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Passenger Facility Charges - Revisions to Rule for Compensation to Carriers

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Revisions to Passenger Facility Charge Rule for Compensation to Air Carriers

FAA-02-13918

March 11, 2004

Final Rule | Final Rule as Published in the Federal Register (March 18, 2004)

This change in compensation to air carriers is limited to what is allowed by statute. Once FAA has determined air carriers' average, necessary and reasonable expenses incurred in collecting and handling PFCs, the compensation rate is not subject to FAA discretion.

For airports, the principal effect of the higher rate of compensation is the marginal erosion of the airports' PFC revenue stream. FAA is changing the basis of compensation from a PFC remitted basis to a PFC collected basis. A rate of compensation of $0.11 for each PFC collected equals about $0.12 for each PFC remitted. Average air carrier ticket refund rates, which account for the difference between PFCs collected and remitted, are about 9 percent.

The increase in compensation will lead to redistribution of $21 million each year in PFC collections to air carriers from airports based on 1999 enplanements. The sum amounts to a loss of slightly more than one percent of the projected annual PFC stream. However, the increase in compensation will not erode approved collection authority for airports. Rather, the higher compensation will result in a small extension of the time period required to collect an authorized amount of PFC revenue. For example, an authorized PFC collection amount, such as $1 million, would currently take a public agency one year to collect at a $4.50 PFC level. This assumes the air carrier retains $0.08 for each remitted PFC. Under the new compensation rate of $0.11, it would take one year plus 3.3 days to collect $1 million at a $4.50 level.

It is possible that some airports may be impacted negatively by the slight increase in the time it would take, because of the increase in the compensation level, to raise authorized PFC amounts for projects. However, most airports with PFC‑funded projects already in place originally planned to finance these projects based on a $3 PFC level. Now, under AIR‑21, they can implement a $4 or $4.50 PFC level to supplement funding. New projects based on the $4.50 PFC level can be planned around the higher rate of compensation, if necessary.

By: Marion Blakey

• FAA PFC Web Site

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