Airport Development Needs: Estimating Future Costs (Letter Report,
04/07/97, GAO/RCED-97-99).
Although no one disputes the need to make continual capital investments
in the nation's airport system--from runway repair to new terminal
construction--estimates of how much this is likely to cost vary widely.
In 1996, airport representatives pegged costs at $10 billion per year,
while airline representatives estimated these costs at $4 billion. The
Federal Aviation Administration (FAA) projected airport capital needs at
$6.5 billion annually. This report (1) compares the estimated capital
development needs made by airport and airline groups and FAA to
determine why they differ, (2) provides an up-to-date range of estimates
of what airport capital development needs are likely to be for the
five-year period from 1997 through 2001, and (3) identifies the key
factors that affect airport capital development needs and determines how
they are likely to affect such needs during the next five years.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: RCED-97-99
TITLE: Airport Development Needs: Estimating Future Costs
DATE: 04/07/97
SUBJECT: Airports
Federal aid for transportation
Future budget projections
Construction grants
Facility construction
Facility repairs
IDENTIFIER: Chicago-O'Hare International Airport (Chicago, IL)
FAA National Plan of Integrated Airport Systems
FAA Airport Improvement Program
Airport and Airway Trust Fund
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Cover
================================================================ COVER
Report to Congressional Committees and the National Civil Aviation
Review Commission
April 1997
AIRPORT DEVELOPMENT NEEDS -
ESTIMATING FUTURE COSTS
GAO/RCED-97-99
Airport Development Needs
(341511)
Abbreviations
=============================================================== ABBREV
AAAE - American Association of Airport Executives
ACC - Airport Consultants Council
ACI - Airports Council International--North America
ACIP - Airport Capital Improvement Plan
AIP - Airport Improvement Program
AMIS - Airport Marketing Information System
ATA - Air Transport Association of America
FAA - Federal Aviation Administration
GAO - General Accounting Office
NASAO - National Association of State Aviation Officials
NPIAS - National Plan of Integrated Airport Systems
PFC - passenger facility charge
ACI/AAAE -
Letter
=============================================================== LETTER
B-275248
April 7, 1997
Congressional Committees and the
National Civil Aviation Review Commission
There has been an ongoing debate in recent years over the amount of
capital investment required at the nation's airports. While no one
disputes that upholding the integrity of the nation's airport system
requires continual capital investment, from repairing runways to
constructing new terminals, the estimates of how much this is likely
to cost have varied widely. In 1996, airport representatives
estimated costs at $10 billion per year, while airline
representatives estimated costs at $4 billion per year. The Federal
Aviation Administration (FAA) estimated that airport capital needs
were roughly between the two other estimates, at $6.5 billion
annually.
As part of the FAA Reauthorization Act of 1996 (P.L. 104-264,
section 274(e)), the Congress directed us to provide an independent
assessment of airport development needs to it and to the National
Civil Aviation Review Commission established by the same act. A
clear understanding of these capital development needs is an
important step in agreeing on the future funding levels for airport
grants and on passenger facility charges. On the basis of our
discussions with the House and Senate aviation subcommittees, we
agreed to the following objectives for our review:
-- Compare the estimated capital development needs made by airport
and airline groups and FAA to determine why they differ.
-- Provide an up-to-date range of estimates of what airport capital
development needs are likely to be for the 5-year period from
1997 through 2001.
-- Identify the key factors that affect airport capital development
needs and determine how these factors are likely to affect such
needs during the next 5 years.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :1
The main reason for the differences in the airports', the airlines',
and FAA's estimates of airport capital needs is that they are based
on widely divergent views about which types of development projects
and airports to include in their estimates. In estimating annual
needs of $10 billion, airport representatives defined needs broadly
to include all projects, whether they are eligible for federal grants
or not, at the more than 3,300 airports that make up the national
airport system. Conversely, in arriving at an estimate of about $4
billion annually, the airlines defined needs more narrowly to include
almost exclusively those projects eligible for federal grants at the
421 largest commercial airports. FAA's estimate of $6.5 billion
annually was based only on those projects eligible for federal grants
but at all airports in the national system.
Using the most current and complete data--compiled from FAA,
airports, state aviation agencies, and private sources--we developed
four estimates ranging from $1.4 billion to $10.1 billion annually
for the 5-year period from 1997 through 2001, depending on how needs
are defined. We believe that providing a range of estimates for
future airport capital needs is more useful than a single estimate
because it provides various perspectives for policymakers to
consider. The estimate of $1.4 billion per year is based on narrowly
defining needs to include only projects eligible for federal grants
to meet safety, security, and environmental needs as well as to
maintain the existing infrastructure at the airports in the national
system, but it does not include the bulk of other needs, such as
projects to improve or expand airport infrastructure. The estimate
of $10.1 billion per year is based on broadly defining needs to
include all projects, regardless of priority or grant eligibility, at
all airports that are, or are currently planned to become, eligible
to receive federal or state support. Regardless of how needs are
defined, estimates will not necessarily correspond to how much
airports will ultimately spend on capital development because of
limitations in estimating future needs and projected costs,
unanticipated needs, complexities in decision-making, and funding
constraints.
Several key factors influence airport capital development needs, most
notably growth in aviation activity and meeting FAA-recommended
design standards (such as runway length) to achieve full productivity
for the aircraft already using the airport. These two factors
account for two-thirds of the estimated $30.6 billion in projects
eligible for federal grants over the next 5 years at airports in the
national system. Three other factors--the reconstruction of existing
infrastructure that is beyond its useful life, upgrades to the
existing infrastructure to prepare the airport facilities to
accommodate the introduction of different aircraft, and addressing
safety, security, and environmental concerns--account for the
remaining one-third of planned capital development projects.
BACKGROUND
------------------------------------------------------------ Letter :2
Understanding the differences between the capital needs estimates
requires some knowledge about the various types of U.S. airports,
FAA's system for tracking airport capital development needs and
providing federal grants, and other sources of capital funding used
by airports. The sections that follow present an overview of these
topics.
THE MULTITIERED SYSTEM OF
U.S. AIRPORTS
---------------------------------------------------------- Letter :2.1
The United States accounts for approximately 40 percent of all
commercial aviation activity and 50 percent of all general aviation
activity in the world. As of March 1997, there were 18,224 public
and private airports in the United States, from large commercial
airports, such as Chicago O'Hare International Airport that handles
more than 30 million passenger enplanements per year, to small,
privately owned grass landing strips in rural areas that may serve
only a few aircraft each year.
Of the 18,224 airports, FAA considers 3,331 to be part of a national
system providing an extensive network of air transportation to every
part of the country. This national system, called the National Plan
for Integrated Airport Systems (NPIAS), is depicted in figure 1 and
is based on FAA's 1996 data. The airports that are part of NPIAS are
categorized into two main groups: commercial service and general
aviation. FAA further divides commercial service airports into
primary and other commercial service airports. The 421 airports that
FAA considered primary airports in fiscal year 1996 are divided into
various classes of hubs (see fig. 1), depending on the number of
annual passenger enplanements at each airport. Nearly all commercial
passenger enplanements in the United States occur at the primary
airports. FAA designates some general aviation airports as reliever
airports to reduce congestion at the commercial service airports.
Figure 1: Categories of U.S.
Airports
(See figure in printed
edition.)
FAA'S ROLE IN FUNDING
AIRPORT CAPITAL DEVELOPMENT
NEEDS
---------------------------------------------------------- Letter :2.2
The airports included in the NPIAS are eligible for federal Airport
Improvement Program (AIP) grants. These grants are awarded by FAA
and funded through the Airport and Airway Trust Fund that is financed
by taxes on domestic airline tickets, international air travel from
the United States, domestic cargo transported by air, and
noncommercial aviation fuel. During fiscal year 1996, FAA awarded
about $1.375 billion in AIP grants.\1
FAA relies on airports, through their planning process, to identify
individual projects for funding consideration. A federal statute and
FAA's rules establish which types of airport development projects are
eligible for AIP funding.\2 Generally, most types of airfield
improvements, such as runways, lighting, navigational aids, and land
acquisition, are eligible, while hangars and interest expense on
airport debt are not. AIP-eligible projects for airport areas
serving travelers and the general public--called "landside
development"--include entrance roadways, pedestrian walkways and
movers, and space within terminal buildings that does not produce
revenue and is used by the public, such as waiting areas.
AIP-ineligible landside development projects include
revenue-producing terminal areas, such as ticket counters and
concessions, and the interest on construction bonds. Because the
estimated cost of eligible airport projects greatly exceeds the
available grant funding, FAA uses a priority system based on airport
and project type to ration the available funds.
