[Federal Register Volume 61, Number 74 (Tuesday, April 16, 1996)]
[Proposed Rules]
[Pages 16678-16681]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-9253]




[[Page 16677]]


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Part III





Department of Transportation





_______________________________________________________________________



Federal Aviation Administration



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14 CFR Part 158



Passenger Facility Charges; Proposed Rule

  Federal Register / Vol. 61, No. 74 / Tuesday, April 16, 1996 / 
Proposed Rules  

[[Page 16678]]



DEPARTMENT OF TRANSPORTATION

 Federal Aviation Administration

14 CFR Part 158

[Docket No. 27791; Notice No. 96-3]

RIN 2120-AF69


Passenger Facility Charges

AGENCY: Federal Aviation Administration, DOT.

ACTION: Advance notice of proposed rulemaking (ANPRM).

-----------------------------------------------------------------------

SUMMARY: This document seeks public comment on changes to several 
sections of Title 14, Code of Federal Regulations, Part 158, Passenger 
Facility Charges (PFC's), that deal with the collection, handling, and 
remittance of PFC's. The notice specifies the quantity and quality of 
airline cost data necessary for the Federal Aviation Administration 
(FAA) to determine an adequate rate of airline compensation. In 
addition, the notice includes several proposed modifications to part 
158 that would allow air carriers to be compensated based on PFC's 
collected; implement the statutory prohibition (FAA Authorization Act 
of 1994) on collection of PFC's from passengers traveling on frequent 
flyer awards; and clarify various terms. Finally, the notice requests 
comments on several proposals dealing with ways to safeguard PFC 
revenue in the event of carrier bankruptcy.

DATES: Comments must be received on or before May 16, 1996.

ADDRESSES: Comments on this notice should be mailed, in triplicate, to: 
Federal Aviation Administration, Office of the Chief Counsel, Attn: 
Rules Docket (AGC-200), Docket No. 27791, 800 Independence Avenue, SW., 
Washington, DC 20591. Comments delivered must be marked Docket No. 
27791. Comments may be examined in Room 915G on weekdays, except 
Federal holidays, between 8:30 a.m. and 5:00 p.m.

FOR FURTHER INFORMATION CONTACT:
Sheryl Scarborough, Passenger Facility Charge Branch (APP-530), 
Airports Financial Assistance Division, Office of Airports Planning and 
Programming, Federal Aviation Administration, 800 Independence Avenue, 
SW., Washington, DC 20591; telephone (202) 267-8825.

SUPPLEMENTARY INFORMATION:

Comments Invited

    Interested persons are invited to participate in this advance 
notice of proposed rulemaking by submitting such written data, views, 
or arguments as they may desire. Comments relating to the 
environmental, energy, federalism, or economic impact that might result 
from considering the options in this advance notice are also invited. 
Substantive comments should be accompanied by cost estimates. Comments 
should identify the regulatory docket or notice number and should be 
submitted in triplicate to the Rules Docket address specified above. 
All comments received on or before the closing date for comments 
specified will be considered by the Administrator before taking action 
on this proposed rulemaking. The proposals contained in this notice may 
be changed in light of comments received. All comments received will be 
available, both before and after the closing date for comments, in the 
Rules Docket for examination by interested persons. A report 
summarizing each substantive public contact with Federal Aviation 
Administration (FAA) personnel concerning this rulemaking will be filed 
in the docket. Commenters wishing the FAA to acknowledge receipt of 
their comments submitted in response to this notice must include a 
preaddressed, stamped postcard on which the following statement is 
made: ``Comments to Docket No. 27791.'' The postcard will be date 
stamped and mailed to the commenter.

Availability of ANPRM

    An electronic copy of this document may be downloaded using a modem 
and suitable communications software from the FAA regulations section 
of the Fedworld electronic bulletin board service (telephone: 703-321-
3339) the Federal Register's electronic bulletin board service 
(telephone: 202-512-1661), or the FAA's Aviation Rulemaking Advisory 
Committee Bulletin Board service (telephone: 202-267-5948).
    Internet users may reach the FAA's web page at http://www.faa.gov 
or the Federal Register's webpage at http://www.access.gpo.gov/
su____docs for access to recently published rulemaking documents.
    Any person may obtain a copy of this ANPRM by submitting a request 
to the Federal Aviation Administration, Office of Rulemaking, ARM-1, 
800 Independence Avenue, SW., Washington, DC 20591, or by calling (202) 
267-9680. Communications must identify the notice number or docket 
number of this ANPRM.
    Persons interested in being placed on the mailing list for future 
NPRM's should request from the above office a copy of Advisory Circular 
No. 11-2A, Notice of Proposed Rulemaking Distribution System, that 
describes the application procedure.

