Passenger Use Fees, Not Blank Checks Building Tomorrow’s Airports Around the World

Over the past several months, I have heard a lot of talk from airline and aviation labor leaders about the support other countries contribute to the success of their national airlines.  These arguments are used to buttress the campaign to enact a National “Airline” Policy.  My counter-argument (we are pushing for a National “Aviation” Policy) has been that these nations and their airlines succeed in the global transport network not only because they have policies that encourage a growing role for aviation, but because – and largely because – they have invested in aviation infrastructure.  Anyone who has ever traveled to, or through, Singapore, Hong Kong, Incheon, Doha, Abu Dhabi or Dubai can see that very plainly.  (See related Centerlines Blog from the Dubai presentation at our Customer Service Seminar last week in Florida.)

 “Aviation’s importance as a catalyst for growth is well-understood in the Middle East and particularly in the Gulf region, where airports rise ahead of the demand curve, not behind it.”   IATA's Tony Tyler

“Aviation’s importance as a catalyst for growth is well-understood in the Middle East and particularly in the Gulf region, where airports rise ahead of the demand curve, not behind it.”

– IATA’s Tony Tyler

 

I have pointed this out continually, and have also pointed out that these places – and others – use a passenger user fee similar to the American PFC or Canadian AIF to generate revenue.  It is not some sheikh or government just writing a check and printing money as some might have you believe.

This is done because leaders (government and business) in those places are looking to the future.  They are not building for yesterday’s traffic or yesterday’s customer or yesterday’s economy.  They are building for tomorrow.  They are shaping their future.

While the governmental systems in most of these places are not ones I would want to emulate, I do applaud their vision, and especially applaud their recognition that modern airport infrastructure, airfield and landside, is critical.

Because I run the airport trade association my words are dismissed by some.  But listen to the words of one of the world’s great aviation leaders:  “Aviation’s importance as a catalyst for growth is well-understood in the Middle East and particularly in the Gulf region, where airports rise ahead of the demand curve, not behind it.”

Who said this?  Some airport director?  Some airport association leader?  No, it was Tony Tyler, Director General and CEO of IATA, the International Air Transport Association — the worldwide voice of airlines.  IATA has been a leader in moving toward a modern system to develop airport infrastructure and Tony, in his current role and in his previous role at Cathay Pacific, understands that.

I agree with Tony and with so many airline leaders around the world who see things the same way.  I remain hopeful that we can work with America’s airlines to build a better future for our passengers; one that helps airlines grow profitably into the future and allows communities the ability to prosper in the 21st century economy.

User Fees are Not Wacky Spendthrift Ideas

There has been a lot of attention paid recently around Washington to how to pay for transportation improvements.

The U.S. Chamber of Commerce has been an important player in this and they should be; the business community is heavily invested (if you will) in how well our transportation system works.  Their president, Thomas Donahue, made an important speech earlier this week on a range of economic issues and when he touched on transportation he said that the users should pay.  Makes sense, I think.

capital domeAlso earlier this week Virginia Gov. Bob McDonnell, who has been under heavy pressure to do something to increase investment in the Commonwealth’s transportation infrastructure, announced a plan that would eliminate the gas tax and substitute an increased sales tax.  Reaction is mixed, but I was interested to hear Republicans interviewed say they are reluctant to embrace this because they feel users should pay.

What is interesting about all this is that two of the more noted conservative institutions in the country, the U.S. Chamber and Virginia Republicans (many of them anyway, the governor is a Republican after all) are publicly embracing a user fee approach to finance infrastructure.  And (without passing judgment on the governor’s specific plan as I am not intimately familiar with it) I agree with them.  Indeed, all those places all over the world we like to point to as being ahead of us in investing in infrastructure use some sort of user fee approach.  Whether in the form of a straight fee or a fuel tax or whatever, the principle of user pays makes sense and, if the levels are set correctly, it works.

This has been the crux of our argument on the PFC for years now.  The PFC is not a federal tax, it is not a federal ANYTHING, except a federal limit on the ability of a community to set a user fee to pay for its own aviation infrastructure.  The PFC, as important thinkers like Bob Poole of the Reason Foundation have argued for years, is the best conservative approach to financing airport infrastructure.  It is paid by users, it is not filtered through Washington or a state capital, it is tied to specific projects, stakeholders and the community must be consulted, and it has an expiration date.  If you gave a conservative a blank sheet of paper and asked him or her to draw up a perfect infrastructure financing scheme my bet is it would look just like this.  And such an approach would benefit the airlines too, that is why airlines all over the world have pushed for such a model.

These are not wacky spendthrift ideas.  They are solidly conservative and prudent and right for these economic and political times.

Will there be sequestration? I don’t think so

I was at an aviation event the other day and ran into a friend who runs another aviation association.  Say something about sequestration, she asked.  Ok. Here are a few thoughts.