FAA maintains a substantial database to support its airport planning
and funding efforts. The NPIAS database includes individual airport
projects from approved airport master plans, system plans, and
discussions with airport officials.\3 It shows these needs for up to
10 years in the future. However, because the legislative mandate to
compile the NPIAS only requires that it contain AIP-eligible
projects, and because the NPIAS is FAA's source for identifying the
projects eligible for grant funding, the NPIAS contains relatively
few of the capital needs projects that are not eligible for AIP
grants. Thus, while the database is substantial, it does not reflect
the total development needs at airports.
--------------------
\1 There are two categories of AIP grant funds--apportionment and
discretionary. Apportionment funds are distributed by formula to
commercial service airports and states. Discretionary funds can
generally be used for any eligible airport. All airports receiving
AIP grants must provide a "matching share," ranging from 10 percent
to 25 percent of a project's total cost, depending on the type of
project and size of the airport.
\2 These development projects are listed in the AIP Handbook (Order
5100.38A). Projects to plan development are also eligible for AIP
funding.
\3 Airport master plans identify the development needed at individual
airports on the basis of forecasts of aviation activity and the
consideration of environmental impacts, community compatibility, and
financial feasibility. Airport system plans identify the aviation
facilities required for the needs of a state, region, or metropolitan
area.
ROLE OF OTHER FUNDING
SOURCES
---------------------------------------------------------- Letter :2.3
AIP grants are only part of the funding picture for airport capital
development needs. Another source of funding for some airports are
passenger facility charges (PFC). In 1990, the Congress authorized
commercial service airports to charge each passenger a $1, $2, or $3
facility charge per trip segment up to a maximum of four charges per
round trip. These airports must apply to the FAA for approval to
levy a PFC. Generally, PFC collections can only be spent on
AIP-eligible projects, with three exceptions: Airports can use PFC
funds for interest on airport bonds, for terminal gates and related
areas, and for noise mitigation projects that are not part of an
FAA-approved noise program. In 1996, 238 airports collected over
$1.1 billion in PFCs.
Collectively, U.S. airports also fund billions of dollars of capital
projects each year from other funding sources. Projects that are not
eligible for AIP grants or PFCs, such as parking facilities or access
for local transportation, must be financed in some other way. Other
sources of funding include grants from state and local governments,
tax-exempt bonds, or revenues generated by the airport. Airports
generate revenues from four general sources: landing fees and
rentals from terminal leases (both paid by airlines), concessions
(such as parking), and other income (such as advertising). Finally,
airlines and other tenants have also privately financed the
construction of their terminals, hangars, and other facilities.
DIFFERENCES IN ESTIMATES STEM
MAINLY FROM WHICH TYPES OF
PROJECTS AND AIRPORTS ARE
INCLUDED
------------------------------------------------------------ Letter :3
The wide variance in the estimates of capital development needs
provided by the airports, the airlines, and FAA is mainly the result
of the differences in the types of projects and airports they
include. The estimate prepared by airports defined needs the most
broadly of the three to include all projects, regardless of whether
they were eligible for AIP grants or not. The airports' estimate
also included all airports in the national system. By contrast, the
airlines' estimate is based almost exclusively on AIP-eligible
projects and is limited to the primary airports, which numbered 421
at that time. FAA's estimate covers all airports in the national
system, but only for AIP-eligible projects. The three groups also
differed somewhat in the databases they used, the manner in which
they treated inflation, and other factors. Figure 2 compares the
three estimates in these various respects.
Figure 2: Comparison of Three
Estimates of Airport Capital
Development Needs
(See figure in printed
edition.)
AIRPORTS' ESTIMATE
---------------------------------------------------------- Letter :3.1
The airports' estimate was prepared by two industry associations, the
Airports Council International--North America (ACI), which represents
many commercial service airports in the United States and Canada, and
the American Association of Airport Executives (AAAE), which
represents airport managers. In arriving at its estimate of $60
billion over 6 years, ACI/AAAE relied mainly on a survey of 140
large, medium, and small hub airports in the United States,
supplemented by FAA's data for smaller U.S. airports.\4 ACI/AAAE
asked its airport members for an estimate of their capital needs,
including those projects not eligible for AIP funding. Eighty-eight
airports responded, and ACI/AAAE extrapolated the results to all 140
hub airports existing at the time.\5 For information on all of the
other 3,000 plus airports in the national airport system, ACI/AAAE
used FAA's NPIAS database for fiscal year 1996. ACI/AAAE also
adjusted its estimate to reflect future inflation of 3 percent per
year.\6
As part of our analysis of each estimate, we attempted to replicate
the calculations to determine if they had been accurately made.
Using ACI/AAAE's data and strictly adhering to its method of
analysis, we calculated total needs of $55.9 billion over 6 years,
$4.1 billion less than ACI/AAAE reported. The $4.1 billion includes
$3.1 billion in estimated needs and $1 billion in inflation
adjustment. Most of the difference resulted from the way
AIP-eligible and -ineligible projects were calculated and the cost
figures attributed to the FAA for nonhub primary airports and general
aviation airports. We discussed these differences with the ACI and
AAAE officials responsible for their estimate, who concurred with our
conclusion.
--------------------
\4 ACI/AAAE initially provided this estimate in testimony before the
House Committee on Transportation and Infrastructure, Subcommittee on
Aviation, on March 13, 1996.
\5 Using information from the 88 airports that responded to the
survey, ACI/AAAE extrapolated the needs of all 140 hub airports by
using the ratio of the responding airports' passenger enplanements to
total passenger enplanements at hub airports. ACI/AAAE also
subtracted some airport projects after the survey was completed on
the basis of their judgments about the likelihood that some projects
would be undertaken.
\6 Airports estimated their future development needs in 1996 dollars.
ACI/AAAE then totaled these for each year and converted the total to
current, inflation-adjusted dollars using a 3-percent rate of
inflation.
AIRLINES' ESTIMATE
---------------------------------------------------------- Letter :3.2
The airlines' estimate was prepared by the Air Transport Association
of America (ATA), the industry association that represents major U.S.
airlines. ATA used a commercial database that blends NPIAS with some
airport and state development plans. ATA's annualized estimate of
airport capital development needs was less than half of ACI/AAAE's
estimate--$4 billion versus $10 billion.\7 Five major factors account
for the $6 billion annual difference between ATA's and ACI/AAAE's
estimates:
-- ATA included only the 421 primary airports. ATA's justification
for doing so was that these airports accounted for more than 99
percent of all commercial passenger enplanements. ATA's
inclusion of only primary airports led ACI/AAAE's estimate to be
about $1.35 billion greater than ATA's.
-- ATA included only a few projects that did not qualify for AIP
funding at the 421 primary airports. This led ACI/AAAE's
estimate to be about $3.4 billion greater than ATA's.
-- ATA used a database that had older information. ATA's database,
which it purchased from a private vendor, was based mainly on
the data compiled in 1994 for the NPIAS, whereas the ACI/AAAE
estimate used data compiled in 1996. This led ACI/AAAE's
estimate to be about $1.3 billion greater than ATA's.\8
-- ATA did not explicitly adjust its estimates for inflation.\9
ACI/AAAE's use of a 3-percent inflation factor across the much
broader range of airports and projects led its estimate to be
about $1 billion greater than ATA's.
-- The sum of all other differences, including the differences in
the number and valuation of individual projects at the same
airports, led ACI/AAAE's estimate to be about $1 billion less
than ATA's estimate.
We were able to replicate ATA's estimate exactly.\10
--------------------
\7 ATA initially provided this estimate in testimony before the House
Committee on Appropriations, Subcommittee on Transportation and
Related Agencies, on March 20, 1996.
\8 We based this estimated difference on a comparison of the 1994 and
1996 NPIAS databases. The 1996 NPIAS shows planned 5-year
development costs that are about $6.5 billion more than the 1994
NPIAS shows for the same time period, 1996 through 2000. This
occurred because neither FAA's NPIAS database nor ATA's AMIS database
includes many projects beyond a 5-year time frame.
\9 According to the airport consultants we interviewed, most but not
all of the master plans and capital improvement plans that feed into
the AMIS and NPIAS databases provide project costs in constant,
non-inflation-adjusted dollars.
\10 In March 1997, ATA updated this estimate to $6 billion annually
for the 5 years from 1997 through 2001. Unlike the previous estimate
of about $4 billion annually, this estimate included all NPIAS
airports and was based on an updated AMIS database. The updated AMIS
database was compiled using FAA's 1996 NPIAS and airports' capital
improvement plans. However, the revision came too late in our work
for us to analyze it in detail.
