Funding Sources For General Aviation Airports

General aviation airports are funded through a combination of federal, state, and local sources. While airports are required to be self-sustaining, they receive little to no direct taxpayer support. Instead, they rely on revenue from user fees, taxes, and fuel flowage fees, as well as grants and programs like the Airport Improvement Program (AIP) and the Passenger Facility Charge (PFC). AIP grants cover 75-95% of eligible costs for small primary, reliever, and general aviation airports, while PFCs can be used for projects not eligible for AIP funds. Local funding is generally provided through tax revenue and usage fees, and smaller airports may receive funding from their sponsor's general fund.

Federal grants through the FAA's Airport Improvement Program (AIP)

The Federal Aviation Administration's (FAA) Airport Improvement Program (AIP) provides grants to public agencies and, in some cases, to private owners and entities for the planning and development of public-use airports. AIP grants are typically apportioned into major entitlement categories such as primary, cargo, and general aviation, with remaining funds distributed to a discretionary fund. Airports are entitled to a certain amount of AIP funding each year, based on passenger volume.

The AIP funds airport infrastructure projects such as runways, taxiways, airport signage, lighting, and markings. AIP grants cover a range of 75-95% of eligible costs, with the percentage depending on the size of the airport and the type of project. For large and medium primary hub airports, the grant covers 75% of eligible costs (or 80% for noise program implementation). For small primary, reliever, and general aviation airports, the grant covers between 90% and 95% of eligible costs, based on statutory requirements.

The AIP was authorized by the Airport and Airway Improvement Act of 1982, which Congress recodified in 1994. The program builds on earlier grants-in-aid programs established after World War II to promote the development of a system of airports to meet the nation's needs. The Federal-Aid Airport Program (FAAP), authorized by the Federal Airport Act of 1946, drew its funding from the general fund of the US Treasury. In 1970, the Airport and Airway Development Act established the Planning Grant Program (PGP) and the Airport Development Aid Program (ADAP), funded by a newly established Airport and Airway Trust Fund.

AIP grants come with conditions and obligations, including the requirement to operate and maintain the airport in a safe and serviceable condition, not grant exclusive rights, mitigate hazards to airspace, and use airport revenue properly. Recipients of AIP grants, referred to as "sponsors," must be legally, financially, and otherwise able to carry out the assurances and obligations contained in the project application and grant agreement.

Passenger Facility Charge (PFC) local user fees

A Passenger Facility Charge (PFC) is a fee that is included in the ticket price and is paid by almost all airline travellers in the United States. Airports use PFCs to fund projects that enhance safety, security, or capacity, reduce noise, or increase air carrier competition. PFCs can also be used to fund projects that are not eligible for Airport Improvement Program (AIP) funds, as long as they are eligible for PFC funds. Airports may also use PFCs to make up the local match portion of AIP grants.

The PFC program was first introduced in June 1992, with charges set at $3 per passenger, per leg. As of 2024, the fee is capped at $4.50 for every enplaned passenger at public agency-controlled commercial airports. The amount of the PFC is set by the airport, within the cap, and must be approved by the Federal Aviation Administration (FAA). Airports submit a PFC application to the FAA outlining the amount of the PFC to be collected, the collection period, and what the funds will be used for.

The use of PFCs has been a source of contention between the airline industry and airports. Airlines have argued that PFCs are an undue tax that will reduce demand for air travel, while airports have countered that PFCs are necessary to fund infrastructure projects that benefit local communities and meet future demand. In 2015, President Barack Obama requested that the cap on PFCs be raised to $8, and in 2017, it was estimated that PFCs generated $3.286 billion in revenue for airports across the United States.

PFCs are just one source of funding for airports, which may also receive revenue from taxes and fees levied on aircraft owners and airport users, as well as grants from state and federal governments. Smaller airports that are sponsored by cities, counties, or states may receive some or all of their operating budget from their sponsor's general fund.

State and local government funding

State governments typically fund aviation trusts through fees and taxes levied on aircraft owners and airport users. This includes fuel flowage fees and state grants, which can be used for projects that are not eligible for Airport Improvement Program (AIP) funding. State funding is generally competitive, with more projects than available funds, and states prioritize projects based on various metrics such as cost-benefit ratios, need, and potential to receive other funding.

Local funding is generally provided through tax revenue and usage fees collected by the airport sponsor or operator. Smaller airports that are sponsored by cities, counties, or states may receive their entire operating budget from the sponsor's general fund if they cannot generate enough revenue to cover their costs. Local funding may also be used to cover capital costs for projects that are not eligible for FAA or state funding, or to contribute to the local match for state and FAA grants.

Additionally, airports may use Passenger Facility Charges (PFCs) to fund projects that are not eligible for AIP funds but are eligible for PFC funds. PFCs are local user fees that airports collect after submitting an application to the Federal Aviation Administration (FAA) and receiving approval. The FAA also provides grants through the AIP for the planning and development of public-use airports, with grants covering 75-95% of eligible costs.

Tenant rents and fees

General aviation airports, which typically serve private aircraft, business aircraft, and smaller charter aircraft, receive substantial support from AIP funds. Each year, the FAA provides $150,000 to these airports for justified and eligible projects. If there are unused funds, they can be rolled over for up to four years, potentially accumulating up to $600,000. However, if the funds remain unused, they are returned to the FAA for redistribution to other airports.

The funding landscape for airports is challenging, with a common misconception that airports are primarily funded by taxpayer dollars. In reality, airports must carefully manage their finances, relying on a combination of sources, including tenant rents and fees, to address their funding needs.

Revenue from aircraft owners and airport users

While airports are indeed owned by state or local governments, they are mandated by the federal government to be as self-sufficient as possible. This means that they are expected to fund their operations from their revenue and plan for major improvement projects. Airports are thus required to operate like businesses.

General aviation airports can receive up to $150,000 in entitlement funding from the FAA each year to spend on justified and eligible projects. If the funds are unused, they can be rolled over for up to four years, allowing airports to potentially accumulate up to $600,000. To access these funds, airports must meet certain FAA requirements, and any unused funds are returned to the FAA for redistribution. This funding mechanism incentivizes airports to carefully plan and execute projects to make effective use of their allocated funds.

Additionally, state grants can be used to fund projects that are not eligible for AIP funding or to make up part or all of the local match for an AIP grant. These grants are sometimes the sole source of capital funding for airports that are not part of the FAA's NPIAS. State funding typically comes with "assurances" that outline the obligations of airport sponsors in exchange for receiving funds. These assurances aim to protect the state's infrastructure investment and ensure safe and efficient airport access for users.

Smaller airports that are sponsored by cities, counties, or states may not generate sufficient revenue to cover their costs. In such cases, they may receive funding from their sponsor's general fund to cover operating costs and capital projects. This local funding is generally provided through tax revenue and usage fees collected by the sponsor or airport operator.

Frequently asked questions