA) 
(49 U.S.C. 47521, et seq.), the Department determined that a peak-
period pricing program, where the objective is to align the number of 
aircraft operations with airport capacity, does not constitute an 
airport noise or access restriction subject to FAA review and approval. 
14 CFR 161.5, definition of ``noise or access restriction.''
    Second, the current Policy on Airport Rates and Charges provides 
that a properly structured peak pricing program that allocates limited 
resources using price during periods of congestion will not be 
considered to be unjustly discriminatory. An airport proprietor may, 
consistent with the policies expressed in the policy statement, 
establish fees that enhance the efficient utilization of the airport. 
61 FR 31994, 32021, Sec.  3 (1996).
    The Airline Deregulation Act's preemption provision does not bar 
airports from taking reasonable, nondiscriminatory measures for a 
purpose within their proprietary authority merely because those 
measures would influence airline behavior. Reasonable, not unjustly 
discriminatory measures taken by an airport operator to align capacity 
and demand consistent with the Department's policy and in order to 
alleviate congestion in the national air transportation system are in 
accordance with Federal policy and are not prohibited because those 
measures have the purpose and effect of influencing airlines to change 
aircraft scheduling practices. See Massport, 883 F.2d at 165, 173-174.
    One commenter cited San Diego Unified Port District v. Gianturco 
(651 F.2d 1306, 9th Cir. (1981)); cert. den. 455 U.S. 1000 (1982) for 
the proposition that an airport's proprietary functions are limited to 
measures designed to insulate an airport proprietor from liability. We 
disagree.
    Gianturco stands for the proposition that a non-airport proprietor 
(in that case, the State of California) may not direct an airport 
proprietor (i.e., the San Diego Unified Port District) to impose a 
curfew on aircraft flights. The decision acknowledged that because an 
airport proprietor bears the monetary liability for excessive aircraft 
noise, it has the proprietary powers to adopt reasonable noise 
regulations. Gianturco did not hold that an airport proprietor's powers 
were limited to the adoption of noise-

[[Page 40434]]

based measures only; similarly, it did not hold that an airport 
proprietor was limited to adopting measures solely designed to insulate 
itself from liability.
    Airport proprietors of course have powers in addition to noise 
controls, including setting fees for the use of the airfield. The Anti-
Head Tax Act provides that authority. 49 U.S.C. 40116(e)(2). See, 
County of Kent, 510 U.S. 355.
    Commenters also claimed that airport-airline charges must relate to 
the costs imposed and benefits received from the charged carrier, 
citing Evansville-Vanderburgh Airport Auth. Dis. v. Delta Airlines, 405 
U.S. 707 (1972) and County of Kent. This test of reasonableness was 
based on the Commerce Clause, and the Supreme Court expressly 
acknowledged that it was within the Department's powers to adopt 
another test of reasonableness, under the Anti-Head Tax Act. The 
Evansville-Vanderburgh court pointed out that the charges did not 
conflict with any federal policies on uniform regulation of air 
transportation, and noted:

    No federal statute or specific congressional action or 
declaration evidences a congressional purpose to deny or pre-empt 
state and local power to levy charges designed to help defray the 
costs of airport construction and maintenance. * * * At least until 
Congress chooses to enact a nation-wide rule, the power [to have 
interstate commerce share a fair share of airport costs] will not be 
denied to the States. 405 U.S. at 721.

    The United States Court of Appeals for the District of Columbia 
Circuit explained, in the Air Canada case, that the Department was not 
obligated to apply a cost-benefit formula for purposes of deciding the 
reasonableness of Miami International Airport's fee allocation 
methodology. Referring to the County of Kent decision, the DC Circuit 
stated:

    [T]he Court made clear that it was not establishing a standard 
for reasonableness under the Anti-Head Tax Act, and that the 
Secretary could establish another standard, whether more or less 
stringent than the standard the Court adopted in Northwest Airlines, 
so long as it was a permissible construction of the statute. We need 
not delve into whether Northwest Airlines requires a cost-benefit 
analysis or any other particular study, nor whether the Department's 
reasonableness standards are consistent with those applied by the 
Supreme Court in Northwest Airlines, because the Department was not 
bound to the standards in that case. [fn. omitted] 148 F.3d 1142 at 
1151-52.

