Modernize the Passenger Facility Charge? Yes, With Deregulated Rate-Setting

Reason Foundation: Moderninizing the PFC

A timely article by Mark Scribner of the Reason Foundation, writing about the need to lift the cap on the current $4.50 Passenger Facility Charge (PFC). Its arguments are compelling, especially for policymakers who may wish to rebalance industry and public contributions to upgrading airports. Inside the article linked above, you will find a link to the full report.

We recently offered a series of alternative PFC recommendations, to be chosen depending on the political environment surrounding the reauthorization of the Federal Aviation Administration (FAA) and its programs (see Upgrade U.S. airports? Fix the PFC). 

While lifting the cap on the PFC is justifiable by looking at project inflation, airport needs, and promoting competition, it is also important that Congress consider deregulating the rate-setting. This would allow airports to set the rate of the PFC for different markets: international, transborder, domestic, and connecting flights. This structure borrows from the successful example of the Canadian Airport Improvement Fee (AIF). For example, at Toronto Pearson, the AIP is set at CAD 30 for non-connecting passengers and CAD 6 for connecting passengers.

Because non-connecting passengers will pay a higher airline fare on average than connecting passengers, this makes sense from its effect on airfares and it recognizes the role that Toronto Pearson plays as a connecting hub, thereby not excessively discouraging small community traffic that typically operates with one stop over Toronto. These considerations apply in the U.S. as well and could help obtain buy-in from connecting hubs and smaller communities.