	FAA’s and the Airport Industry’s Estimates of Airports’ Planned Capital Development Vary Substantially

The estimated costs of planned airport capital development vary depending  on which projects are included in the estimates. According to FAA’s  estimate, which includes only projects that are eligible for Airport  Improvement Program (AIP) grants, the total cost of airport development  will be about $46 billion, or about $9 billion per year, for 2001 through 2005. ACI’s estimate includes all  of the projects in FAA’s estimate, plus other planned airport capital projects  that may or may not be eligible for AIP grants. ACI estimates a total cost of  almost $75 billion, or nearly $15 billion per year for 2002 through 2006. Neither ACI’s nor FAA’s estimate includes funding for the terminal  modification projects that are needed to accommodate the new explosives  detection systems required to screen checked baggage. ACI estimates that  these projects will cost a total of about $3 billion to $5 billion over the next  5 years. $12 Billion a Year, Mostly from Bonds and Federal Sources

From 1999 through 2001, the 3,364 airports that make up the national  airport system received an average of about $12 billion per year for planned  capital development. The single largest source of these funds was bonds,  followed by AIP grants and passenger facility charges. The amount and type of funding vary depending on the airport’s size. Past Funding Levels Would Cover All of FAA’s Planned Development Estimate but Would Fall About $3 Billion Short of ACI’s Estimate

If the funding for airport capital development remains at about $12 billion a  year over the next 5 years, it would cover all of the projects in FAA’s  estimate. However, it does provide a useful  indication of where funding differences may be the greatest. From 1999  through 2001, smaller airports received an average of about $2.4 billion a  year for planned capital development while large- and medium-hub airports  received an average of about $9.4 billion. Ability to Fund Planned Capital Development Has Improved for Both Smaller and Larger Airports

The difference between past funding and planned development has  declined over the past 5 years, and, at recent funding levels, airports would  be able to fund a higher percentage of their planned capital development  than they could fund in 1998. Options Are Available to Address Difference between Funding and Planned Development

Options are available to increase airport funding or to make better use of  the existing funding. These options, some of which were authorized or  implemented as part of AIR-21, include increasing the AIP grant funding for  smaller airports, increasing passenger facility charges, creating a separate  fund for new security projects, and using innovative financing approaches. The various options would benefit different types of airports to varying  degrees. Another option would be to increase or eliminate the cap on passenger  facility charges. This option would primarily benefit larger airports,  because passenger facility charges are a function of the volume of  passenger traffic. Analysts nonetheless  expect the demand for air travel to rebound, and the nation’s aviation  system must be ready to accommodate the projected growth safely and  securely.
Why GAO Did This Study

Since Congress enacted the Wendell H. Ford Aviation Investment and Reform Act for the 21 Century (AIR-21) 3 years ago, much has changed. At that time, the focus was on reducing congestion and flight delays. Today, flights are being canceled for lack of business, two major air carriers are in bankruptcy, and attention has shifted from increasing the capacity of the national airspace system to enhancing aviation security. Furthermore, as the federal budget deficit has increased, competition for federal resources has intensified, and the costs of airport capital development are growing, especially with the new requirements for security. Nonetheless, analysts expect the demand for air traffic services to rebound. Until that time, the unexpected slump in air traffic creates a window of opportunity to improve the safety and efficiency of the national airport system.

What GAO Found

Although there is general consensus among stakeholders that maintaining the integrity of the national airport system requires continual capital investment, estimates vary as to the type and cost of planned airport capital development required to ensure a safe and efficient system. For 2001 through 2005, the Federal Aviation Administration (FAA) has estimated annual planned capital development costs of about $9 billion, while the Airport Council International (ACI), a key organization representing the airport industry, has estimated annual costs of about $15 billion for 2002 through 2006. The estimates differ primarily because FAA's includes only projects that are eligible for federal funding, whereas ACI's includes projects that may or may not be eligible for federal funding. Neither FAA's nor ACI's estimate covers the airport terminal modifications needed to accommodate the new explosives detection systems required to screen checked baggage. According to ACI, the total cost of these modifications could be $3 billion to $5 billion over the next 5 years. From 1999 through 2001, airports received an average of about $12 billion a year for planned capital development. The primary source of this funding was bonds, which accounted for almost $7 billion, followed by federal grants and passenger facility charges, which accounted for $2.4 billion and $1.6 billion, respectively. The amounts and types of funding also varied by airport type. Of the $12 billion, large- and medium-hub airports received over $9 billion, and smaller airports received over $2 billion. If airports continue to receive about $12 billion a year for planned capital development, they would be able to fund all of the projects included in FAA's estimate, but they would not be able to fund about $3 billion in planned development estimated by ACI. While this projected shortfall could change with revisions in future funding, planned development, or both, it nevertheless indicates where funding differences may be the greatest. Options are available to increase or make better use of the funding for airport development, and these options would benefit different types of airports to varying degrees. For example, raising the current cap on passenger facility charges would primarily benefit larger airports, while increasing or redistributing Airport Improvement Program grant funds would be more likely to help smaller airports.