[Federal Register Volume 62, Number 77 (Tuesday, April 22, 1997)]
[Notices]
[Pages 19638-19646]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-10355]


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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration
[Docket No. 28895]


Airport Privatization Pilot Program: Application Procedures

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of proposed procedures; notice of public meeting.

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SUMMARY: Section 149 of the Federal Aviation Authorization Act of 1996 
establishes an airport privatization pilot program, and authorizes the 
Department of Transportation to grant exemptions from certain Federal 
statutory and regulatory requirements for up to five airport 
privatization projects. This notice identifies the issues the 
Department will need to consider in granting exemptions and approving 
the transfer of a public use airport under the program, and proposes 
application procedures to be used by interested public airport sponsors 
and private parties to apply for inclusion in the program. A public 
meeting will be held on the proposed procedures on Wednesday, May 21, 
1997.

DATES: Comments must be received by June 4, 1997. The public meeting 
will be held on May 21, 1997 at FAA headquarters, 800 Independence 
Avenue SW., Washington, DC; 3rd Floor auditorium; telephone: (202) 267-
8728.
    Registration: 8:30 a.m.; Meeting: 9:00 a.m.-1:00 p.m. Please note: 
Please allow time to go through FAA building security.

ADDRESSES: Comments should be mailed, in quadruplicate, to: Federal 
Aviation Administration, Office of Chief Counsel, Attention: Rules 
Docket (AGC-200), Docket No. 28895, 800 Independence Avenue, SW., 
Washington, DC 20591. All comments must be marked: ``Docket No. 
28895.'' Commenters wishing the FAA to acknowledge receipt of their 
comments must include a pre-addressed, stamped postcard on which the 
following statement is made: ``Comments to Docket No. 28895.'' The 
postcard will be date stamped and mailed to the commenter. Comments on 
this Notice may be examined in room 915G on weekdays, except on Federal 
holidays, between 8:30 a.m. and 5 p.m.

FOR FURTHER INFORMATION CONTACT: Benedict D. Castellano, Manager, 
Airport Safety and Compliance Branch, AAS-310, Federal Aviation 
Administration, 800 Independence Ave. SW., Washington, DC 20591, 
telephone (202) 267-8728. To request to be

[[Page 19639]]

included on the list of speakers at the public meeting, call Kevin 
Hehir AAS-310, (202) 267-8224.

SUPPLEMENTARY INFORMATION:

Introduction and Background

    This proposal of application procedures to be used by applicants 
for an airport privatization project is being published pursuant to 
Sec. 149 of the Federal Aviation Administration Authorization Act of 
1996, Pub. L. No. 104-264 (October 9, 1996) (1996 Reauthorization Act), 
which adds a new Sec. 47134 to Title 49 of the U.S. Code. Section 47134 
authorizes the Secretary of Transportation, and through delegation, the 
FAA Administrator, to exempt a sponsor of a public use airport that has 
received Federal assistance, from certain Federal requirements in 
connection with the privatization of the airport by sale or lease to a 
private party. Specifically, the Administrator may exempt the sponsor 
from all or part of the requirements to use airport revenues for 
airport-related purposes, to pay back a portion of Federal grants upon 
the sale of an airport, and to return airport property deeded by the 
Federal Government upon transfer of the airport. The Administrator is 
also authorized to exempt the private purchaser or lessee from the 
requirement to use all airport revenues for airport-related purposes, 
to the extent necessary to permit the purchaser or lessee to earn 
compensation from the operations of the airport.
    In addition to proposing application procedures, this notice 
describes the issues the FAA will consider in determining whether to 
approve an application for an exemption under Sec. 47134 and other 
Federal requirements for airport operation. The term ``public sponsor'' 
is used in this document to mean the governmental agency or authority 
that currently owns or operates a public airport and proposes to sell 
or lease it to a private purchaser or lessee. The term ``private 
operator'' is used to refer to a private firm or firms that propose to 
purchase or lease a public use airport under the program; the term 
``applicant'' means all of the parties jointly participating in the 
application for privatization of a particular airport.

Requirements for Transfer of a Federally-Assisted Public Airport

    A request for transfer of the operation of an airport from an 
existing public sponsor to a new operator, whether public or private, 
requires FAA approval. The request for exemption under Sec. 47134 would 
be considered in conjunction with existing approval requirements and 
processes.

Grant/Deed Conditions

    Airport sponsors receiving Federal assistance under a grant program 
or through donation of surplus property agree as a condition of the 
assistance to obtain FAA approval before transferring control or 
ownership of the airport to another party. For example, Assurance No. 
5.b. in Airport Improvement Program (AIP) grant agreements provides 
that a sponsor will not sell, lease, or otherwise transfer any part of 
its title or other interests in the airport property subject to the 
grant assurances, for the duration of the term of the grant agreement, 
without approval by the Secretary. Assurance No. 5 further provides 
that the sponsor and the transferee approved by the Secretary shall 
insert in the contract or document transferring the sponsor's interest, 
and make binding upon the transferee, all of the terms, conditions and 
assurances contained in the sponsor's grant agreement. Similar 
conditions are written into the deeds of conveyance for Federal surplus 
property donated to an airport sponsor.
    In reviewing a request for transfer, the FAA will consider whether 
the new owner/operator will assume the obligations of the original 
sponsor under existing grant agreements or deeds, and whether the new 
owner/operator has the powers and authority to fulfill its obligations 
under the assurances.