FAA'S ESTIMATE
---------------------------------------------------------- Letter :3.3
FAA's April 1996 estimate placed airport capital development needs at
an annualized amount of about $6.53 billion--over $2.5 billion larger
than ATA's and about $3.5 billion smaller than ACI/AAAE's. FAA's
annual estimate was larger than ATA's for three main reasons:
-- Unlike ATA, which included only the 421 primary airports in its
estimate, FAA included all 3,331 airports that are part of the
national airport system. Including all national system airports
led FAA's estimate to be about $1.35 billion greater than ATA's.
-- FAA based its estimate on its 1996 NPIAS information, while ATA
used 1994 information. This led FAA's estimate to be about $1.3
billion greater than ATA's.
-- The sum of all other differences, such as ATA's inclusion of a
small number of AIP-ineligible projects, led FAA's estimate to
be about $70 million less than ATA's and accounted for the
remaining difference between the two estimates.\11
Four main reasons explain why FAA's annual estimate was about $3.5
billion smaller than ACI/AAAE's:
-- FAA excluded all AIP-ineligible projects, while ACI/AAAE
included them. This led ACI/AAAE's estimate to be about $3.4
billion greater than FAA's estimate.
-- We found ACI/AAAE's estimate to be overstated, which led it to
be about $500 million (before inflation adjustment) greater than
FAA's.
-- FAA did not explicitly adjust its estimates for inflation like
ACI/AAAE did. Not adjusting for inflation accounts for
ACI/AAAE's estimate being about $1 billion greater than FAA's.
-- The sum of all other differences between FAA's and ACI/AAAE's
estimates, including the differences in the time period covered
and the number and valuation of individual projects, account for
the remainder of the difference. In sum, these differences led
ACI/AAAE's estimate to be about $1.4 billion less than FAA's.
We were able to replicate FAA's 5-year estimate to within about $8
million (or 0.02 percent). The difference we found is attributable
to slightly different versions of the NPIAS. (A more detailed
reconciliation of the three estimates appears in table I.5 in app.
I.)
--------------------
\11 The sum of these three differences does not exactly equal the
difference between FAA's and ATA's annual estimates because of
rounding.
COMPARISON OF LIKE AIRPORTS
AND PROJECTS FURTHER
CLARIFIES THE DISPARITY
BETWEEN ESTIMATES
---------------------------------------------------------- Letter :3.4
If the analysis is narrowed to those projects and airports that are
common to all three estimates, the differences among the estimates
decrease. Table 1 shows that when comparing the same projects
(AIP-eligible projects at primary airports), the estimates range from
about $4 billion to $5.2 billion per year, a $1.2 billion, or 31
percent, difference. This result supports our contention that the
main reason for the differences among the three estimates is the
treatment of projects ineligible for AIP grants and the scope of
airports included. This result also highlights other factors
contributing to the differences in estimates, such as FAA's reliance
on more current data and differences in source data and methods.
(Table I.4 in app. I provides a more extensive comparison of the
three estimates on the basis of the types of projects and airports
each estimate considered.)
Table 1
Comparison of Estimates for AIP-
Eligible Projects at Primary Airports
(Dollars in millions)
Annual average
----------------------------------
Number of
Primary airport airports
category (1996) ACI/AAAE ATA FAA
---------------------- ---------- ---------- ---------- ----------
Large hub 29 $2,600 $2,256 $2,930
Medium hub 40 900 705 1,021
Small hub 71 400 584 637
Nonhub 281 550 420 599
======================================================================
Total 421 $4,450\a $3,965 $5,187
----------------------------------------------------------------------
\a This figure represents ACI/AAAE's reported estimate. GAO's
recalculated total based on ACI/AAAE's data is $4,153 million.
The valuation of the individual projects within each database also
accounts for some of the difference in the three estimates.
Quantifying the overall magnitude of this difference among the
estimates would be nearly impossible because there are some 45,000
airport projects in the NPIAS database and because there is no unique
project identifier by which to compare the same projects among the
databases. However, to provide some indication of whether the same
project was valued equally in all three estimates, we selectively
compared the same projects at a large, medium, and small hub
airport.\12 As table 2 shows, the three estimates contained different
valuations for the same projects. Differing cost estimates for the
same projects are likely the result of varying time periods and
sources for the data.
Table 2
Comparison of Individual Project
Valuations at Selected Airports, AIP-
Eligible Portion
(Dollars in millions)
ACI/
Hub AAAE's ATA's FAA's
Airport size Project estimate estimate estimate
-------------------- -------- -------- -------- -------- --------
John F. Kennedy Large Internat $537.6 $555.7 $512.4
International ional
Arrivals
Building
Reno/Tahoe Medium Noise 11.7 14.5 12.5
International mitigati
on
Billings Logan Small All 13.3 19.5 25.6
International projects
======================================================================
Total $562.6 $589.7 $550.5
----------------------------------------------------------------------
--------------------
\12 We did not compare other categories of airports, such as general
aviation, because ATA did not include other categories of airports
and ACI/AAAE did not survey these airports, instead relying on FAA's
estimates.
FUTURE AIRPORT CAPITAL
DEVELOPMENT NEEDS DEPEND ON THE
SCOPE OF PROJECTS AND AIRPORTS
CONSIDERED
------------------------------------------------------------ Letter :4
The capital development needs for the nation's airports over the
5-year period from 1997 through 2001 will vary according to how
narrowly or broadly needs are defined. A narrow definition yields a
much lower estimate than one that includes all airports and projects.
However, regardless of how needs are defined, none of these estimates
may represent how much airports will actually spend on capital
development during this period because of data limitations,
unanticipated needs, airline and community influence, and funding
constraints.
AIRPORT CAPITAL DEVELOPMENT
NEEDS VARY CONSIDERABLY OVER
THE NEXT 5 YEARS, DEPENDING
UPON HOW NEEDS ARE DEFINED
---------------------------------------------------------- Letter :4.1
To provide an up-to-date range of estimates for airport capital
development needs for the period from 1997 through 2001, we applied
ever-widening criteria of needs to the most current data we could
obtain. Using FAA's preliminary 1997 NPIAS database supplemented by
ACI/AAAE and state aviation data, we determined a range of estimates
from $1.4 billion annually to $10.1 billion annually over the 5-year
period, depending on what types of airports and projects are
included. A range of estimates, rather than a single estimate,
provides various perspectives on airport needs for policymakers to
consider. Table 3 shows the four estimates we developed on the basis
of varying criteria, which are discussed below.
Table 3
Range of Airport Capital Needs, 1997
Through 2001
(Dollars in millions)
Number of Annual
Scope of projects and airports airports Total, 1997 averag
included in the estimates (1997) through 2001 e
---------------------------------- ------------ ------------ ------
All AIP-eligible projects to 1,846 $7,069 $1,414
maintain current infrastructure
and meet safety, security, and
environmental needs at existing
NPIAS airports, but not address
capacity or other needs
All AIP-eligible projects to meet 2,084 $13,873 $2,775
high-priority needs at existing
NPIAS airports\a
All AIP-eligible projects to meet 3,331 $30,550 $6,110
needs at existing NPIAS airports
All AIP-eligible and most AIP- 4,664 $50,646 $10,12
ineligible projects at existing 9
and proposed NPIAS airports and
existing state system airports
----------------------------------------------------------------------
\a We defined high-priority projects as those receiving a score of
less than 140.2, the average priority score computed under FAA's
Airport Capital Improvement Plan (ACIP) process for each project in
FAA's preliminary 1997 NPIAS database. Under FAA's ACIP process,
limited grant funds are ranked according to a formula that assigns
point values to projects on the basis of the type of airport and type
of project. The lower the point value, the higher the priority of a
project. For example, a runway safety project at a large hub airport
would score fewer points, and accordingly have a higher priority,
than a terminal upgrade at a smaller airport. The FAA uses the ACIP
process as a guide, but not the sole criteria, for awarding
discretionary grants.
AIP-eligible projects to meet safety, security, and environmental
needs, as well as maintain the existing infrastructure of airports,
total $1.4 billion per year. This amount would include $161 million
per year for safety and security projects, many of which are for
federally mandated programs;\13 $422 million per year for
environmental projects, mostly for noise compatibility programs;\14
and $831 million per year for reconstruction projects to maintain the
existing airport infrastructure. However, this estimate does not
include the bulk of airports' other needs, such as projects that
would improve existing infrastructure or add additional
infrastructure to meet future demands. The next highest estimate of
about $2.8 billion per year includes all projects with an Airport
Capital Improvement Plan (ACIP) score of less than 140.2, the average
score of all the projects contained in FAA's preliminary 1997 NPIAS
database. This estimate, therefore, reflects the projects that FAA
considers to be of a higher priority--which in addition to meeting
all AIP-eligible safety, security, environmental, and reconstruction
needs, covers a portion of airports' other needs. For example, at
this level, almost 30 percent of airports' AIP-eligible planned
capacity needs would be met.