    Comment: The proposals are inconsistent with International Civil 
Aviation Organization (ICAO) standards for airport pricing and violate 
standard provisions in bilateral agreements. Every foreign airline that 
commented on the notice, 34 embassies, the Washington delegation of the 
European Commission, U.S. carriers and others argued that the proposals 
were not consistent with ICAO pricing guidelines or provisions in U.S. 
bilateral agreements (although several foreign carriers expressed a 
preference for per-operation fees over weight-based fees). Some U.S. 
carriers assumed the charges could not apply to foreign carriers due to 
bilateral agreements, and that the charges would, therefore, 
discriminate against U.S. carriers. One association filed comments 
refuting the assertion that ICAO and bilateral provisions prohibit the 
proposed charges.
    Response: For the reasons discussed in part above under Legal 
Authority, the Department believes the proposed charges can be applied 
to U.S. and foreign air carriers alike, consistent with ICAO guidance 
and with U.S. bilateral agreement obligations. First, those documents 
contain provisions for charges like those proposed, as described below. 
Second, the United States Government maintains a formal and 
comprehensive system for regulation of airport charges, including 
administrative and legal forums in which both foreign and U.S. parties 
may challenge the reasonableness of any airport charge. See 14 CFR part 
16 and 49 U.S.C. 47129. The United States Government is fully committed 
to compliance with its international obligations regarding airport 
charges, and the final policy, as adopted by this action, includes in 
its basic statement of principles a clear reminder of the requirement 
that U.S. airport charges comply with those obligations.
    Two-part landing fee. The two-part landing fee will be based on the 
same long-unchallenged rate base as a weight-based fee, so it is 
clearly cost-based. Some foreign carriers argued the fee would 
disproportionately affect foreign carriers by reducing small-aircraft 
feed traffic in peak hours, but that effect would apply to both U.S. 
and foreign carriers, and to both international and domestic long-haul 
flights. Accordingly, we do not find that a two-part landing fee would 
have a disproportionate effect on foreign carriers.
    Moreover, the proposal is consistent with ICAO guidance, which 
expressly states, ``Landing charges should be based on the weight 
formula. * * * However, allowance should be made for the use of a fixed 
charge per aircraft or a combination of a fixed charge with a weight-
related element, in certain circumstances, such as at congested 
airports and during peak periods.'' ICAO's Policies on Charges for 
Airports and Air Navigation Services, Doc 9082/7 (7th Ed. 2004), ]; 26 
(i). It also is consistent with ICAO guidance on airport charging 
systems, which provides that charges ``should be determined on the 
basis of sound accounting principles and may reflect, as required, 
other economic principles, provided that these are in conformity with 
Article 15 of the Convention on International Civil Aviation and other 
principles in the present Policies.'' Id., ] 23(iii).
    Charges for facilities under construction. ICAO guidance expressly 
allows for pre-funding of airport projects particularly those that are 
long-term and of a large-scale. ICAO's Policies on Charges for Airports 
and Air Navigation Services, Doc 9082/7 (7th Ed. 2004), ] 24 states:

    * * * notwithstanding the principles of cost-relatedness for 
charges and of the protection of users from being charged for 
facilities that do not exist or are not provided * * *, prefunding 
of projects may be accepted in specific circumstances where this is 
the most appropriate means of financing long-term, large-scale 
investment, provided that strict safeguards are in place, including 
the following:
    (i) Effective and transparent economic regulation of user 
charges and the related provision of services, including performance 
auditing and ``benchmarking'' (comparison of productivity criteria 
against other similar enterprises);
    (ii) Comprehensive and transparent accounting, with assurances 
that all aviation user charges are, and will remain, earmarked for 
civil aviation services or projects;
    (iii) Advance, transparent and substantive consultation by 
providers and, to the greatest extent possible, agreement with users 
regarding significant projects;
    (iv) Application for a limited period of time with users 
benefiting from lower charges and from smoother transition in 
changes to charges than would otherwise have been the case once new 
facilities or infrastructure in place.