Regulatory Requirements

    An operator of an airport receiving air service by aircraft with 
more than 30 passenger seats must hold an FAA operating certificate 
under 14 C.F.R. Part 139. Authority to certificate airports served by 
aircraft with 9 or more passenger seats was granted to the FAA in the 
1996 Reauthorization Act. FAA operating certificates are not 
transferable; a new operator of a certificated airport must obtain a 
new certificate issued by the FAA.

Section 47134

    Section 47134 contains specific provisions for issuance of an 
exemption in connection with a transfer of airport operation. These 
conditions supplement and to some extent overlap the factors that FAA 
would consider under Assurance No. 5.b., but do not replace other 
requirements for approval of an airport transfer. In summary, 
Sec. 47134 provides that the Administrator may issue exemptions to a 
public sponsor and a private sponsor only if the Administrator finds 
that the sale or lease agreement contains provisions satisfactory to 
the Administrator to ensure that:
    (1) The airport will continue to be available for public use on 
reasonable terms and conditions without unjust discrimination;
    (2) The operation of the airport will not be interrupted if the 
private operator experiences bankruptcy or other financial difficulty;
    (3) The private operator will ``maintain, improve, and modernize'' 
airport facilities through capital investments, and submit a plan for 
these actions;
    (4) Airport fees imposed on air carriers will not increase faster 
than inflation unless a higher amount is approved by at least 65 
percent of the air carriers using the airport and the air carriers 
having at least 65 percent of the landed weight of aircraft at the 
airport;
    (5) Fees imposed on general aviation operators will not exceed the 
percentage increase in fees imposed on air carriers;
    (6) Safety and security will be maintained ``at the highest 
possible levels;''
    (7) Adverse effects of noise from operations at the airport will be 
mitigated to the same extent as at a public airport;
    (8) Adverse effects on the environment from airport operations will 
be mitigated to the same extent as at a public airport; and
    (9) Collective bargaining agreements that cover airport employees 
on the date of the sale or lease.
    In addition, the Administrator must find that the transfer will not 
result in unfair and deceptive trade practices or unfair methods of 
competition.

Number of Participating Airports

    In establishing the privatization pilot program, Congress placed 
limitations on the number and kind of airports eligible to participate. 
Paragraph 47134(d)(1) provides that if the applications of 5 airports 
are approved, then one must be a general aviation airport. Paragraph 
47134(d)(2) provides that no more than one of the airports approved may 
be an airport with more than 1 percent of total passenger boardings (a 
large hub airport), as defined in 49 U.S.C. Sec. 47102(10).

Process for Applying for an Exemption Under Section 47134

    This part of the notice summarizes the FAA's proposed procedures 
for applying for an exemption under 49 U.S.C. Sec. 47134, including the 
information required from applicants and the process for agency 
handling of requests. Final guidance on application

[[Page 19640]]

procedures will be issued after a review of public comments on this 
notice.
    Substantive issues the FAA believes need to be considered in the 
issuance of an exemption and approval of transfer are discussed below 
(see section titled, Issues Considered By the FAA in Granting an 
Exemption Under Sec. 47134) as further guidance for applicants.

Exemption Application and Review Process: Overview

    Subject to revision after review of public comment, the FAA intends 
to apply the following policies to the process for filing and review of 
requests for privatization of a public airport:
    1. A request for participation in the airport privatization pilot 
program will be initiated by the filing of an application for exemption 
under Sec. 47134(a).
    2. With the exception noted below, applications for exemption will 
be accepted on or after December 1, 1997, and will be handled on a 
first-come first-served basis until the limits of Sec. 47134 are 
reached. An otherwise qualifying application for exemption will be 
accepted before December 1, 1997, if the sponsor has issued, on or 
before the date of publication of this notice, a formal solicitation or 
request for proposals for the sale or lease of an airport. All 
applications will be evaluated in the order of receipt.
    3. Participation in the program is limited to five airports. The 
maximum of five participants in the program will be considered to have 
been reached based on applications under review, not exemptions 
granted, so that an airport with an application on file will not be in 
a race for inclusion in the program.
    4. An application received by the FAA will be considered to be 
filed on the date received. Application packages will be date-stamped 
on receipt in Room 600 East, FAA headquarters building.
    5. FAA will review the application to determine if it meets the 
procedural requirements stated in this notice.
    6. The FAA will not accept ``placeholder'' applications filed 
before the applicant has sufficient information on the proposed 
transfer. If an application cannot reasonably be brought into 
compliance with the requirements of Sec. 47134 and other applicable 
Federal statutes with current information, the FAA will notify the 
applicant that the application is rejected and that the application is 
no longer on file. The applicant may file a new application at any 
time, and receive a new ``on file'' date at that time.
    7. If the application does meet the procedural requirements 
described in this notice, the applicant will be notified that the 
application is ``accepted for review.'' The FAA may request additional 
information before accepting the application for review, but the 
original filing date will remain in effect.
    8. The FAA proposes to publish in the Federal Register a notice 
that an application has been received under 49 U.S.C. Sec. 47134, and 
that the FAA has accepted the application for review. The FAA will 
establish a docket and accept public comment on the application for a 
defined period.
    9. Selection as one of the 5 airports eligible to participate in 
the program will be evidenced by the issuance of an exemption under 
Sec. 47134(b). If an application is approved, an exemption will be 
issued after the execution of all documents necessary to fulfill the 
requirements of Sec. 47134 and other laws and regulations within the 
FAA's jurisdiction (e.g., issuance of a Part 139 certificate to the 
private operator; FAA approval of a security program under Part 107; 
and possibly a 3-way agreement between the public sponsor, the private 
operator, and the FAA.
    10. FAA representatives will be available to meet with parties 
interested in an airport privatization project both before and after 
the filing of an application for exemption to discuss the Federal 
statutory requirements and policies that apply to applications under 
Sec. 47134.