First, I strongly believe it will not happen.  That Congress and the president will figure something out.  For a whole variety of reasons, I think the climate is right for some sort of deal.capital dome

I do agree that if sequestration happens, NextGen would take a big blow.  This cannot be permitted to happen.  But pardon me for being a little jaded.  I’ve been working on air traffic control reform and modernization since 1993 when I authored a presidential commission report calling for satellite based navigation by 1997.  It didn’t happen then because certain interests didn’t want it and, frankly, the airlines did not care.

In the end, the best way to move this along is to change the way it is financed, allow access to capital markets, as proposed by our 1993 commission and so many others.  The real lesson from sequestration is that getting air traffic control modernization out of the usual Washington way of doing things is the best answer.

The same is true with airport infrastructure. Although the federal grant program is not impacted by sequestration, it just shows how unreliable Washington is as a partner.  We must allow airports more freedom to generate their own resources.

Bottom line.  Doubt it will happen, but I think sequestration really shows how we need less Washington in the matter of aviation infrastructure.

Just before I started writing this I learned of the death of Sen. Daniel Inouye.  Senator Inouye is the second longest serving senator ever, and one of the greatest Americans of the 20th century.  He was a true war hero, who left his arm on a battlefield in Europe during World War II.  He was a great patriot and senator, one of those people who knew how to get something done.  He was an important part of the Watergate Committee in 1973. Such was his integrity that, even though he was a Democrat, no one ever questioned his aggressive pursuit of the truth.  When I arrived in the Senate as a young staffer six years later, I could easily see the quality of this man.  Later, I had the honor of testifying before his committee.  And I still recall going to some ceremony in the Senate a few years ago, taking my seat and then looking up a moment later as Senator Inouye asked if he could sit next to me.  No pretense, no “great man” vibe.  Just one of the greatest people this country ever produced politely asking if a seat was taken and if he might be able to sit there.  I can’t stop smiling thinking about it.  What a great man.  They say his last word was “Aloha.” So I will say Aloha, Senator Inouye.

An Industry Veteran Has It Right

I was talking to a friend the other day, one who has been in the aviation industry a long time and worked with and for airlines for much of that time.  He expressed to me, unasked and unprompted, his concern with the airline industry’s initiative to enact a National Airline Policy rather than a National Aviation Policy.  How can we leave out all the other sectors, he wondered?  Where would this kind of approach leave us? On the outside, looking in, he guessed.

greg-blog-photoThat conversation turned my mind back to the speech Sen. Jay Rockefeller gave earlier this year to the Aero Club of Washington.  Sen. Rockefeller was lamenting the fact that it took so long to get an FAA bill enacted, and I should say it was an effort he poured his heart and soul into. With much justification, he said that the reason was the aviation industry never came together. He implored us not to let that happen again. That, in large part, is why the ACI-NA board passed a resolution favoring a National Aviation Policy, and specifically mentioned policies to promote every sector.

So, back to my friend, the airline veteran. How do you square what Sen. Rockefeller asked us to do with what the airline industry, as a group, is doing? You cannot. Dividing the industry makes no sense. As I have written before in this space, the only real thing that is keeping the aviation industry as a whole from moving together is the airlines’ unwillingness to engage on the issue of airport infrastructure. I know they like to point to various countries

So when will the airlines get the message and work with the rest of the industry?

around the world as having enlightened policies, but the point they miss is they have AVIATION policies not airline policies. They use policies to build and modernize airport infrastructure that can benefit airlines but are banned/limited here, partly because airlines have decided to cut off their nose to spite their face.

I continue to hope the entire aviation industry can come together. Airports are willing and I know most other sectors are willing as well.  So, why will the airlines not heed Sen. Rockefeller’s great advice and join the effort to come together?

Get Ready For Holiday Travel

Kudos to TSA Administrator John Pistole for holding a press conference at Reagan National Airport Tuesday about the busy Thanksgiving holiday travel period that is less than a week away.  We have widely supported TSA’s risk-based security initiatives and I applaud the agency for proactively sharing how these initiatives help ensure, as he put it yesterday, “…effective security in the most efficient way.” Also that travelers should check the TSA website to make sure they understand the rules for liquids, aerosols and gels in their carry-on bags.

TSA Administrator John Pistole

I will be doing the same thing on behalf of the nation’s airports early next week through a series of TV and radio interviews. I’ll use those forums to discuss how airports are preparing for the high volume of anticipated traffic and inform the public about what they can expect at airports this holiday season.  America’s airports are prepared to meet the needs of holiday travelers and airports want passengers to have a great experience regardless of whether it’s Thanksgiving, the December holiday season, or any day of the year. The main message is to be prepared – check the airport, airline and TSA website to make sure you have all relevant information.  Also to pack your patience!

Airports are complex environments, with airlines, federal agencies, concessionaires and airport staff all responsible for different things.  But everyone is working together to make the travel experience safe, secure and whenever possible, convenient for passengers not only during the holidays, but throughout the year.

