Policy and Procedures Concerning the Use of Airport Revenue: Petition of the Clark County Department of Aviation to Use a Weight-Based Air Service Incentive Program, 21146-21150 [2012-8399]
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Federal Register / Vol. 77, No. 68 / Monday, April 9, 2012 / Notices
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BILLING CODE 4910–9X–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
[Docket No. FAA–2011–0361]
Policy and Procedures Concerning the
Use of Airport Revenue: Petition of the
Clark County Department of Aviation
to Use a Weight-Based Air Service
Incentive Program
Federal Aviation
Administration (FAA), Department of
Transportation (DOT).
ACTION: Partial granting of petition;
Disposition of comments.
AGENCY:
On April 14, 2011, the FAA
issued a Notice in the Federal Register
(76 FR 21,420, April 15, 2011) seeking
comment on a petition submitted by
Clark County Department of Aviation
(CCDOA), owner and operator of Las
Vegas McCarran International Airport
(Airport). The petition requested a
determination by the Federal Aviation
Administration (‘‘FAA’’) that its
proposed air service incentives program
(‘‘Incentives Program’’), intended to
induce increases in landed weight by air
carriers at McCarran International
Airport (the ‘‘Airport’’ or ‘‘LAS’’) in Las
Vegas, is consistent with Federal law
and policies on the use of airport
revenue and on airport rates and
charges. In its petition, CCDOA
proposed the FAA amend its
interpretation of ‘‘new air service’’ to
include ‘‘increases in landed weight.’’
The FAA has interpreted these
policies, and the underlying Federal
statutes, to permit a temporary waiver of
standard airport fees for carriers that
provide new air service at an airport, as
an incentive to begin or expand air
service. In September 2010, the agency
issued the Air Carrier Incentive Program
Guidebook to provide specific guidance
to airport operators on the use of air
service incentive programs. That
guidance restates FAA’s previously
issued opinions regarding what
constitutes new service as characterized
in the FAA’s Policy and Procedures
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SUMMARY:
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Concerning the Use of Airport Revenue
(Revenue Use Policy) (64 FR 7,696 (Feb.
16, 1999)). Since the inception of the
Revenue Use Policy in 1999, the FAA
has defined new air service as: (a)
Service to an airport destination not
currently served, (b) nonstop service
where no nonstop service is currently
offered, (c) new entrant carrier, and/or
(d) increased frequency of flights to a
specific destination. The FAA’s
interpretation has not permitted an
airport operator to offer an incentive
program that provides discounts based
on increased aircraft weight or an
increased number of seats on existing
flights. CCDOA proposes an incentive
program that would reward air carriers
for an increase in landed weight. An
increase in landed weight could result
from an increase in the size of aircraft
used, or ‘‘upgauging,’’ on existing
flights, consolidation of existing flights,
and/or added flights. CCDOA requests
that the FAA amend existing guidance
to make clear that its proposed incentive
plan is consistent with Federal law and
existing agency policies on the use of
airport revenue and on airport rates and
charges.
This notice responds to the comments
received and grants a portion of the
petition as written.
ADDRESSES: Comments received on the
petition [identified by Docket Number
FAA–2011–0361] are available for
public review in the 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.
Also, you may review public dockets on
the Internet at https://
www.regulations.gov.
FOR FURTHER INFORMATION CONTACT:
Kevin Willis, Manager, Airport
Compliance Division, ACO–100, Federal
Aviation Administration, 800
Independence Avenue SW.,
Washington, DC 20591, telephone (202)
267–3085; facsimile: (202) 267–5257.
SUPPLEMENTARY INFORMATION:
I. The Petition
On February 14, 2011, the Federal
Aviation Administration (FAA) received
a letter and a 13-page memorandum
from counsel for CCDOA, the owner and
operator of McCarran International
Airport in Las Vegas, Nevada,
requesting a determination from the
FAA that CCDOAs proposed air service
incentive program does not conflict
with Federal obligations
In brief, CCDOA stated that the
‘‘objective of the proposed Incentives
Program is to provide an incentive at the
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margin to promote additions to
scheduled air service seat capacity.’’
The program provides, subject to certain
terms and exceptions, that:
* * * all monthly scheduled service
landed weight, by airline, in excess of that
operated in the same month of the prior year,
would receive a credit of up to 100% of the
landing fee (currently $2.26 per 1,000 pounds
of landed weight) paid on the incremental
landed weight.
In addition to new flights, the credit
would apply to existing flights for
which an increase in aircraft size
resulted in an increase in landed
weight.
In its petition, CCDOA makes the
argument that upgauging should be an
eligible incentive because it is
considered new service. CCDOA reasons
in its petition, ‘‘Air travelers, as well as
airports, reasonably regard an upgrade
in the size of equipment used on a flight
to constitute ‘‘new service(s).’’ CCDOA
stated the Revenue Use Policy does not
provide for nor does it exclude
upgauging as a form of new air service.
Finally, the CCDOA argued the
proposed petition is not contradictory to
statute, grant assurance obligations, and
the FAA’s Revenue Use Policy.
The FAA published the Petition and
sought comments on it prior to issuing
a determination.
II. Discussion
A. Summary of Comments
In addition to the CCDOA’s
comments, seven comments were
received in the docket. Five comments
generally supported the petition; two
opposed it. The four airport operator
commenters generally supported the
petition or greater flexibility for
operators to design air service incentive
programs. Of the two airline
commenters, ATA opposed the petition,
while British Airways supported it. One
citizen opposed the petition because it
would not result in savings for
passengers.
Comments in Support of the Petition
In its petition, the CCDOA states it is:
concerned with a temporary, but
precipitous, drop in air service at (LAS) that
has not rebounded as quickly as at other
airports. Landed weight at LAS was down
approximately 17% from Calendar Year 2007
through the 12-month period ending in
September 2010. While some individual
carriers have expanded operations, these
initiatives have fallen well short of restoring
McCarran operations to previous levels. This
drop-off in operations has meant that the
Airport’s airside and terminal facilities are
not optimally utilized. The shortfall in traffic
has also caused a significant drop in Airport
revenue, particularly non-aeronautical
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revenue. While load factors at LAS are high,
the service cutbacks by the carriers are
reflected in a drop in passengers. On average,
the Airport generates approximately $9 per
passenger in non-aeronautical revenue (rental
cars, concessions, taxi fees, gaming, etc.).
Because of the decline in passenger volume,
annual revenue from these sources declined
by approximately $20 million or 10% over a
two year period from FY 2008 to FY 2010.
Additionally, the CCDOA stated the
proposed program is needed to:
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to help induce expansion in air carrier
operations, and thus promote effective
utilization of airside and terminal facilities
and generate additional passengers that, in
turn, increase non-airline revenues that can
be applied to further reduce air carrier
costs(.) (T)he Department has developed the
Incentive Program to provide temporary
relief from fees for increased air service to
LAS. The Department views the downturn in
operations as a short-term anomaly, and the
proposed incentives will be discontinued
when traffic is back on track.
In addition to the Petitioner, two
other airport operators generally
supported the petition or greater
flexibility to allow operators to design
air service incentive programs. The
Wayne County Airport Authority
(WCAA) supported the petition in full.