Filing an Application

    1. Applicants must submit a complete application package containing 
the information described under ``Form and Content of Applications'' in 
this notice to: Susan L. Kurland, Associate Administrator for Airports, 
ARP-1, Room 600 East, Federal Aviation Administration, 800 Independence 
Avenue, SW., Washington, DC 20591.
    2. Applications may be delivered or mailed, but will not be 
considered to be ``on file'' with the FAA until received and date-time 
stamped in the Office of the Associate Administrator for Airports, Room 
600 East.

Form and Content of Applications

    1. There is no required form for an application. However, the 
application package must be submitted with a cover letter, signed 
jointly by appropriate officials of the current public sponsor and the 
private operator proposing to buy or lease the airport, requesting an 
exemption pursuant to 49 U.S.C. Sec. 47134 for the purpose of the 
privatization of an airport. Officials signing for the public sponsor 
must provide evidence of their authority to file the application.
    2. The following statements and information must be included in an 
application. The FAA realizes that some documents, figures, and other 
information will not be available until shortly before the execution of 
the transfer transaction. The agency assumes that the application would 
be filed after the public sponsor has selected a private operator and 
reached sufficient agreement with the operator on the terms of the 
transaction to represent those terms in an application. The FAA will 
not require that all information listed below be provided at the time 
of the application, however. For each item below for which information 
is not available, the applicant may substitute a description of the 
expected response and the date by which the final information will be 
available. Information not provided with the application should be 
submitted to the FAA as soon as it becomes available.

The Application

Part I. Parties to the Transaction

    A. Name of the airport proposed for sale or lease.
    B. Name and address of the public sponsor of the airport; name, 
address, telephone number and fax number of the person to contact about 
the application.
    C. Name and address of the private operator proposing to purchase 
or lease the airport; name, address, telephone number and fax number of 
the person to contact about the application.
    D. If the private operator proposing to purchase or lease the 
airport is a partnership, joint venture, or other consortium of 
multiple interests, the name and address of each of the participating 
members.
    E. Citizenship of the private operator and/or each member of the 
private operator consortium, and percentage of interest of each such 
member.

Part II. Airport Property

    A. A description of the airport property to be transferred. 
Applicants should describe property in sufficient detail to identify 
the parcels of property and facilities to be transferred; a map and a 
legal description of the property may be included but are not required.
    B. A history of the acquisition of existing airport property: 
applicants should include information on grants, types of deeds, the 
dates and means of conveyance (e.g. Surplus Property Act), other 
Federal conveyance of donated property, parcels purchased with Federal 
funds and parcels purchased with only local funds.

[[Page 19641]]

Part III. Terms of the Transfer

    A. A detailed description of the terms of the transfer, other than 
financial, including:
    The form of the transaction (sale, lease, other);
    Term of the lease or other transfer agreement;
    Description of any rights, authority, or interests retained by the 
public sponsor, including reversion of title to facilities;
    If the private operator is a consortium, a description of the 
respective rights and responsibilities of each member;
    B. Financial terms of the transaction:
    Amounts and timing of payments to public sponsor.
    Amounts of payments to sponsor to be used, respectively, for 
airport purposes (including recoupment of public sponsor investments 
not previously recovered) and other purposes.
    Financing arrangements of the private operator for purchase payment 
or initial lease payment.
    Other relevant financial terms of the transfer.
    C. Copies of all documents executed as part of the transfer, to be 
provided as they are executed or are in sufficiently final form to 
indicate the substantive nature of the expected final document.
    D. If applicable, a request for confidentiality of any particular 
document or information submitted, with supporting information.

Part IV. Qualifications of the Private Operator

    A. Complete description of airport operations experience. If the 
private operator is a newly formed entity, describe the experience of 
the constituent members and the proposed management structure to 
integrate operational functions.
    B. Financial resources for operating/capital expenses of the 
airport.
    C. Timing/details of application for Part 139 certificate, if 
applicable.
    D. Plan for compliance with Part 107, if applicable.
    E. Affiliations with air carriers or other persons engaged in 
aeronautical business activity at an airport (other than airport 
management).

Part V. Requests for Exemption

    A. Describe the specific exemption requested by the public sponsor 
under 49 U.S.C. Sec. 47134(b)(1), from the prohibition on use of 
airport revenue for general purposes, including the amount of funds 
involved.
    B. Describe the specific exemption requested by the public sponsor 
under 49 U.S.C. Sec. 47134(b)(2), from the requirement to repay Federal 
grant funds or return property.
    C. Describe the specific exemption requested by the private 
operator under 49 U.S.C. Sec. 47134(b)(3), from the prohibition on use 
of airport revenue for general purposes.

Part VI. Certification of Air Carrier Approval

    A. Provide a certification that air carriers meeting the 
requirements of 49 U.S.C. Sec. 47134(b)(1)(A) approve the exemption 
described in Part V.A. above. ( See Granting Exemptions under the 
section titled Issues Considered by the FAA in Granting An Exemption 
Under Sec. 47134 for definitions and guidance.)
    B. Provide a list of all air carriers serving the airport (as 
described in the above mentioned section on granting exemptions), a 
list of the air carriers that have approved the exemption, the total 
landed weight of all air carrier aircraft at the airport within the 
preceding year, and the total landed weight of the carriers that have 
approved the exemption.
    C. Provide a copy of each document indicating air carrier approval 
of or objection to the exemption requested.