Including all AIP-eligible projects at existing national system
airports yields an estimate of $6.1 billion annually. In the scope
of projects and airports included, this estimate is comparable to
FAA's earlier estimate of $6.5 billion for 1996 through 2000, and in
its size, it approximates ATA's recently revised annual estimate of
$6 billion for 1997 through 2001. The fourth and most inclusive
estimate of $10.1 billion annually includes all projects, whether
eligible for AIP or not, and all existing and proposed NPIAS airports
and existing state-funded airports. Including AIP-ineligible
projects at NPIAS airports accounts for $3.7 billion of the $4
billion annual difference between this estimate and the next highest
estimate.\15 The remaining difference stems from adding airports
proposed for inclusion into the NPIAS and non-NPIAS state-funded
airport needs. Although the federal government is not responsible
for funding AIP-ineligible projects or state airports, we included
them in our range of estimates because ineligible projects compete
with eligible projects for airport financing and NPIAS airports
compete with non-NPIAS airports for limited state funds.
--------------------
\13 The regulations for safety and security programs may be found at
title 14, sections 139 and 107, respectively, Code of Federal
Regulations.
\14 The regulations for noise compatibility programs may be found at
title 14, section 150, Code of Federal Regulations. Noise
compatibility programs are not mandated but are voluntary.
\15 The majority of AIP-ineligible projects were based on ACI/AAAE's
earlier survey of hub airports and our reconstructed estimate of
AIP-ineligible needs discussed earlier. However, another $392
million of AIP-ineligible projects for nonhub, other commercial
service, and general aviation airports were drawn from FAA's
preliminary 1997 NPIAS database.
MAJORITY OF PLANNED CAPITAL
DEVELOPMENT NEEDS IS AT THE
LARGEST AIRPORTS
---------------------------------------------------------- Letter :4.2
The nation's 29 large hub airports account for a significant share of
the planned capital development for the period from 1997 through
2001. Specifically, these airports account for 28 to 52 percent of
total planned capital needs across the four estimates we developed.
General aviation airports, including reliever airports, varied
between 15 and 22 percent of total needs, depending upon the
estimate. Table 4 shows the planned capital development by type of
airport for the four estimates.
Table 4
Planned Development by Type of Airport
Under Various Capital Needs Estimates,
1997 Through 2001
(Dollars in millions; Percentage of
total by type of airport in
parentheses.)
Type of airport
--------------------------------------------------------------
Other
commer Genera Total,
Scope of projects and cial l 1997
airports included in the Large Small Medium servic aviati State throug
estimates hub hub hub Nonhub e on funded h 2001
------------------------ ------ ------ ------ ------ ------ ------ ------ ------
All AIP-eligible $901 $261 N/A\a $7,069
projects to maintain $2,002 $1,320 (13) $1,022 (4) $1,564
current infrastucture (28) (19) (15) (22)
and meet safety,
security, and
environmental needs at
existing NPIAS
airports, but not
address capacity or
other needs
All AIP-eligible $366 N/A $13,87
projects to meet high- $5,305 $2,954 $1,115 $1,524 (3) $2,068 3
priority needs at (38) (21) (8) (11) (19)
existing NPIAS
airports\b
All AIP-eligible $13,54 $728 N/A $30,55
projects to meet needs 3 $4,547 $2,795 $2,841 (2) $6,096 0
at existing NPIAS (44) (15) (9) (9) (20)
airports
All AIP-eligible and $26,15 $729 $447 $50,64
most AIP-ineligible 3 $9,258 $3,783 $2,946 (1) $7,329 (1) 6
projects at existing (52) (18) (8) (6) (15)
and proposed NPIAS
airports and existing
state system airports
----------------------------------------------------------------------------------------
Note: Percentages may not sum to total because of rounding.
\a N/A means not applicable.
\b We defined high-priority projects as those receiving a score of
less than 140.2 under FAA's ACIP process.
ESTIMATES ARE SUBJECT TO
CERTAIN LIMITATIONS
---------------------------------------------------------- Letter :4.3
While our estimates of capital needs, as well as previous estimates,
are useful indicators of future development activity, it is important
to recognize that the actual level and types of development that
ultimately result may be different for several reasons:
-- Limitations on the accuracy of the data collected. According to
FAA planners and consultants, the accuracy of airport master
plans and system plans diminishes significantly beyond 3 to 5
years into the future. Two studies have shown that final
project costs may be about one-third higher than original
planned costs,\16 partly because of the difficulty in predicting
future growth in aviation activity and actual project costs and
outcomes. For example, according to ACI, AAAE, and Airport
Consultants Council (ACC) officials,\17 development costs may be
understated because master plans and system plans are
preliminary estimates and are not based on detailed design and
engineering plans, which provide more precise cost estimates.
-- Unanticipated needs. Airports must also adjust their capital
spending to respond to federal or local mandates and to changes
in the market. For example, following an accident in 1990, in
which two aircraft collided on the ground, FAA imposed new
requirements for runway and taxiway signs that airports had not
previously planned for. Similarly, if some of the White House
Commission on Aviation Safety and Security's recommendations for
improved airport security are implemented, unforeseen
security-related costs may occur.\18
-- Complexities of the decision-making process. While airport
master plans and system plans may represent airports' estimates
of future development, that does not necessarily mean that
airlines or local communities concur. For example, some airport
development has been prevented on the basis of input from
airlines and communities about airline competition, development
costs, and environmental issues, including noise.
-- Availability of funding. Even if the demand for projects were
fully anticipated, accurately measured, and not opposed, they
still may not be financially feasible. Constraints on funding
sources, whether they be legislatively imposed, such as AIP and
PFCs, or imposed by market forces, such as airport bonds, will
vary among airports and projects and may mean that not all
projects can be funded. For example, in a prior GAO report, we
determined that the large and medium hub airports rely less on
AIP funds than do smaller airports, but AIP remains an important
funding source, representing almost one-fourth and one-third,
respectively, of their total capital funds.\19 Our analysis also
showed that as the total number of passengers at an airport
decreases, the airport's reliance on AIP funds increases.
Similarly, a 1996 FAA study found that small hub airports rely
on AIP funds more than large or medium hub airports.\20
We were not able to compare the various estimates of capital needs to
actual levels of historical spending because no reliable data on
airports' capital spending currently exist. We found no data that
track airport capital expenditures in the aggregate. While FAA
tracks which projects receive AIP funds, it does not track airports'
entire capital programs or the relationship of these programs to
previously stated needs in the NPIAS. Furthermore, we found no data
that track projects that do not receive federal funding. AAAE
estimated that airports' total capital spending was about $10 billion
in 1992. However, double counting of capital and operating
expenditures and limited coverage of all airports means this estimate
is not fully reliable as a gauge of capital spending. In a more
recent study, Coopers & Lybrand L.L.P. estimated that airport
expenditures increased from $4.5 billion to $6.9 billion between 1993
and 1996, averaging $5.92 billion annually.\21 However, this estimate
is based on aggregate funding from airport bonds, AIP, PFCs, and
states, rather than actual expenditures; also, it does not include
funding from local government or airport operating income directed to
capital spending.
--------------------
\16 These are Richard de Neufville, Airport System Planning: A
Critical Look at the Methods and Experience (M.I.T. Press and
MacMillan, 1976); and Edward W. Merrow, Understanding the Outcomes
of Megaprojects, A Quantitative Analysis of Very Large Civilian
Projects (RAND, Mar. 1988). According to Richard de Neufville and
some airport consultants, final project costs continue to be about
one-third higher than original planned costs.
\17 ACC represents consulting firms that specialize in serving the
airport industry.
\18 Among the recommendations of the Commission are federally
mandated security systems, including explosives-detection system
machines; improved training; and passenger identification. At this
time, FAA has not determined the total costs to implement the
Commission's recommendations, although it is expected to be several
billion dollars. Also, it is unknown how the costs may be funded.
Final Report to President Clinton, White House Commission on Aviation
Safety and Security (Feb. 12, 1997).
\19 AIP Funding for the Nation's Largest Airports (GAO/RCED-96-219R,
July 31, 1996).
\20 Innovative Approaches for Using Federal Funds to Finance Airport
Development (Mar. 1996).
\21 Federal Aviation Administration: Independent Financial
Assessment (Feb. 28, 1997). This study was required by the Federal
Aviation Reauthorization Act of 1996 (P.L. 104-264, section 274).