The WCAA agreed with Petitioner that
the proposal meets the requirements of
federal law and grant agreements, is not
barred by law or other FAA policies, is
not preempted by the Airline
Deregulation Act (ADA), and is not
discriminatory unless one carrier
obtains the incentive and another is
denied the incentive. WCAA also
supported Petitioner’s assertion that the
FAA should interpret ‘‘new service’’ to
include upgauge flights.
The City of St. Louis, owner and
operator of Lambert-St. Louis
International Airport (STL) generally
supported the CCDOA’s Petition to use
weight-based incentive programs. STL
cites its own air carrier use agreement,
which allows for mitigation of landing
fees with increased levels of total
landed weight at the airport. It is
important to note that the STL rate
structure differs from the Petition
because is not an exception nor an
incentive but the basic fee structure
agreed to by all carriers. Also, the trigger
for STL’s program is total landed weight
at the airport, not an individual carrier’s
landed weight. However, STL asserts
the justification is the same as that in
the Petition and supports a weightbased incentive permitted by federal
law.
The Airport Council International,
North America (ACI–NA), supported the
petition and urged FAA to increase
‘‘flexibility in air service incentive
programs.’’ ACI–NA did not believe the
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proposal was discriminatory and did
not believe it conflicted with Federal
law.
Although the American Association of
Airport Executives (AAAE) did not
specifically state it supported the
petition, it did comment that airports
should have maximum flexibility to
structure incentive plans to attract and
retain air service. The FAA views its
comments as generally in favor of
allowing changes to the FAA’s
definitions of the type of service that
qualify.
Finally, the foreign air carrier, British
Airways expressed support for the
petition stating that such incentives will
encourage carriers to consider increased
capacity and/or frequency.
Comments Not Supporting the Petition
The Air Transport Association urged
the FAA to deny the petition stating the
petition lacked a policy rationale, since
the incentive plan is designed only to
increase concession revenue from
passengers, not to obtain new air
service. ATA’s also argued that service
with more seats is not currently defined
as ‘‘new service,’’ and should not be so
defined, because it is not in itself new
entry into new markets. ATA discounts
the CCDOA’s references to FAA’s prior
determinations in Wichita and Port of
Portland, and claims these documents
no not address the question whether
incremental increase in landed weight
may be considered new service. ATA
also states an incremental increase
incentive would be discriminatory,
because some carriers will not be able
to upgauge.
Both proponents and opponents
weighed in on the proposal’s
compliance with the Airline
Deregulation Act of 1978. (Pub. L. 95–
504)
A member of the general public
objected to the petition stating the
benefits provided to carriers will not be
passed on to passengers.
B. Summary of Relevant Law, Grant
Assurance Obligations and Applicable
Policy
Airport sponsors that accept federal
funds under the FAA’s Airport
Improvement Program [49 U.S.C. 47101,
et seq., and 49 U.S.C. 40103(e)], agree to
a set of standard grant assurances. These
include an assurance that airport
revenue will be used for the capital and
operating costs of the airport or airport
system, or certain other purposes. They
also include assurances that fees
charged air carriers will be reasonable,
not unjustly discriminatory, and
substantially comparable to fees charged
other carriers making similar use of the
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airport. Additionally, they prohibit
exclusive rights and encourage airports
to create a fee and rental structure to be
as self-sustaining as possible. In
reviewing this petition, the FAA
determined applicable assurances may
include:
Grant Assurance 22, Economic
Nondiscrimination, implements the
provisions of 49 U.S.C. 47107(a)(1) through
(6). The intent of the assurance and statute
is to address both the reasonableness of
airport access and the prohibition of adopting
unjustly discriminatory conditions as a
potential for limiting access as well as air
carrier agreements.
Grant Assurance 23, Exclusive Rights,
implements the provisions of 49 U.S.C.
40103(e) and 47107(a) (4) and prohibits
airport sponsors from granting exclusive
rights to airport users.
Grant Assurance 24, Fee and Rental
Structure, implements Title 49 U.S.C.
47107(a)(13) by addressing selfsustainability. The intent of the assurance
and statute is for the airport operator to
charge fees that are sufficient to cover as
much of the airport’s costs as is feasible
while maintaining a fee and rental structure
consistent with the sponsor’s other federal
obligations.
Grant Assurance 25, Airport Revenue Use,
implements Title 49 U.S.C. 47107(b)(1)
which requires that grant agreements for
airport development grants include an
assurance that ‘‘the revenues generated by a
public airport will be expended for the
capital or operating costs of—(A) The airport;
(B) the local airport system; or (C) other local
facilities owned or operated by the airport
owner or operator and directly and
substantially related to the air transportation
of passengers or property.’’
In addition to the grant assurance
obligations, FAA reviewed the petition’s
compliance with FAA’s Policy
Regarding Airport Rates and Charges
and the Revenue Use Policy.
1. Policy Regarding Airport Rates and
Charges (Rates and Charges Policy)
The Department of Transportation
published the Rates and Charges Policy
on June 21, 1996 (61 FR 31,994), which
was amended on July 14, 2008 (73 FR
40,430). The 2008 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 policy as amended does not
specifically refer to incentive programs
or fee waivers, but provides in part:
3. Aeronautical fees may not unjustly
discriminate against aeronautical users or
user groups.
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2. Policy and Procedures Concerning the
Use of Airport Revenue (Revenue Use
Policy)
In the FAA Authorization Act of 1994,
Congress expressly prohibited ‘‘the use
of airport revenues for general economic
development, marketing and
promotional activities unrelated to
airports or airport systems.’’ [49 U.S.C.
47107(1)(2)(b)]. In accordance with
Congressional direction, the Department
of Transportation and the FAA
published FAA’s Policy and Procedures
Concerning the Use of Airport Revenue.
This policy stood up the air carrier
incentive program. Specifically under
Section V.A.2, Permitted uses of Airport
Revenue, the policy states:
expenditures for the promotion of an airport,
promotion of new air service and
competition at the airport, and marketing of
airport services are legitimate costs of an
airport’s operation. [64 FR 7703]
Section VI.B.12 of the policy,
Prohibited Uses of Airport Revenue,
specifically prohibits the direct subsidy
of air carriers with airport revenues, but
notes:
Prohibited direct subsidies do not include
waivers of fees or discounted landing or
other fees during a promotional period. Any
fee waiver or discount must be offered to all
users of the airport, and provided to all users
that are willing to provide the same type and
level of new services consistent with the
promotional offering. [64 FR 7720]
As stated in the Revenue Use Policy,
The FAA continues to believe that the costs
of operating aircraft, or payments to air
carriers to operate certain flights, are not
reasonably considered an operating cost of an
airport. In addition, payment of subsidy for
air service can be viewed as general regional
economic development and promotion,
rather than airport promotion. [See, 64 FR
7709–7710]
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Finally, in its analysis of the petition,
the FAA applied the 1978 Airline
Deregulation Act (ADA), specifically the
preemption provision, [See, 49 U.S.C.
41713(b)] which states that State and
local governments are prohibited from
enacting or enforcing any provision
having the force or effect of law related
to a ‘‘price, route, or service of an air
carrier.’’