Part VII. Airport Operation and Development

    A. Provide a description of how the private operator, the public 
sponsor, or both will address the following issues with respect to the 
operation, maintenance, and development of the airport after the 
proposed transfer. (Factors the FAA will consider in reviewing 
applications are discussed in this notice under the previously 
mentioned section on granting exemptions below.)
    1. Part 139 certification. A request for Part 139 certificate 
should be filed with the local FAA regional Airports Division. The 
exemption application needs only to reflect the private operator's 
intentions and the status of a certificate application, if applicable.
    2. Continuing access to the airport on fair and reasonable terms 
and without unjust discrimination, in accordance with Sec. 47134(c)(1).
    3. Continued operation of the airport in the event of bankruptcy or 
other financial impairment of the private operator, in accordance with 
Sec. 47134(c)(2). The application should include any provision for 
reversion to the public sponsor.
    4. Maintenance, improvement, and modernization of the airport, in 
accordance with Sec. 47134(c)(3), including the public sponsor's most 
recent 5-year capital improvement plan (CIP) and the 5-year CIP 
proposed by the private operator. Applicants should identify the 
sources of funds to be used for capital development, including any 
continuing contributions by the public sponsor. Applicants should also 
include any financial security provisions , such as a letter of credit 
or performance bond, for the accomplishment of the maintenance, 
improvement, and modernization projects committed to by the private 
operator.
    5. Compliance with the limitations on air carrier fees described in 
Sec. 47134(c)(4).
    6. Compliance with the limitation on general aviation fees 
described in Sec. 47134(c)(5).
    7. Maintenance of safety and security at the airport, in accordance 
with Sec. 47134(c)(6). The application should note the applicant's 
contacts with the Airports District Office on Part 139 and the Office 
of Aviation Security on Part 107, but does not need to duplicate 
information filed in connection with those actions.
    8. Mitigation of adverse effects of noise from airport operations, 
in accordance with Sec. 47134(c)(7). The applicant should specifically 
describe its intentions with respect to an existing or future Part 150 
noise compatibility program for the airport, with respect to the public 
sponsor's commitments under past records of decisions on airport 
development projects, and other measures the private operator intends 
to take in the future.
    9. Mitigation of adverse effects on the environment from airport 
operations, in accordance with Sec. 47134(c)(8).
    10. Recognition of existing collective bargaining agreements 
covering employees of the public sponsor, in accordance with 
Sec. 47134(c)(9).
    B. The applicant's acceptance of the grant assurances contained in 
the public sponsor's grant agreements with the FAA. Assurance No. 25 
need not be addressed.

Part VIII. Periodic Audits

    Section 47134(k) provides that the FAA may conduct periodic audits 
of the financial records and operations of an airport receiving an 
exemption under the pilot program.
    Applicants should indicate their express assent to this provision 
in the application.

Issues Considered by the FAA in Granting an Exemption Under 47134

Granting Exemptions

    Section 47134(b) authorizes the Secretary, in connection with 
approval of an application for transfer to a private operator, to grant 
the following exemptions: From requirements governing use of airport 
revenue, to the

[[Page 19642]]

extent necessary to permit the sponsor to recover from the transfer, 
the amount approved by 65 percent of the carriers serving the airport 
and by carriers whose landed weight at the airport in the preceding 
calendar year represented 65 percent of the total landed weight at the 
airport;
    From any statutes, regulations or grant assurances requiring 
repayment of Federal grants or the return of Federal property; and
    From requirements governing use of airport revenue to the extent 
necessary to permit the airport operator to earn compensation from the 
operations of the airport.
    The exemption authority is discretionary. The FAA will make every 
effort to exercise its authority under Sec. 47134 to permit the 
completion of transactions negotiated in good faith in reliance on the 
statute and this guidance. The FAA notes that Sec. 47134 authorizes 
exemptions only from the requirements on the use of airport revenue to 
permit the private operator to earn compensation from the airports. As 
discussed below, the compensation of the private operator could also be 
subject to limitations based on the requirement that aeronautical fees 
be reasonable. Reasonable fees are addressed separately under 
Sec. 47134(g).

65 Percent Carrier Approval

    The FAA proposes to apply the 65 percent approval requirement as 
follows. The FAA would consider ``the carriers operating at the 
airport'' to be (1) all air carriers, including air carriers operating 
under 14 CFR Part 135, that are parties to a lease, use or operating 
agreement with the public sponsor on the date the applicants solicit 
carrier certification of agreement, and (2) any other carriers that 
conducted at least 50 commercial operations in the calendar year 
preceding the application. This would not include infrequent or 
transient users of the airport, but would include all carriers with a 
substantial interest in the fees charged and facilities provided by the 
airport operator. The FAA proposes to define landed weight as the total 
landed weight at the airport, as determined from records used by the 
public sponsor to calculate weight-based landing fees owed by each air 
carrier landing at the airport in the calendar year preceding the 
filing of the application. An applicant that did not use landed weight 
to calculate weight-based landing fees could request a waiver and 
propose an alternate methodology.