A key part of making the passenger experience enjoyable is reducing the wait time at the security checkpoint line or for processing international arriving passengers by CBP.  The key to success is for TSA and CBP to have adequate staffing to handle the millions of passengers who will travel not only during the holiday season but all year round. We are already experiencing problems at international airports so I am concerned about what might happen if Congress and the President don’t address the looming sequestration threat.  I am not alone – lots of people are concerned about the cuts we could see early in the new year.  Administrator Pistole was asked a question about that on Tuesday and he responded that “…the bottom line is to keep the frontline security operations in full force, to keep the movement of people and goods moving smoothly.”

Earlier in the press conference he emphasized how PreCheck and technology are helping to increase efficiency.  In facilitation we have Global Entry and pilot programs for Automated Border Control.  But there is more that needs to be done.  We also need better recognition that airports are a key driver of our economy, responsible for 8 percent of U.S. GDP and an estimated 7 percent of jobs.  They are critical for our global competitiveness.

Brookings study does a real service

A short time ago, I posted a guest blog on the National Journal transportation blog site,  the topic this week is on recent Brookings study on international air travel and our international airports. The study found them lacking due to the inability to invest in needed upgrades. More importantly, it spelled our a series of recommendations to fix the situation.

Here is my blog and my thoughts on two of the recommendations:

The Brookings study shines an important light on a key fact: that a very few airports support a great percentage of this country’s international traffic, even traffic that begins elsewhere. In an increasingly global economy we must make the best of this tremendous asset; our competitors are certainly doing so. Yet, we have a set of policies in this country that utterly fail to take this into account.

Happily, the Brookings study proposes two policy changes long championed by Airports Council International – North America that could make a big difference: making permanent the exclusion from alternative minimum tax of airport private purpose bonds and – most importantly – allowing airports to generate their own resources by removing artificial federal restraints on those airports.

In particular, this second tool is one that is used all over the world. Airlines and others like to point to places like Dubai and China and say they are investing in new facilities and we need to do the same. Yet, those places use exactly the tools that federal law prohibits here – a passenger user fee. In the United States, we largely rely in a system of government grants that is under severe pressure and the issuance of debt that can never be a long-term stand-alone strategy. The passenger user fee is severely limited, at the insistence of airlines who believe it gives airports too much control over their own future, and supported by the federal government, at least tacitly, which supports the current Washington-based system.

So, I believe the Brookings study does a real service in pointing out the importance of our international gateways and the fact that current policies hold them back. I do not think doubling down on Washington is the answer. And I also think we need to keep in mind that we have a system of airports in this country. If anything, the federal involvement should be re-oriented, and airports need to be able use the same tools in use by our competitors all over the world. It will help our economy, our communities and, I would argue, our airlines. If we do this, our international gateway airports will be able to do their part to undergird our national competitiveness.

Infrastructure Investment Is A Community Issue

Invited to participate in a National Journal blog, ACI-NA President Greg Principato today posted the following blog in an answer to this question: Can the link between consumers and infrastructure wonks be drawn more closely?

Unfortunately, in aviation as with many other industries, consumers may not have the best understanding of government policies that have a big impact on them or their communities. Earlier this year ACI-NA conducted national research that showed consumers don’t fully understand how airports are funded, but when educated, they largely support airport infrastructure investments.

A majority (61%) recognized the importance of airports to the economy, with 33% saying they are “extremely important” to their local economy, a finding that is consistent with a recent ACI-NA report that found that 10.5 million jobs and $1.2 trillion in spending were attributable to economic activity generated by the nation’s 490 commercial airports. But despite widespread public support, only one in four Americans were aware that the federal government has the power to limit how airport improvement funds are spent at the local level. Even fewer people (16%) know that general tax revenues are rarely used to fund commercial airports.

ACI-NA is working to change that and has recently launched a national public education campaign aimed at fostering awareness and understanding of the vital role that America’s commercial airports play in economic growth and job creation.

This is critically important because local communities need to come together to support improving airport infrastructure. The FAA projects that domestic passenger and cargo volumes will at least double over the next decade. To give you a frame of reference, in 2012 we expect 730 million people will travel through America’s airports. By 2024, we expect that number to swell to 1 billion people.

It’s a mistake to get too wonky on this issue because the most important thing for consumers is that their airports run efficiently and help to generate positive economic impacts in their communities. This point has been underscored by the pervasive political discussions regarding local and national elections–people want policies that will help create jobs and restore economic growth.  Well, vibrant airports are essential for communities as they seek to grow their employment base and attract new businesses. But we need to ensure that our airport infrastructure can continue to support the growth that it’s helping to create.

Airport infrastructure is not an aviation issue but a community issue and an economic development issue. We need to start talking in those terms so that Main Street understands their stake in airports being able to build and maintain effective modern infrastructure.

The entire discussion can be found online at the National Journal blog site.