C. Discussion/Analysis
FAA’s Revenue Use Policy
specifically permits airport operators to
offer certain limited term incentives,
using airport revenue, to air carriers that
opt to participate in incentive programs.
Each incentive program is developed
individually and independently by
airport operators; however, the Revenue
Use Policy specifically limits the goals
of incentive programs to encourage (1)
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new service and/or (2) competition.
Over the past decade, FAA has defined
new service to include:
(1) Service to a new airport;
(2) Nonstop service where no nonstop
service currently is offered;
(3) New entrant carrier; and/or
(4) Increased frequency of flight(s) to
a specific destination.
CCDOA petitioned the FAA to expand
the definition of new service to include
‘‘increases in landed weight.’’ CCDOA’s
petition stated an increase in landed
weight could result from an increase in
the size of the aircraft a carrier uses—
also known as ‘‘upgauging’’—on
existing routes, consolidation of existing
flights, and/or added flights. CCDOA
requested the FAA amend its existing
guidance to make clear that its proposed
incentive plan is consistent with
Federal law and existing agency
policies.
CCDOA did not request FAA amend
the Revenue Use Policy; instead,
CCDOA asked the FAA make a finding
that would expand the agency’s
interpretation of new service. FAA has
the legal authority to amend or modify
interpretations of Policy. It is under this
authority that the FAA considered
CCDOA’s petition.
1. Legal Issues
In its request, the CCDOA argues
increases in seats through increases in
landed weight meets the definition of
new air service as prescribed in the
Revenue Use Policy. The Revenue Use
Policy permits airports to offer
incentives to airlines for establishing
‘‘new service’’ to (a) increase travel
using the airport or (b) promote
competition at the airport.
In consideration of CCDOA’s request,
the FAA has reviewed the petition
based on the goals of the air carrier
incentive program as defined in the
Revenue Use Policy, as well as in
accordance with FAA’s airport sponsor
assurances and the Rates and Charges
Policy.
Previously, FAA opined that an
addition of seats on existing flights was
not new service. Moreover, since the
publication of the Revenue Use Policy
in 1999, FAA has been requested on
several occasions to opine on its
definition of ‘‘new service.’’ Over the
past thirteen years, FAA has defined
‘‘new service’’ to include: (a) Service to
an airport destination not currently
served; (b) nonstop service where no
nonstop service is currently offered; (c)
new entrant carrier; and/or (d) increased
frequency of flights to a specific
destination, if incentivized by an airport
would clearly set out to achieve the
goals of the air carrier incentive
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program. However based on a
thoughtful review, FAA agrees that an
increase in seats by adding flights,
which results in increases in landed
weight, can be regarded as new service.
The petition argues that an airport
sponsor should be permitted to offer
incentives to air carriers based on
increases in landed weight. The FAA
separated the petition into two
arguments based on comments received
and FAA’s position that adding seats
through adding flights is considered
new service. First, the FAA analyzed
CCDOA’s position that an air carrier
should be eligible for incentives solely
based on increases in landed weight.
Second, FAA analyzed whether
increases in passenger yields as a result
of increases in landed weight, whether
through adding more flights or
upgauging existing flights, should be
eligible for incentives.
In analyzing the first argument, FAA
determined, that air carriers could
increase landed weight, yet reduce the
number of flights and the number of
seats, which amounts jointly and
individually to a reduction in service.
As such, this argument could actually
undermine one of the two goals of the
incentive program allotted for under the
current Policy (new service or
competition).
FAA then analyzed the second
argument, limiting the scope of review
to the premise that upgauging
individual flights may provide more
passenger seats to a designated market
or to an airline’s overall operation, thus
potentially increasing use of an airport.
Under certain conditions, the FAA has
determined such a program may meet
the goals of new service and/or
competition in conformance with an
airport sponsor’s federal obligations and
existing policy. Adding more passenger
seats to an air carrier’s existing flight
schedule through upgauging may
provide more opportunity for the flying
public, which the FAA agrees may
increase travel using the airport.
However, if an airline decides to
consolidate a schedule to a given market
while adding passenger seats through
upgauging, the airline would be
reducing service offered to the flying
public or limiting air travel options.
This is contrary to the goals of the
program, which is to encourage new
service and increase competition. An
existing, and unchallenged definition of
new service, is adding new flights to
existing routes. Allowing flights to be
consolidated on existing routes may
result in more seats but fewer travel
options for the traveling public. The
FAA cannot view actions that actually
reduce options to be beneficial to the
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traveling public. Therefore, the FAA has
determined that such a program may
conflict with program goals specifically
identified in existing Policy as well as
the airport sponsor’s grant obligations
even conducted without any controls.
Thus FAA reviewed the petition in
light of comments received and FAA’s
existing position, to determine if
upgauging with certain conditions
would be a viable option for expanding
the definition of new service, as the
CCDOA requested in its petition. As a
stand-alone incentive, upgauging could
possibly be viewed as unjustly
discriminatory or conferring an
exclusive right because some airlines
may not have the ability to upgauge
based on the fleet of aircraft used to
operate. It is important to understand it
is not the role of FAA to accommodate
the manner in which an airline or any
aviation-based service provider
structures its enterprise. However, when
using airport revenue to incentivize new
service, it is the FAA’s role to ensure
sponsors do so in a manner consistent
with their federal obligations, including
the Revenue Use Policy. After FAA’s
extensive review, with consideration of
the incentive program’s goals, as well as
an airport’s federal obligation to be not
unjustly discriminatory and not to
confer an exclusive right, the FAA has
determined the definition of new
service can be expanded to include
upgauging with certain conditions that
ensure compliance goals.
In permitting use of airport revenue
for incentive programs, the Revenue Use
Policy specifically ties the use to the
goal of increasing travel or promoting
competition at the airport. Thus, when
FAA analyzed the argument that
upgauging may allow sponsors more
options to increase travel and therefore,
use of the airport, the FAA recognized
the logical conclusion that more seats
on larger aircraft would be a potential
means to that goal. It is critical to note
that the FAA recognizes that the
existence of more seats on an existing
route does not necessarily result in more
passengers. However, the agency has
determined that more seats on larger
aircraft serving existing routes may
indeed allow sponsors to create
incentive programs with more options,
as noted by many commenters to the
petition, in pursuit of the program’s
goals.
Balancing the sponsors’ goal of
increasing travel in accordance with its
federal obligations and the Revenue Use
Policy, with the airline’s business
decisions, the FAA has determined that
an incentive program may include
incentives for upgauging as an
expanded definition of ‘‘new service’’
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with certain conditions. The FAA has
determined that incentive programs
cannot target upgauging as the specific
goal of the program; instead, the goal
must be expanded or added new
service. In the petition before the
agency, the measurable goal would be to
increase use of the airport by increasing
total landed-weight, through upgauging
on currently served routes and/or
additional flights. Such a program
would offer all airlines, regardless of
aircraft fleet, the ability to participate
and thus meet the airport’s obligations
under Grant Assurances 22 and 23. Any
decreases in service on incentive routes
is not eligible for participation in the
incentive program.
FAA’s granting of the CCDOA Petition
in part represents a modification to the
agency’s interpretation of the definition
of ‘‘new service,’’ which is not defined
in the Revenue Use Policy.