Terms and Conditions Required for Approval--General Approach

    Section 47134(c) permits the FAA to grant an exemption only upon 
finding that the sale or lease agreement includes provisions 
satisfactory to the FAA to ensure that nine separate statutory 
objectives will be fulfilled.
    With respect to some of the objectives listed in Sec. 47134(c), it 
may be appropriate to rely on provisions in the sale or lease agreement 
that track the general statutory language to meet the substantive 
requirements of the terms and conditions. For other objectives, as 
discussed below, it will be necessary for applicants to describe the 
specific measures they intend to take to meet the objective. The FAA 
proposes to require that the purchase or lease agreement provide that 
terms and conditions included in the agreement to satisfy objectives in 
Sec. 47134(c) (at least those objectives relating to safety, 
environment, and reasonable access) are intended to create third party 
beneficiary rights for the United States enforceable through a civil 
action to obtain specific performance of the terms and conditions. The 
FAA will also consider the private operator's adherence to the terms 
and conditions agreed upon to meet the objectives of Sec. 47134(c), in 
evaluating requests for discretionary AIP grants. These steps are 
considered to be reasonably necessary for the FAA to assure that the 
terms and conditions will be followed after the sale of an airport or 
during the life of a lease.
    The FAA solicits comment on whether any additional actions would be 
appropriate. In particular, should the FAA conduct an independent 
evaluation of the qualifications of the private operator similar to the 
evaluation of fitness of an applicant for an air carrier economic 
certificate conducted by the Department under 49 U.S.C. Secs. 41108, 
41110. The FAA is proposing to require information on the proposed 
airport operator's qualifications and financial resources in the 
application. Commenters suggesting any other actions are requested to 
include the policy or legal justification for their suggestions.

Terms and Conditions To Assure Public Access on Reasonable Terms 
Without Unjust Discrimination

    Section 47134(c)(1) requires the transfer agreement to include 
provisions ensuring that the airport will be available for public use 
on reasonable terms without unjust discrimination. The FAA has 
construed a corresponding requirement in the AIP grant assurances to 
require the following:
    (1) that the airport be open to all members of the public for 
aeronautical use on reasonable terms and conditions, without unjust 
discrimination;
    (2) that, subject to its physical limitations, the airport be open 
to all commercial aviation service providers who meet the reasonable 
terms, conditions and minimum standards adopted by the airport 
proprietor, unless the airport proprietor undertakes a particular 
aviation service in its own name on an exclusive basis; and
    (3) that the rates, fees and charges imposed on aeronautical users 
of the airport will be reasonable and not unjustly discriminatory.
    The FAA would construe the assurance of access on reasonable terms 
in the transfer agreement to encompass no less, even if the assurance 
were framed in the general terms of the statute. The FAA invites 
comment on whether more specific provisions should be required.

Reasonable Rates and Charges Imposed by Airport Operator

    Other provisions in Sec. 47134 make it clear that Congress intended 
the airport operator to charge only reasonable, not unjustly 
discriminatory fees. For example, Sec. 47134(g) provides that an 
airport operator shall not be prohibited from collecting reasonable 
fees and charges from aircraft operators. In addition, an airport 
operator under this provision would be subject to the Anti-Head Tax 
Act, which prohibits imposition of unreasonable airport charges. 
Finally, Sec. 47134 provides that consideration of the reasonableness 
of fees charged at an airport under Sec. 47134 will be subject to 
review under 49 U.S.C. 47129, which provides expedited procedures for 
determining the reasonableness of airport fees. In light of this latter 
provision, the FAA intends to apply the Policy on Airport Rates and 
Charges to aeronautical fees imposed by the transferee. In addition, if 
Sec. 47129's jurisdictional requirements are met, the expedited 
procedures mandated by Sec. 47129 would be employed to determine the 
reasonableness of disputed fees.

Reasonable Compensation for the Airport Operator

    Section 47134(b)(3) authorizes the FAA to exempt the private 
operator from statutory limitations on use of airport revenue to permit 
the transferee to earn compensation from the operations of the airport. 
No other exemptions to permit compensation are specifically mentioned 
in the statute.

[[Page 19643]]

    If a transferee intends to earn compensation from the aeronautical 
operations of the airport, then the requirement for reasonable fees 
would apply to that compensation. It is well accepted that for a fee to 
be reasonable, the amount of compensation to the operator of a 
facility, in the form of rate of return or return on equity included in 
the fee, must also be reasonable.
    The OST/FAA Policy Regarding Airport Rates and Charges (Policy) 
addresses the issue of compensation to private airport owners only 
briefly. As to fees for the use of the airfield, paragraph 2.4 of the 
Policy provides that ``a private equity owner of an airport can include 
a reasonable return on investment in the airfield.'' 61 FR 32019. A 
private equity owner that has done so may not include an imputed 
interest charge, as well. Policy, Par. 2.4.1(a). The Policy does not 
further define a reasonable rate of return. For the use of aeronautical 
facilities other than the airfield, the Policy permits the airport 
owner to establish fees using any reasonable methodology. Policy, Par. 
2.6, 61 FR 32020. The FAA considers Paragraph 2.6 to permit a private 
equity owner of the airport to earn a reasonable return on its equity 
investment in nonairfield aeronautical facilities.
    The FAA does not propose to provide additional guidance, at this 
time. The FAA will apply the provisions of the policy to permit a 
private operator to earn, through aeronautical fees, a reasonable rate 
of return on the funds it invests in aeronautical facilities at the 
airport. The private operator would not be able to include in the 
aeronautical fees a rate of return on its lease payments to the public 
sponsor, unless agreed to by the aeronautical users. Comments are 
requested on the effect of this aspect of the rates and charges policy 
on proposed lease and sale transactions.
    The FAA will not attempt to define as a matter of general policy 
the level of a reasonable rate of return for equity owners or lessees 
but would consider the issue on a case-by-case basis. Consistent with 
accepted practices for determining the reasonableness of regulated 
rates, the primary factor that the FAA would consider in determining a 
reasonable rate of return would be the private operator's cost of 
capital for its investment in the airport. The FAA requests that 
commenters who disagree with this proposed case-by-case approach 
propose and justify an alternative approach that could be adopted as a 
matter of general policy.
    Consistent with the terms of the Policy, the provisions governing 
reasonable rates of return on investment need not be followed if the 
private operator and aeronautical users agree to another arrangement. 
Policy Par. 2.4. Such an agreement would also be subject to sections 
47134(c) (4), (5), as discussed below.

