Introduction
The United States of America’s airports are considered vital economic pillars. Roughly, it is estimated that American airports generate above $1 trillion per annum and provide more than ten million jobs nationally (Miller et al., 2020). Over time air transport has increased, with more passengers traveling globally. Such an overwhelming demand has necessitated the improvement of aviation infrastructure (Phillips et al., 2020). The airports, therefore, must be modernized to offer exemplary services and spur competition. The primary funding sources for American airports are federal grants, passenger facility charges, and tenant fees and rents.
Discussion
Airport cash flow, such as rates and charges, rentals, concession revenue, and fees, are the fundamental sources of income. This income is used to service the operation and management expenses and finance the “pay as you go” capital projects (Atkinson, 2020). Additionally, the revenues are used to pay back bondholders both the interest and principal. Revenue and General Obligation Bonds are other sources of finances for an airport for capital improvements. They form a critical financial instrument used in pledging revenue streams. It is estimated that such bonds save the airports over $1 billion annually in interest costs (Atkinson, 2020). However, the ability of the airport to use it relies on factors such as the debt structure, its management and administration, the economic base, and its scope of operation.
Passenger Facility Charges (PFCs) are another funding source for the airports. The American Congress approved the PFCs of up to $3 per passenger (Atkinson, 2020). The finances acquired from this scheme are used to manage infrastructural and technological enhancement projects such as the construction and maintenance of airways, hangars, and taxiways. The PFC funds are approximated to generate over $1.35 billion (Miller et al., 2020). In most airports, this money is used to establish and manage long-term projects with future returns. The airports also receive financing through aviation aid from state governments, and state-imposed taxes are the primary revenue source for such funds.
The National Civil Aviation Review Commission (NCARC) is the legally authorized body in the United States of America that considers and recommends the funding of airports. Financing the aviation industry in America depends on the size of the airport and the services it provides. However, as per the commission, they are required to be as self-sufficient as possible even though almost all airports in the United States are managed by the state and federal government (Miller et al., 2020). This will ease the burden of taxpayers’ money to run the airport operations. This means that each airport should be managed as a business funding itself through the revenue collected.
Before funding the airports, aviation commissions such as the NCARC should address various vital issues. As such, they include analyzing the capital needs of the airport. Further, the current funding sources will be assessed to determine if they are sufficient or insufficient to meet the current demands. Additionally, the need for the airport to receive a grant is established. If the grant is provided, the NCARC should define how it will be financed and which airport to receive it. Though not all the airports will qualify for a grant, the commissions are obligated to ensure that all federal roles and public interests are upheld in those airports that did not receive the grant (Phillips et al., 2020). All airports identified as crucial players in national transportation qualify for grants from the Airport Improvement Program. This is because such airports are vital to the nation’s economic growth. The government, therefore, obligates itself to meet its capital needs requirements.
Airport capital needs requirements are the essential expenditures necessary to comply with federal mandates such as safety and security, technological enhancements, and maintenance infrastructure. Such demands could also include meeting user requirements, mitigating environmental impacts, and providing hangars and parking facilities. The grant covers 75% of the eligible costs for large and medium airports and 95% for small primary ones (Atkinson, 2020). For an airport to qualify for a grant or bond from the Airport Improvement Program (AIP), it must meet the inclusion criteria set by the Federal Aviation Administration (FAA).
AIP grants are only meant for public-use airports with both heliports and seaplane bases included. These airports are those that are owned publicly, private entities but are considered as relievers by the FAA, or managed privately but have scheduled services with a minimum of 2,500 enplanements per annum (Miller et al., 2020). Further, for the airport to be eligible for such grants, it should be included in the National Plan of Integrated Airport Systems (NPIAS). The NPIAS is developed and published every two years. It seeks to identify the specific airports that are vital in public transportation and play a role in meeting the needs of civil aviation, postal services, and the national defense.
Conclusion
Projects financed by the grants are only those justified by the FAA. Operational costs such as equipment, salaries, and supplies are excluded. Eligible projects include runway, taxiway, and apron rehabilitation or construction, airfield lighting, signage, and drainage (Phillips et al., 2020). Environmental and planning studies, airport layout plans, and improvement of safety areas and access roads qualify for financing. The grant recipients should be legally and financially capable of conducting the assurances and obligations outlined in the grant agreement and project application.
References
Atkinson, C. L. (2020). The Federal Aviation Administration Airport Improvement Program: Who benefits? Public Organization Review, 20(4), 789-805. Web.
Miller, B. M., Knopman, D., Ecola, L., Phillips, B., Kim, M. K., Edenfield, N.,… & Prosdocimi, D. (2020). US Airport Infrastructure Funding and Financing: Issues and Policy Options Pursuant to Section 122 of the 2018 Federal Aviation Administration Reauthorization Act (No. RR-3175).
Phillips, B., Kim, M., Edenfield, N., Schwam, D., & Prosdocimi, D. (2020). US Airport Infrastructure Funding and Financing.