Background

Current Regulation

    In the late 1980's, the traditional sources of airport revenue for 
capital improvements began to appear inadequate to meet these demands.
    Congress responded to these needs by enacting 49 U.S.C., The 
Aviation Safety and Capacity Expansion Act of 1990, which allows public 
agencies controlling commercial service airports (those with regularly 
scheduled service and enplaning 2,500 or more passengers per year) to 
charge enplaning passengers using the airport a $1, $2, or $3 facility 
charge. Public agencies wishing to impose these PFC's must apply to the 
FAA for such authority and meet certain requirements spelled out in the 
legislation and the implementing regulation (14 CFR part 158) issued by 
the FAA in may 1991.
    Upon receiving FAA approval to impose PFC's, the public agency 
gives written notification to all carriers who are required to collect 
PFC's. On the charge effective date, carriers and their agents begin 
collecting the PFC's when the ticket is issued. PFC's are collected 
until the charge expiration date, or upon further notification from the 
public agency or the FAA. PFC's are collected based on the original 
ticket issued. Carriers remit PFC revenue monthly to airports.
    Section 158.53(a) provides, as compensation for collecting, 
handling, and remitting the PFC revenue, that the collecting air 
carrier was entitled to retain $0.12 of each PFC remitted on, or 
before, June 28, 1994. Thereafter, air carriers are entitled to $0.08 
of each PFC remitted.

Petition for Rulemaking and Public Comments

    On May 27, 1994, Air Transport Association of America (ATA), on 
behalf of its members, petitioned for a rule change to Sec. 158.53(a) 
to extend the $0.12 handling fee for an additional 3 years, at which 
time the petitioner would file comments as to whether or not the 
airline industry, as a whole, had fully recovered the costs of 
implementing, operating, and maintaining the PFC collection system. 
Further, the petitioner requested that Sec. 158.53 be amended to allow 
air carriers to retain a handling fee for a refunded PFC. As 
justification for such changes, the petitioner asserted that the 
economic health of the airline industry depends, in part, upon the full 
cost

[[Page 16679]]

