Yes! FAA proposes regulation to allow congestion pricing

Very exciting news yesterday: the FAA has proposed amendments to a rule that will allow the most congested airports to adopt a modified form of congestion pricing. (You can–and should–read the full filing at regulations.gov and my take on congestion pricing at American.com.) I spent the evening reading over the rule, and I think it’s a very sound proposal on the whole. Here are the highlights:

These amendments are intended to provide greater flexibility to operators of congested airports to use landing fees to provide incentives to air carriers to use the airport at less congested times or to use alternate airports to meet regional air service needs.

This is really the only way to go. Other ways, short of airlines voluntary giving up flights–that is, voluntarily giving up their competitive advantages, which is ludicrous–are all arbitrary. The inelasticity of costs for using runway space has meant shortages of slots at high-demand times of day at a handful of airports.

First, this notice proposes to clarify the policy by explicitly acknowledging the ability of airport operators to establish a two-part landing fee structure consisting of both an operation charge and a weight-based charge, in lieu of the standard weight-based charge. Such a two-part fee would serve as an incentive for carriers to use larger aircraft and increase the number of passengers served with the same or fewer operations.

As Patrick Smith and others have pointed out, congested airports see large numbers of small jets (“regional jet” is a misnomer). These are often used to offer more frequent flights. Perhaps more efficient pricing will persuade airlines to offer less-frequent flights with larger aircraft. There’s no incentive for airlines to do this unless the rule changes.

Second, this action proposes to expand the ability of the operator of a congested airport to include in the airfield fees of a congested airport a portion of the airfield costs of other, underutilized airports owned and operated by the same proprietor.

I’m curious about this proposal, which means that at least some of the additional fees paid by airlines flying to JFK (run by the Port Authority of New York and New Jersey) at busy times can go to support another PANYNJ airport, say, sleepy Stewart International at Newburgh, sixty miles north of Manhattan. I thought a good side benefit of congestion charging would be plowing those resources back into improving capacity at the congested airport. This is especially important because of the hub-and-spoke system: the airlines with the most flights at, say, JFK–Delta, JetBlue, and American–can’t move flights to Stewart because that goes against the whole idea of a hub system, which remains a very efficient air traffic model. But then again, my friend Daniel Hall at Common Tragedies has urged using roadway congestion charge revenue to cross-subsidize mass transit, so perhaps the FAA’s second point is valid after all. (UPDATE: Daniel has responded in the comments and on his blog. Turns out my first instinct was correct.)

Third, this action proposes to permit the operator of a congested airport to charge users of a congested airport a portion of the cost of airfield projects under construction.

Congestion charging at airports would, ideally, reduce congestion and fund improvements to accommodate even more traffic.

This rule would only apply to “congested” airports. Others would have to maintain the current policy of “establish[ing] reasonable and not unjustly discriminatory fees and charges for aeronautical use of the airfield.” Since the thirty-five busiest airports in the United States handle three-quarters of all passenger traffic, however, delays at a few top airports swiftly become a systemic issue.

There’s a section on pricing that strikes me as disingenuous:

The proposed actions do not represent true congestion pricing because they do not authorize airport proprietors to set fees to balance demand with capacity without regard to allowable costs of airfield facilities and services.

Putting it differently, this rule authorizes a change in pricing to ameliorate congestion. Sounds like “congestion pricing” to me, just like it does to the airline lobby. (The only difference is that I like it and they don’t.) The FAA lets the cat out of the bag in the very next sentence:

Nevertheless, by enabling proprietors at congested airports to assign additional, but still appropriate, costs to the airfield to better reflect the cost of using congested airfield facilities, these proposed actions should encourage more efficient use of these facilities and encourage feasible capacity expansion.

Is this new pricing system permitted under current law? Yes, says the FAA: “[A]lthough most airports rely on a single element weight-based landing fee, the use of a weight-based landing fee is not required.” That is, the current structure charges less for smaller planes, even though they contribute to congestion and use just as much (if not more) airspace as a larger jet. A more rational policy would charge for use of the field and surrounding airspace, which is what the law allows.

The proposal offers two possible approaches by which airports can administer the new fees:

Two approaches are being considered, and we solicit comment on each. Under the first approach, the costs of facilities under construction could be included only during periods when the airport experiences congestion. Under the second approach, the costs could be included at the congested airport throughout the day. Any costs recovered for principal and interest during the construction period would have to be deducted from the amount later capitalized and amortized for recovery in the rate-base after the facility is put into use.

To pay for future improvements, the latter approach sounds better. Strictly to reduce congestion, the first approach seems the wiser way.

The FAA’s proposal includes the text that is to be amended (original regulation here). There’s also plenty of regulatory background on airports fees, and the entire discussion is well worth reading.

Policy Regarding Airport Rates and Charges [FAA]
Feds Change Airport-Landing Fees Policy [AP via Google]
Exclusive: details on government’s new airport congestion plan [elliott.org]

UPDATE: The Reason Foundation’s Bob Poole has been the free-market go-to guy on airport congestion for a long time. Here’s what today’s Reason e-newsletter says: “Earlier this week, Transportation Secretary Mary Peters announced the Department of Transportation will allow airports to use congestion pricing to help reduce air travel delays. Reason’s Robert Poole, a long-time advocate of congestion pricing, says if pricing is implemented at New York’s delay-plagued airports it will ‘motivate airlines to make the highest and best use of runway capacity, while generating the funding to expand capacity.'” See his FAQ on congestion pricing here.

Photo credit: Flickr user notelse. Used through a Creative Commons license.

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