2. Implementation
In granting the CCDOA Petition in
part, FAA has determined an incentive
program may implement the goal of
encouraging new service by offering
incentives to air carriers opting to either
upgauge existing flights to aircraft
offering more seats and/or adding a new
flight. When an incentive program
allows air carriers the option to upgauge
aircraft on existing flights to increase
seats and/or adding an additional flight,
the FAA has determined such a program
may meet the definition of new air
service as prescribed in the Revenue
Use Policy with certain conditions.
Previously, the FAA opined that an
addition of seats on an existing flight
was not new service. This is a change
in interpretation on a definition not
defined in the Policy.
An air carrier incentive program that
includes the following conditions may
achieve the goals of the air carrier
incentive program as defined in the
Revenue Use Policy, and in accordance
with statute cited herein:
D A condition permitting an airport
sponsor to use airport revenue as part of
a comprehensive incentive program to
encourage air carriers to increases seats
on existing flights though upgauging
must preclude upgauging from being the
only component of the incentive
program. In other words, upgauging
cannot be the stand alone piece of the
incentive program. The program must
also include offering similarly
formulated incentives for adding new
flights.
D A condition permitting an airport
sponsor to use airport revenue as part of
a comprehensive incentive program
includes prohibiting air carriers
participating in the incentive program
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21149
from cancelling existing service on the
route(s) for which the airport sponsors
is offering incentives. To be eligible for
incentives to upgauge, an air carrier
must demonstrate an increase in service
above and beyond the baseline set by
the market(s) targeted by the incentive
program.
D A condition prohibiting air carriers
from receiving incentives for ‘‘new’’
flights to other markets targeted under
the incentive program when it reduces
service in other markets targeted. The
goal is for airport sponsor’s to increase
use of the airport, thus incentivizing
carriers for swapping service to extend
incentives is not congruent with the
airport sponsor’s goal.
In its review, FAA agrees air carrier
incentive programs should include, as a
matter of compliance, a provision to
ensure air service is not lost nor
substituted. In response to the CCDOA’s
petition, the FAA agrees that an airport
sponsor may exercise oversight and
judgment to ensure its air carrier
incentive program is administered in a
nondiscriminatory manner. Any
allegations of unjustly discriminatory
treatment or other assurance violations
remain within the jurisdiction of the
FAA. The oversight described by the
CCDOA in its petition would allow the
airport operator the ability to set
parameters for carriers for certain
landed weight of different aircraft type.
The FAA believes the manner in which
CCDOA plans to implement its
oversight on landed weight will achieve
the goal of nondiscriminatory
application. While the FAA is
comfortable with CCDOA’s stated
intent, the FAA is not opining on the
actual implementation of the plan. FAA
must remain objective should a
complaint be filed alleging
inconsistences with CCDOA’s plan and
federal obligations.
3. Unintended Consequences
The air carrier incentive program was
not created to test the upper limit of
what a market will yield with respect to
the number of passenger seats
demanded. As such, an incentive
program that allows for upgauging of
aircraft must be constructed in a manner
that does not allow for a perpetual
upgauging of aircraft. Once the
incentive period expires, upgauging
aircraft as a means of offering new
service cannot again be incentivized.
This determination is consistent with
the Revenue Use Policy and Grant
Assurance 24 as it relates to the addition
of flights to a markets schedule as well.
While a sponsor’s air carrier incentive
program may be ongoing for several years,
each air carrier’s incentive period should be
E:\FR\FM\09APN1.SGM
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Federal Register / Vol. 77, No. 68 / Monday, April 9, 2012 / Notices
limited to no more than two years except
under special circumstances (e.g., new
entrants).
limited to one year in accordance with
past guidance.
pmangrum on DSK3VPTVN1PROD with NOTICES
The air carrier incentive program was
never intended to be a maximum
sustainable market growth-incentive
program where airlines would be
incentivized to test the limits of a
markets demands. Rather the program
was offered to airports to encourage
airlines to test new markets and offer
passengers more travel options and in
turn promote more travel using the
airport. The limits on allowable
incentive periods have been vetted by
FAA and deemed reasonable timeframes
for airlines to assess the demand for a
‘‘new service’’ and evaluate the
sustainability to continue that service
without incentives in accordance with
existing policy, grant assurance
obligations, and statute.
III. Conclusion
Incentive programs must walk the fine
line between allowing sponsors the
ability to enhance the viability of new
service through temporary incentives
and simply buying increased use of the
airport. The air carrier incentive
program, as currently constituted,
ensures properly structured programs
will meet the goals for which an air
carrier incentive program is allowed.
FAA has viewed the CCDOAs petition
in order to ensure its proposal will meet
the same goals. As such, FAA agrees
that, with certain conditions in place,
incentive programs may include
opportunities for air carriers to upgauge
existing service. The conditions must
require flight schedules are not
contracted while allowing airlines to
receive proportional credit for
upgauging existing flight(s) to targeted
market(s) within the schedule to
provide more capacity.
While FAA agrees to expand its
interpretation of ‘‘new service’’ to
include upgauging with stated
parameters as an accepted form of new
service, the onus to create an incentive
program that is not unjustly
discriminatory must be borne by the
sponsor responsible for the airportspecific air carrier incentive program.
The conditions included within this
notice are guidance.
All existing guidance not addressed
herein remains applicable. FAA
reminds airport sponsors: Incentives
must not be offered in an unjustly
discriminatory manner; incentives must
be applied similarly to similarly
situated carriers participating in
incentive programs; new entrants are
deemed similarly situated to
incumbents after one year; and
additional incentives for incumbents are
VerDate Mar<15>2010
15:11 Apr 06, 2012
Jkt 226001
Issued in Washington, DC on April 3, 2012.
Randall Fiertz,
Director, Airport Compliance and
Management Analysis.
[FR Doc. 2012–8399 Filed 4–6–12; 8:45 am]
BILLING CODE 4910–13–P
DEPARTMENT OF TRANSPORTATION
Maritime Administration
[Docket No. MARAD 2012 0048]
Requested Administrative Waiver of
the Coastwise Trade Laws: Vessel
ASPIRE; Invitation for Public
Comments
Maritime Administration,
Department of Transportation.
ACTION: Notice.
AGENCY:
As authorized by 46 U.S.C.
12121, the Secretary of Transportation,
as represented by the Maritime
Administration (MARAD), is authorized
to grant waivers of the U.S.-build
requirement of the coastwise laws under
certain circumstances. A request for
such a waiver has been received by
MARAD. The vessel, and a brief
description of the proposed service, is
listed below.
DATES: Submit comments on or before
May 9, 2012.
ADDRESSES: Comments should refer to
docket number MARAD–2012–0048.
Written comments may be submitted by
hand or by mail to the Docket Clerk,
U.S. Department of Transportation,
Docket Operations, M–30, West
Building Ground Floor, Room W12–140,
1200 New Jersey Avenue SE.,
Washington, DC 20590. You may also
send comments electronically via the
Internet at https://www.regulations.gov.