Carrier Approval of Fee Increases

    Section 47134(c)(4) requires the transfer agreement to include 
provisions ensuring that airport fees imposed on air carriers will not 
increase faster than the rate of inflation unless 65 percent of 
carriers operating at the airport and air carriers whose aircraft 
accounted for 65 percent of the landed weight at the airport in the 
preceding calendar year approve of the increase. The FAA does not 
intend to require the purchase agreement to include any more specific 
language than the statutory provision. However, if a fee increase that 
exceeds the rate of inflation is contemplated as part of the initial 
transfer, the FAA would require that the application for approval 
include proof that the requisite carrier approval has been obtained.
    Another provision of Sec. 47134 requires the airport operator to 
commit to making capital investments in the airport. Consistent with 
that provision, the FAA does not intend to apply Sec. 47134(c) to fee 
increases that are attributable solely to inclusion of new investments 
in the airport rate base. If the 65 percent approval requirement were 
to apply to fee increases caused by new capital improvements, the 
requirement would give air carriers an effective veto over those 
capital improvements, since investors could not be expected to put 
capital into a project that is legally barred from generating 
sufficient revenue to earn a return on investment. Thus, an 
interpretation of the 65 percent approval requirement to apply to fee 
increases attributable solely to new investment at the airport would 
frustrate implementation of the statutory provision requiring the 
airport operator to commit to making capital investment at the airport. 
The FAA, therefore, intends to permit fee increases based solely on new 
capital investment at the airport to occur without 65 percent air 
carrier approval. Existing majority-in-interest clauses and similar 
agreements would continue in effect, however. Comments are requested on 
the effect of this interpretation of the 65 percent approval provision.

Terms and Conditions To Assure Continued Operation in the Event of 
Bankruptcy or Insolvency

    Section 47134(c)(2) requires the sale or lease agreement to include 
provisions ensuring that the operation of the airport will not be 
interrupted by the insolvency, liquidation, or bankruptcy proceeding. 
The FAA considers this to be an issue for which simple repetition of 
the statutory assurance in the sale or lease agreement will not be 
adequate. Some provisions that could be sufficient to ensure continued 
operation are listed below; the FAA invites suggestions for other 
approaches:
    (1) Including in the transfer agreement an automatic reverter to 
the public sponsor in the event that the airport ceases operations due 
to the bankruptcy or reorganization of the private operator.
    (2) In lieu of automatic reverter, including in the application a 
contingency plan for sponsor takeover in defined circumstances.
    (3) Recording as an encumbrance on the airport property the 
obligation to operate the property as an airport.
    (4) Establishing an escrow fund or bond to ensure funds are 
available to pay the essential costs of operating the airport.
    The FAA's objective is to implement the statutory mandate to assure 
that the transferred airport continues to operate while avoiding 
requirements that interfere with the feasibility of a pilot program. 
The FAA specifically invites comment on whether the individual options 
would be effective under U.S. bankruptcy law.

Terms and Conditions To Assure Capital Investment and Improvements by 
the Airport Operator

    One of the purposes of the pilot program is to use private 
ownership or long term leases of airports to increase investment in 
airport infrastructure above that available through the public sector. 
Section 47134(c)(3) requires the transfer agreement to include 
provisions to assure that the airport operator will maintain, improve 
and modernize the facilities of the airport through capital investments 
and will submit to the Secretary a plan for carrying out such 
maintenance, improvements and modernization. The FAA proposes to 
consider as acceptable components of the plan for improvement and 
modernization (1) a five-year capital improvement plan (CIP), and 
inclusion in the transfer agreement of a provision assuring that the 
airport operator will substantially implement the five-year CIP; and 
(2) an assurance of a certain minimum level of capital investment using 
the private operator's funds. For an assurance of sufficient minimum 
investment, the applicant could, for example, offer a five-year CIP 
that exceeds or accelerates the public sponsor's most recent five-year 
CIP for the airport; commit to an amount that exceeds the local match 
for entitlement

[[Page 19644]]

funds; commit to apply for and use entitlement funds, if available, for 
the life of the lease of the airport; or commit to use sources other 
than PFCs to finance at least a share of its investment in the airport.

