[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]
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