1). The federal government provides grants to help fund airport capital  development through its Airport Improvement Program (AIP). Congress  appropriates funds for AIP and other FAA programs from the Airport and  Airway Trust Fund (AATF), which is itself funded by a variety of aviation- related taxes, such as taxes on tickets, cargo, general aviation gasoline,  and jet fuel. Because of the size and duration of airport  development—for example, planning, funding and building a new runway  can take more than a decade and several hundred-million dollars to  complete—long-term debt is used to help finance these types of projects. Airport Planned Development Cost Estimates Differ due to Multiple Factors

The FAA’s estimate of the costs for infrastructure development at airports  over the next 5 years is about $32.5 billion compared to the airport  industry’s estimate of almost $100 billion for the same period. FAA reported a decrease in  estimated costs for planned projects at most large and medium hubs, with  increases at other hub types. The airport industry’s estimate of 5-year planned development cost, as  developed by Airports Council International-North America (ACI-NA), is  three times FAA’s. The principal reason why FAA’s and ACI-NA’s planned development  costs differ so significantly is that the ACI-NA cost estimate encompasses  substantially more projects than does FAA’s, according to ACI-NA. The 5-year FAA estimate for 2017 through 2021 fell  from the prior estimate to $32.5 billion, whereas ACI-NA’s estimate  increased by $24.4 billion to $99.9 billion, or three times FAA’s estimate. Airports Rely on Federal and Locally Generated Revenues to Fund Development

In 2015, we estimated that in recent years national system airports had  generated an average of $10 billion annually for capital development. AIP grants must be used for eligible and justified projects, which  are planned and prioritized by airports, included in their capital  improvement plans, and reviewed and approved by FAA staff and the  Secretary of Transportation. PFC collections: Congress last raised the PFC cap in 2000 to $4.50 per  flight segment, with a limit on the total PFCs that a passenger can be  charged per round trip of $18 total. As we reported in 2015, airports have a number of options for addressing  any shortfall in funding their capital development, including prioritizing  capital development projects, financing projects, attempting to increase  airport revenues, or entering into public-private partnerships. Increasing Passenger Facility Charges Would Increase Airport Funding, but Other Effects Are Less Certain

One approach to increasing funding for airports that has been advanced  by airports and others is to increase or eliminate the current $4.50 cap on  PFCs. However, any increase in PFCs is controversial and strongly  opposed by airlines, which contend that airports currently have adequate  access to funding for their development. We have previously found that  increasing the PFC cap would significantly increase PFC collections  available to airports. While an increase in PFCs would mainly flow to the larger airports,  smaller airports could also benefit from increased PFC collections. Such a decrease would  also result in marginally slowing growth in revenues to the AATF. Under all three  scenarios, AATF revenues, which totaled $14.3 billion in 2016 and are  used to fund FAA activities, would likely continue to grow overall based  on current projections of passenger growth; however, the modeled cap  increases could reduce total AATF’s revenues by roughly 1 percent  because of reduced passenger demand. This is a work of the U.S. government and is not subject to copyright protection in the  United States.
Why GAO Did This Study

Roughly 3,300 airports in the United States are eligible for federal AIP grants from the FAA that can be used for certain types of projects, such as building runways and noise mitigation. To fund development, in addition to AIP grants, airports rely on locally generated revenues and federally authorized PFCs, which are added to the price of an airline ticket and have been capped at $4.50 per flight segment.
The administration's call to boost spending on public infrastructure has renewed attention on the importance of maintaining and improving airport infrastructure.
This testimony discusses: (1) the differences between estimates of airports' planned development costs, (2) the federal funding and other airport funding and revenues that may be available to defray development costs, and (3) the implications of increasing the cap on PFCs, among other objectives.
This testimony is based on previous GAO reports issued from March 1998 through April 2015, with selected updates conducted through March 2017. To conduct these updates, GAO reviewed recent information on FAA's program activities and analyses outlined in FAA reports, and related airport industry estimates of infrastructure development costs. GAO also interviewed officials from FAA, and airport and airline trade associations.

What GAO Found

The Federal Aviation Administration's (FAA) estimate of the costs for planned capital development at airports over the next five years is about $32.5 billion, compared to the Airports Council International-North America's (ACI-NA) estimate of almost $100 billion, both for the period 2017-2021. The difference between these two estimates can be attributed to a number of factors, but most significantly to the types of projects included in the estimates. FAA's estimate is limited to projects that are eligible for Airport Improvement Program (AIP) grants that do not already have funding arranged, whereas ACI-NA's estimates include all projects regardless of AIP eligibility or whether funding is arranged. The figure below illustrates the disparity between the two estimates since 2005. Note that since 2015, FAA's estimate has decreased by $1 billion whereas ACI-NA's has increased by $24.4 billion.
In addition to the AIP and state grants they receive, airports generate funds through airport-generated income and Passenger Facility Charges (PFC), among other sources. In 2015, GAO estimated that funding from these sources totaled an average of $10.3 billion annually (2013 dollars), $2.7 billion less than airports' planned development costs. Airports have a number of options for addressing any shortfall in funding their planned development costs, including prioritizing development projects, financing projects with long term debt, attempting to increase airport revenues, or entering into public-private partnerships.
Increasing or eliminating the PFC cap would significantly increase PFC collections available to airports under three scenarios GAO modeled in prior work. However, according to GAO's model, an increase in the PFC could also marginally slow passenger growth and therefore the growth in tax revenues to the Airport and Airway Trust Fund (AATF), which is used to fund FAA programs. Such projected effects depend on key assumptions regarding the consumers' sensitivity to a PFC cap increase, whether the airlines decide to pass on the full increase to consumers, and the rate at which airports would adopt the increased PFC cap. Any increase in PFCs is strongly opposed by airlines which contend that an increase could reduce passenger demand.