Theory and Law of Airport Revenue Diversion (2008) / Chapter Skim
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4 airline industry costs, and a diversion of revenue could, according to the airlines, only worsen the airlines' financial condition, which, since deregulation, has fallen to historic lows.5 As a consequence, Congress has imposed constraints on the use of airport funds for off-airport municipal activities, at least for most airports receiving federal financial support. This study examines the issue of airport revenue diversion, the theoretical rationale for its prohibition, and the array of federal statutes and Federal Aviation Administration (FAA)
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5 nance expenses, principal and interest debt service, and various "pay as you go" infrastructure, such as terminal or runway expansions or improvements.10 Airlines pay rental charges for the space they occupy at ticket counters, gates, and baggage handling, maintenance, and catering facilities, and also pay takeoff and landing fees, parking fees, and fuel fees.11 Two methodologies dominate computation of airline fees and charges under airport use agreements: the residual method and the compensatory method.12 Many airports use a combination of residual and compensatory ratemaking. In a residual agreement, the signatory airlines accept the financial risk, and guarantee to provide the airport with sufficient revenue to cover its operating and debtservice costs.
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6 also passed the Aviation Safety and Capacity Expansion Act, creating a federally authorized but locally collected program of airport PFCs to supplement public airport capital needs.18 Between 2001 and 2005, airports received an average of approximately $13 billion a year for capital development, most of which comprised bonds ($6.5 billion) , federal grants ($3.6 billion)
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7 cargo waybill tax, a $6 international departure tax, a 15 cents per gallon general aviation gasoline tax, and a 17.5 cents per gallon general aviation fuel tax.29 Legislation passed that year shifted much of AIP funding away from the traditional 10 percent tax imposed on each ticket sold.30 Beginning in January 2000, aviationrelated federal taxes generated to fund the AIP included a 7.5 percent domestic ticket tax and a $2.50 per person per flight segment fee for all flights, though certain rural airports were exempted from the latter. The federal grant programs also are funded by a $12.00 international arrival tax and a $12.00 international departure tax (adjusted for inflation from 1999)
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8 TABLE 1. CURRENT AVIATION EXCISE TAX STRUCTURE32 (Taxpayer Relief Act of 1997, P.L.
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9 The AIP provides funding for airport planning and development projects that enhance capacity, safety, and security and mitigate noise. Several thousand airports have been designated by the FAA as eligible for AIP funding.
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10 receiving funds through the AIP funds essentially is double-dipping and taxpayers pay the brunt of this practice. Air carriers and air travelers also pay a heavy price for airport revenue diversion." 45 Monopolies generally have been disfavored in American law since promulgation of the Sherman Act of 1890.
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