    The Department believes that charging for the costs of airfield 
projects under construction as those costs are incurred, exclusively at 
congested airports for the primary purpose of relieving current 
congestion, can be a ``most appropriate means of financing long term 
large scale projects'' because it can address current congestion 
without increasing total charges to users over time. In fact, financing 
airfield projects under construction through peak hour charges will 
ultimately result in lower charges to carriers, by reducing interest 
costs that would otherwise be capitalized and added to project debt 
charged to airlines through landing fees after the project is 
completed.

[[Page 40435]]

    We note that the proposal adopted by this action to allow recovery 
of construction costs before a project is in use is not ``pre-funding'' 
or ``pre-financing,'' as those terms are used in ICAO guidance and 
elsewhere. The adopted policy does not allow the accumulation of funds 
before a project begins, to be used later. Rather, the policy requires 
that costs be incurred for construction before the charges can be 
assessed, and limits the charges to a reasonable annual amortized 
amount for the costs actually incurred.
    Moreover, the U.S. system of regulation of airport fees, through 
the grant assurances and 49 U.S.C. 40116, provides the safeguards 
recommended by ICAO. U.S. obligations under bilateral air services 
agreements and FAA's AIP program provide the means by which user fees 
can be regulated and transparent accounting can be assured. As noted in 
the proposed policy, ``[t]he Department strongly encourages all 
airports to comply with the obligations * * * to engage in meaningful 
consultation with carriers * * * to justify their fees and to exchange 
appropriate financial information to enable carriers to fully evaluate 
* * * proposed fees.'' The Department also strongly encourages 
substantive consultations between airports and users. Finally, the 
provisions in proposed section 2.5.3(a) are consistent with ICAO 
safeguard (iv), above.
    As to the requirement of U.S. air services agreements, the majority 
of U.S. air services agreements specifically recognize that user 
charges may reflect but not exceed the full cost to the competent 
charging authorities of providing the appropriate airport services. 
(Others simply require that charges be just, reasonable and non-
discriminatory.) These provisions do not preclude funding facilities 
that are still under construction if the charging authority is already 
incurring costs. We note also that the policy requires that all 
planning and environmental approvals have been obtained, that financing 
has been obtained, and that construction has actually commenced, all of 
which go to assure that the airfield facilities charged for will 
actually be provided.
    Some foreign airlines complained that the provision allowing 
charges for facilities under construction would permit an airport to 
build facilities that would not ease congestion, such as terminal 
facilities. Airfield charges are limited to airfield facilities, 
however, and this applies to facilities under construction as well as 
those in use.
    Charges for a secondary airport. Bilateral air services agreements 
recognize that user charges may reflect but not exceed the full cost to 
the competent charging authorities of providing the appropriate airport 
services ``at the airport or within the airport system.'' This language 
clearly indicates that these agreements contemplate charges at one 
airport for costs at another, as long as the charges are justified and 
in compliance with the other standards of the agreement, including 
equitable apportionment.