SEVERAL FACTORS AFFECT AIRPORT
CAPITAL DEVELOPMENT NEEDS
------------------------------------------------------------ Letter :5
Five key factors are reflected in FAA's preliminary 1997 NPIAS
database as influencing airport capital development needs eligible
for AIP funding. In the NPIAS database, projects are classified
according to their main purpose, and in descending order for dollar
volume of projects, these key factors are (1) growth in the demand
for aviation services, (2) bringing an airport up to FAA-recommended
design standards to achieve full productivity of aircraft using the
airport, (3) the reconstruction of aging airport infrastructure, (4)
upgrades to infrastructure to accommodate the introduction of
different aircraft, and (5) safety, security, and environmental
concerns. Together, as figure 3 depicts, the first two factors
represent two-thirds of airports' planned development costs in FAA's
preliminary 1997 NPIAS database. The reconstruction of aging
infrastructure (such as restoring airfield pavements), upgrading
intended to allow an airport to accommodate different aircraft (such
as larger or heavier aircraft), and projects to address safety,
security, and environmental concerns (including aircraft noise) make
up the remaining one-third. Development needs included in the
preliminary 1997 NPIAS to address these factors total about $30.6
billion over the 5-year period from 1997 through 2001.
Figure 3: Factors Contributing
to AIP-Eligible Airport Needs,
1997 Through 2001
(See figure in printed
edition.)
Source: Preliminary 1997 NPIAS database.
ANTICIPATED GROWTH GENERATES
PROJECTS FOR NEW CAPACITY
---------------------------------------------------------- Letter :5.1
Projects intended to expand an airport's capacity are the largest
single category of AIP-eligible needs in FAA's preliminary 1997 NPIAS
database. About $10.6 billion, or 34.7 percent, of FAA-projected
capital development costs are for projects to expand an airport's
capacity beyond its current design. Most of these projects are to
expand airfield capacity and terminal buildings. According to FAA,
the main objective of enhancing capacity is to reduce congestion
resulting from flight delays. In 1994, FAA designated 23 airports as
the most congested, and by 2004, FAA expects that number to rise to
29 if additional capacity is not added.\22 However, ACI, AAAE, and
ACC officials noted that FAA's designation of most congested airports
does not include capacity limitations in terminals and other landside
areas, such as entrance roadways. Some landside and terminal area
development projects are not eligible for AIP funding.
The eventual effect on congestion and delays of completing
capacity-related projects is not clear. All the current and the
expected most congested airports are large or medium hub airports,
and 82 percent, or $8.6 billion, of the total dollar spending planned
for capacity-related projects is directed to those airports.
However, even if additional capacity is added, it may not
significantly reduce delays. According to FAA, three-quarters of all
delays are caused by weather, while traffic volume accounts for
delays only 19 percent of the time.\23
The demand for passenger and cargo service at commercial airports is
expected to continue to grow over the next decade, stretching
airports' current capacity. At commercial airports, passenger
enplanements have increased by an average of about 4 percent annually
since 1990, and FAA estimates that this pace will continue through
2008. Domestic cargo activity, which is concentrated at busy
commercial service airports, is expected to grow at 6 percent per
year for the next decade, according to The Boeing Company's 1996/1997
World Air Cargo Forecast. In contrast to commercial airports,
activity at general aviation airports has declined since 1990, but
FAA expects about a 1-percent annual growth rate through 2008.
To examine whether the forecasted growth in aviation activity
influences airport capacity projects, we performed a regression
analysis relating capacity needs to the forecasted growth in aviation
activity. We found a positive and statistically significant
relationship between forecasted activity growth, measured either as
aircraft operations (take-offs and landings) or passenger
enplanements, and the dollar value of capacity-related projects in
the NPIAS.\24 This relationship among the 69 large and medium hub
airports, and among all 421 primary airports, is statistically
significant, but there are differences in magnitude. For all 421
primary airports, the dollar value of capacity-related projects in
the NPIAS is considerably more sensitive to changes in the forecasted
level of passenger enplanements than to changes in the forecasted
level of aircraft operations;\25 we expect this is because, on
average, smaller airports have greater excess capacity on their
airfield. Examining just the 69 large and medium hub airports, we
found that the dollar value of planned capacity projects is equally
sensitive to changes in enplanements and operations.\26
--------------------
\22 FAA designates airports as the most congested airports if they
exceed 20,000 hours of annual flight delays.
\23 1995 Aviation Capacity Enhancement Plan, U.S. Department of
Transportation and Federal Aviation Administration (Dec. 31, 1996).
\24 A more complete discussion of the regression analysis's
methodology and results is presented in app. II.
\25 For the 421 primary airports, we estimate that a 1-percent
increase in forecasted enplanements is associated with nearly a
0.75-percent increase in projected spending for capacity-related
projects, while a 1-percent increase in forecasted aircraft
operations is associated with an increase in projected spending for
capacity-related projects only about half that large. Technically,
this percentage change, or elasticity, applies only for airports that
have values of forecasted growth in enplanements or operations and
dollar values of capacity-related projects that are close to the mean
values of those measures for all airports included in the regression.
In dollar terms, each additional operation is associated with about
$1,000 in additional planned capacity spending, while each additional
passenger is associated with about $50 in additional planned capacity
spending.
\26 For the 69 large and medium hub airports, we found a 1-percent
increase in either enplanements or operations is associated with
slightly more than a 0.5-percent increase in projected spending for
capacity-related projects. In dollar terms, each additional
operation is associated with about $1,500 in additional planned
capacity spending, while each additional passenger is associated with
about $40 in additional planned capacity spending.
MAXIMIZING AIRPORT
CAPABILITIES GENERATES
PROJECTS TO MEET RECOMMENDED
DESIGN STANDARDS
---------------------------------------------------------- Letter :5.2
Projects intended to bring existing airports up to FAA-recommended
design standards, on the basis of the current use of the airport, are
the second largest category of AIP-eligible needs reported in FAA's
preliminary 1997 NPIAS database. About $9.8 billion, or 32 percent,
of FAA's projected capital development costs for airports are for
these types of projects. For example, at an airport now serving
aircraft that are larger and faster than what the airport was
originally designed for, aircraft fuel or passenger loads must be
limited, causing them to operate below their full operational
capabilities. FAA has guidance on airport design, such as runway
specifications for serving various types of aircraft. Nearly
three-quarters of the money in this category is intended for projects
that would improve runways and taxiways, expand terminals, and
purchase land so that the aircraft using the airport could operate
more productively.
AGING INFRASTRUCTURE
GENERATES PROJECTS FOR
RECONSTRUCTION
---------------------------------------------------------- Letter :5.3
The reconstruction of aging airport infrastructure is the third
largest category of AIP-eligible needs. About $4.15 billion, or 13.6
percent, of FAA's projected airport capital development costs is for
the reconstruction of existing infrastructure that has deteriorated
due to weather or use and has reached the end of its useful life.
Typical projects include the rehabilitation of airfield pavements or
the replacement of airfield lighting systems.
Ninety-one percent of all planned reconstruction costs are for
projects to repair airfield pavements. The rehabilitation of
airfield pavements, according to FAA, is generally done on a 15- to
20-year cycle. According to FAA, failure to replace deteriorating
pavement increases an airport's maintenance costs, limits aircraft
operating loads, and can result, for example, in potholes that can
damage aircraft landing gear. According to airport officials and
consultants, the reconstruction of aging infrastructure will continue
to be a significant capital development cost.
THE INTRODUCTION OF
DIFFERENT AIRCRAFT GENERATES
PROJECTS TO UPGRADE
FACILITIES
---------------------------------------------------------- Letter :5.4
The estimated cost of upgrading existing facilities to accommodate
the introduction of different types of aircraft not yet using the
airport is the fourth largest factor affecting AIP-eligible needs.
About $3.1 billion, or 10.2 percent, of FAA's projected airport
capital development costs is for upgrading existing facilities. In
contrast to design standards, which address current deficiencies,
upgrades are intended to provide for changes anticipated in the
future. Such changes include, for example, aircraft that are being
developed or existing aircraft not currently serving an airport.
Typical projects include increasing the length of runways and
strengthening runways and taxiways so that airports will be able to
accommodate in the future aircraft that the airports cannot now
serve. Nearly half of the costs for planned upgrades is for runways,
while just over one-third is for access roads. If airlines and
manufacturers eventually introduce larger aircraft with heavier
payloads and wider wingspans, airports may be faced with considerably
greater upgrade costs.