recovery of programs which the carriers implement. This includes the 
PFC program, which the carriers are required, by law, to carry out on 
behalf of airport operators. Further, the petitioner asserted that 
service to passengers may ultimately be harmed if airlines are required 
to cut costs elsewhere to compensate for unrecovered costs associated 
with the PFC program.
    Since the petition was submitted, the carrier compensation rate has 
been decreased to $0.08 per PFC remitted in accordance with 
Sec. 158.53(a). The FAA was unable to respond to the petitioner's 
request for an immediate decision because the timing of that request 
did not allow sufficient opportunity for public comment on a proposal 
that would affect both carriers and public agencies.
    A summary of the ATA's petition for rulemaking was published in the 
Federal Register on June 24, 1994 (59 FR 32668). This summary included 
a request for specific data to be provided to the FAA by air carriers 
and public agencies. Twelve comments, from 11 commenters, were received 
on the ATA's proposals.
    Ten comments from air carriers were in favor of the proposals and 
many of the comments included some of the types of data requested by 
the FAA. The air carriers commenting included five major domestic 
carriers, one of which submitted two separate comments, two 
international carriers, a charter carrier, and a regional carrier. The 
data provided by these carriers, in most cases, indicated that the 
carriers had incurred as yet unrecovered start-up costs, even though 
the start-up costs varied widely from carrier to carrier. Most of the 
carriers also indicated that they did not expect to fully recover their 
ongoing monthly costs if carrier compensation were lowered to $0.08 per 
remitted PFC. Those carriers which addressed the issue of handling fees 
for refunded PFC's argued that under the current rule, for refunded 
tickets, the carrier is required to handle the PFC twice and yet is not 
entitled to compensation for either transaction.
    One dissenting comment from the City of Chicago argued against FAA 
adoption of a modification to the rate of carrier compensation. The 
City argued that, in the data provided with the petition for 
rulemaking, the ATA had not made a persuasive case that air carriers 
would incur losses if the compensation level were $0.08. The City also 
stated its belief that any shortfall, if it exists, would be quickly 
made up as PFC collections begin at more and more airports. The City 
also stated that raising the compensation rate to $0.12 would result in 
over $1 million per year in lost PFC revenue and that the City would be 
required to defer implementation of PFC projects or tap into other 
revenue sources to make up for this lost revenue.
    Insofar as the handling fees for refunded PFC's, the City stated 
that the ATA petition did not provide enough information to fully 
analyze the impact on airports of the proposal. The City further stated 
that it was willing to ``keep an open mind'' on this issue but that any 
change should be coupled with the ability of airports to audit airline 
collection and remittance practices, enabling the airports to ensure 
that PFC's are properly remitted and to ``Safeguard against distortion 
in the ordinary practices of refunding/rewriting tickets versus 
honoring previously issued tickets.''
    The FAA agrees that a change to the airline compensation level 
could affect the length of time needed for a public agency to collect 
its approved amount of PFC revenue. Public agencies take into account a 
variety of factors when preparing PFC applications. However, these 
factors are forecasted estimates based on available data present at any 
one time. Procedures are already in place, and have been utilized, to 
allow the public agency to make the necessary adjustments, either 
upward or downward, to the duration of PFC revenue collection in the 
event that actual collections differ from the amounts forecast in the 
PFC application. In addition, the PFC regulation (Part 158) provides 
procedures that have already been utilized for deleting projects from 
approved applications.
    The remaining dissenting comment was a joint submission of the 
Airports Council International--North America (ACI-NA) and the American 
Association of Airport Executives (AAAE). The ACI-NA and AAAE argued 
that the data provided in the ATA's petition is seriously flawed and 
that the airlines have not demonstrated, as is required by statute, 
that the expenses for which they seek compensation are ``necessary and 
reasonable.'' Insofar as the handling fee for refunded PFC's, the ACI-
NA and AAAE stated that they are not receptive to the proposed change 
unless ``public agencies are provided with some mechanism to better 
reconcile anticipated PFC collections with actual amounts remitted.''
    The FAA acknowledges the airports' argument that additional 
measures may be needed to allow public agencies to monitor air carriers 
to ensure that PFC's are properly remitted. The FAA is currently 
working with industry groups to prepare airline PFC auditing guidelines 
which should address many of these concerns. Because this auditing 
guidelines effort is ongoing, the FAA is not proposing changes to 
airline auditing requirements at this time.

Request for Additional Information

Airline Compensation Issues

    The FAA did not receive sufficient information as a result of its 
request for data to permit a determination of adequate level of airline 
compensation. Therefore, the ANPRM provides additional guidance about 
the quantity and quality of data needed for the FAA to determine 
adequate compensation.
    The FAA has reviewed the petition and comments received and finds 
that the carriers responding to the petition and request for comments 
accounted for approximately 50 percent of the enplanements at approved 
PFC locations, at the time of response. Some of the data provided by 
the carriers included cost centers that were not fully explained. The 
information received does not sufficiently justify a change to the rate 
at which carriers are compensated for collection and remittance of 
PFC's.
    The data provided by the ATA and the carriers indicates the 
possibility of a need to adjust the compensation rate in order to 
reflect the average reasonable and necessary carrier costs associated 
with collecting, handling, and remitting the PFC.
    The FAA will consider an increase in the carrier compensation rate 
above the current $0.08 level, if data provided by carriers accounting 
for a sufficient portion of the enplanements at PFC approved locations 
indicates a clear need for the compensation level to be modified. The 
data provided by the carriers must be broken out by cost centers and 
certified by the carrier's accountant, an independent accounting firm, 
or by the officers of the company. Further, a description of each cost 
center and its relationship to the PFC program is needed. To proceed on 
the subject, the FAA must have detailed and persuasive data from 
carriers that, in total, represent at least 75 percent of the 
enplanements at PFC locations. In the FAA's judgment, the amount of 75 
percent of the enplanements at PFC locations would give an adequate 
view of current industry costs and this information would also provide 
adequate cost data to determine if a change in the carrier compensation 
rate is appropriate and necessary.
    In addition, the FAA requests that public agencies imposing PFC's 
provide

[[Page 16680]]

specific information on the effect a change in the current $0.08 
compensation rate would have on their PFC revenue stream; and their 
ability to implement projects within the PFC regulatory timeframe.