2. Adequacy of Guidance

    Several airline commenters stated that the proposals were too vague 
to provide useful guidance on implementation, and would simply lead to 
litigation. Airport commenters that generally supported the proposals 
asked for additional guidance about how the costs of projects under 
construction would actually be allowed in current charges, and what 
airports would be eligible to use the proposed fees.
    Comment: Revise the definition of congested airport. Several 
commenters found the definitions of congested airport and congested 
hours incomplete or unsatisfactory. A carrier association commented 
that the definition included many airports that did not have a 
congestion problem justifying extraordinary pricing increases, and some 
airports with no congestion at all, such as St. Louis and Pittsburgh. 
The commenter also questioned the policy of defining airports as 
congested based on their contribution of one percent or more of the 
national delay total, on the basis that many factors could contribute 
to delay other than airfield infrastructure capacity. In contrast, some 
commenters representing airports argued for an expansion of the 
definition, to include airports with congestion issues as defined by 
the airport operator, and airports with local congestion but no role in 
national system delays at all.
    Response: The Department understands why the definition proposed in 
the January 17 notice was not considered sufficiently precise to 
identify an appropriate list of airports eligible for the proposed 
charges. The Department is clarifying here that it interprets 49 U.S.C. 
47175(2) to refer to the most recent 2004 Airport Capacity Benchmark 
Report, which has replaced the 2001 report. The 2004 report includes 35 
airports while the 2001 report examined 31. We expect to update section 
47175(2) as part of the agency's reauthorization legislation. In 
response to these comments, particularly given the status of the 
reauthorization legislation, the Department has revised the definition 
of congested airports. The final policy adopts a definition that 
contains two criteria, one relating to existing congestion and the 
other to future congestion. An airport qualifies as currently congested 
if it accounts for at least one percent of system delays nationally or 
is listed in table 1 of the FAA's Airport Capacity Benchmark Report 
2004. Whether these criteria are met should be determined using the 
most recent year for which delay data are available and the most recent 
Airport Capacity Benchmark Report available. An airport is considered 
congested in the future if it is forecasted to meet a defined threshold 
level of congestion in the FACT 2 study or the most recent update of 
that study. The two criteria produce lists of specific airports, 
current versions of which have been placed in the public docket. The 
group of airports produced by the definition is finite, identifiable, 
and a relatively small portion of the several hundred commercial 
airports in the U.S. However, the list includes not only airports that 
are now congested, but airports that have a real expectation of 
becoming congested in the foreseeable future and would have an interest 
in planning to prevent a congested condition before it occurs.
    We note that two of the fourteen additional airports that qualify 
as congested based upon the 2004 report do not currently have congested 
hours. On balance, it is reasonable to adopt the same definition here 
that Congress used to define congested airports for purposes of 
environmental streamlining in the Vision 100--Century of Aviation 
Reauthorization Act. First, the policy amendments, like the 
environmental streamlining provisions in Vision 100, are intended to 
help reduce airport congestion and delays. Use of a narrower definition 
would reduce the utility of this policy in achieving these goals. 
Second, any viable definition of a congested airport has to reflect the 
dynamic nature of the aviation industry. This means any definition 
adopted by the Department should, like 49 U.S.C. 47175(2), consider not 
only which airports account for the most current delays in any given 
year, but also which airports are the largest in terms of size and 
activity level and have historically played a significant role in the 
national air transportation system. The FAA took these latter factors 
into account in identifying the 35 airports in the 2004 report. There 
is no other comparable list. Third, the FAA currently uses this list of 
airports, known as the operational evolution partnership (OEP) 
airports, to monitor progress in adding capacity as part of its 
strategic planning. Finally,

[[Page 40436]]

