Despite an influx of infrastructure spending, the nation's airports are being squeezed by the costs of servicing existing debt and the need to modernize their operations.
The challenges were laid out in detail during a Federal Aviation Administration reauthorization hearing held by the Aviation Subcommittee of the House Transportation & Infrastructure Committee Thursday.
"There's $30 billion a year need in airport infrastructure development," said Kevin Dolliole, director of aviation at Louis Armstrong New Orleans International Airport. "The AIP program and PFC airport revenues equate to about $13 billion a year so, there's still a big gap."
Dolliole was testifying on behalf of the Airports Council International-North America which Thursday released a
According to the ACI-NA, AIP funding has remained stagnant for nearly two decades, and in most instances, cannot be directed towards terminal projects, which is what many facilities need the most. The report shows needs for terminal improvements pegged at over $63 billion for 2023-2027 with airfield improvements clocking in at over $38 billion.
Passenger Facility Charges allow airports to impose a fee on passengers to fund airport projects. The fee is currently capped at $4.50 per passenger, a rate that hasn't been raised by the federal government for over twenty years. The airports have been playing a steady beat for raising the PFC cap for a variety of reasons.
"As PFC revenues increase, airports have a better ability to improve terminals and improve the airfield," said Dolliole. "They can provide matches to grants that we receive and the more we can do with grants, it's less we have to do with debt and costs that flow down to the air carriers that fly in and out of our facilities."
The
Increasing bond issuance without steady backing is hampered in an industry that's already deeply in debt. "Approximately $8 billion in airport bond principal and interest payments are due each year, with total outstanding debt for U.S. commercial airports standing at roughly $111 billion at the end of the 2021 fiscal year," ACI-NA found in its report.
Long term outstanding debt for airports has been mostly on the rise since 2012 with the biggest jump happening in 2018 when it nearly doubled as measured by percentage change to 8% from 4% and cracking the $100 billion mark. Per the report, "Because the funding gap is so wide, airports in the U.S. have been forced to take on debt just to fund the maintenance of existing assets – rather than to finance capital expenditure." The report further notes that some airports have reached their borrowing capacity.
In December of last year, the FAA issued its 2023-2027 National Plan of Integrated Airport Systems showing a total of $62.4 billion will be needed for airport development but the agency only includes projects that have an identified funding source.
ACI-NA is projecting $151 billion over the next five years, a figure that also includes unfunded projects such as parking facilities, hangars, cargo buildings, the revenue producing portions of passenger terminals, and certain improvements to highway and transit airport access systems.
The Infrastructure Investment and Jobs Act promises to funnel $15 billion into airports by funding improvements to runways, taxiways, safety, sustainability projects, terminal improvements, airport-transit connections, and roadway projects. That revenue stream is set to run out in 2026 and inflation has taken a bite out of how far the money goes.
Comparing the Consumer Price Index to the Construction Cost Index shows an ever-widening spread that started in 2012. Using 2012 number as a baseline of 100, by 2027 the CCI is projected to be over 200, while the CGI is expected to be under the 150 mark.
Assuming no changes are made to flat PFC revenues and AIP grants, funding levels will be cut nearly in half when the clock runs out on federal infrastructure money. Net revenues peaked for the airports in 2017 getting close to $4 billion before heading into a nosedive during the pandemic. The trend reversed in 2020 but by 2021 was still in the red.
Data from the report indicates that larger size hubs account for the biggest share of infrastructure need at over $79 billion as measured from 2023-2027.
ACI-NA estimates that airports took a $40 billion hit during the pandemic. The industry has since surged back along with a rise in stability. Moody's Investors Service recently boosted the credit rating for senior revenue bonds at
Earlier this month Fitch Ratings upgraded Miami-Dade County's $4.9 billion of aviation revenue refunding bonds to A-plus from A as
In the Northeast, the Port Authority of New York and New Jersey reported
Other topics covered during the testimony included access to flights by the disabled, Essential Air Service designation for airports, near misses on the runways and ongoing labor shortages including pilots and air traffic controllers. Members of the panel also pointed out some of the soft services that have become expected in modern airports including accessible electrical outlets, enhanced restrooms, and water stations.
"Continued infrastructure investment and reduced regulatory burdens for America's airports will support good-paying jobs, stimulate the economy, advance important environmental goals, and improve the passenger experience for millions of travelers," said ACI-NA President and CEO Kevin M. Burke in a statement. "It's time for Congress to make meaningful reforms in how it funds America's critical airport infrastructure."