Terms and Conditions Relating to Safety and Security

    Section 47134(c)(6) requires that the transfer agreement include 
satisfactory provisions to assure that safety and security at the 
airport will be maintained at the highest possible levels.
    For airports that are currently subject to airport operator 
certificates issued under 14 CFR Part 139, the FAA proposes to satisfy 
this statutory mandate as it applies to safety by requiring that the 
transfer agreement provide that the private operator shall not take 
over operational control of the airport until the private operator has 
received a new Part 139 certificate. The FAA proposes to take a similar 
approach to airport security by requiring that a transfer agreement for 
an airport governed by an airport security plan approved under 14 CFR 
Part 107 provide that the private operator shall not take over 
operational control of the airport until the private operator has 
received approval of an airport security plan under Part 107.
    For general aviation airports, including reliever airports, that 
are not governed by Part 107 or Part 139, the FAA intends to rely on 
the private operator's assumption of the public sponsor's outstanding 
grant obligations to provide for the requisite level of safety and 
security of the airport. Standard assurance 19.a requires the airport 
sponsor to ``suitably operate and maintain the airport and all 
facilities thereon or connected therewith,'' and further requires that 
the ``airport and all facilities which are necessary to serve 
aeronautical users of the airport * * * shall be operated at all times 
in a safe and serviceable conditions and in accordance with the minimum 
standards as may be required or prescribed by applicable Federal, state 
and local agencies for maintenance and operation. It will not cause or 
permit any activity or action thereon which would interfere with its 
use for airport purposes.'' The FAA relies on the assurances to provide 
an appropriate level of safety and security at all grant-obligated 
general aviation airports, including privately-owned reliever airports 
currently under grant.

Terms and Conditions Relating to Noise Mitigation

    Section 47134(c)(7) requires the transfer agreement to include 
satisfactory provisions to assure that adverse effects of noise from 
the operation of the airport will be mitigated to the same extent as at 
a public airport.
    The FAA will look to proponents to describe means of assuring that 
this condition can be satisfied for the particular airport at issue. 
One obvious provision would be the private operator's commitment to 
continue to implement the measures of an existing approved Part 150 
noise compatibility program, which could be included in the transfer 
agreement. (Proponents should note the provision in Section 47109(a), 
as amended, setting the Federal share at 40% of project costs if 
discretionary funds are used. Although FAA will evaluate applications 
from a private operator according to the same priority ranking system 
as for a public sponsor, the private operator should anticipate bearing 
60 percent of allowable noise project costs as well as other projects 
receiving discretionary funds.) The FAA solicits comment on other 
possible commitments by applicants that would satisfy the intent of the 
congressional requirement. For example, the sponsor could commit to 
continue to exercise its land-use control powers, including the power 
to condemn land for public purposes, to assure airport compatible land 
use.
    In proposing measures to assure the implementation of 
Sec. 47134(c)(7), proponents should keep in mind that the private 
operator will be subject to other assurances to permit access to the 
airport on reasonable and not unjustly terms, without unreasonable 
burdens on air commerce. Also, the airport under private operation will 
be subject to the Airport Noise and Capacity Act of 1990 (ANCA). ANCA 
prohibits the adoption of noise or access restrictions on stage 2 
aircraft unless specified procedures are followed and prohibits the 
adoption of noise or access restrictions on stage 3 aircraft except by 
agreement with aircraft operators or upon approval by the FAA.

Terms and Conditions Relating to Environmental Mitigation

    Section 47134(c)(8) requires the transfer agreement to include 
satisfactory provisions to assure that any adverse effects on the 
environment from operations at the airport will be mitigated to the 
same extent as at a public airport. The FAA proposes to implement this 
provision by requiring the airport operator to assume all mitigation 
measures identified in existing records of decisions accompanying final 
environmental impact statements, findings of no significant impact, and 
airport layout plan approvals previously agreed to by the public 
sponsor. The FAA would rely on its current practices for airport layout 
plan approval, and approval of AIP grants and PFC applications to 
assure that adverse effects from any new airport development are 
suitably mitigated.

Terms and Conditions: Collective Bargaining

    Section 47134(c)(9) requires the transfer agreement to include 
satisfactory provisions to assure that the transfer does not abrogate 
any collective bargaining agreement covering employees of the airport 
in effect on the date of transfer. The FAA proposes to consider this 
provision satisfied if the transfer agreement includes a provision by 
which the parties agree not to abrogate any collective bargaining 
agreement covering employees of the airport in effect on the date of 
transfer. Certification from each collective bargaining representative 
that the transfer agreement will not abrogate its contract would also 
meet the requirement.

Unfair Competition Finding

    Section 47134(e) requires the FAA to find that approval will not 
result in unfair and deceptive practices or unfair methods of 
competition. The FAA proposes to evaluate each proposed transaction's 
potential for unfair competition individually and solicits comment on 
information that would be needed to perform this evaluation.

Protection of General Aviation Interests

    Section 47134(f) requires the FAA to ensure that the interests of 
general aviation users of the airport are not adversely affected in 
approving an application for a private transfer. The FAA intends to 
review the exemption application and transfer agreement for the 
applicant's commitment to this effect. The FAA solicits comments on 
whether any additional measures are appropriate.

Revocation Procedures

    Section 47134(i) authorizes the FAA to revoke the exemptions 
granted to permit a private transfer if, after providing the airport 
operator with notice and an opportunity to be heard, the FAA determines 
that the transferee has knowingly violated any of the required terms 
and conditions specified

[[Page 19645]]

in the section titled, Form and Content of Applications. The FAA 
proposes to rely on the procedures in 14 CFR Part 16 to provide the 
required notice and opportunity to be heard in the case of a revocation 
proceeding. In addition, the FAA will consider other remedies, such as 
obtaining orders for specific performance of the terms and conditions, 
as an alternative to commencement of revocation procedures. The FAA 
invites comments on the adequacy of these procedures in the event of a 
violation of the terms of the exemption.