the overall list remains viable in terms of identifying the largest 
airports that handle the vast majority of operations. The OEP airports 
include all of the large hub airports, which have 1% or more of the 
total annual passenger enplanements in the country, and 5 medium hub 
airports, which have at least .25% but less than 1% of passenger 
enplanements. All but two of the airports that qualify as congested 
airports only because they are OEP, Pittsburgh and San Diego, ranked 
among the 50 busiest in the country in 2006, according to FAA OPSNET 
data (https://www.aspm.faa.gov/opsnet/sys/main.asp). St. Louis and 
Pittsburgh simply illustrate the point that there is a twofold test for 
using the new fees. The new fees may not be imposed at an airport that 
does not have congested hours, even if it is on the list of ``congested 
airports'' developed by the FAA for planning purposes.
    In response to comments, the Department is also adding a definition 
for congested hours. A congested hour is an hour during which demand 
approaches or exceeds average runway capacity resulting in volume-
related delays. This will typically occur during the most desirable 
peak hours of operation at a congested airport, although some like 
LaGuardia Airport experience congestion throughout the operating day.
    We continue to believe the threshold of one percent of national 
delays is a reliable indicator of an airport's ability to accommodate 
demand. While factors other than the airfield may contribute to 
performance--an example offered was typical low visibility in morning 
hours at San Francisco International Airport--those factors can have a 
direct effect on efficiency and be beyond the ability of the airport 
proprietor or the FAA to change. Accordingly, it is appropriate to use 
a performance measure that takes into account all factors that 
contribute to airfield performance, and the percentage of national 
delays is a reliable indicator of airfield performance.
    The Department is not adopting the recommendation to delegate to 
airport operators the responsibility to determine whether there is 
sufficient congestion to justify the proposed charges. Because the 
policies will increase fees for some users at peak hours, the 
Department believes they should be applied only where objectively 
justified as effective in reducing or preventing congestion that would 
have a significant effect on delays in the national system. The FAA is 
in the best position to make determinations on this effect, and 
believes the definition of congested airport for this purpose should 
remain a responsibility of the Department.
    The Department also declines to extend the proposed pricing options 
to general aviation airports and other commercial airports with little 
or no national impact. This expansion of the pricing policies would 
have no effect on the primary issues the Department is trying to 
address: congestion and delays experienced at peak periods at the most 
heavily used airports, and the ripple effect of those delays throughout 
the national system.
    Comment: The notice did not make clear or place sufficient limits 
on the kinds of costs at a secondary airport in the local system that 
could be included in the rate base at a congested airport.
    Response: The Department agrees that the proposed policy will be 
more useful if it contains more specific guidance about what costs 
could be included in the proposed peak hour charges. Paragraph 2.4 of 
the 1996 Rates and Charges Policy listed specific costs that could be 
charged to the airfield, but that paragraph was vacated by the Air 
Transport Association decision. Clearly only the airfield costs at a 
secondary airport could be included in landing fees at the congested 
airport airfield, as a matter of reasonableness in a cost-based system 
of charges. Within that limitation, the airfield costs that may be 
recovered in the landing fee at the congested airport would be the same 
types of costs that are recoverable from operators at the primary 
airport. Accordingly, as clarification, the final policy adopted notes 
only that costs of the second airport that may be included in the rate 
base of the first airport are limited to customary airfield cost center 
charges for the first airport. If the airfield costs rated-based at the 
first (congested) airport are reasonable, they are reasonable for the 
airfield at the secondary airport as well. If carriers had agreed in a 
lease and use agreement to include other, non-airfield costs in a 
landing fee, those costs at the secondary airport could not be included 
in the fee at the primary airport (unless the carriers agree), because 
they are not costs of the airfield itself.
    Comment: The proposed policy lacks guidance on how principal and 
interest costs of projects under construction could be rate-based in 
current charges, and how much of the project cost could be included.
    Response: First, we would expect airports to conform as closely as 
possible to current commercial practice in recovering project costs 
after a project is completed and in use. Typically a project under 
construction would be financed by interim financing until the project 
is completed, at which time the total costs would be capitalized and 
financed through a long-term bond issue. When the project is completed, 
carriers would be charged the annual debt service over the amortization 
period of the bonds. For charges imposed on carriers while the project 
is under construction, the final policy states that the amount of 
project costs included in charges during the construction period cannot 
exceed an amount corresponding to debt service calculated in accordance 
with a commercially reasonable amortization period, which would 
consider the expected period of the permanent financing and not simply 
the time required for construction. The policy continues to make clear 
that project costs paid for during the construction period will be 
deducted from total costs financed later. We believe this guidance is 
sufficient to prevent excessive annual charges for project costs during 
construction.
    Comment: It is not clear whether the three proposed charges can be 
used in combination.
    Response: The preamble to the notice noted that 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.