All comments will become part of this
docket and will be available for
inspection and copying at the above
address between 10 a.m. and 5 p.m.,
E.T., Monday through Friday, except
Federal holidays. An electronic version
of this document and all documents
entered into this docket is available on
the World Wide Web at https://
www.regulations.gov.
FOR FURTHER INFORMATION CONTACT:
Joann Spittle, U.S. Department of
Transportation, Maritime
Administration, 1200 New Jersey
Avenue SE., Room W21–203,
Washington, DC 20590. Telephone 202–
366–5979, Email Joann.Spittle@dot.gov.
SUPPLEMENTARY INFORMATION: As
described by the applicant the intended
service of the vessel ASPIRE is:
SUMMARY:
PO 00000
Frm 00084
Fmt 4703
Sfmt 4703
Intended Commercial Use of Vessel:
‘‘Six pack charter for sport fishing.’’
Geographic Region: ‘‘Washington,
Oregon, California.’’ The complete
application is given in DOT docket
MARAD–2012–0048 at https://
www.regulations.gov. Interested parties
may comment on the effect this action
may have on U.S. vessel builders or
businesses in the U.S. that use U.S.-flag
vessels. If MARAD determines, in
accordance with 46 U.S.C. 12121 and
MARAD’s regulations at 46 CFR part
388, that the issuance of the waiver will
have an unduly adverse effect on a U.S.vessel builder or a business that uses
U.S.-flag vessels in that business, a
waiver will not be granted. Comments
should refer to the docket number of
this notice and the vessel name in order
for MARAD to properly consider the
comments. Comments should also state
the commenter’s interest in the waiver
application, and address the waiver
criteria given in § 388.4 of MARAD’s
regulations at 46 CFR Part 388.
Privacy Act
Anyone is able to search the
electronic form of all comments
received into any of our dockets by the
name of the individual submitting the
comment (or signing the comment, if
submitted on behalf of an association,
business, labor union, etc.). You may
review DOT’s complete Privacy Act
Statement in the Federal Register
published on April 11, 2000 (Volume
65, Number 70; Pages 19477–78).
By Order of the Maritime Administrator.
Dated: April 2, 2012.
Julie P. Agarwal,
Secretary, Maritime Administration.
[FR Doc. 2012–8454 Filed 4–6–12; 8:45 am]
BILLING CODE 4910–81–P
DEPARTMENT OF TRANSPORTATION
Maritime Administration
[Docket No. MARAD 2012 0047]
Requested Administrative Waiver of
the Coastwise Trade Laws: Vessel SIR
MARTIN II; Invitation for Public
Comments
Maritime Administration,
Department of Transportation.
ACTION: Notice.
AGENCY:
As authorized by 46 U.S.C.
12121, the Secretary of Transportation,
as represented by the Maritime
Administration (MARAD), is authorized
to grant waivers of the U.S.-build
requirement of the coastwise laws under
certain circumstances. A request for
SUMMARY:
E:\FR\FM\09APN1.SGM
09APN1
]]>Agencies
[Federal Register Volume 77, Number 68 (Monday, April 9, 2012)]
[Notices]
[Pages 21146-21150]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-8399]
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
[Docket No. FAA-2011-0361]
Policy and Procedures Concerning the Use of Airport Revenue:
Petition of the Clark County Department of Aviation to Use a Weight-
Based Air Service Incentive Program
AGENCY: Federal Aviation Administration (FAA), Department of
Transportation (DOT).
ACTION: Partial granting of petition; Disposition of comments.
-----------------------------------------------------------------------
SUMMARY: On April 14, 2011, the FAA issued a Notice in the Federal
Register (76 FR 21,420, April 15, 2011) seeking comment on a petition
submitted by Clark County Department of Aviation (CCDOA), owner and
operator of Las Vegas McCarran International Airport (Airport). The
petition requested a determination by the Federal Aviation
Administration (``FAA'') that its proposed air service incentives
program (``Incentives Program''), intended to induce increases in
landed weight by air carriers at McCarran International Airport (the
``Airport'' or ``LAS'') in Las Vegas, is consistent with Federal law
and policies on the use of airport revenue and on airport rates and
charges. In its petition, CCDOA proposed the FAA amend its
interpretation of ``new air service'' to include ``increases in landed
weight.''
The FAA has interpreted these policies, and the underlying Federal
statutes, to permit a temporary waiver of standard airport fees for
carriers that provide new air service at an airport, as an incentive to
begin or expand air service. In September 2010, the agency issued the
Air Carrier Incentive Program Guidebook to provide specific guidance to
airport operators on the use of air service incentive programs. That
guidance restates FAA's previously issued opinions regarding what
constitutes new service as characterized in the FAA's Policy and
Procedures Concerning the Use of Airport Revenue (Revenue Use Policy)
(64 FR 7,696 (Feb. 16, 1999)). Since the inception of the Revenue Use
Policy in 1999, the FAA has defined new air service as: (a) Service to
an airport destination not currently served, (b) nonstop service where
no nonstop service is currently offered, (c) new entrant carrier, and/
or (d) increased frequency of flights to a specific destination. The
FAA's interpretation has not permitted an airport operator to offer an
incentive program that provides discounts based on increased aircraft
weight or an increased number of seats on existing flights. CCDOA
proposes an incentive program that would reward air carriers for an
increase in landed weight. An increase in landed weight could result
from an increase in the size of aircraft used, or ``upgauging,'' on
existing flights, consolidation of existing flights, and/or added
flights. CCDOA requests that the FAA amend existing guidance to make
clear that its proposed incentive plan is consistent with Federal law
and existing agency policies on the use of airport revenue and on
airport rates and charges.
This notice responds to the comments received and grants a portion
of the petition as written.
ADDRESSES: Comments received on the petition [identified by Docket
Number FAA-2011-0361] are available for public review in the 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. Also, you may review
public dockets on the Internet at https://www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Kevin Willis, Manager, Airport
Compliance Division, ACO-100, Federal Aviation Administration, 800
Independence Avenue SW., Washington, DC 20591, telephone (202) 267-
3085; facsimile: (202) 267-5257.
SUPPLEMENTARY INFORMATION:
I. The Petition
On February 14, 2011, the Federal Aviation Administration (FAA)
received a letter and a 13-page memorandum from counsel for CCDOA, the
owner and operator of McCarran International Airport in Las Vegas,
Nevada, requesting a determination from the FAA that CCDOAs proposed
air service incentive program does not conflict with Federal
obligations
In brief, CCDOA stated that the ``objective of the proposed
Incentives Program is to provide an incentive at the margin to promote
additions to scheduled air service seat capacity.'' The program
provides, subject to certain terms and exceptions, that:
* * * all monthly scheduled service landed weight, by airline,
in excess of that operated in the same month of the prior year,
would receive a credit of up to 100% of the landing fee (currently
$2.26 per 1,000 pounds of landed weight) paid on the incremental
landed weight.
In addition to new flights, the credit would apply to existing
flights for which an increase in aircraft size resulted in an increase
in landed weight.
