1). The three primary  sources of funding for airport development are Airport Improvement  Program (AIP) grants, PFCs, and locally generated revenue. All three  sources of funds are linked to passenger aviation activity. The grants generally require matching funds from the local  match ranging from 10 to 25 percent depending on the size of the  airport and type of project. The  Airports Council International-North America (ACI-NA), a trade  association for airports, also estimates the cost of planned airport capital  projects. We reported in June 2014 that economic issues such as volatile fuel  prices and the economic recession have affected the industry as have  airlines’ consolidation and an adoption of business models that focus   For instance, the 2007-2009 recession  more on capacity management.combined with a spike in fuel prices, helped spur industry mergers and a  change in airline business models. The greatest reduction in  scheduled flights occurred at medium-hub airports, which decreased  nearly 24 percent from 2007 to 2013, compared to a decrease of about 9  percent at large-hub airports and about 20 percent at small-hub airports. 2). While 2014  passenger activity as represented by the number of passengers onboard  aircraft departing U.S. airports has rebounded nearly back to 2007 levels  (down 4 percent), the total number of commercial passenger and cargo  aircraft departures (operations) in 2014 is still down 18.5 percent since  2007. In June 2014, we reported that GA activity has also declined since 2007,  particularly affecting airports that rely on general aviation activity for a  large share of their revenue. According to the MIT study, the number of annual  hours flown by GA pilots, as estimated by FAA, has also decreased over  the past decade. Airport Capacity Needs and AIP- Eligible Planned Development Costs Have Mostly Declined

		The Projected Number of Future Capacity Constrained Airports Has Declined

Earlier this year, FAA reported on airport capacity needs through 2030. To do this, FAA  modeled recent and forecasted changes in aviation activity, current and  planned FAA investments in air-traffic-control modernization, and airport  investments in infrastructure, such as new runways, to determine which  airports are likely to be congested or capacity constrained in future  years.with previous studies in 2004 and 2007 following a similar methodology. 4). However, in  the 2015 report, FAA projected that 6 airports will be capacity constrained  in 2020. Estimated AIP-Eligible Development Costs for Next 5 Years Are Lower, Though Estimates of Overall Development Costs Have Increased

In the September 2014 NPIAS, FAA estimated that airports have roughly  $33.5 billion in planned development projects for the period 2015 through  2019 that are eligible for federal support in the form of AIP grants.estimate is roughly 21 percent less than FAA’s previous estimate of $42.5  billion for the period 2013 through 2017 (see fig. The ACI-NA also estimated airports’ planned development for the 2015  through 2019 period for projects both eligible and not eligible for AIP  funding. According to ACI-NA, the total estimated planned-development  cost for 2015 through 2019 is $72.5 billion, more than twice FAA’s  estimate for just AIP eligible projects.percent over its prior estimate of $68.7 billion for the prior 2013–2017   ACI-NA’s estimate increased 6.2  estimating period. Federal Support for Airport Development Has Decreased, While Debt Levels May Leave Little Room for New Development at Some Airports

		Federal Funding for Airport Development Has Declined in Recent Years

In Fiscal Year 2015, Congress made $3.35 billion available in  appropriations acts for AIP funding, a reduction from the annual  appropriations of $3.52 billion for fiscal years 2007 through 2011. For example, at least 50 airports have leveraged their  PFCs through 2030 or later, according to FAA data. The President’s fiscal year 2016 budget proposal and airports have called  for increasing the PFC cap to $8—which is intended to account for  inflation since 2000, when the maximum PFC cap was last raised—and  eliminate AIP entitlements for large-hub airports. Some examples include:
Non-aviation development on airport property: Airports have  turned to an increasing range of unique developments on airport  property, including high-end commercial retail and leisure activities,  hotels and business centers, and medical facilities for non-aviation  revenues. Public-private partnerships: Airports can fund airport improvements  with private sector participation.
Why GAO Did This Study

U.S. airports are key contributors to the national and regional economies, providing mobility for people and goods, both domestically and internationally. Since 2007 when GAO last reported on airport funding, airports of all sizes have experienced significant changes in aviation activity. Financing for airport capital improvements is based on a mix of federal AIP grants, federally authorized but statutorily-capped PFCs, and locally generated aviation-related and non-aviation-related revenues. As deliberations begin in advance of FAA's 2015 reauthorization, Congress is faced with considering the most appropriate type, level, and distribution of federal support for development of the National Airspace System.
This testimony discusses trends in (1) aviation activity at airports since 2007, (2) forecasted airport capacity needs and airports' planned development costs, and (3) financing for airport development. This testimony is based on previous GAO reports issued from June 2007 through December 2014, with selected updates conducted through April 2015. To conduct these updates, GAO reviewed recent information on FAA's program activities and analyses outlined in FAA reports, including the 2015 aviation forecast, and the 2015–2019 planned airport-development estimates.

What GAO Found

Economic factors, since 2007, have led to fewer scheduled commercial flights, a trend more pronounced for some types of airports. These economic factors include not just the volatile fuel prices and the 2007 to 2009 recession but also evolving airline practices, such as airline mergers and the adoption of business models that demonstrate capacity management. For example, as GAO reported in June 2014, the number of scheduled flights at medium- and small-hub airports has declined at least 20 percent from 2007 to 2013, compared to about a 9 percent decline at large-hub airports. General Aviation (GA) has also declined in activity, as measured by the number of GA aircraft operations and hours flown, due to similar economic factors. In recent years, however, passenger growth has rebounded. According to the Federal Aviation Administration's (FAA) projections, U.S. airline passenger growth is predicted to grow 2 percent per year through 2035—a growth rate that is slightly lower than that of past forecasts.
According to FAA estimates, the number of airports that require additional capacity to handle flight operations to avoid delays has declined since 2004. Similarly, the future cost of planned airport development has also declined in recent years. Earlier this year, FAA projected that 6 airports will be capacity constrained in 2020 compared to 41 in the 2004 projection. Even with this improvement, some airports—like those in the New York City area region—will remain capacity constrained, according to FAA. The overall improved capacity situation is also reflected in reduced estimates of future airport-development costs that are eligible for federal grants. In September 2014, the FAA estimated that for the period 2015 through 2019, airports have about $33.5 billion in planned development projects eligible for federal Airport Improvement Program (AIP) grants—a 21 percent reduction from the $42.5 billion estimate for the time period 2013 through 2017. The biggest decline in planned development costs among project categories is in capacity projects such as new runway projects. However, an airport industry association estimated planned airport capital project costs, both those eligible and not eligible for AIP, of $72.5 billion for 2015 through 2019, an increase of 6.2 percent from the association's prior 5-year estimate for 2013 through 2017.
As traditional funding sources for airport development have generally declined, airports have increasingly relied on other sources of financing. Specifically, federal AIP grants and Passenger Facility Charges (PFC) are two primary sources of federally authorized funding for airports. The amount made available for AIP decreased from over $3.5 billion for fiscal years 2007 through 2011 to less than $3.4 billion for fiscal year 2015. Further the President's 2016 proposed budget calls for additional reductions in AIP, though it would be offset with a proposed increase in the PFC cap, which is currently $4.50 per flight segment. Airports have sought additional opportunities to collect non-aviation revenues. As a result, according to FAA, non-aviation revenue has increased each year from 2008 through 2014. For example, airports have 1) partnered with the private sector to fund airport improvements; 2) identified new business ventures on airport property including the development of commercial retail, leisure activities, and medical facilities; and 3) explored options for privatization.