3. Effectiveness

    Many air carriers and carrier associations commented that at least 
some of the proposals would not have any effect on congestion, but 
would simply increase costs. Some airports and airport associations, 
even though supportive of the additional flexibility in addressing peak 
hour congestion, expressed concern about the effectiveness of the 
proposals in influencing carrier scheduling in peak hours.
    Comment: Charging for facilities under construction and costs of a 
secondary airport would still not produce landing fees high enough to 
induce carriers to move flights out of peak hours. The basic comment on 
effectiveness of two of the proposals--forward financing and support of 
secondary airports--is that the increased costs of peak period 
operation would still not be enough to induce carriers to schedule 
fewer flights in those hours, or to move flights to a secondary 
airport. As long as the fees must remain revenue-neutral, even with 
added costs in the peak hours, they cannot be set at an effective 
market-

[[Page 40437]]

clearing rate. Reasons offered in support of this conclusion included:
     There are too many negative consequences for carriers of 
not maintaining flights at peak hours, including coordination with 
schedules throughout the system, and marketing considerations of how 
flights appear in reservation systems;
     Landing fees are only a portion of carrier costs for a 
flight;
     Carriers have investment in facilities at the airport that 
must be productively used;
     The costs of higher landing fees at one airport would be 
absorbed by carriers on a system-wide basis, and would not directly 
affect the calculation of benefits of the targeted flights at that 
airport;
     Increased landing fees for carriers have no disincentive 
effect on passengers, who are the actual drivers of demand for service 
in peak hours;
     Even if fees are passed on directly to passengers, those 
passengers are still likely to absorb the additional cost for the 
convenience of traveling at desired times.
    Response: Other commenters argued that the increased fees did not 
have to have an effect on all operators or flights to be effective. 
Rather, a decision by carriers to cancel or reschedule just a few 
marginally profitable operations would be sufficient to achieve some 
beneficial effect on congestion in peak hours.
    We agree. The notice did not claim that the proposed policies would 
have the exact effect of real congestion pricing, because they would 
not result in setting rates at the perfect market-clearing price. 
Without any differentiation between peak and off-peak fees, which is 
the almost universal case at present, there is no incentive for 
airlines to reschedule even the most marginally profitable operation to 
avoid peak hours. If an increase in fees adversely affected the cost-
effectiveness of even a few of these operations, there would be a 
positive effect on congestion and a reduction in delays during peak 
hours.
    Comment: The proposal to allow a 2-part landing fee does not 
require that the airport be congested, which would permit a landing fee 
that discriminates against smaller aircraft when there is no 
justification related to congestion.
    Response: The existing policy does not expressly limit the forms in 
which airport fees can be imposed, as long as they are reasonable, not 
unjustly discriminatory, and limited to recovery of appropriate airport 
costs. Conventional weight-based fees meet these tests. The policy 
amendments make clear that a 2-part fee can be justified in a situation 
where demand exceeds capacity in peak hours, and smaller aircraft 
serving relatively fewer passengers contribute to the peak hour 
congestion. In this case a 2-part fee could be justified by its 
beneficial effect on peak hour congestion without significantly 
affecting the number of passengers able to travel at peak hours. The 
amendments do not limit the use of a 2-part fee to congested hours, but 
it is not clear what other circumstances might justify such a fee. In 
any event, the fee should be justified based upon meaningful 
consultation with carriers, including exchange of appropriate financial 
information. The fee, if challenged, would require evidence that it is 
reasonable, not unjustly discriminatory, and based upon legitimate 