SAFETY, SECURITY, AND
ENVIRONMENTAL CONCERNS HAVE
GENERATED SPECIAL PROGRAMS
---------------------------------------------------------- Letter :5.5
Projects intended to address safety, security, and environmental
needs are among FAA's top funding priorities and account for $2.9
billion, or 9.5 percent, of total AIP-eligible needs. Of this total,
about $807 million, or 2.6 percent, of FAA's projected capital
development costs are for safety and security projects, including
projects for federally-mandated safety and security programs. Safety
and security projects, which have FAA's highest AIP funding priority,
include purchasing fire and rescue equipment and installing security
checkpoints. The costs of implementing the recommendations of the
White House Commission on Aviation Safety and Security, which were
issued on February 12, 1997, are not reflected in these estimates
because projects to implement the recommendations have yet to be
developed.
In addition, $2.1 billion, or 6.9 percent, of total planned costs for
development needs is for environmental protection, mainly aircraft
noise mitigation projects. These projects include, for example, the
acquisition of noise-impacted land and the soundproofing of
residences and public buildings in the areas underlying aircraft
approach and departure routes. Unlike safety and security programs,
noise compatibility programs are voluntary.
AGENCY COMMENTS
------------------------------------------------------------ Letter :6
We provided the Department of Transportation, FAA, ACI, AAAE, ATA,
and ACC with a copy of our draft report for review and comment.
Agency and association officials, including FAA's Deputy Associate
Administrator for Airports; ACI's President; AAAE's Senior Vice
President, Federal Affairs; ATA's Managing Director, Airports; and
the Chairman of ACC's Governmental Affairs Committee, generally
agreed with the facts presented and provided some clarifying comments
and information, which we included in the report as appropriate.
Agency and association officials also stated that the report was a
thorough and balanced representation of the facts.
---------------------------------------------------------- Letter :6.1
We performed our review from December 1996 through March 1997 in
accordance with generally accepted government auditing standards.
Additional details on our scope and methodology are contained in
appendix III.
We are sending copies of this report to other interested
congressional committees; the Secretary of Transportation; the
Administrator, Federal Aviation Administration; and the Director,
Office of Management and Budget. Copies will be made available to
other interested parties on request.
Please call me at (202) 512-2834 if you or your staff have any
questions about this report. Major contributors to this report are
listed in appendix IV.
John H. Anderson Jr.
Director, Transportation Issues
List of Recipients
The Honorable John McCain
Chairman
The Honorable Ernest F. Hollings
Ranking Minority Member
Committee on Commerce, Science,
and Transportation
United States Senate
The Honorable Slade Gorton
Chairman
The Honorable Wendell H. Ford
Ranking Minority Member
Subcommittee on Aviation
Committee on Commerce, Science,
and Transportation
United States Senate
The Honorable Bud Shuster
Chairman
The Honorable James L. Oberstar
Ranking Democratic Member
Committee on Transportation
and Infrastructure
House of Representatives
The Honorable John J. Duncan, Jr.
Chairman
The Honorable William O. Lipinski
Ranking Democratic Member
Subcommittee on Aviation
Committee on Transportation
and Infrastructure
House of Representatives
The Honorable Norman Y. Mineta
Chairman, National Civil Aviation Review Commission
CALCULATION, COMPARISON, AND
RECONCILIATION OF THE ESTIMATES OF
AIRPORT CAPITAL DEVELOPMENT NEEDS
=========================================================== Appendix I
In order to discern the nature and extent of the differences among
the three capital needs estimates, it was necessary to understand how
the respective databases were compiled and the estimates were
calculated. Only then could we compare the results and begin the
process of reconciling the estimates.
AIRPORTS' ESTIMATE
------------------------------------------------------- Appendix I:0.1
In March 1996, the airports, through the Airports Council
International--North America (ACI) and the American Association of
Airport Executives (AAAE), estimated airport capital development
needs at $60 billion for the 6-year period from 1997 through 2002.
In 1996, ACI/AAAE conducted a survey of 140 hub airports to derive an
estimate of airport capital needs. The survey sought information on
hub airports' total capital needs, including AIP-ineligible projects,
and asked airport officials to estimate how much would be eligible
for AIP funds and whether financing had been committed to the
project. Using information from the 88 airports that responded to
the survey, ACI/AAAE extrapolated needs for all 140 hubs on the basis
of their relative number of passenger enplanements. ACI/AAAE relied
upon the Federal Aviation Administration's (FAA) National Plan of
Integrated Airport Systems (NPIAS) to estimate the capital needs for
all other categories of airports. ACI/AAAE also subtracted some
airport projects after the survey was completed on the basis of their
judgments about the likelihood that these projects would be
undertaken. Finally, ACI/AAAE converted estimates to future costs by
adding a 3-percent annual inflation factor. Table I.1 shows
ACI/AAAE's reported estimate of airport capital development needs for
1997 through 2002 and our reconstruction of that estimate, by
category of airport.
Table I.1
ACI/AAAE's Estimate and GAO's
Recalculation of Airport Capital
Development Needs, 1997 Through 2002
(Dollars in millions)
GAO's
ACI/ reconstruc
AAAE's ted
Number of estimated estimated
airports\a 6-year 6-year
Airport type (1996) Source total total
---------------------- ---------- ---------- ---------- ----------
Large hub 29 Survey $28,900 $28,598
Medium hub 40 Survey 11,600 10,344
Small hub 71 Survey 3,500 3,211
Nonhub and other 435 FAA 3,300 3,249
commercial service
Reliever 325 FAA 2,800 2,209
General aviation 2,429 FAA 4,000 3,373
Inflation adjustment ACI/ 5,900 4,936
AAAE
======================================================================
Total 3,329 $60,000 $55,920
----------------------------------------------------------------------
\a As reported by ACI/AAAE.
In reconstructing ACI/AAAE's estimate, and strictly adhering to its
method of analysis, we calculated total needs of $55.9 billion over 6
years, $4.1 billion less than ACI/AAAE reported. The $4.1 billion
includes $3.1 billion in estimated needs and $1 billion in inflation
adjustment. Most of the difference resulted from different
calculations for hub airport costs, cost figures attributed to FAA
for nonhub primary and general aviation airports, and the inflation
adjustment. We discussed these differences with the ACI and AAAE
officials responsible for their estimate, who concurred with our
conclusion.
AIRLINES' ESTIMATE
------------------------------------------------------- Appendix I:0.2
In March 1996, the airlines, through the Air Transport Association of
America (ATA), estimated airport capital development needs to be
about $20 billion for the 5-year period from 1996 through 2000. ATA
defined airport capital needs more narrowly than ACI/AAAE, including
almost exclusively AIP-eligible projects at the nation's 421 largest
commercial service airports, or primary airports. To derive its
estimate, ATA relied on a database, called Airport Marketing
Information System (AMIS), purchased from a private vendor. AMIS
extensively uses the NPIAS for its structure and much of its
information but also updates it using airport master plans, system
plans, and capital improvement plans developed by airports and
states, which detail the projects that are likely to be funded and
completed. The version of AMIS used by ATA is based on the 1994
NPIAS, instead of the 1996 NPIAS update used by FAA.\1 Furthermore,
because AMIS is largely derived from the NPIAS, it does not generally
include projects not eligible for AIP grants. Less than 1 percent of
ATA's total estimate included AIP-ineligible projects. We
reconstructed ATA's estimate, using the same AMIS database and ATA's
methods, and found that they had accurately calculated their
estimate. Table I.2 below presents ATA's estimate of airport capital
development needs for 1996 through 2000.
Table I.2
ATA's Estimate of Airport Capital
Development Needs, 1996 Through 2000
(Dollars in millions)
Number of
Airport type airports (1996) 5-year total
------------------------------ ------------------ ------------------
Large hub 29 $11,279
Medium hub 40 3,523
Small hub 71 2,921
Nonhub 281 2,101
======================================================================
Total 421 $19,824
----------------------------------------------------------------------
--------------------
\1 In total, for the same 5-year period and categories of projects
and airports, the AMIS and the 1994 NPIAS differed by about $108
million, or 0.5 percent.
FAA'S ESTIMATE
------------------------------------------------------- Appendix I:0.3
In April 1996, FAA estimated airport capital development needs to be
$32.7 billion for the 5-year period from 1996 through 2000. In
making its estimate, FAA relied on the NPIAS database of AIP-eligible
projects at the 3,331 national system airports. The NPIAS is a
compilation of FAA's regional office data on individual airport
projects from approved airport master plans, system plans, and
discussions with airport officials. Under FAA's guidance, all
airport projects for up to 10 years in the future are entered into
the NPIAS database and coded according to project type, estimated
cost, year of planned expenditure, project description, and grant
eligibility.
