Rebutting Delta’s Misleading Statements on PFC’s

Airlines and airports don’t always see eye to eye on the financing of aviation infrastructure. Normally this debate, while spirited, is conducted on a high level. 

BUT…I am reading the article penned by Delta CEO Richard Anderson in the February issue of Delta’s in-flight magazine, Sky. This article sets a new standard for misinformation and misdirection; it cannot be allowed to pass without comment. 

Delta's CEO Richard Anderson once lead Northwest Airlines.

It is hard to know where to begin. So we’ll begin with a statement he makes that isn’t even true. 

In taking aim at the passenger facility charge user fee (PFC) he states:  “Currently, airports charge airline customers $4.50 for every take off and landing.” This is untrue on more than one level. 

First, many airports charge a $4.50 PFC, but many charge $3 and some do not charge one. And it is not on every take off and landing. He knows these things; it is too bad he will not acknowledge them, but rather will mislead Delta passengers (many of whom will read his words while passing time during a delay that might have been alleviated with more investment in airport infrastructure). 

He also never mentions what the PFC is used for. runways, taxiways, terminals, to start. Every dime collected – except what the airlines keep for collecting the fees – goes to projects. Nothing, not a penny, is used to support a bureaucracy or pay an executive bonus (more later on that). The PFC is project-based, and airlines must be consulted on these projects (few ever object, by the way).

In Atlanta, for example, the new fifth runway, which benefits passengers around the country who connect there — and benefits Delta more than any other airline — would not be possible without the PFC. 

The PFC is the most effective and efficient infrastructure financing mechanism in the United States today. Without it, we would have fewer runways and taxiways and terminals would be sorely lacking. Oh, and airlines earn almost $100 million per year for collecting the PFC. 

The PFC also helps foster competition between airlines. Without it, Southwest’s services to places like Detroit, Philadelphia and Baltimore would not be possible, nor Jet Blue in Burlington, nor Air Tran in Atlanta. Hmmm. I think I just figured out why he doesn’t like PFC’s. Like the old New Yorker cartoon said:  “I love free enterprise, its competition I can’t stand”. I guess I can understand why Mr. Anderson’s life would be better without those pesky, profitable, low fare carriers. 

He also seems to lament that air fares have come down during deregulation (as everyone knew they would). If this is a surprise to him, then he wasn’t paying attention. And, of course, that doesn’t account for all those fees you now have to pay.  Airlines made $2 billion in all sorts of fees in the third quarter alone last year. An article in the Feb. 21 Washington Post travel section included this comment by one traveler:  “there’s a fee to pay the fee.” 

A family of four could pay $400 in bag fees alone, sort of puts the $2.50 increase in the PFC limit currently being contemplated by Congress into perspective. God forbid if the family members each want the $8 blanket and pillow too. 

He also laments the government has not fully modernized air traffic control. This one is really amusing to me. In the early and mid-90′s, several commissions, including one I ran, proposed ways to accomplish this. The government made a concerted effort. And it died because the airlines did not support it, they literally didn’t care. A senior executive for Northwest Airlines, when this was proposed, told me straight to my face “we don’t give a sh-t about air traffic control.” Mr. Anderson worked for Northwest back then (no, he was not the one who said that to me). Other airline executives were more polite, but no less pointed. (Northwest thought a change in tax law to put more money in their pockets would have been a better idea. Seriously.) 

Only when several airlines, led by the one Mr. Anderson helped run, got into trouble because of lengthy delays in 1999 and 2000 did the airlines get religion and descend on Washington to blame air traffic control for their problems. I was amused sitting in their audiences, hearing people who told me a few years earlier they didn’t give a sh-t about air traffic control lament that the delays were all the governments fault because the air traffic control system was not up to date. 

I take at face value the airlines’ current interest in the subject, but the fact is that they undercut it when there was a chance to jump start progress and only became interested 10 years ago to deflect criticism aimed at their treatment of their passengers during delays. 

Speaking of customer service, have you noticed that services once provided by airlines, especially during delays and cancellations, are no longer available from the airline?  It is airports that have stepped into this breach. This is a cost that airports have taken off airlines hands. 

Mr. Anderson ends his screed by stating that “…we will continue to fight these tax increases.” What he really means is that he will continue to fight against runways and taxiways and terminals. He will continue to fight against resources for air traffic control and he will continue to fight against competition. 

When Mr. Anderson brought the Delta Northwest merger to a close, it is reported he received a $13 million bonus. Enough to hire a couple hundred flight attendants, by my calculation; an amount equal to four average projects funded by the aviation money in the stimulus package. I wonder how much of that bonus is funded by bag or other fees?  Maybe he figures if there is no PFC increase he might get a bonus this year too?

Fact: Airports Used Stimulus Plan to Create Jobs

There has been a lot of press coverage this week of the fact that the stimulus package became law a year ago.  Anniversaries are always an occasion for taking stock, and this is no exception.  This being Washington, most of the stock taking has depended on politics, ideology and other such factors. 

