What’s Good for the Goose...

It's a New Year. We have the same party in both houses of Congress, Moody's has changed its outlook for the U.S. airport industry to positive from stable, and both enplanement growth and the U.S. economy are expected to be robust in 2015. 

But despite these positive indicators, the stage is still not properly set for airports to move ahead. 

What's the problem? Money. (No surprise here!) More specifically, the problem is the money that airlines are raking in with ancillary fees vs. the purchasing power airports are losing in PFCs. The airlines are opposed to any increases in passenger fees except those they impose themselves.

To review, airlines collected about $3.5 billion in bag fees and $2.9 billion in change fees last year. Because this revenue isn't taxed like fares deposited into the Airport and Airway Trust Fund, airports lose out. I'm sure some ancillary revenue is used for investment, but plenty becomes dividends for airline shareholders.

Now let's look at airports. PFCs have been capped at $4.50 since 2000. Unlike airline profits, virtually all PFC money is meant to be reinvested in airport facilities. And the total dollars available to airports is woefully inadequate. Increasing PFCs to $8.50 would amount to a mere fraction of what airlines collected in bag fees last year.

To be fair, baggage and change fees are not the only sources of airline revenue. Similarly, PFCs are not airports' only source of revenue.  

What's my point? The airlines argument that higher PFCs will harm the industry does not hold water. Increased ancillary fees have not reduced passenger traffic. Rather, they've led to record airline profits and an opportunity to invest in their product. They're a success!

What I'm suggesting is that airports also need to invest in their product to grow and better serve the public. PFCs are an efficient, much-needed source of funds for airports. Opposing them is selfish and without merit.

Cheers,

Paul