Airports Press Congress For PFC, AIP Flexibility By Kimberly Johnson Airport executives are urging lawmakers to grant airports money-saving flexibility by allowing them to spend passenger facility charges (PFC) and Airport Improvement Program (AIP) revenue to pay debt service. They also want bonds reclassified to enable their refinancing. Among those interested in the changes is Pittsburgh International, which is trying to reduce debt to create a lower cost structure and retain the US Airways hub there. Airports could save billions if Congress relaxes restrictions, and airports would pass on those savings to carriers, Charles Barclay, president of American Association of Airport Executives (AAAE), said June 3 at a press conference in Washington. Barclay, joined by Airports Council International-North America (ACI-NA) President David Plavin, said that while current FAA reauthorization legislation in the House has a provision calling for AIP money to be used for airport debt, it's limited to smaller airports. "We're encouraging Congress to go broader than that," Barclay said. "In today's challenging operating environment, we believe that airports should be allowed, for a limited period of time, to use funds from the [AIP] and from their [PFCs], at their discretion, for the full array of services offered in their terminal buildings -- including airline areas, consumer services facilities, gates, concourses, and the like," Plavin and Barclay wrote in a June 3 letter to House Speaker Dennis Hastert (R-Ill.). Airports want a blanket use of PFC and AIP revenue use for existing debt, says ACI-NA Vice President Stephen Van Beek. "Large airports [can now] use new PFC money to retire outstanding debt provided that debt was initially eligible" for projects such as ticket counters, he said. FAA can make some exceptions for non-hub airports with existing debt for non-allowable projects, such as administrative areas, he said. FAA currently approves the use of PFC revenue to pay existing eligible debt service, provided it was accrued after Nov. 5, 1990, when PFCs were enacted, according to an FAA official. In 2002, for example, $1.86 billion was collected in PFCs, with about 25% paying debt service. PFC and AIP spending flexibility would aid a suffering industry at no additional government expense, Barclay and Plavin said. Further savings, they argue, could result by eliminating restrictions on advanced refunding of airport bonds and allowing airports to take advantage of lower interest rates. Individual airport savings would vary, but the ability to reclassify bonds would give airports a competitive edge, according to James Bennett, the new president and CEO of Metropolitan Washington Airports Authority (MWAA). An early payout of MWAA's $425 million in outstanding bonds, for example, would bring about $35 million in savings. While airport executives have long advocated bond reclassification, its biggest hurdle is that it's not considered revenue-neutral, Standard & Poor's Kurt Forsgren said. Congress "views it as costing the government money because of reduced tax revenues," he said. Reclassifying bonds would be one way of passing along some industry relief in a manner unlike the direct subsidy contained in some post-Sept. 11, 2001, legislation, he said. However, "given the budget environment in Washington, anything that smells like lost or forgone tax revenues, even if it can be justified... probably will not go too far." Options for Pittsburgh Some airports are already looking at how PFC flexibility would lower their costs for carriers. According to the executives, Pittsburgh International would like to use between 25%-50% of its PFC revenue for debt service. "Large airports can only use PFC for public space or space that is non-exclusive," said Kent George, Allegheny County Airport Authority executive director. "Small airports can do it, so large airports should be able to do it," he said. He cautioned that airports should continue to use PFC money for safety and security projects such as fencing and access control. "I don't think you will see any airport offsetting safety and security items to pay debt service," but "that's a decision the local community should make." While US Airways is attempting to "shirk their debt," Pittsburgh is trying to reduce operating costs that would benefit all its carriers, George said. Pittsburgh International lowered operating costs for carriers as traffic declined. Charges initially based on 600 departures per day are now levied on 450 departures, saving $5 million-$6 million, he said. According to a spokeswoman for Allegheny County Chief Executive Jim Roddey, both Pittsburgh International and Philadelphia International have submitted cost-cutting plans to Pennsylvania Gov. Edward Rendell (D). PFCs for debt service are just one facet of Pittsburgh's proposal. "Everything is on the table," she said. US Airways spokesman David Castelveter would not speak directly about the airport's initiatives, but said bringing down costs at the Pittsburgh airport was a major priority for the carrier. US Airways officials are meeting Wednesday with Sen. Arlen Specter (R-Pa.) in Washington, D.C., to discuss the carrier's financial situation at the airport. Joel Bacon, lobbyist for AAAE/ACI-NA, is hopeful Congress will take up the measures when FAA reauthorization reaches the floor of the House and Senate this week. *************************************************** The owner of Roger's Trinbago Site/TnTisland.com Roj (Roger James) escape email mailto:ejames@xxxxxxxxx Trinbago site: www.tntisland.com Carib Brass Ctn site www.tntisland.com/caribbeanbrassconnection/ Steel Expressions www.mts.net/~ejames/se/ Mas Site: www.tntisland.com/tntrecords/mas2003/ Site of the Week: http://www.natalielaughlin.com/ TnT Webdirectory: http://search.co.tt *********************************************************