objectives.
    Comment: If the proposed charges are adopted as final policy, the 
Department should adopt Option 1, limiting charges for secondary 
airports to peak hours, to avoid unfairly penalizing carriers already 
operating outside of peak hours. Carriers that already operate outside 
of peak hours noted that imposing the costs of secondary airports and 
projects under construction in all hours, rather than just congested 
hours, would increase costs for operators that have no operations in 
peak hours. Thus the proposed policy would simply increase costs for 
these operators with no incentive effect on peak hour congestion.
    Response: We agree. This comment argues for limiting the additional 
proposed charges to flights in congested hours, Option 1. Otherwise, 
cargo operators and other operators that are already avoiding congested 
time periods would be penalized without any related incentive effect. 
Charging the additional costs in all hours would also result in the 
off-peak operators subsidizing operations during peak hours, actually 
reducing the intended disincentive for operation during those peak 
hours. Limiting charges for secondary airports, as well as facilities 
under construction, to peak hours maximizes the potential 
differentiation between peak and off-peak charges within a revenue-
neutral system, and best serves the purpose for which these charges are 
authorized.
    Comment: The Department did not conduct any analysis of the effects 
of the proposal showing that it would have the intended effect on 
airport congestion.
    Response: This comment is technically correct but presumes that the 
Department needed quantitative analysis before it could conclude that 
the proposals would reduce congestion. The premise of the proposal that 
added costs would result in fewer operations is based on general 
pricing theory, and on the reliable conclusion that at some level of 
cost and unprofitability, a carrier will discontinue or reschedule an 
operation. The Department did not attempt a study of the proposals, 
because a conclusion on the effectiveness at an airport would depend 
entirely on the circumstances at each airport and the details of the 
charges imposed. A simulation of the effect of pricing at an airport 
was conducted by the FAA Center of Excellence for Operations Research 
(NEXTOR) in 2004. This research was done in cooperation with a number 
of stakeholders, including airline participants. While the simulation 
was necessarily a simplification of an actual airport situation, the 
results did indicate that peak period pricing would affect carrier use 
of peak hours.
    The Department agrees with commenters that the proposed policies 
should not be used to increase costs to operators at a particular 
airport unless there is reason to believe they would have an actual 
positive effect on congestion. That effect could be either to relieve 
existing congestion and reduce delays to an acceptable level, or to 
prevent that level of congestion if it would otherwise occur. The final 
policy language adopted incorporates two changes to reinforce that 
policy.
    Both charges for facilities under construction and charges for a 
secondary airport are authorized only if they would have the effect of 
reducing or preventing a level of congestion serious enough for the 
airport to be identified on an FAA list of airports that either have or 
are forecasted to have among the highest level of operating delays at 
U.S. airports. The fact alone that an airport is congested within the 
definition of the policy is not in itself sufficient to justify 
imposing the fees; the airport proprietor must have reason to believe 
that the added fees in peak periods would have an actual effect in 
reducing or preventing that congestion. The airport proprietor may 
implement the added fees as it would any other fee change. We expect 
the airport proprietor to engage in meaningful consultation with 
airport users before implementing new or increased fees, particularly 
by using a new fee methodology. As we discussed in the Notice of 
Proposed Amendment, the airport proprietor should provide adequate 
information to enable the airlines to evaluate the proprietor's 
justification for the new charges and to assess their reasonableness. 
Each side should thoroughly consider the views of the

[[Page 40438]]

