AAAE questions airline opposition to local airport investment as baggage fee collections skyrocket

With ancillary fee collections adding nearly $6.2 billion to airline coffers in 2013 according to just-released Department of Transportation data, the American Association of Airport Executives (AAAE) today questioned the continued opposition of U.S. carriers to a modest increase in the federal cap on local airport charges to finance necessary airport infrastructure upgrades.  

“The U.S. airline industry has made an art form out of extracting billions of dollars in revenue from their customers for the privilege of checking a bag or for any number of other services that were once part and parcel with an airlines ticket charge, and yet they profess outrage that airports would seek a fraction of the amount they collect to enhance safety, security, efficiency and convenience at their facilities through a modest increase in the federal cap on local fees,” AAAE President and CEO Todd Hauptli said today. “This approach from the airlines may be great for the next quarterly report, but the carriers, their customers, and the traveling public will likely pay the price in the long-term as necessary improvements fall further and further behind at airports across the country.”

In 2013, U.S. carriers collected nearly $3.4 billion in baggage fees and more than $2.8 billion from reservation change fees according to DOT. The staggering $6.2 billion in fees collected does not include other airline ancillary fees charged in some cases for seat assignments, early boarding privileges, or pillows and blankets. To put those figures in perspective, federal investment in airport infrastructure through the Airport Improvement Program (AIP) for fiscal year 2014 will total some $3.35 billion.

In contrast to the dramatic increase in the collection of ancillary fees by U.S. carriers, the federal cap on PFCs has not been adjusted since 2000. Adding to the problem for airports is the decline in purchasing power that those revenues produce because of construction cost inflation.  AAAE, ACI-NA and the Gateway Airports Council have asked Congress to increase the PFC cap from $4.50 to $8.50 with periodic adjustments for inflation to give airports the tools they need to meet current and future demands. AAAE reiterated its support for a PFC increase in a letter to Congress today, which can be viewed here.

“Airports could have used that additional revenue to build critical infrastructure projects and increase competition at their facilities at a time when they are being squeezed by an artificial federal cap on local PFCs and cuts in Airport Improvement Program funding,” Hauptli added. “It’s time for Congress to allow airports to pursue the self-help they need to finance critical infrastructure projects.”

Hauptli also noted the impact that the increased reliance by airlines on ancillary fees, is having on revenues flowing to the Airport and Airway Trust Fund, which supports aviation system upgrades including airport improvements.  Historically, airline tickets have been taxed to help finance the aviation system, but baggage fees and other ancillary revenues are not taxed in the same manner.  The shift in the airline pricing model away from ticket price increases to a greater reliance on ancillary fees effectively shortchanges the Airport and Airway Trust Fund of revenue that would otherwise support airport and aviation system improvements. AAAE has asked Congress to eliminate the ancillary fee loophole to ensure that adequate resources flow to the Trust Fund for necessary aviation system improvements.