Passenger Facility Charge Collection and Remittance Issues

    The FAA recently undertook a study of PFC collection and remittance 
issues at the request of Congress. One issue being studied is the 
problem of PFC revenues and airline bankruptcies.
    Several comments by a number of parties have indicated that the 
provision in Sec. 158.49(b), Handling of PFC's, may cause problems for 
the public agency in the event of an airline bankruptcy. The provision 
allows a collecting carrier to commingle PFC revenue with the carrier's 
other sources of revenue, before the carrier remits the PFC revenue to 
the public agency. A suggestion has been made that the FAA delete the 
provision allowing the carrier to commingle PFC revenue with other 
sources of revenue, and require that carriers place PFC revenues in 
escrow accounts for the period between collection and remittance. 
Therefore, the FAA is requesting comments on three possible 
modifications to Sec. 158.49(b). The FAA specifically requests 
comments, including estimates of costs and benefits, on each of the 
following proposals relating to this issue.
    1. Should the FAA prohibit commingling of PFC revenue with other 
sources of revenue, and require that carriers establish a separate 
trust account for PFC revenue collected?
    2. Should the FAA require that carriers establish third-party 
escrow accounts to hold PFC revenue between collection of the revenue 
and remittance to the public agency?
    3. Approximately 85 percent of domestic tickets issued in the 
United States are written by travel agents who remit ticket revenues to 
carriers through the Airline Reporting Corporation (ARC) clearinghouse. 
Should the FAA require that, for travel agency-issued tickets, the ARC 
remit PFC revenue directly to the public agency?
    The FAA is concerned that costs to the carriers of any of these 
possible modifications may outweigh any benefits the public agencies 
may derive. The FAA is concerned that a cost-effective system of escrow 
accounts may not provide much protection to the public agency. 
Therefore, the FAA solicits comments on whether, for travel agent-
issued tickets, direct remittance to the public agency by the ARC might 
provide as much, or more, protection to public agencies as an escrow 
account.
    In addition, the FAA requests that carriers collecting PFC's 
provide information on an estimate of any interest revenue that might 
be lost if the commingling provision is eliminated, and the estimated 
cost of each suggested modification.
    The FAA also requests that airports indicate their assessment of 
whether the benefits of this proposal outweigh expected increases to 
the PFC compensation rate resulting from implementation of this 
proposal.
    Lastly, the FAA requests that public agencies, carriers, and the 
public provide any opinions to any of the possible modifications that 
will help safeguard PFC revenues in the event of an airline bankruptcy.

 Section-by-Section Discussion of the Proposals

    This ANPRM contains proposals to amend several sections of part 
158.
    One of these proposals is intended to address a change sought by 
the Air Transport Association in its petition for rulemaking which 
would allow air carriers to be compensated based on PFC's 
``collected,'' rather than ``remitted.''
    Another proposal in this document is in response to a requirement, 
contained in the FAA Authorization Act of 1994, to implement the 
statutory prohibition on collection of PFC's from passengers traveling 
on frequent flyer awards.
    An additional proposal clarifies that an air carrier has remitted 
the PFC's to the public agency when the public agency receives the PFC 
payment.
    Further proposals codify current industry practice by providing for 
appropriate PFC adjustments when an itinerary change is initiated by 
the passenger.