In its petition, CCDOA makes the argument that upgauging should be
an eligible incentive because it is considered new service. CCDOA
reasons in its petition, ``Air travelers, as well as airports,
reasonably regard an upgrade in the size of equipment used on a flight
to constitute ``new service(s).'' CCDOA stated the Revenue Use Policy
does not provide for nor does it exclude upgauging as a form of new air
service. Finally, the CCDOA argued the proposed petition is not
contradictory to statute, grant assurance obligations, and the FAA's
Revenue Use Policy.
The FAA published the Petition and sought comments on it prior to
issuing a determination.
II. Discussion
A. Summary of Comments
In addition to the CCDOA's comments, seven comments were received
in the docket. Five comments generally supported the petition; two
opposed it. The four airport operator commenters generally supported
the petition or greater flexibility for operators to design air service
incentive programs. Of the two airline commenters, ATA opposed the
petition, while British Airways supported it. One citizen opposed the
petition because it would not result in savings for passengers.
Comments in Support of the Petition
In its petition, the CCDOA states it is:
concerned with a temporary, but precipitous, drop in air service
at (LAS) that has not rebounded as quickly as at other airports.
Landed weight at LAS was down approximately 17% from Calendar Year
2007 through the 12-month period ending in September 2010. While
some individual carriers have expanded operations, these initiatives
have fallen well short of restoring McCarran operations to previous
levels. This drop-off in operations has meant that the Airport's
airside and terminal facilities are not optimally utilized. The
shortfall in traffic has also caused a significant drop in Airport
revenue, particularly non-aeronautical
[[Page 21147]]
revenue. While load factors at LAS are high, the service cutbacks by
the carriers are reflected in a drop in passengers. On average, the
Airport generates approximately $9 per passenger in non-aeronautical
revenue (rental cars, concessions, taxi fees, gaming, etc.). Because
of the decline in passenger volume, annual revenue from these
sources declined by approximately $20 million or 10% over a two year
period from FY 2008 to FY 2010.
Additionally, the CCDOA stated the proposed program is needed to:
to help induce expansion in air carrier operations, and thus
promote effective utilization of airside and terminal facilities and
generate additional passengers that, in turn, increase non-airline
revenues that can be applied to further reduce air carrier costs(.)
(T)he Department has developed the Incentive Program to provide
temporary relief from fees for increased air service to LAS. The
Department views the downturn in operations as a short-term anomaly,
and the proposed incentives will be discontinued when traffic is
back on track.
In addition to the Petitioner, two other airport operators
generally supported the petition or greater flexibility to allow
operators to design air service incentive programs. The Wayne County
Airport Authority (WCAA) supported the petition in full. The WCAA
agreed with Petitioner that the proposal meets the requirements of
federal law and grant agreements, is not barred by law or other FAA
policies, is not preempted by the Airline Deregulation Act (ADA), and
is not discriminatory unless one carrier obtains the incentive and
another is denied the incentive. WCAA also supported Petitioner's
assertion that the FAA should interpret ``new service'' to include
upgauge flights.
The City of St. Louis, owner and operator of Lambert-St. Louis
International Airport (STL) generally supported the CCDOA's Petition to
use weight-based incentive programs. STL cites its own air carrier use
agreement, which allows for mitigation of landing fees with increased
levels of total landed weight at the airport. It is important to note
that the STL rate structure differs from the Petition because is not an
exception nor an incentive but the basic fee structure agreed to by all
carriers. Also, the trigger for STL's program is total landed weight at
the airport, not an individual carrier's landed weight. However, STL
asserts the justification is the same as that in the Petition and
supports a weight-based incentive permitted by federal law.
The Airport Council International, North America (ACI-NA),
supported the petition and urged FAA to increase ``flexibility in air
service incentive programs.'' ACI-NA did not believe the proposal was
discriminatory and did not believe it conflicted with Federal law.
Although the American Association of Airport Executives (AAAE) did
not specifically state it supported the petition, it did comment that
airports should have maximum flexibility to structure incentive plans
to attract and retain air service. The FAA views its comments as
generally in favor of allowing changes to the FAA's definitions of the
type of service that qualify.
Finally, the foreign air carrier, British Airways expressed support
for the petition stating that such incentives will encourage carriers
to consider increased capacity and/or frequency.
Comments Not Supporting the Petition
The Air Transport Association urged the FAA to deny the petition
stating the petition lacked a policy rationale, since the incentive
plan is designed only to increase concession revenue from passengers,
not to obtain new air service. ATA's also argued that service with more
seats is not currently defined as ``new service,'' and should not be so
defined, because it is not in itself new entry into new markets. ATA
discounts the CCDOA's references to FAA's prior determinations in
Wichita and Port of Portland, and claims these documents no not address
the question whether incremental increase in landed weight may be
considered new service. ATA also states an incremental increase
incentive would be discriminatory, because some carriers will not be
able to upgauge.
Both proponents and opponents weighed in on the proposal's
compliance with the Airline Deregulation Act of 1978. (Pub. L. 95-504)
A member of the general public objected to the petition stating the
benefits provided to carriers will not be passed on to passengers.
B. Summary of Relevant Law, Grant Assurance Obligations and Applicable
Policy
Airport sponsors that accept federal funds under the FAA's Airport
Improvement Program [49 U.S.C. 47101, et seq., and 49 U.S.C. 40103(e)],
agree to a set of standard grant assurances. These include an assurance
that airport revenue will be used for the capital and operating costs
of the airport or airport system, or certain other purposes. They also
include assurances that fees charged air carriers will be reasonable,
not unjustly discriminatory, and substantially comparable to fees
charged other carriers making similar use of the airport. Additionally,
they prohibit exclusive rights and encourage airports to create a fee
and rental structure to be as self-sustaining as possible. In reviewing
this petition, the FAA determined applicable assurances may include:
Grant Assurance 22, Economic Nondiscrimination, implements the
provisions of 49 U.S.C. 47107(a)(1) through (6). The intent of the
assurance and statute is to address both the reasonableness of
airport access and the prohibition of adopting unjustly
discriminatory conditions as a potential for limiting access as well
as air carrier agreements.
Grant Assurance 23, Exclusive Rights, implements the provisions
of 49 U.S.C. 40103(e) and 47107(a) (4) and prohibits airport
sponsors from granting exclusive rights to airport users.
Grant Assurance 24, Fee and Rental Structure, implements Title
49 U.S.C. 47107(a)(13) by addressing self-sustainability. The intent
of the assurance and statute is for the airport operator to charge
fees that are sufficient to cover as much of the airport's costs as
is feasible while maintaining a fee and rental structure consistent
with the sponsor's other federal obligations.
Grant Assurance 25, Airport Revenue Use, implements Title 49
U.S.C. 47107(b)(1) which requires that grant agreements for airport
development grants include an assurance that ``the revenues
generated by a public airport will be expended for the capital or
operating costs of--(A) The airport; (B) the local airport system;
or (C) other local facilities owned or operated by the airport owner
or operator and directly and substantially related to the air
transportation of passengers or property.''
In addition to the grant assurance obligations, FAA reviewed the
petition's compliance with FAA's Policy Regarding Airport Rates and
Charges and the Revenue Use Policy.