Administration of AIP Grants

    Sections 47134(g)(1) authorizes otherwise eligible airports to 
continue to qualify for AIP apportionments under 49 U.S.C. Sec. 47114. 
In addition, a private operator may receive discretionary AIP funds, 
but with a higher local share required than a public sponsor's share. 
Under 49 U.S.C. Sec. 47107, the FAA must receive satisfactory written 
assurances on a number of subjects before issuing a grant. This 
requirement is fulfilled by the standard sponsor assurances included in 
every AIP grant agreement. Section 47134 authorizes the FAA to grant 
exemptions from a very limited number of the assurances mandated by 
Sec. 47107.
    In addition, standard assurance 5.b. requires a sponsor, before 
transferring an obligated airport to include in the transfer document 
and make binding on the transferee all conditions and assurances 
contained in the grant agreement.
    The FAA intends to apply the requirement in standard assurance 5.b. 
to any transfer proposed under Sec. 47134, subject to the specific 
exemptions authorized by that section. In addition, the FAA would 
require an airport operator applying for new AIP grants to agree to all 
standard assurances except those from which Sec. 47134 authorizes an 
exemption. As with a public sponsor, approval of a project grant would 
be subject to the provisions of 49 U.S.C. Sec. 47106, which requires 
the FAA to make special findings on environmental impacts and local 
acceptance before approving grants for certain airport improvement 
projects.
    The FAA employs a priority system to allocate discretionary AIP 
funds. The current system does not differentiate between otherwise 
equivalent projects proposed by public and private sponsors. The FAA 
solicits comment on whether such a distinction is appropriate for 
requests for discretionary funds submitted by participants in the pilot 
program.

Administration of Passenger Facility Charges

    Section 47134(g)(1) authorizes an airport operator to impose a 
passenger facility charge (PFC) under 49 U.S.C. Sec. 40117. If a PFC is 
being collected at an airport at the time of transfer, the FAA would 
require the private operator to agree to accept all of the terms, 
requirements, and limitations of the PFC statute, 14 CFR Part 158 and 
all applicable records of decision approving collection and use of PFC 
revenues as a condition of continuing the existing PFC program. A 
private operator would need to comply with the PFC statute and Part 158 
to obtain new approval to impose a new PFC or to use PFC revenue not 
already approved for use in an FAA record of decision.

Notice of Public Meeting

Background

    The FAA will conduct a public meeting on the proposed application 
procedures and policies discussed in this notice. Comments from the 
public at this meeting should be directed specifically to the agency's 
implementation of the Airport Privatization Pilot Program established 
in the FAA Reauthorization Act of 1996.
    The closing date for comments on the proposal is June 4, 1997. In 
order to give the public an additional opportunity to comment on this 
notice, the FAA is planning this public meeting. Because this 
additional opportunity to comment is provided, the FAA does not intend 
to extend the closing date for comments.

Participation at the Public Meeting

    Requests from persons who wish to present oral statements at the 
public meeting on the Airport Privatization Pilot Program should be 
received by the FAA no later than May 16, 1997. Such requests should be 
submitted to Kevin Hehir, AAS-310, 202-267-8224 as listed in the 
section titled FOR FURTHER INFORMATION CONTACT. Requests received after 
May 16, 1997, will be scheduled if time is available during the 
meeting; however, the name of those individuals may not appear on the 
written agenda. The FAA will prepare an agenda of speakers that will be 
available at the meeting. To accommodate as many speakers as possible, 
the amount of time allocated to each speaker may be less than the 
amount of time requested. Those persons desiring to have available 
audiovisual equipment should notify the FAA when requesting to be 
placed on the agenda.

Public Meeting Procedures

    The following procedures are established to facilitate the public 
meeting:
    1. There will be no admission fee or other charge to attend or to 
participate in the public meeting. The meeting will be open to all 
persons who have requested in advance to present statements or who 
register on the day of the meeting, subject to availability of space in 
the meeting room.
    2. The public meeting may adjourn earlier if all speakers have 
completed their statements.
    3. The FAA will try to accommodate all speakers; therefore, it may 
be necessary to limit the time available for an individual or group.
    4. Participants should address their comments to the panel. No 
individual will be subject to cross-examination by any other 
participant.
    5. Sign and oral interpretation can be made available at the 
meeting, as well as an assistive listening device, if requested 10 
calendar days before the meeting.
    6. Representatives of the FAA will conduct the public meeting.
    7. The meeting will be recorded by a court reporter. A transcript 
of the meeting and any material accepted by the panel during the 
meeting will be included in the public docket. Any person who is 
interested in purchasing a copy of the transcript should contact the 
court reporter directly. This information will be available at the 
meeting.
    8. The FAA will review and consider all material presented by 
participants at the public meeting. Position papers or material 
presenting views or information related to this notice may be accepted 
at the discretion of the presiding officer and subsequently placed in 
the public docket. The FAA requests that persons participating in the 
meeting provide 10 copies of all materials to be presented for 
distribution to the panel members; other copies may be provided to the 
audience at the discretion of the participant.
    9. Statements made by members of the public meeting panel are 
intended to facilitate discussion of the issues or to clarify issues. 
FAA officials may ask questions to clarify statements made by the 
public and to ensure a complete and accurate record. Comments made at 
this public meeting will be considered by the FAA when deliberations 
begin concerning whether to adopt any or all of the proposed rules.
    10. The meeting is designed to solicit public views and more 
complete information on the proposed application

[[Page 19646]]

procedures and implementation of the Airport Privatization Pilot 
Program. Therefore, the meeting will be conducted in an informal and 
nonadversarial manner.

    Issued in Washington, DC on April 16, 1997.
David L. Bennett,
Director, Office of Airport Safety and Standards.
[FR Doc. 97-10355 Filed 4-18-97; 8:45 am]
BILLING CODE 4910-13-P