Sections 158.3, 158.45, and 158.47

    In response to a legislative requirement to prohibit collection of 
PFC's from holders of frequent flyer tickets, the FAA is proposing to 
modify Secs. 158.3, 158.45(d), and 158.47.
    Section 204 of the Federal Aviation Administration Authorization 
Act of 1994, Pub. L. 103-305 (August 23, 1994) (49 U.S.C. 
40117(e)(2)(D)), precludes collection of a PFC from a passenger 
enplaning at an airport if the passenger did not pay for the air 
transportation which resulted in such enplanement, including any case 
in which the passenger obtained the ticket for air transportation with 
a frequent flier award coupon without monetary payment.
    This provision prohibits the collection of PFC's from passengers 
who obtained their ticket with an award coupon issued under a frequent 
flyer or similar bonus award program.
    The FAA is proposing to add a definition of ``frequent flyer award 
coupon'' to the definitions in Sec. 158.3.
    In addition, Sec. 158.45(d) is being modified to include non-
revenue passengers, as defined by existing Department of Transportation 
regulations, and frequent flyers to the list of passengers from whom 
issuing carriers and their agents shall not collect PFC's.
    Finally, a paragraph prohibiting collection of PFC's from non-
revenue passengers and frequent flyers is being proposed in 
Sec. 158.47.
    The FAA proposes a change to Secs. 158.45(a)(3) and 158.47(c)(4) to 
delete a provision requested by air carriers in the original PFC rule 
that is no longer applicable under current industry ticketing 
practices.
    The second sentence in each paragraph currently states--
    Any changes in itinerary that are initiated by a passenger that 
require an adjustment to the amount paid by the passenger are subject 
to collection or refund of the PFC as appropriate.
    However, current industry practice is to recalculate the applicable 
PFC's whenever a passenger initiates a change in itinerary, whether or 
not a fare change is applicable. Therefore, each sentence would be 
modified to delete the phrase ``that require an adjustment to the 
amount paid by the passenger.''

Section 158.51 Remittance of PFC's

    The FAA proposes a change that would clarify Sec. 158.51 that 
provides for PFC's collected by a carrier to be ``remitted'' to the 
public agency on a monthly basis, no later than the last day of each 
calendar month.
    There has been some confusion as to whether this provision is 
satisfied by the act of mailing the payment to the public agency by 
that date, or whether receipt by the public agency is required. The 
second sentence in the paragraph currently states--
    PFC revenue recorded in the accounting system of the carrier, as 
set forth in Sec. 158.49 of this part, shall be remitted to the public 
agency no later than the last day of the following calendar month.
    This sentence is being modified by replacing the words ``remitted 
to'' with the words ``received by.'' This change would make it clear 
that the public agency must receive the payment to satisfy the 
regulation.

[[Page 16681]]

Section 158.53  Collection Compensation

    The FAA proposes to amend Sec. 158.53(a) to change the basis for 
which the air carrier is compensated for handling PFC's. This proposal 
is a change sought by the ATA in its petition for rulemaking.
    At the time part 158 was enacted, it was felt that there would be a 
relatively small proportion of itinerary changes that would result in 
PFC refunds.
    However, actual practice has shown larger than expected refund 
activity resulting in costs for which the carriers are not being 
reimbursed.
    Currently, carriers are entitled to compensation only when they 
``remit'' the PFC to the public agency. If refunds occur, carriers do 
not receive compensation for their handling of the PFC. Under the 
proposal, air carriers would be entitled to receive compensation for 
each PFC at the time the ticket is first issued, or ``collected.'' 
Thus, the carriers would receive some compensation for all PFC 
collections. Air carriers would not, however, be entitled to additional 
compensation even though additional transactions, such as refunds, may 
take place.

Request for Comments

    The FAA solicits comments and information from all segments of the 
pubic interested in the PFC program. The primary focus of this advance 
notice is carrier compensation for the collection, handling, and 
remittance of PFC's. All comments received by the FAA at the address 
and by the date listed above will be reviewed and utilized in any 
development of proposed regulations. Comments received pursuant to this 
ANPRM will be analyzed and discussed in the preamble to the Proposed 
Rule. Any proposed rulemaking will also be made available for public 
review and comment.

Regulatory Process Matters

Economic Impact

    The FAA is unable to determine at this point the likely costs in 
imposing the proposals or the annual effect on the economy. Following a 
review of the comments submitted to this ANPRM, the FAA will determine 
what regulatory requirements will be proposed, if any, and will review 
the potential costs and benefits, as required by Executive Order 12866.

