[Federal Register Volume 63, Number 155 (Wednesday, August 12, 1998)]
[Notices]
[Pages 43228-43230]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-21607]


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DEPARTMENT OF TRANSPORTATION

Office of the Secretary
Federal Aviation Administration
[Docket No. 29303]


Policy Regarding Airport Rates and Charges

AGENCY: Departmen of Transportation, Office of the Secretary, and 
Federal Aviation Administration.

ACTION: Advance notice of proposed policy, request for comments.

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SUMMARY: This document requests suggestions for replacement provisions 
for the portions of the Department of Transportation's Policy Regarding 
Airport Rates and Charges (Policy Statement) issued June 21, 1996 and 
vacated by the United States Court of Appeals for the District of 
Columbia Circuit. The Department is beginning this proceeding in order 
to carry out its responsibility to establish reasonableness guidelines 
for airport fees.

DATES: Comments must be submitted on or before October 13, 1998. Reply 
comments will be accepted and must be submitted on or before October 
26, 1998. Late filed comments will be considered to the extent 
possible.

ADDRESSES: Comments on this notice must be delivered or mailed, in 
quadruplicate, to: Federal Aviation Administration, Office of Chief 
Counsel, Attention: Rules Docket (AGC-10), Docket No. 29303, 800 
Independence Ave., SW, Room 915G, Washington, DC 20591. All comments 
must be marked ``Docket No. 29303.'' Commenters wishing the FAA to 
acknowledge receipt of their comments must include a preaddressed, 
stamped postcard on which the following statement is made: ``Comments 
to Docket No.     . The postcard will be date stamped and mailed to the 
commenter.
    Comments on this Notice may be delivered or examined in room 915G 
on weekdays, except on Federal holidays between 8:30 am and 5:00 p.m.

FOR FURTHER INFORMATION CONTACT: Mr. Barry Molar, Manager (AAS-400), 
(202) 267-3187 or Mr. Wayne Heibeck (AAS-400), Compliance Specialist, 
(202) 267-8726, Airport Compliance Division, Office of Airport Safety 
and Standards, Federal Aviation Administration, 800 Independence Ave., 
SW, Washington, DC 20591.

SUPPLEMENTARY INFORMATION: 

Background

    On June 21, 1996, Office of the Secretary and the Federal Aviation 
Administration (together, the ``Department'' of Transportation or 
``Department'') issued a Policy Statement (61 FR 31994 et seq.) on the 
fees charged by airports to air carriers and other aeronautical users. 
This Policy Statement responded to 49 U.S.C. 47129(b), which requires 
the Secretary to publish standards or guidelines to be used in 
determining whether an airport fee is reasonable in disputes between 
airports and airlines. (Section 113 of the Federal Aviation 
Administration Authorization Act of 1994, Public Law No. 103-305).
    The Policy Statement reflected industry practice at commercial 
service airports of establishing fees for the use of airfields (e.g., 
runways and taxiways) and public-use roadways on the basis of the 
airport operator's costs, using historic cost valuation (HCA 
requirement). This cost-based approach allowed airports to recover out-
of-pocket costs and permitted airfield fees to include as a cost 
imputed interest on airport operator funds invested in the airfield, 
except funds obtained from airfield fees.
    Recognizing that fees for other aeronautical facilities (e.g., 
hangars and terminals) were often established through direct 
negotiations with individual users, the Department adopted a more 
flexible approach to nonairfield fees. The Department permitted these 
fees to be set by any reasonable methodology, including, among others, 
appraised fair market value. Among the factors it considered to support 
the disparate treatment, the Department found that airports had not 
exercised monopoly power in pricing these facilities and that state and 
local governments operate airports to provide aeronautical services for 
their communities to benefit their residents and improve the local 
economic base, not to generate revenue surpluses.
    The Policy Statement modified the approach taken in the February 3, 
1995 Interim Policy on determining the reasonableness of fees for 
nonairfield facilities. (Under the Interim Policy, airfield and 
nonairfield fees were considered reasonable only when capped at 
historical cost). The Policy Statement also discussed: the Department's 
preference for direct local negotiation between airport proprietors and 
users; the prohibition on unjustly discriminatory fees; the obligation 
to maintain a fee and rental structure that makes the airport as self-
sustaining as possible under the circumstances at the airport; and the 
prohibition against unlawful diversion of airport revenues.
    Both the Air Transport Association (ATA) and the City of Los Angles 
sought judicial review of the policy Statement. The ATA challenged the 
Department's approach to determining reasonable nonairfield fees and 
the decision to permit airfield fees to include any imputed interest 
charge. The City of Los Angeles challenged the HCA requirement for 
airfield fees.
    The United States Court of Appeals for the District of Columbia 
Circuit vacated and remanded portions of the Policy Statement setting 
forth guidance on fair and reasonable airfield and nonairfield fees. 
Air Transport Association of America v. Department of Transportation 
(ATA v. DOT), 119 F.3d 38 (D.C. Cir. 1997), as modified on rehearing, 
Order of Oct. 15, 1997. Specifically, the court vacated:

