The federal government must adopt bond-related policy changes and emergency provisions to keep the airport industry afloat, the American Association of Airport Executives said yesterday in a report by its energy and air service task force.

In a press conference, airport executives likened a looming air transportation crisis to the subprime mortgage meltdown, and outlined recommendations for a new energy and air service policy, as well as a set of emergency response recommendations that "should be implemented by government and industry in an immediate crisis situation caused by high energy prices in air transportation." The executives, however, stopped short of labeling the current air travel situation a crisis or emergency.

The report urged the federal government to consider giving a "reconstituted" Air Transportation Stabilization Board the authority to guarantee airport bonds. The ATSB was put together after the Sept. 11 terrorist attacks with the authority to issue airline loan guarantees.

Airports would also benefit from a "public purpose" reclassification of some private-activity bonds, allowing airports to advance refund bonds when interest rates are low, thereby saving money on financing charges, the task force said in the report.

The group called for an expansion of the bonds for which passenger facilities charge revenue can be used to pay debt service. Under current rules, airports can use PFC revenue for debt service on projects that are not eligible for AIP grants, but they must get Department of Transportation approval. The report asked for the PFC revenue-eligible universe be expanded to include all but special facility bonds. The group said airports should be allowed to use both PFC revenue and federal airport improvement program funding to back their debt service.

The report also urged Congress to increase passenger facilities charges in the next Federal Aviation Administration reauthorization bill, which lawmakers are now crafting while the FAA operates under stopgap legislation. Larger airports with high passenger levels usually levy PFCs, and can use the revenue to repay bonds issued for airport improvements. There is currently a $4.50 cap on PFCs, and airline officials have argued in the past against raising the cap to $7.

"Since passengers - not the airlines - pay the local fees, PFC-funded projects don't appear on airlines' balance sheets," the report said.

Federal lawmakers should boost AIP funding to airports to help pay for new runways, taxiways and to help with rising jet fuel costs, according to the report.

The group warned that financially strapped airports are deferring capital expenditures and, in some cases, freezing their budgets or using their capital funds to cover operational expenses as they search for ways to cushion the impact of high fuel prices, airline service cuts and the volatile prices of commodities such as asphalt and steel.

About three dozen small airports have lost air service altogether, at least temporarily, Tory Richardson of the Fort Wayne-Allen County Airport Authority told reporters yesterday.

To back up its argument that airports are a critical component to the American economy, the report cited a recent industry study that credited U.S. aviation with $1.3 trillion in national output, or 5.8% of the U.S. economy.

"When you get into an air transportation crisis, everyone wants to debate regulation or deregulation," said Chip Barclay, president of AAAE. His group is asking the federal government to "step in to an industry that is fundamental to the economy" in a way that won't affect the industry when it's healthy.

"Most of these recommendations are philosophical, with some specifics," he said.

On the proposed ATSB bond guarantees, Barclay said the board's authority to guarantee air carrier loans "doesn't do much good if you don't have anywhere to land."

Along with the bond-related requests, the task force called for federal government intervention throughout the industry. The report and Barclay suggested emergency government regulation of jet fuel prices, taxes on airline fees for such things as checked baggage and curbside check-in, as well as bolstered funding and incentives for the Essential Air Service program that subsidizes airline service to small communities, and a temporary reprieve from any new unfunded federal mandates that would force airports to take on additional costs.

The report, which was developed by about 90 airport executives, is being sent to government officials.

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