Centerlines - December 2010 - (Page 12)

A S S O C I AT E S ’ C O R N E R Court Backs DOT Efforts to Encourage Innovative Congestion Pricing EVEN DURING T H E current economic downturn, many airports in the United States have continued to experience serious problems of congestion and delay. While these problems have varied local roots, they have nationwide consequences. The U.S. Department of Transportation has recognized these problems are likely to get worse in the future and that capacity enhancements are not always feasible or adequate solutions. Accordingly, in 2008 DOT revised its Rates and Charges Policy to clarify and expand the ability of airports to use their rate-setting powers to provide price signals to encourage air carriers to better align their demand for airport facilities with available capacity. DOT’s new rules provide that airports can use two-part landing fees that reflect both the number of operations and the weight of aircraft. In addition, congested airports can include certain costs of future facilities and secondary airports in their landing fees. The logic of DOT’s approach is simple: Through the use of innovative rate-setting methods, local airport operators can give air carriers economic incentives to alter their schedules to avoid peak hours, up-gauge their fleets and use secondary airports — and consequently reduce congestion and delay at primary airports throughout the country. ACI-NA strongly supported DOT’s new rules. Airlines, acting collectively through Air Transport Association, took a different view. ATA challenged DOT’s revised policy in the U.S. Court of Appeals, arguing under the Airline Deregulation Act that it is inherently unlawful for airports to set rates with the expectation or intent that they will alter airline behavior. In its July 2010 decision, the court rejected ATA’s misconceived approach. The court recognized that every rate structure sends pricing signals to the air carriers using an airport, so any change in airport rate-setting methods will inevitably alter the economic incentives air carriers face. Rejecting ATA’s theory, the court held that so long as airport fees are reasonable and not unjustly discriminatory, they are lawful even if they are expected or intended to influence airline decisions. The real question, therefore, is not whether airports can impose rates and charges to create economic incentives that may affect airline behavior. The question is what kind of economic incentives airport rate-setters will create. DOT wisely recognized that airport sponsors can give incentives to air carriers to make more efficient use of scarce airport capacity, and the court encouraged them to do so. In its decision, the court underscored that local conditions vary widely from airport to airport, uniform methods of cost recovery should not be expected and airports need flexibility in how they set their rates. Recognizing the importance of both reducing congestion and accommodating as many passengers as possible, the court applauded DOT for giving airports the ability to increase their rates (especially at peak hours) to better allocate scarce airport capacity while providing incentives for airlines to up-gauge their fleets to carry more passengers on fewer fl ights. The court concluded that differences in incentives from airport to airport “are unavoidable, not unlawful,” and proclaimed that DOT’s creativity “should be welcomed on its merits, not spurned for its novelty.” Airports that are currently experiencing or expect to see a mismatch of capacity and demand — whether congested or underutilized — should consider innovative forms of both airfield and terminal rate-setting that may provide powerful incentives to air carriers to better align their use of airport facilities with existing capacity and, as a result, better serve the traveling public. SCOTT P. LEWIS ANDERSON & KREIGER LLP WHAT is ACI-NA DOING? ■ Anderson & Kreiger was retained by ACI-NA for this case and member contributions to the Legal Fund covered the costs of the appeal. 12 CENTERLINES | DECEMBER 2010

Table of Contents for the Digital Edition of Centerlines - December 2010

Centerlines - December 2010
President’s Message
Canadian Airports
Associates’ Corner
On the Hill and On the Stump
Cover Story: Evolving Airport Concessions
Passenger Focus: Measuring Customer Satisfaction
Fees vs. PFCs
Grand Openings
Now Underway
New Members
Index of Advertisers/
Box Scores

Centerlines - December 2010