The Senate last week approved legislation on a voice vote that would extend through June 30 the laws authorizing and funding Federal Aviation Administration programs at current levels, including authority to provide new grants to airports for improvement projects.

Senate approval of the bill late Wednesday came after the House approved the legislation on Tuesday. The stopgap funding measure now goes to President Bush, who is expected to sign the bill before the current extension expires at the end of the month.

Under the legislation, the FAA would be authorized to provide new grant funding through Sept. 30. That authority expired Dec. 31 because it was not included as part of the current extension.

Under the grant program, also known as AIP, the FAA provides funds to about 3,400 airports. The grants are sometimes used to repay tax-exempt bonds, but more often are used to augment other funding sources, such as bond proceeds, and other state and local grants.

"Given the very real needs that exist at airports across the country, we're grateful that Congress has acted in the short term to extend critical FAA taxes and programs, thereby allowing FAA to release much-needed funding for critical safety, security, and capacity-enhancing projects at airports," Charles Barclay president of the American Association of Airport Executives, said after Senate action on the bill.

The extension also provides Congress with additional time to finish work on a new multi-year FAA bill.

The House approved its bill in September, but progress on the Senate version has been held up over differences in legislation approved by the Senate Commerce Committee and the Senate Finance Committee last summer. For example, the bill passed by the Commerce Committee proposed charging a $25 fee per flight on commercial and high-end general aviation jet flights to help pay for upgrading the nation air traffic control system, but the fee was not included in the FAA measure approved by the Finance Committee.

Congressional action on the FAA extension came as Moody's Investors Service in a report published last week said that it does not expect any significant declines in AIP funding in the coming years, as commercial aviation capacity and security remain important concerns nationwide.

The rating agency also noted that all the pending FAA bills would either keep or increase the maximum so-called passenger facility charge, currently capped at $4.50 per leg. The House-approved bill, for example, would raise the PFC cap to $7. Larger airports with high passenger levels typically levy the PFC and often use the revenue to repay bonds issued for improvements or expansions.

"This is an important consideration for any airport that uses PFCs as part of its financing mix, particularly for debt instruments secured by PFCs, either alone or commingled with general airport revenues." Moody's said.

Second-tier airports with smaller passenger levels tend to rely more heavily on the AIP than on PFCs.

Moody's also said that the outlook for airports for 2008 and beyond is expected to remain stable as the demand for air travel and the financial position of the majority of rated airports is likely to stay strong.

But "a prolonged recession combined with sustained increases in fuel costs could cause a spike in ticket prices or reduction in airline profits that could weaken airlines further and ultimately affect airport credit," Moody's said.

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