In deriving its estimate of airport capital needs, the FAA defined
capital needs as development projects that are eligible for AIP
funding at any of the national system airports. FAA excluded
AIP-ineligible projects because the agency is not responsible for
funding these projects. FAA also excluded projects to plan
development because they do not represent infrastructure development.
Table I.3 presents FAA's estimate of airport capital development
needs for the 5-year period from 1996 through 2000.
Table I.3
FAA's Estimate of Airport Capital
Development Needs, 1996 Through 2000
(Dollars in millions)
Number of
Airport type airports (1996) 5-year total
------------------------------ ------------------ ------------------
Large hub 29 $14,650
Medium hub 40 5,105
Small hub 71 3,183
Nonhub 281 2,995
Other commercial service 143 692
Reliever 330 2,238
General aviation 2,437 3,808
======================================================================
Total 3,331 $32,671
----------------------------------------------------------------------
We verified FAA's estimate by reconstructing it using the NPIAS and
following FAA's methodology. We were able to closely, but not
exactly, match FAA's estimate of $32.671 billion. Our total, using
the same criteria, was $32.679 billion, for a total difference of $8
million over 5 years. The difference we found is attributable to
slightly different versions of the NPIAS.
To the extent, however, that any estimate of planned development uses
the NPIAS database, it should be noted that about 14 percent of the
FAA field offices that update the NPIAS screen projects for their
likelihood of receiving AIP grants before including those projects in
the NPIAS database. Thus, the representation of need in the NPIAS
may be less comprehensive for airports in those locations in
comparison to other locations where FAA field offices include all
AIP-eligible projects without regard to expectations of funding.
Also, about 18 percent of FAA field offices include projects
ineligible for AIP funding in their NPIAS database; for example, 7.3
percent of the projects in the 1996-through-2000 NPIAS were
ineligible for AIP funding. While FAA screened these projects out of
the 1996-through-2000 NPIAS when preparing its estimate of planned
development needs, ATA did not screen out AIP-ineligible projects.
COMPARISON OF THE ESTIMATES
OF AIRPORT CAPITAL
DEVELOPMENT NEEDS
------------------------------------------------------- Appendix I:0.4
Once we had reconstructed each of the three airport capital
development needs estimates, we compared them across airport
categories and by types of projects. Table I.4 compares the total
and average reported estimates of each.
Table I.4
Comparison of Estimated Capital Needs
Reported by ACI/AAAE, ATA, and FAA
(Dollars in millions)
Total estimated needs Annual average
---------------------------- ----------------------------
Number ACI/
of AAAE\a ATA FAA
Airport airports Project 1997- 1996- 1996- ACI/
type (1996) type 2002 2000 2000 AAAE ATA FAA
--------- -------- -------- -------- -------- -------- -------- -------- --------
Large hub 29 E $15,600 $11,279 $14,650 $2,600 $2,256 $2,930
Medium 40 E 5,400 3,523 5,105 900 705 1,021
hub
Small hub 71 E 2,400 2,921 3,183 400 584 637
Nonhub 281 E 3,300 2,101 2,995 550 420 599
=========================================================================================
Total 421 E 26,700 19,824 25,933 4,450 3,965 5,187
primary
airports
Other 143 E N/A\b N/A 692 N/A N/A 138
commerci
al
service
Reliever 330 E 2,800 N/A 2,238 467 N/A 448
General 2,437 E 4,000 N/A 3,808 667 N/A 762
aviation
=========================================================================================
Total 3,331 E 33,500 N/A 32,671 5,583 N/A 6,534
primary
and
other
airports
Total hub 140 I 20,600 N/A N/A 3,433 N/A N/A
airports
Total E and I 54,100 19,824 32,671 9,017 3,965 6,534
needs
Inflation IA 5,900 N/A N/A 983 N/A N/A
adjustme
nts
=========================================================================================
Total $60,000 $19,824 $32,671 $10,000 $3,965 $6,534
estimate
-----------------------------------------------------------------------------------------
Legend
E = AIP-eligible.
I = AIP-ineligible.
IA = Inflation adjustment.
\a ACI/AAAE combined the needs of primary nonhub and other commercial
service airports in its estimate.
\b N/A means not applicable and indicates that the estimate did not
include this category of airport or project.
As the preceding table shows, ACI/AAAE's estimate of needs is greater
than the others because it includes AIP-ineligible projects that
account for more than $20 billion over 6 years. Similarly, FAA's
estimate of capital needs exceeds ATA's estimate because it includes
a broader range of airports. We were not able to compare the various
estimates according to project type because ACI/AAAE coded projects
differently from ATA or FAA.
RECONCILIATION OF ATA'S,
FAA'S, AND ACI/AAAE'S
ESTIMATES
------------------------------------------------------- Appendix I:0.5
The process of reconstructing and comparing the three total capital
needs estimates--$19.8 billion for ATA, $32.7 billion for FAA, and
$60.0 billion for ACI/AAAE--allowed us to measure the source and
magnitude of their differences. Combining the various effects and
eliminating double counting resulted in the reconciliation scheme
appearing in table I.5.
Table I.5
Reconciliation of the 1996 Estimates of
Total Airport Capital Development Needs
(Dollars in millions)
Total
Source Description estimate
-------------------- -------------------------------------- --------
======================================================================
ATA Primary airports $19,824
Add items in FAA's
----------------------------------------------------------------------
Update from 1994 to 1996 NPIAS 6,460
Other commercial service airports 692
Reliever airports 2,238
General aviation airports 3,808
Subtract items in ATA's
----------------------------------------------------------------------
AIP-ineligible projects (193)
Projects to plan development (43)
All other differences (115)
======================================================================
FAA All airports, AIP-eligible only $32,671
Add items in ACI/AAAE's
----------------------------------------------------------------------
AIP-ineligible projects 20,600
Overstatement in ACI/AAAE's estimate 3,116
(before inflation adjustment)
ACI/AAAE's inflation adjustment 5,900
Subtract items in FAA's
----------------------------------------------------------------------
All other differences (2,287)
======================================================================
ACI/AAAE All airports, all projects $60,000
----------------------------------------------------------------------
To reconcile ATA's and FAA's estimates, four adjustments had to be
made. First, the ATA estimate, which is based on the AMIS database,
is in turn a derivative of the 1994 NPIAS. The 1994 NPIAS is about
$6.5 billion less than the 1996 NPIAS for the same 1996-through-2000
time period because the NPIAS does not account for many projects
beyond 5 years. Second, FAA included all other commercial service
airports (between 2,500 and 10,000 annual enplanements), reliever
airports, and general aviation airports in its estimate, whereas ATA
included only primary airports (enplanements greater than 10,000).
Third, ATA's estimate included a small number of planning projects
and AIP-ineligible development projects that FAA did not include.
Finally, the remaining difference of $115 million cannot be
specifically attributed to a single factor but is likely caused by
the differences in the number and valuation of the projects between
the two databases.
To reconcile FAA's and ACI/AAAE's estimates, four adjustments had to
be made. First, and most significantly, ACI/AAAE included $20.6
billion of AIP-ineligible projects that FAA did not include. Second,
the errors we found in ACI/AAAE's estimate that led to an
overstatement did not occur in FAA's estimate. To avoid double
counting when calculating the inflation adjustment, we used the
pre-inflation amount of the overstatement, $3.1 billion. Third,
ACI/AAAE's estimate includes a 3-percent inflation adjustment of $5.9
billion that FAA did not include in its estimate. Finally, the
remaining difference between the two estimates, about $2.3 billion,
cannot be specifically attributed to a single factor but is due to
differences in the time periods covered (1996 through 2000 for FAA
and 1997 through 2002 for ACI/AAAE) and differences in the number and
valuation of the projects in the two databases.
REGRESSION MODEL AND RESULTS
========================================================== Appendix II
This appendix describes the regression model that we developed to
estimate the association between forecasted growth in aviation
activity and the dollar value of capacity-related projects.
Regression modelling is a technique that identifies the strength of
association of one explanatory factor with the dependent variable,
while controlling for the influences of other external factors.
Using this model, we found a positive and statistically significant
relationship between forecasted activity growth (the relevant
explanatory factor), measured either as aircraft operations or
enplanements, and planned capacity spending (the dependent variable).
Time and data limitations precluded testing more elaborate
specifications, and therefore, our results should be taken as
suggestive rather than conclusive evidence. The following sections
discuss the regression data, model, and results.
