RDU CEO Echoes Call For Congress To Modernize The Passenger Facility Charge
A message from Raleigh-Durham Airport Authority President and CEO Michael Landguth:
Airports like RDU are experiencing tremendous growth. The rising volume of people flying through our facilities greatly outpaces the speed at which we can build more parking lots, better amenities, and expand the terminals and airfield to accommodate more flights and farther destinations.
RDU is on pace to serve more than 14 million customers in 2019, a more than 10 percent increase over the number of passengers served last year. As president & CEO of the Raleigh-Durham Airport Authority, I see first-hand the growing pains associated with rapid increases in passenger volumes and the critical need for additional funding to support that growth.
In 2018, RDU contributed $12.6 billion to the economy, generated $450 million in state and local taxes and supported 86,000 regional jobs. RDU plays an integral role in the economic vitality of the Research Triangle region and central North Carolina.
We’re already hard at work to ensure RDU can continue to serve millions more passengers each year. The airport will spend $104 million this year alone on property and asset maintenance like repaving John Brantley Boulevard and repairing aging taxiways. That does not account for the $3 billion in needs such as replacing our primary runway, adding new gates to both terminals and building a new rental car and ground transportation center.
The question is – how do we pay for it?
My peer and colleague Doug Kreulen, CEO at the Nashville International Airport, penned the following op-ed about the funding challenges airports face. I echo his call for Congress to modernize the Passenger Facility Charge (PFC), a small fee added to each plane ticket to fund airport infrastructure. The PFC hasn’t increased in nearly twenty years and can no longer support the funding needs of airports like RDU and Nashville. Please read on to learn about action Congress can take to fund infrastructure such as runways, roads, terminals and gates that allow our airports and regional economies continue to thrive.
BNA CEO: Modernize federal program to keep airport fueling Music City economy
Nashville Business Journal (editorial)
There’s much talk in Washington these day about the pressing need for infrastructure upgrades across the U.S. That’s understandable. Transportation infrastructure — airports, roads, bridges, sea ports and more — is a critical building block of economic growth, the very foundation on which much job creation and business activity rests.
A thriving community requires easy connection to the world around it. Without modern transportation networks, the smooth flow of travel and commerce suffers and economic decline follows. That means fewer jobs and stagnant wages.
Commercial airports in particular are vitally important to the prosperity of a region. We see that play out every day at Nashville International Airport (BNA), where our role is both to accommodate and foster the booming economy and rapid population jump occurring here.
Serving as the gateway to Music City, BNA is an engine of enormous economic activity and job creation. Indeed, no single community asset has a greater impact on our economic health. Preliminary figures from a BNA study currently underway indicate that in 2018 alone BNA produced more than $7 billion in total economic impact, creating more than 67,000 jobs and generating nearly $170 million in state and local taxes — astounding figures that roughly doubled since 2012. Not surprisingly, serving 16 million passengers last year, BNA stands as one of the fastest growing — and most impactful — airports in North America according to industry researcher OAG.
With this growth, however, come challenges – namely, how best to upgrade and expand the airport so as to continue its role in sparking economic development. From the sight of cranes and backhoes, dust walls and orange cones across our campus, it should be obvious by now that BNA is in the midst of a major expansion.
Construction is underway for more aircraft gates, security lines, terminal space, parking and more. Beyond the current construction phase, passenger projections indicate we’ll soon thereafter need even more gates, more facilities, more runway space and, eventually, a second terminal. This extended capital improvement program, BNA Vison as it is called, will transform Nashville International Airport and set the stage for the next generation of economic growth and job creation. Think non-stop service to Asia, for example, and how it would benefit Tennessee’s automotive, health care, financial and technology companies.
Of course, this all assumes we can finance the actual construction of what is planned on paper. And therein lies the rub: How to pay for this much-needed infrastructure for our region?
Fortunately, to date BNA has had the means and capital access to fund the first phase of our expansion. To be clear, the airport receives no local tax dollars for either operations or construction projects. Rather, most major projects at the airport are funded largely by Passenger Facility Charges (PFC), a program created by Congress in 1990 to assess a modest user fee attached to airline tickets and used to pay for capital improvements at the airport where the flight originates.
Designed to benefit the local airport, it pays for critical BNA infrastructure, especially those projects that increase capacity, improve safety and, importantly, create competition among airlines to benefit consumers.
So far, so good. The problem, however, is that this once effective local tool has grown outdated and inadequate to meet future demands. Specifically, the PFC has been stuck at $4.50 since 2000, and inflation over the last 19 years has dramatically reduced its buying power. Today’s PFC is equivalent to $2.32 in 2000 dollars. Put another way, had the fee kept up with construction cost inflation (ENR), it would be worth $8.53 today and have produced $237 million in additional funds for airport improvement projects in Nashville.
So while passenger traffic has increased at BNA by a robust 112 percent since 2000, requiring expensive infrastructure upgrades, our ability to fund these same projects with PFC proceeds has eroded by 90 percent. Imagine buying a house at 2019 prices when you’re salary has held constant since 2000. At the airport, we can’t build what we can’t afford, regardless of how necessary.
If left unaddressed, we are on a course headed toward stagnation and decline as airports, including Nashville International, forgo needed upgrades, expansions and enhancements. Envision a future with deteriorating facilities, more expensive air service, longer lines and more congestion generally.
Unlike many federal problems, however, the solution in this case is straightforward, obvious, and logical: Congress must modernize the Passenger Facility Charge by adjusting the fee to restore its purchasing power and indexing it to inflation going forward.
Such an approach allows for local airport control without additional federal tax dollars or interference from Washington. The PFC program was originally designed with these goals in mind and Congress can boost its effectiveness with a simple change. The launch of much needed airport improvements will be immediate and dramatic.
In Nashville we have detailed our needs and designed a capital improvements program to meet the region’s growing market demand for air travel, both business and leisure. A modernized PFC will allow us to create a world-class airport, maintain competition and affordable fares among the airlines, and continue to fuel the roaring economic engine that BNA serves throughout Middle Tennessee. Nashville deserves nothing less.
Serving 16 million passengers in 2018, Nashville International Airport (BNA) is one of the fastest growing airports among the top 50 airports in North America. BNA features 15 airlines and offers 540 daily flights to more than 71 nonstop destinations. For more information, visit flynashville.com.
Douglas E. Kreulen
President & CEO, Nashville International Airport