paragraphs 2.4, 2.4.1, 2.4.1(a), 2.5.1, 2.5.1(a), 2.5.1(b), 
2.5.1(c), 2.5.1(d), 2.5.1(e), 2.5.3, 2.5.3(a), 2.6, the Secretary's 
supporting discussion in the preamble, and any other portions of the 
rule necessarily implicated by the holding of [the August 1, 1997 
opinion].

    The court's opinion found fault with the Department's distinction 
between the airfield, on the one hand, and nonairfield facilities, on 
the other hand, with respect to the reasonableness of fees. The court 
believed the Department should have explained its fees policy in light 
of the economics of airport behavior and had failed to justify the 
distinction between airfield and nonairfield fees. The court also 
questioned the Department's justification for the disparate treatment 
of imputed interest charges.
    On November 25, 1997, the Airports Council International-North 
America (ACI) and the American Association of Airport Executives (AAAE) 
filed a

[[Page 43229]]

Petition for Rulemaking proposing revisions of the Policy Statement 
(Docket No. OST-97-3158). The ACI/AAAE would have the Department permit 
airport proprietors to value airfield assets at an amount greater than 
historic cost (but no higher than a competitive market-based fair 
market value) and would permit an airport proprietor to charge imputed 
interest on aeronautical fees invested in aeronautical facilities. It 
would also permit an airport proprietor to charge current costs for 
airfield facilities (in addition to non-airfield facilities) not 
currently in use.
    In support of its petition, the ACI/AAAE explained that it is the 
longstanding practice at many commercial service airports to charge 
fair market value for exclusive-use assets and to value airfield assets 
on the basis of historical cost. They asserted that their proposal 
would not necessarily change industry practice.
    With regard to monopoly power, the ACI/AAAE disputed the claim that 
airports behave like monopolists and did not believe it necessary to 
hold all aeronautical fees to cost-of-service levels. Capping the fees 
at competitive market rates (as opposed to above-competitive market 
rate) would, in any event, prevent any monopolistic abuses, according 
to ACI/AAAE. Additionally, ACI/AAAE explained that airport proprietors 
engage in competition in order to maintain existing service and attract 
new air carriers. Further, the prohibition against unlawful airport 
revenue diversion acts as a check to monopolistic charging, according 
to these airport industry organizations. Airports compete to be 
gateways to domestic and international geographic regions, also. It is 
airlines that have market power in many city-pair markets, not 
airports, according to ACI/AAAE. Airlines wield power at airports 
through majority-in-interest clauses that provide veto power over 
construction or other capital projects.
    ACI/AAAE also requested revisions to portions of the Policy 
Statement not vacated by the D.C. Circuit Court of Appeals. They 
proposed that the Department base its review of the reasonableness of 
airport fees on written submissions, rather than on a de novo review. 
They also proposed language that the Policy Statement and the expedited 
procedures created by 49 U.S.C. 47129 should not be applied to fees 
charged to signatories to an agreement.
    On March 12, 1998, the ATA filed a Petition for Rulemaking 
proposing revisions to the Policy Statement. The ATA would have the 
Department reinstate the approach taken in the Interim Policy and 
require all aeronautical fees to be based on HCA valuation of assets. 
The result of this requirement would in turn be to reinstate the HCA 
cap on total aeronautical revenues, according to the ATA. In addition, 
the ATA would have the policy bar imputed interest in aeronautical 
charges, or at most permit imputed interest only on funds derived from 
nonaeronautical users. Finally, the ATA would have the Department 
reinstate the prohibition on charges for facilities not in use and 
apply that prohibition to all aeronautical charges.
    In support of its request on the first two issues, ATA asserts that 
its proposal would address the concerns expressed by the Court of 
Appeals over the disparate treatment of airfield and nonairfield fees. 
In addition, the ATA argues that the proposal on asset valuation and 
imputed interest is not precluded by the court's opinion, which faulted 
the Department for lack of adequate justification. The ATA further 
argues that its approach is supported by the Department's recent 
determination on remand in the Los Angeles International Airport 
(``LAX'') Rates Proceeding, DOT Order 97-12-31 (December 23, 1997), and 
that the Department's rationales in that decision apply nationwide.
    On the third issue, the ATA argues that the court vacated the 
prohibition on charging for facilities not in use only because the 
prohibition was limited to the airfield. The ATA argues that because 
the basic premise and reasoning for the prohibition were not challenged 
before the court, the ACI/AAAE should not be permitted to reopen the 
issue, especially when the ACI/AAAE have offered no persuasive reason 
to reject the Department's rationale for the prohibition.