But there is one element of the stimulus about which there need be no debate; because the facts are the facts.  As the late Senator Daniel Patrick Moynihan once said, “You are entitled to your own opinion; you are not entitled to your own facts.”  John Adams once said “facts are stubborn things” meaning you can’t change them to suit an opinion.  And that element of the stimulus, and the facts that accompany it, concern the investments made in airport infrastructure. 

There were two essential elements to this.  First was the $1.1 billion dollars in direct investment, using the Airport Improvement Program.  The FAA did a fabulous job getting this money out the door to fund more than 300 projects.  These projects not only put thousands to work, they also enhanced the safety and security of all our passengers.  Money was spent on runways, taxiways and other essential projects.  Kate Lang and her team at the FAA Airports Office are to be commended for the way they carried this out, and its impact can’t be denied. 

The second element was the two-year waiver of the Alternative Minimum Tax (AMT) levy on private purpose bonds.  One-third of the value of the stimulus bill consists of its tax provisions, and I can’t believe any of them had as big an impact as this.  The majority of airport bonds are subject to AMT; even though this defies common sense (can it seriously be argued that airport projects are not public purpose projects?).  It has been a priority of our organization to change this; four years of investment in research and message paid off when the stimulus bill was being considered and a two year waiver was included (some old AMT bonds can also be re-financed under this waiver).  

The impact was extraordinary.  Before this provision was signed into law, the market for airport bonds was all but completely frozen.  Once this provision became law, the thaw was almost immediate and now more than $8 billion in airport bonds have been sold, financing projects that are creating or saving tens of thousand of jobs.  Just at Las Vegas and Sacramento – two airports – a total of 2,800 jobs were saved on projects that would have been shut down without this provision.  In addition to thawing the bond market, this provision also has saved airports $700 million (AMT bonds are more costly to airports than non-AMT bonds), money that can be put back into job creating, passenger-serving, projects. 

Indeed, this provision has been so successful we are arguing strenuously for it to be made permanent. 

So, the facts are plain and simple.  The stimulus provisions related to airports generated jobs by the tens of thousands, perhaps even more than that.  They led to projects that will benefit passengers and enhance safety.  

These are the facts.  And, you know what Daniel Patrick Moynihan and John Adams said about facts.

Meet Every Traveler’s Hero: Airport Directors

It’s been two weeks since I last wrote; we spent most of that time trying to get out of our cul de sac in the D.C. suburbs. 

I was able to get out of town just ahead of the most recent foot of snow to travel to Houston to attend our CEO Forum and board meeting. The CEO Forum is open to all member airport directors and several dozen of them were there. 

It is a real honor to work with a group that is at the same time among the best business leaders I have ever been around and the best public servants as well (in the U.S., airports are owned mostly by local and state governments, that is not true in Canada). 

As I stood up there and welcomed the group, I could turn in any direction and see an airport director who has worked his or her fingers to the bone to bring new air service to their community. Without fail, I could look in any direction and see airport directors who have bent over backwards to reduce costs for their airlines and worked together with airlines to improve the efficiency of their operations. 

And without fail, I looked in every direction and saw men and women who have made the needs of passengers their number one concern day in and day out. Can there be any serious argument that it is airports that are the true keepers of the flame where passenger needs are concerned? 

I wish every air passenger could meet these folks.  The users of North America’s air transport system can rest assured that some of the most talented people on the continent are at the helm of our airports.

Winging my way back from Hong Kong

Filed 1/30/10: I’m sitting in the Hong Kong Airport Red Carpet Clu waiting for my flight. Security and immigration were very efficient here; even my hip didn’t seem to faze them. I still got wanded, and my bag was opened but everything was done quickly and professionally.  

Sonia Liu from ACI Asia-Pacific on the cable car over the mountains.

On Friday, I went with two ACI Asia-Pacific staff members, Sonia Liu and Frank Fu, on a cable car ride (the kind where the cab hangs from a cable, not the San Francisco kind). We went over water and mountains until we reached a village. At the village is a Buddhist Temple, as well as the world’s largest bronze Buddha (trust me, it is huge). We also enjoyed a traditional Chinese tea service at a beautiful tea house in the village. 

Last evening, Frank joined Angela Gittens and me for a Hong Kong Harbor cruise and a viewing of the nightly Hong Kong laser and light show. They have an impressive skyline here, and this laser and light show occurs every night. 

Entrance to a Buddhist Temple near Hong Kong.

I wish I had a chance to stay for a longer period of time. I didn’t know what to expect, given the history of Hong Kong, especially over the past 10-15 years. It is a very different place than Shanghai, the only other Chinese city I have ever visited. Most signs are in English as well as Chinese, which makes it more “comfortable.” Still, you do realize you are in Asia. You do get a sense that Hong Kong deserves its exotic reputation; you can see why it figures in so many movies. 

I hope I get a chance to come back soon, there is so much more to do. 

Filed 1/31/10: I’m now sitting on my flight to San Francisco from Hong Kong. Needed to go through gate screening before I boarded the plane. My bags were opened and I was patted down. Agents worked in teams, a man and a woman. One looked in the bags and the other did the pat down depending on the passenger’s gender. Again, very thorough, but efficient, quick and friendly (as much as is possible under the circumstances). A good experience.