1. Policy Regarding Airport Rates and Charges (Rates and Charges
Policy)
The Department of Transportation published the Rates and Charges
Policy on June 21, 1996 (61 FR 31,994), which was amended on July 14,
2008 (73 FR 40,430). The 2008 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 policy as amended does not specifically refer to
incentive programs or fee waivers, but provides in part:
3. Aeronautical fees may not unjustly discriminate against
aeronautical users or user groups.
[[Page 21148]]
2. Policy and Procedures Concerning the Use of Airport Revenue (Revenue
Use Policy)
In the FAA Authorization Act of 1994, Congress expressly prohibited
``the use of airport revenues for general economic development,
marketing and promotional activities unrelated to airports or airport
systems.'' [49 U.S.C. 47107(1)(2)(b)]. In accordance with Congressional
direction, the Department of Transportation and the FAA published FAA's
Policy and Procedures Concerning the Use of Airport Revenue. This
policy stood up the air carrier incentive program. Specifically under
Section V.A.2, Permitted uses of Airport Revenue, the policy states:
expenditures for the promotion of an airport, promotion of new air
service and competition at the airport, and marketing of airport
services are legitimate costs of an airport's operation. [64 FR
7703]
Section VI.B.12 of the policy, Prohibited Uses of Airport Revenue,
specifically prohibits the direct subsidy of air carriers with airport
revenues, but notes:
Prohibited direct subsidies do not include waivers of fees or
discounted landing or other fees during a promotional period. Any
fee waiver or discount must be offered to all users of the airport,
and provided to all users that are willing to provide the same type
and level of new services consistent with the promotional offering.
[64 FR 7720]
As stated in the Revenue Use Policy,
The FAA continues to believe that the costs of operating aircraft,
or payments to air carriers to operate certain flights, are not
reasonably considered an operating cost of an airport. In addition,
payment of subsidy for air service can be viewed as general regional
economic development and promotion, rather than airport promotion.
[See, 64 FR 7709-7710]
Finally, in its analysis of the petition, the FAA applied the 1978
Airline Deregulation Act (ADA), specifically the preemption provision,
[See, 49 U.S.C. 41713(b)] which states that State and local governments
are prohibited from enacting or enforcing any provision having the
force or effect of law related to a ``price, route, or service of an
air carrier.''
C. Discussion/Analysis
FAA's Revenue Use Policy specifically permits airport operators to
offer certain limited term incentives, using airport revenue, to air
carriers that opt to participate in incentive programs. Each incentive
program is developed individually and independently by airport
operators; however, the Revenue Use Policy specifically limits the
goals of incentive programs to encourage (1) new service and/or (2)
competition. Over the past decade, FAA has defined new service to
include:
(1) Service to a new airport;
(2) Nonstop service where no nonstop service currently is offered;
(3) New entrant carrier; and/or
(4) Increased frequency of flight(s) to a specific destination.
CCDOA petitioned the FAA to expand the definition of new service to
include ``increases in landed weight.'' CCDOA's petition stated an
increase in landed weight could result from an increase in the size of
the aircraft a carrier uses--also known as ``upgauging''--on existing
routes, consolidation of existing flights, and/or added flights. CCDOA
requested the FAA amend its existing guidance to make clear that its
proposed incentive plan is consistent with Federal law and existing
agency policies.
CCDOA did not request FAA amend the Revenue Use Policy; instead,
CCDOA asked the FAA make a finding that would expand the agency's
interpretation of new service. FAA has the legal authority to amend or
modify interpretations of Policy. It is under this authority that the
FAA considered CCDOA's petition.
1. Legal Issues
In its request, the CCDOA argues increases in seats through
increases in landed weight meets the definition of new air service as
prescribed in the Revenue Use Policy. The Revenue Use Policy permits
airports to offer incentives to airlines for establishing ``new
service'' to (a) increase travel using the airport or (b) promote
competition at the airport.
In consideration of CCDOA's request, the FAA has reviewed the
petition based on the goals of the air carrier incentive program as
defined in the Revenue Use Policy, as well as in accordance with FAA's
airport sponsor assurances and the Rates and Charges Policy.
Previously, FAA opined that an addition of seats on existing
flights was not new service. Moreover, since the publication of the
Revenue Use Policy in 1999, FAA has been requested on several occasions
to opine on its definition of ``new service.'' Over the past thirteen
years, FAA has defined ``new service'' to include: (a) Service to an
airport destination not currently served; (b) nonstop service where no
nonstop service is currently offered; (c) new entrant carrier; and/or
(d) increased frequency of flights to a specific destination, if
incentivized by an airport would clearly set out to achieve the goals
of the air carrier incentive program. However based on a thoughtful
review, FAA agrees that an increase in seats by adding flights, which
results in increases in landed weight, can be regarded as new service.
The petition argues that an airport sponsor should be permitted to
offer incentives to air carriers based on increases in landed weight.
The FAA separated the petition into two arguments based on comments
received and FAA's position that adding seats through adding flights is
considered new service. First, the FAA analyzed CCDOA's position that
an air carrier should be eligible for incentives solely based on
increases in landed weight. Second, FAA analyzed whether increases in
passenger yields as a result of increases in landed weight, whether
through adding more flights or upgauging existing flights, should be
eligible for incentives.
In analyzing the first argument, FAA determined, that air carriers
could increase landed weight, yet reduce the number of flights and the
number of seats, which amounts jointly and individually to a reduction
in service. As such, this argument could actually undermine one of the
two goals of the incentive program allotted for under the current
Policy (new service or competition).
FAA then analyzed the second argument, limiting the scope of review
to the premise that upgauging individual flights may provide more
passenger seats to a designated market or to an airline's overall
operation, thus potentially increasing use of an airport. Under certain
conditions, the FAA has determined such a program may meet the goals of
new service and/or competition in conformance with an airport sponsor's
federal obligations and existing policy. Adding more passenger seats to
an air carrier's existing flight schedule through upgauging may provide
more opportunity for the flying public, which the FAA agrees may
increase travel using the airport. However, if an airline decides to
consolidate a schedule to a given market while adding passenger seats
through upgauging, the airline would be reducing service offered to the
flying public or limiting air travel options. This is contrary to the
goals of the program, which is to encourage new service and increase
competition. An existing, and unchallenged definition of new service,
is adding new flights to existing routes. Allowing flights to be
consolidated on existing routes may result in more seats but fewer
travel options for the traveling public. The FAA cannot view actions
that actually reduce options to be beneficial to the
[[Page 21149]]
traveling public. Therefore, the FAA has determined that such a program
may conflict with program goals specifically identified in existing
Policy as well as the airport sponsor's grant obligations even
conducted without any controls.
Thus FAA reviewed the petition in light of comments received and
FAA's existing position, to determine if upgauging with certain
conditions would be a viable option for expanding the definition of new
service, as the CCDOA requested in its petition. As a stand-alone
incentive, upgauging could possibly be viewed as unjustly
discriminatory or conferring an exclusive right because some airlines
may not have the ability to upgauge based on the fleet of aircraft used
to operate. It is important to understand it is not the role of FAA to
accommodate the manner in which an airline or any aviation-based
service provider structures its enterprise. However, when using airport
revenue to incentivize new service, it is the FAA's role to ensure
sponsors do so in a manner consistent with their federal obligations,
including the Revenue Use Policy. After FAA's extensive review, with
consideration of the incentive program's goals, as well as an airport's
federal obligation to be not unjustly discriminatory and not to confer
an exclusive right, the FAA has determined the definition of new
service can be expanded to include upgauging with certain conditions
that ensure compliance goals.
