Who Funds Airports? Government Funding For Airport Infrastructure

Airports are often thought to be funded by taxpayer dollars, but this is a misconception. In the United States, airports are largely self-sustaining and are funded by those who use them. Airport infrastructure projects are funded through federal grants, the Passenger Facility Charge (PFC) local user fee, and tenant rents and fees. Federal grants are provided through the FAA's Airport Improvement Program (AIP), which offers funding for public agencies and, in some cases, private owners and entities, for the planning and development of public-use airports. The PFC is a per-person fee collected by an airport for passengers enplaning their flight, and it is used for repairing aging facilities, improving aviation safety, and accommodating rising demand. Tenant rents and fees are assessed to businesses that operate at the airport, including airlines.

US airports are largely self-sustaining

While it is a common misconception that airports are funded by taxpayers, infrastructure projects at airports in the US are funded through three key mechanisms: federal grants through the FAA's Airport Improvement Program (AIP), the Passenger Facility Charge (PFC) local user fee, and tenant rents and fees. Federal grants come from a portion of the travel taxes paid when buying an airline ticket or shipping a package, and fuel taxes paid by general aviation.

The PFC is a local user fee collected by airports to repair aging facilities, improve aviation safety, enhance the passenger experience, create more airline competition to lower airfares, and accommodate rising demand. It is collected per passenger at airports owned by public agencies with scheduled passenger services and is used to fund FAA-approved airport improvement projects.

The AIP provides grants to public agencies and, in some cases, private owners and entities, for the planning and development of public-use airports included in the National Plan of Integrated Airport Systems (NPIAS). AIP grants are used for projects related to enhancing airport safety, capacity, security, and environmental protection.

All but one US commercial airport is owned and operated by public entities, including local, regional, or state authorities. Airports are required by the federal government to be as self-sustaining as possible, operating like businesses by funding their operations from their revenue and planning for funding for improvement projects.

Federal grants are a source of funding

The degree of reliance on federal grants is generally inversely related to the size of the airport. For example, federal grants contributed around 10% of the funding for the 71 largest airports in the US, while they accounted for 50% of the funding for the remaining 3,233 national system airports.

The AIP is just one of three key mechanisms for funding infrastructure projects at airports in the US. The other two are the Passenger Facility Charge (PFC), a local user fee, and tenant rents and fees.

The PFC is a per-person fee collected by an airport for passengers enplaning (boarding) their flight at that airport. It is collected only at airports owned by public agencies with scheduled passenger service. The PFC is used to repair aging facilities, improve aviation safety, enhance the passenger experience, create more airline competition to lower airfares, and accommodate rising demand.

While airports are largely self-sustaining, federal grants are an important source of funding for many, especially smaller airports.

Passenger Facility Charge (PFC) is a local user fee

Airports in the United States are largely self-sustaining and are funded by those who use them. The vast majority of airport revenues come from fees paid by passengers, landing fees, and space rental fees paid by airlines. Although almost all U.S. airports are owned by state or local governments, they are required by the federal government to be as self-sustaining as possible and receive little to no direct taxpayer support.

The Passenger Facility Charge (PFC) is a local user fee that is included in the ticket price and goes towards the upkeep and maintenance of airports. The PFC was created by Congress in 1992 and is collected by all commercial airports controlled by public agencies. The PFC is capped at $4.50 per flight segment, with a maximum of $18 total for a round trip. Airports use the revenue generated from PFCs to fund FAA-approved projects that enhance safety, security, or capacity, reduce noise, or increase air carrier competition.

The PFC program was established by the Aviation Safety and Capacity Expansion Act of 1990, which allowed the Secretary of Transportation to grant authority to public agencies controlling commercial service airports to impose a local fee of $1, $2, or $3 per enplaned passenger. Beginning on June 1, 1992, commercial airports started collecting PFCs, which were added to airline tickets at a rate of $3 per passenger, per leg.

In 2001, due to the passage of the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century, Congress raised the PFC cap to $4.50 per ticket. This cap has remained in place for almost 20 years, and airports have lobbied for it to be increased or removed to allow for much-needed infrastructure improvements.

The PFC is one of the key mechanisms for funding infrastructure projects at airports, along with federal grants through the FAA's Airport Improvement Program (AIP) and tenant rents and fees. Modernizing the PFC cap is crucial for restoring its purchasing power and providing airports with the flexibility to set their own levels based on local needs.

State governments may provide funding

State governments typically fund aviation trusts through fees and taxes levied on aircraft owners and airport users in the state. This can include revenue generated from fuel flowage fees. State grants can sometimes be used to fund projects that are not eligible for Airport Improvement Program (AIP) funding and can be used to make up part or all of the local match for an AIP grant.

State funding is generally competitive, as there are more projects than funds available. States prioritise projects using a variety of metrics, including cost-benefit ratios, need and justification, geographic location, and the potential of a project to receive other types of funding.

Smaller airports that are sponsored by cities, counties, and states typically do not generate enough revenue to cover their costs and, as a result, receive some or all of their operating budget from the sponsor's general fund.

Local funding is provided through general fund allocation

Local funding for airports is often provided through general fund allocation. This funding varies depending on the ownership and operation of the airport. Local funding is typically provided through tax revenue and usage fees collected by the sponsor or airport operator. Airports aim to generate sufficient revenue to cover operating costs and build a cash reserve for capital projects, but this is not always possible.

Smaller airports that are sponsored by cities, counties, and states typically do not generate enough revenue to cover their costs and, as a result, receive some or all of their operating budget from the sponsor's general fund. Local funding may also be used to cover capital costs for projects that are not eligible for or unlikely to receive FAA and state funding, or to make up part of the local match for state and FAA grants. Airports that use their sponsor's general fund often compete with other departments for funding, such as schools, emergency services, and public works. This competition for funds makes it important for airport managers to convey the airport's economic benefit, role in emergency and disaster response, and place in the national transportation system to sponsor decision-makers.

Local funding sources may also include taxes and fees levied by port/airport/special districts and authorities. These organizations are typically authorized by an act of state legislature and may not exist in all states. They have the ability to define the roles of each airport in their system and share revenues among airports for capital and operating costs. Commercial service airports, which cater to a higher volume of people and goods, have significantly more revenue-generating opportunities than GA airports, which often cater to smaller, slower aircraft. By sharing revenues within their system of airports, these entities can ensure the financial health of the whole system.

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