Request for Comments

    As a first step in responding to the court's decision, the 
Department is soliciting suggestions for appropriate replacement 
provisions for the portion of the Policy Statement vacated by the 
court. In addition, more information on the nature of specific airport 
fee practices and analysis of the economics of airport behavior are 
necessary before the Department proposes new fee guidelines.
    The Department anticipates that these comments will be candid, will 
accurately reflect current industry practices, and will suggest 
procedures that can be implemented without undue disruption to the 
industry. We hope that both the air carriers and the airports will be 
able to provide us with the same type of information, from each party's 
perspective. This request for comment is limited to the provisions in 
the Policy Statement that the District of Columbia Circuit Court of 
Appeals vacated. These are the provisions subjected to the remand 
proceeding. Accordingly, the Department is not requesting, at this 
time, comments on other portions of the Policy Statement nor on our 
procedures under 49 U.S.C. 47129.
    Specifically, in addition to proposals for replacement provisions, 
the Department requests the following:
     A description of the existing aeronautical fee structures 
and methodologies in place at specific airport(s) (in the case of 
aeronautical users, airports where the user pays fees).
     The rationale for those methodologies and, if certain fees 
are negotiated, including a discussion of the factors considered in 
arriving at the final fee product.
     The explanation of the basis for distinctions between fees 
charged for airfield versus non-airfield assets, if applicable (and, if 
applicable, between terminal facilities and hangars and maintenance 
facilities). The basis may include industry practice, airport market 
power, airline market power, etc.
     Evidence that would support a determination that airports 
do or do not possess or use monopoly power in setting aeronautical fees 
and a discussion of the comment's view of the issue. In the proceeding 
that led to the Policy Statement, airport operators and airport users 
disputed whether airport proprietors can and do exercise monopoly power 
in pricing essential aeronautical facilities.
     Proposals on methods to curb abuse of any monopoly power 
in a fee reasonableness standard.
     If comments suggest a change in fee structures or 
methodologies, comments should include an explanation of how the 
proposal would affect the economic behavior of airports and air 
carriers. Comments should also justify the proposal under the statutory 
reasonableness standard (49 U.S.C. 40116(e) and 47107(a)) and explain 
how the proposal addresses the concerns raised by the court.
     Comments should also address the suggestion in ATA v. DOT 
that ``Congress intended the Secretary to fashion a quasi-legislative 
uniform approach [for several different methodologies, depending on the 
circumstances] to measuring the reasonableness of airport fees.'' 119 
F.3d at 40. Examples of approaches that would meet the court's 
concerns, accompanied by justification based on

[[Page 43230]]

industry practice, economic behavior, and other relevant criteria are 
invited.
     Comments requesting the Department to readopt any of the 
vacated provisions should include suggestions on how the Department 
could better justify doing so in light of the concerns raised by the 
court.
    Accordingly, the Department is requesting comments on the matters 
stated above and is requesting proposals to replace provisions for the 
vacated portions of the Policy Statement.

Petitions for Rulemaking

    The petitions for rulemaking of ACI/AAAE and ATA evidently start 
from different assumptions and propose significantly divergent 
policies. Moreover, as discussed above, the Department has determined 
that additional information and input is needed before a specific 
proposal is formulated. Accordingly, the Department is opening a new 
docket to receive comments on fee reasonableness. The Department is 
taking no further action on these petitions at this time. Therefore, 
this Advance Notice of Proposed Policy is limited to the issues raised 
by Air Transport Association of America v. Department of 
Transportation, 119 F.3d 38 (D.C. Cir. 1997). The substance of the two 
petitions will be considered along with the comments submitted by other 
interested parties. Comments on the petitions may be submitted during 
the reply period.

    Issued in Washington, D.C. on August 5, 1998.
Rodney E. Slater,
Secretary of Transportation.

Jane F. Garvey,
Adminsitrator, Federal Aviation Administration.
[FR Doc. 98-21607 Filed 8-11-98; 8:45 am]
BILLING CODE 4910-13-M