other. As we indicated in the 1996 Rates and Charges Policy, at 
paragraph 1.1.1, and in Appendix 1 to that Policy, we encourage 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. In determining the reasonableness of any 
new fee instituted under this policy, we will consider the 
effectiveness of the fee in addressing congestion. Even in the absence 
of a complaint, the FAA may request a report on the effectiveness of a 
fee imposed under these amendments, under the FAA's authority in 49 
U.S.C. 47107(a)(15) and the AIP grant assurances.
    The policy amendments adopted here include new language emphasizing 
the importance of providing this information to carriers in proposing 
higher peak period fees, including justification for the fees. While 
the airport proprietor's objective justification of the peak period fee 
is not technically required by regulation, it may serve to rebut a 
prima facie case of unreasonableness if the fee is challenged by a 
carrier in a proceeding before the Department under 49 U.S.C. 47129, or 
in an FAA grant assurance investigation under 14 CFR part 16.
    We note that one commenter observed that the Department had in fact 
found that revenue-neutral peak period pricing would not work, in an 
analysis of peak period pricing in connection with the environmental 
impact statement for a proposed runway extension project at 
Philadelphia International Airport. However, that analysis determined 
not that such pricing would not work at all, but rather that it would 
not reduce delays so as to meet the purpose and need of the proposed 
runway project. Specifically, the analysis showed that peak period 
pricing would reduce general aviation and turboprop operations on the 
shorter runways but would have no impact on congestion on the primary 
air carrier runways and therefore would not reduce delays at the 
airport. That example is not pertinent to the policies adopted here. As 
discussed below in more detail, runway development projects are the 
preferred response to demand. Pricing should only be used when new 
runways cannot be made available in time to prevent significant delays 
that would adversely affect the national air transportation system. 
Moreover, that analysis assumed charges only for traditional current 
airfield costs at the congested airport itself, and not the additional 
costs of projects under construction and secondary airports under 
consideration here. So, the Philadelphia analysis does not have any 
relevance for the policies adopted here, and certainly does not 
indicate they would not have an effect on congestion at PHL or any 
other airport.
    An airline employee involved in scheduling noted the complexities 
of airline scheduling and suggested that a carrier's response would not 
necessarily be what the airport intends. The Department recognizes that 
airline scheduling is indeed complex, and that carriers take a number 
of factors into account in deciding where and when to use a certain 
aircraft. However, we continue to believe that the cost of operating at 
a particular airport at a particular time will become a factor at some 
price point. If the proposed policies allow an airport operator to 
reach that price point for even a small number of marginally efficient 
operations in peak hours, the purpose of the policies will have been 
served.
    A carrier association noted that because landing fees work as an 
incentive only on landings, departures in peak hours would be 
unaffected and actually subsidized by operators with more arrivals in a 
congested period. The Department believes that there will typically be 
enough of a balance between arrivals and departures that an incentive 
that works only on arrivals would still work in most cases. Presumably 
this issue would be addressed in an airport operator's consideration of 
the fees before they were adopted. We note that the Massport peak 
period pricing rule applies congestion fees to both arrivals and 
departures, which is permitted under the Department Rates and Charges 
Policy as long as total fees do not exceed aggregate airfield costs.
    Commenters who concluded that the proposals would not reduce 
congestion had different views about what that meant. Many carriers 
argued that because the proposed policy changes would not achieve their 
stated purpose and would simply increase costs to industry and 
travelers, the Department should not adopt the changes. Some airports 
and associations reached the opposite conclusion--that because a 
revenue-neutral pricing system could not raise fees enough to affect 
scheduling, the Department should abandon the requirement for revenue 
neutrality and allow airports to set fees high enough to be effective.
    The Department is required to provide guidance on reasonable fees 
based on our survey of the nationwide aviation field, and we have found 
that airfield fees nationwide typically are based on capital costs plus 
recurring costs associated with maintenance, upgrading, repaving, and 
installation of safety and security systems. The cost-based system of 
user fees also conforms to U.S. international obligations. As mentioned 
above, the Department believes that the newly allowed charges that may 
be incorporated in peak fees can have an effect on enough operations to 
affect congestion, at least at some airports, and should be available 
to the operator of a congested airport where that effect can be 
reasonably predicted and ultimately demonstrated.
    Comment: The two-part landing fee would simply impose additional 
costs without resulting in schedule changes for smaller aircraft as 
intended. The effectiveness of the two-part landing fee is a somewhat 
different issue from the two facilities charges. Most commenters seemed 
to accept that a 2-part landing fee