The head of Spokane International Airport appealed to a congressional committee Tuesday to allow airports like Spokane’s to raise fees on passengers to fund development projects.
Larry Krauter, CEO of the airport and Felts Field, said airlines continue to raise fees on flyers “with no negative impact to travel in Spokane” while they oppose the airport’s efforts to finance necessary construction projects.
Before the U.S. House Committee on Transportation and Infrastructure, Krauter asked lawmakers to lift the “outdated cap” on the passenger facility charge – a $4.50 “user fee” on each passenger traveling out of Spokane that is among the few sources of funding for the airport.
“The $4.50 cap on PFCs has not been adjusted in nearly 20 years, meaning that its purchasing power in today’s dollars is about half of what it once was,” he said. “The status quo is not working when it comes to funding the infrastructure investments our airports desperately need.”
Krauter said the Spokane airport’s long-term capital improvement plan has been stymied because of inadequate sources of money. The $190 million plan would update security screening checkpoint capacity and configuration, baggage claim, gate capacity and aging heating and air conditioning systems.
Without an increase to the passenger charge, the project would be paid for with bonds, Krauter said, swelling the overall cost to $342 million, because of interest, and would take 38 years to pay off.
“The PFC cap forces us to finance investments over a longer period of time, meaning that we ultimately pay almost as much in interest as we do for the project itself,” he said.
Lifting the facility charge cap to $8.50 per boarding passenger would change things “substantially,” Krauter said, and drive interest down to $18.7 million on the airport’s capital improvement project.
“Why should we be forced to take on crushing levels of debt?” Krauter said. “The bottom line is … increasing the PFC is the most viable way to increase funding for improvements to our nation’s airports’ infrastructure. The cost of doing nothing is simply too high.”
Krauter was joined at the committee hearing by Tori Barnes, a spokeswoman for the U.S. Travel Association; Ted Christie, president of Spirit Airlines; Joe Lapano, CEO of Tampa International Airport; Candace McGraw, CEO of Cincinnati-Northern Kentucky International Airport; and Marc Scribner, senior fellow with the Competitive Enterprise Institute.
Rep. Peter DeFazio, a Democrat from Oregon who chairs the committee, asked Krauter a number of questions aimed to highlight the practice of airlines raising ancillary fees while opposing the ability of airports to do the same.
DeFazio began by pointing out that American, Delta, Jet Blue and United airlines have all raised baggage fees by $5 since August.
“You don’t think a $5 increase in the bag fee drove down boardings?” DeFazio said. The assembled airport representatives said they had seen no such drop-off.
“I did study economics in undergraduate and graduate school. I’m just confused about the differences, the variables in price elasticity,” DeFazio said. “If it’s a bag fee, you thank them. But if it’s a PFC so you can get through security faster, you might have a lower price ticket, you might have more competition, you’ll have a better airport experience, you’ll never fly again.”
DeFazio turned to Krauter.
“To Spokane, Alaska says that a $4.50 increase will discourage air travel,” he said. “Are they one of your incumbent airlines?”
“Yes, sir, they are. They are the busiest incumbent airline in our market,” Krauter said.
“And they said if your fee went up by $4.50, that they would have no choice except to raise air fares or reduce service. Do you buy that argument?” DeFazio said.
“I don’t and for the same reasons you’ve stated,” Krauter said. “We have seen ancillary fees continue to increase considerably year after year with no negative impact to travel in Spokane. In fact, we’re setting new records for travel every year.”
In a prepared statement not delivered to the committee but entered into the record, Krauter said airlines were resistant to increases in the PFC because it had originally been designed to help “build facilities to increase competition … for the good of the whole and not to benefit the few.”
With the consolidation of the airline industry, the companies don’t want competition, so they oppose increases to the PFC, Krauter said.
In 2017, Congress considered lifting the PFC cap but decided not to after significant pushback from the airline industry, which called it a “tax.”
In an editorial written for the Hill newspaper, the president of the the major airlines’ lobbying group said an increase in the charge would make flyers “an ATM for the nation’s airports.”
“Already, flyers are taxed at nearly 21 percent on a typical domestic round-trip ticket,” Nicholas Calio wrote, adding that the cap lift would allow airports “to raise the PFC as high as they wanted, until flyers’ pockets are turned inside out.”
At the hearing, Krauter said the airports are not supported by a region’s surrounding taxpayers, so they are reliant on the passenger fee.
“The taxpayers do not support the airport. The users support the airport,” he said.