In permitting use of airport revenue for incentive programs, the
Revenue Use Policy specifically ties the use to the goal of increasing
travel or promoting competition at the airport. Thus, when FAA analyzed
the argument that upgauging may allow sponsors more options to increase
travel and therefore, use of the airport, the FAA recognized the
logical conclusion that more seats on larger aircraft would be a
potential means to that goal. It is critical to note that the FAA
recognizes that the existence of more seats on an existing route does
not necessarily result in more passengers. However, the agency has
determined that more seats on larger aircraft serving existing routes
may indeed allow sponsors to create incentive programs with more
options, as noted by many commenters to the petition, in pursuit of the
program's goals.
Balancing the sponsors' goal of increasing travel in accordance
with its federal obligations and the Revenue Use Policy, with the
airline's business decisions, the FAA has determined that an incentive
program may include incentives for upgauging as an expanded definition
of ``new service'' with certain conditions. The FAA has determined that
incentive programs cannot target upgauging as the specific goal of the
program; instead, the goal must be expanded or added new service. In
the petition before the agency, the measurable goal would be to
increase use of the airport by increasing total landed-weight, through
upgauging on currently served routes and/or additional flights. Such a
program would offer all airlines, regardless of aircraft fleet, the
ability to participate and thus meet the airport's obligations under
Grant Assurances 22 and 23. Any decreases in service on incentive
routes is not eligible for participation in the incentive program.
FAA's granting of the CCDOA Petition in part represents a
modification to the agency's interpretation of the definition of ``new
service,'' which is not defined in the Revenue Use Policy.
2. Implementation
In granting the CCDOA Petition in part, FAA has determined an
incentive program may implement the goal of encouraging new service by
offering incentives to air carriers opting to either upgauge existing
flights to aircraft offering more seats and/or adding a new flight.
When an incentive program allows air carriers the option to upgauge
aircraft on existing flights to increase seats and/or adding an
additional flight, the FAA has determined such a program may meet the
definition of new air service as prescribed in the Revenue Use Policy
with certain conditions. Previously, the FAA opined that an addition of
seats on an existing flight was not new service. This is a change in
interpretation on a definition not defined in the Policy.
An air carrier incentive program that includes the following
conditions may achieve the goals of the air carrier incentive program
as defined in the Revenue Use Policy, and in accordance with statute
cited herein:
[ssquf] A condition permitting an airport sponsor to use airport
revenue as part of a comprehensive incentive program to encourage air
carriers to increases seats on existing flights though upgauging must
preclude upgauging from being the only component of the incentive
program. In other words, upgauging cannot be the stand alone piece of
the incentive program. The program must also include offering similarly
formulated incentives for adding new flights.
[ssquf] A condition permitting an airport sponsor to use airport
revenue as part of a comprehensive incentive program includes
prohibiting air carriers participating in the incentive program from
cancelling existing service on the route(s) for which the airport
sponsors is offering incentives. To be eligible for incentives to
upgauge, an air carrier must demonstrate an increase in service above
and beyond the baseline set by the market(s) targeted by the incentive
program.
[ssquf] A condition prohibiting air carriers from receiving
incentives for ``new'' flights to other markets targeted under the
incentive program when it reduces service in other markets targeted.
The goal is for airport sponsor's to increase use of the airport, thus
incentivizing carriers for swapping service to extend incentives is not
congruent with the airport sponsor's goal.
In its review, FAA agrees air carrier incentive programs should
include, as a matter of compliance, a provision to ensure air service
is not lost nor substituted. In response to the CCDOA's petition, the
FAA agrees that an airport sponsor may exercise oversight and judgment
to ensure its air carrier incentive program is administered in a
nondiscriminatory manner. Any allegations of unjustly discriminatory
treatment or other assurance violations remain within the jurisdiction
of the FAA. The oversight described by the CCDOA in its petition would
allow the airport operator the ability to set parameters for carriers
for certain landed weight of different aircraft type. The FAA believes
the manner in which CCDOA plans to implement its oversight on landed
weight will achieve the goal of nondiscriminatory application. While
the FAA is comfortable with CCDOA's stated intent, the FAA is not
opining on the actual implementation of the plan. FAA must remain
objective should a complaint be filed alleging inconsistences with
CCDOA's plan and federal obligations.
3. Unintended Consequences
The air carrier incentive program was not created to test the upper
limit of what a market will yield with respect to the number of
passenger seats demanded. As such, an incentive program that allows for
upgauging of aircraft must be constructed in a manner that does not
allow for a perpetual upgauging of aircraft. Once the incentive period
expires, upgauging aircraft as a means of offering new service cannot
again be incentivized. This determination is consistent with the
Revenue Use Policy and Grant Assurance 24 as it relates to the addition
of flights to a markets schedule as well.
While a sponsor's air carrier incentive program may be ongoing
for several years, each air carrier's incentive period should be
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limited to no more than two years except under special circumstances
(e.g., new entrants).
The air carrier incentive program was never intended to be a
maximum sustainable market growth-incentive program where airlines
would be incentivized to test the limits of a markets demands. Rather
the program was offered to airports to encourage airlines to test new
markets and offer passengers more travel options and in turn promote
more travel using the airport. The limits on allowable incentive
periods have been vetted by FAA and deemed reasonable timeframes for
airlines to assess the demand for a ``new service'' and evaluate the
sustainability to continue that service without incentives in
accordance with existing policy, grant assurance obligations, and
statute.
III. Conclusion
Incentive programs must walk the fine line between allowing
sponsors the ability to enhance the viability of new service through
temporary incentives and simply buying increased use of the airport.
The air carrier incentive program, as currently constituted, ensures
properly structured programs will meet the goals for which an air
carrier incentive program is allowed. FAA has viewed the CCDOAs
petition in order to ensure its proposal will meet the same goals. As
such, FAA agrees that, with certain conditions in place, incentive
programs may include opportunities for air carriers to upgauge existing
service. The conditions must require flight schedules are not
contracted while allowing airlines to receive proportional credit for
upgauging existing flight(s) to targeted market(s) within the schedule
to provide more capacity.
While FAA agrees to expand its interpretation of ``new service'' to
include upgauging with stated parameters as an accepted form of new
service, the onus to create an incentive program that is not unjustly
discriminatory must be borne by the sponsor responsible for the
airport-specific air carrier incentive program. The conditions included
within this notice are guidance.
All existing guidance not addressed herein remains applicable. FAA
reminds airport sponsors: Incentives must not be offered in an unjustly
discriminatory manner; incentives must be applied similarly to
similarly situated carriers participating in incentive programs; new
entrants are deemed similarly situated to incumbents after one year;
and additional incentives for incumbents are limited to one year in
accordance with past guidance.
Issued in Washington, DC on April 3, 2012.
Randall Fiertz,
Director, Airport Compliance and Management Analysis.
[FR Doc. 2012-8399 Filed 4-6-12; 8:45 am]
BILLING CODE 4910-13-P