DATA
------------------------------------------------------ Appendix II:0.1
All of the data we used came from FAA's 1996 NPIAS database. NPIAS
contains data on, among other things, individual airport
characteristics, such as the type of airport and the current and
forecasted level of aircraft operations and enplanements, and
projected capital spending over 5 years. For our analysis, we
computed the level of forecasted activity growth in aircraft
operations (take-off and landings) and enplanements by subtracting
current levels from levels forecasted for 5 years in the future. We
also created a measure of each airport's current congestion level to
serve as a control variable, by dividing each airport's actual
operations by its capacity number of operations. For the dependent
variable, we summed projected spending for capacity-related projects
for 5 years, 1996 through 2000.
MODEL
------------------------------------------------------ Appendix II:0.2
For our analysis, we regressed planned capacity spending on one of
two explanatory factors--forecasted growth in operations or
forecasted growth in enplanements--and a control variable,
congestion. We included congestion as a control variable because we
anticipated that heavily congested airports may be more likely to
plan high levels of spending on capacity-related projects. While we
performed our regression analysis using both linear and log-linear
specifications, we based our results on the linear specifications
because in some instances negative activity growth rates limited the
appropriateness of the log-linear model. We also estimated the model
for two groups of airports--the 421 airports classified as primary
airports and, within this group, the 69 airports designated as large
and medium hub airports. Time and data limitations precluded testing
more elaborate specifications, and therefore, our results should be
taken as suggestive rather than conclusive evidence.
RESULTS
------------------------------------------------------ Appendix II:0.3
We found a positive and statistically significant (at the 95-percent
level) relationship between forecasted growth in aviation activity
and planned capacity spending. This relationship exists using either
operations or enplanements as the measure of aviation activity and
for both the more inclusive set of 421 primary airports and the
largest 69 airports (large and medium hubs). For all 421 primary
airports, planned capacity spending is considerably more sensitive to
changes in the forecasted level of enplanements than to changes in
the forecasted level of operations, but when examining just the large
and medium hubs, we found an equal sensitivity to each measure.
We also found a positive relationship between our congestion variable
and planned capacity spending. This relationship was statistically
significant at the 95-percent level in the two regressions using the
421 primary airports, and at the 90-percent level for the regression
using the 69 large and medium hub airports when we used operations as
the measure of aviation activity. The explanatory power of our
model, as measured by the multiple correlation coefficient (R\2 )
statistic,\\1 was greater for the regressions using the 421 primary
airports. Table II.1 presents the regression coefficients and
summary statistics used in our analysis.
Table II.1 Regression Coefficients and
Summary Statistics
All primary airports Large and medium hub airports only
---------------------------------- ----------------------------------
Forecasted Forecasted
growth in Forecasted growth in Forecasted
aircraft growth in aircraft growth in
operations enplanements operations enplanements
----------------- ---------------- ---------------- ---------------- ----------------
Explanatory 993,000 52,600 1,460,000 38,300
factor (8.2) (9.0) (3.3) (2.1)
coefficient
Elasticity of .37 .74 .54 .53
explanatory
factor
Congestion 102,000,000 42,700,000 188,000,000 149,000,000
coefficient (6.4) (2.3) (1.9) (1.4)
Constant -27,400,000 -11,700,000 -96,500,000 -62,500,000
Number of 421 421 69 69
observations
R\2 .25 .27 .21 .13
-----------------------------------------------------------------------------------------
Note: t-statistics are in parentheses, coefficients have been
rounded to 3 significant digits, elasticities have been computed at
mean values, and the forecasted growth variables are measured in
thousands.
Source: GAO's analysis of NPIAS data.
The regression coefficients for the explanatory factors shown in
table II.1 indicate the change in planned capacity spending for each
additional unit of operations or passenger enplanements, when holding
the control variable constant. For example, the coefficient of
993,000 means that for each additional forecasted unit of operations
at 1 of the 421 primary airports, the model indicates an additional
$993,000 of planned capital spending over 5 years.
The elasticity measure in table II.1 compares the relative
sensitivity of planned capital spending with respect to changes in
the explanatory factors. For all 421 primary airports, we estimate
that at mean values of our variables, the elasticity of planned
capacity spending is about twice as great with respect to forecasted
enplanement growth (.74) than with respect to the forecasted growth
in operations (.37). That is, at mean values, a 1-percent increase
in anticipated enplanements is associated with nearly a 0.75-percent
increase in planned capacity spending, while a 1-percent increase in
anticipated aircraft operations is associated with an increase in
planned capacity spending only about half that large. However, for
the 69 large and medium hub airports, we estimate that at mean values
of our variables the elasticities are almost identical--.53 for
enplanements and .54 for operations. That is, at mean values, we
estimate that a 1-percent increase in either enplanements or
operations is associated with slightly more than a 0.5-percent
increase in planned capacity spending.
--------------------
\1 The greater the R\2 , the greater the association between the set
of explanatory variables and the dependent variable and, therefore,
the greater the proportion of the variance in the dependent variable
that can be accounted for by the explanatory variables. This
statistic can range from 0 to 1.
SCOPE AND METHODOLOGY
========================================================= Appendix III
To compare the various airport capital needs estimates and determine
why they differ, we reconstructed, compared, and reconciled each of
the three main estimates of needs. Appendix I describes how the
three databases were compiled and our reconciliation process. While
we did not verify the accuracy of the data in each of the databases,
we determined the accuracy of the calculation through our process of
reconstructing the estimates. In addition, we compared categories of
airports and types of projects, as well as individual projects,
across the databases to ascertain how complete the data sets were.
We also discussed with ACI/AAAE, ATA (and its data vendor), and FAA
officials the process by which their data were obtained and how they
were input, maintained, and compiled. In the two instances in which
our reconstructed estimates did not match the reported estimates, we
discussed our results with ACI/AAAE and FAA officials to understand
why they differed and to obtain agreement that our reconstructed
estimate was accurate. Finally, by comparing the three databases, we
were able to isolate and measure the differences among each of the
three estimates. Because the projects in the databases could not be
linked by a common identifier, it is not possible to measure to what
extent the databases varied as a result of the differences in
valuation for the same projects versus the differences in the array
of projects at each airport. Therefore, these two effects were
combined as a default measure.
To provide an up-to-date range of estimates for airport capital
development needs over the 5 years from 1997 through 2001, we used
FAA's preliminary 1997 NPIAS database, supplemented by other data
sources. To obtain information on airport development needs that are
not eligible for AIP grants, we relied on three data sources. We
used an updated version of AMIS, the database previously used by ATA,
to estimate the value of projects funded by passenger facility
charges (PFC). We used the results of two different ACI/AAAE surveys
to estimate the value of AIP-ineligible projects at hub airports.
Finally, we used a survey conducted for us by the National
Association of State Aviation Officials (NASAO) of their members to
estimate the needs of airports in state system plans but not included
in the NPIAS.\1 Forty-two states and Puerto Rico responded to the
survey. We selected several criteria for defining need--from very
narrow (safety, security, environmental, and reconstruction projects)
to very broad (all projects regardless of eligibility at all airports
for which data are available)--and applied them to the most current
data available from FAA, ACI/AAAE, and state aviation officials. As
with the first objective, we did not authenticate the accuracy of
individual data elements.
To identify the key factors that affect airport development and how
these will affect future capital needs, we interviewed numerous
aviation industry experts and reviewed relevant studies. For FAA, we
interviewed officials in headquarters and at all 31 FAA Regional
Airport Division Offices and Airport District Offices. We also
reviewed all NPIAS and predecessor plans for the national system
published since 1947, recent aviation forecast reports, and the FAA's
1995 Aviation Capacity Enhancement Plan, the latest such plan
available. For airport representatives, we held numerous discussions
with officials from ACI and AAAE and interviewed 13 airport directors
or commissioners. For airline representatives, we spoke with ATA
officials and held a roundtable discussion with representatives from
10 passenger and cargo airlines. Finally, we held discussions with
various aviation experts, including officials from six airport
engineering and planning firms and two academics active in consulting
for airports. All of these people were asked about the factors that
have historically influenced airport development and the trends that
are likely to affect future development needs. In addition, we
performed a regression analysis of various predicted measures of
aviation activity and future estimates of needs to better understand
the relationship between predicted growth and capacity-related
development. This regression analysis is more completely described
in appendix II.
We performed our review from December 1996 through March 1997 in
accordance with generally accepted government auditing standards.
--------------------
\1 NASAO represents all 50 states, Guam and Puerto Rico.
MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IV
Gerald L. Dillingham
R. Jerry Aiken
Paul Aussendorf
Beverly Ann Bendekgey
Charles R. Chambers
Jay R. Cherlow
Mitchell B. Karpman
Joseph D. Kile
Mark Premo
Stanley G. Stenersen
Randall B. Williamson
*** End of document. ***