Progressives and Libertarians Team Up to Deregulate Airports

Reps. Earl Blumenauer and Thomas Massie have introduced a bill that would cut federal airport spending while giving airports more freedom to raise their money.

This week, libertarian-leaning Rep. Thomas Massie (R–Ky.) and progressive Rep. Earl Blumenauer (D–Oregon) introduced a bill that would cut federal spending on airports in exchange for letting those airports raise the fees they charge passengers.

These fees, known as Passenger Facility Charges (PFCs), can be used to finance the expansion of passenger terminals, something the federal government's main airport grant program doesn't pay for. Allowing airports to raise more money for terminal expansion, the thinking goes, will let more airlines offer more flights, raising service levels and lowering ticket prices.

Since 2000, the maximum PFC an airport can charge has been capped at $4.50 per boarding, the purchasing power of which has been whittled away by inflation. The Airports Council International–North America, a trade group, estimated in 2017 that the country's airports will need $100 billion in infrastructure improvements over a five-year period.

Massie and Blumenauer's bill would help airports fund those improvements by lifting the PFC cap.

Large airports that raise their fees above $4.50 would have to return all funding they get from the feds' Airport Improvement Program (AIP). The bill would also cut funding for AIP grants, currently a $3.3 billion program, by $400 million a year.

"Simply put, we want to deregulate the airports," says Massie, telling Reason that getting rid of the PFC cap is a way to fund infrastructure "without raising taxes and not having the federal government make local decisions."

The bill's biggest opponent is the airline industry, which argues that airports have plenty of money and that higher PFCs will mean higher ticket prices.

In a May blog post, Airlines for America argued that removing the cap on PFCs would raise prices for travelers, causing a depressing ripple effect throughout the economy. Airports, the industry association argues, have some $14.5 billion in cash reserves that they can spend on infrastructure without raising PFCs.

That latter point is misleading, replies Bob Poole, director of transportation policy at the Reason Foundation (which publishes this website).

"Prudent management says [airports] have to have reserves," Poole says. That ensures "they can pay their debt service in a recession when there's less air service and they're not making as much on parking charges and rental car fees."

Far from raising ticket costs, uncapping PFCs would likely be a net win for passengers' budgets. The revenue from PFCs have "opened up a number of airports to be able to do large-scale expansion of terminals," Poole notes. "The ultra-low-cost carriers like Allegiant and Spirit and Frontier have been able to get increasing amounts of gate space."

Big airlines oppose removing caps on PFCs, Poole argues, precisely because it would bring in more revenue that airports could then spend on adding gate space for their competitors.

Massie had introduced an identical PFC cap bill in 2017 with Rep. Peter DeFazio (D–Oregon), but that effort proved unsuccessful. With DeFazio now chairman of the House Transportation Committee, Massie thinks his bill stands a much better chance of success.

A handful of conservative groups have opposed lifting the cap on PFCs, including Grover Norquist's Americans for Tax Reform and the National Taxpayers Union, claiming that it is effectively an tax increase.

Massie argues that PFCs are basically the platonic ideal of a user fee, saying "the money does not go to the government. It goes directly to the airports."

"Airports are in need of investment. The president has talked about trying to get $1 trillion for infrastructure investment," says Massie. "This is the single easiest way to get that money."