Significance

    This anticipated rulemaking is ``a significant regulatory action'' 
as defined in Executive Order 12866 and the Department of 
Transportation Regulatory Policies and Procedures.

Other Regulatory Matters

    At this preliminary stage it is not yet possible to determine 
whether there will be a significant economic impact on a number of 
small entities or what the paperwork burden might be. These regulatory 
matters will be addressed at the time of publication of any NPRM on 
this subject.

List of Subjects in 14 CFR Part 158

    Administrative practice and procedure, Air carriers, Airport, Air 
transportation, Passenger facility charge, Reporting and recordkeeping 
requirements.

The Proposed Amendment

    In consideration of the foregoing, the Federal Aviation 
Administration proposes to amend part 158 of the Federal Aviation 
Regulations (14 CFR part 158) as follows:

PART 158--PASSENGER FACILITY CHARGES (PFC'S)

    1. The authority citation for part 158 continues to read as 
follows:

    Authority: 49 U.S.C. Secs. 40117, 47114, 47106, 47524e, and 
47526.

    2. Section 158.3 is amended by adding the following definition in 
alphabetical order:


Sec. 158.3  Definitions.

    Frequent flyer award coupon means a zero-fare award of air 
transportation that an air carrier, or foreign air carrier, provides to 
a passenger in exchange for accumulated travel mileage or trip credits 
in a customer loyalty program. The definition of frequent flyer award 
coupon does not extend to redemption of accumulated credits for awards 
of additional or upgraded service on trips for which the passenger has 
paid a published fare. ``Two-for-the-price-of-one'' and similar 
marketing programs are not included in this definition.
    3. Section 158.45 is amended by revising the second sentence of 
paragraph (a)(3), and revising paragraph (d) to read as follows:


Sec. 158.45  Collection of PFC's on tickets issued in the U.S.

    (a) * * *
    (3) * * * Any changes in itinery that are initiated by a passenger 
are subject to collection or refund of the PFC as appropriate.
* * * * *
    (d) Issuing carriers and their agents shall not collect PFC's 
from--
    (1) A passenger on any flight to an eligible point on an air 
carrier that receives essential air service compensation of that route 
under 49 U.S.C. Sec. 41733, as amended by Pub. L. 103-305 (August 23, 
1994);
    (2) Non-revenue passengers, as defined by existing Department of 
Transportation regulations; and
    (3) A passenger enplaning at an airport if the passenger did not 
pay for the air transportation which resulted in such enplanement, 
including any case in which the passenger obtained the ticket for the 
air transportation with a frequent flyer award coupon without monetary 
payment.
* * * * *
    4. Section 158.47 is amended by revising the second sentence of 
paragraph (c)(4), and adding paragraph (i) to read as follows:


Sec. 158.47  Collection of PFC's on tickets issued outside the U.S.

* * * * *
    (c) * * *
    (4) * * * Any changes in itinerary that are initiated by a 
passenger are subject to collection or refund of the PFC as 
appropriate.
* * * * *
    (i) Issuing carriers and their agents shall not collect PFC's from 
non-revenue passengers, as defined by existing Department of 
Transportation regulations, and passengers traveling under ``frequent 
flyer award coupons.''
    5. Section 158.51 is amended by revising the second sentence to 
read as follows:


Sec. 158.51  Remittance of PFC's.

    * * * PFC revenue reported in the accounting system of the carrier, 
as set forth in Sec. 158.49 of this part, shall be received by the 
public agency no later than the last day of the following calendar 
month (or if that date falls on a weekend or holiday, the first 
business day thereafter).
    6. Section 158.53 is amended by revising paragraph (a) to read as 
follows:


Sec. 158.53  Collection compensation.

* * * * *
    (a) Retain $0.12 of each PFC remitted on or before June 28, 1994. 
Retain $0.08 of each PFC remitted from June 29, 1994, through [date of 
enactment of rulemaking]. Thereafter, air carriers shall be entitled to 
$0.08 of each PFC collected; and
* * * * *
    Issued in Washington, DC, on April 8, 1996.
W. Robert Billingsley,
Acting Director, Office of Airport Planning and Programming, APP-1.
[FR Doc. 96-9253 Filed 4-15-96; 8:45 am]
BILLING CODE 4910-13-M