Order Code RL33920
Federal Aviation Administration Reauthorization:
An Overview of Selected Provisions
in Proposed Legislation
March 14, 2007
Bart Elias, Coordinator
Specialist in Aviation Safety, Security, and Technology
Resources, Science, and Industry Division
John W. Fischer, Robert S. Kirk, Linda Luther, Carol Hardy Vincent,
James E. McCarthy, and Brent Yacobucci
Resources, Science, and Industry Division
Todd B. Tatelman and Jon O. Shimabukuro
American Law Division

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Federal Aviation Administration Reauthorization: An
Overview of Selected Legislative Provisions in
Proposed Legislation
Summary
Funding authorization for aviation programs set forth in Vision 100 — Century
of Aviation Reauthorization Act (P.L. 108-176) will expire at the end of FY2007.
Also, authorization of the existing tax and fee structure that provides revenue for the
aviation trust fund is set to expire at the end of FY2007. Consequently, FAA
reauthorization has been identified as a priority for the first session of the 110th
Congress.
The FAA’s proposal, entitled The Next Generation Air Transportation System
Financing Reform Act of 2007 (H.R. 1356, introduced by request), recommends a
new system for financing aviation system operations and capital improvements that
levies various fee-for-service charges (user fees), on primarily commercial system
users, and excise taxes (primarily fuel taxes) for general aviation system users. The
FAA proposes several modifications to the airport improvement program, including
increases in passenger facility charges (PFCs) that airports can impose on passengers,
and initiatives intended to modify and simplify the apportionment of grants to
airports. The FAA proposal also recommends several management and
organizational reforms, including the proposed establishment of an air transportation
system advisory board, and authority to create a independent commission to make
recommendations regarding the realignment and consolidation of FAA facilities and
services. The proposal also includes language intended to better integrate
development of the Next Generation Air Transportation System (NGATS) into the
FAA’s ongoing planning and acquisition activities and would allow airport and
private investment in certain aviation facilities and services. The FAA proposal
seeks to control congestion at certain airports through market-based mechanisms,
such as slot auctions and peak-period pricing.
With regard to addressing the environmental impacts of aviation, the FAA
proposal includes language that seeks to: provide funding for research into
technology or processes that would reduce noise, air emissions, and water quality
impacts; provide grants for programs or projects intended to mitigate or minimize
regulated environmental impacts; and provide grants or specify regulatory procedures
to assist airports in complying with environmental requirements. The FAA proposal
also recommends establishing a consortium for fostering innovation to develop
cleaner, quieter, and more efficient next-generation aircraft. Further, the FAA
proposal seeks to limit the scope of the Air Tour Management Program, designed to
mitigate noise and other adverse impacts from air tours over national park units, to
those parks where air tour impacts have been identified as a concern or could become
a more substantial issue.
The proposal includes language that would significantly modify the existing
Essential Air Service Program (EAS), that subsidizes air carrier service to small and
isolated communities, primarily by setting more stringent criteria for eligibility and
restricting further expansion of the program. This report will be updated as required.

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Contents
Overview of the FAA Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
FAA Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Proposed Tax and Fee Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ATO User Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Safety and Operations User Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Trust Fund Excise Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Air Transportation System Advisory Board (Board) . . . . . . . . . . . . . . . . . . . 5
Budget and Structural Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Bonding Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Agency Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Airport Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
AIP Program Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Changes in Formula Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Changes in Discretionary Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
AIP Eligibility Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
AIP Grant Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Federal Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Passenger Facility Charges (PFCs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Project Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Increasing the PFC Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Competition Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Other Airport-Related Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Privatization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Airport Development Rights Pilot Program . . . . . . . . . . . . . . . . . . . . 13
ADS-B Support Pilot Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
FAA Management and Organizational Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Planning and Oversight of Next Generation Air Transportation
System Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Realignment and Consolidation of FAA Facilities and Operations . . . . . . . 15
Partnerships for Next Generation Technology Deployment . . . . . . . . . . . . 16
System Capacity and Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Controlling Congestion at New York’s Laguardia Airport . . . . . . . . . . . . . 18
Market-Based Strategies for Alleviating Congestion . . . . . . . . . . . . . . . . . 18
Environmental Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Research Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Mitigation Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Grants and Procedural Changes to Assist with Environmental
Compliance
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
The Air Tour Management Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Miscellaneous Programs and Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
The Essential Air Service Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

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CRS Aviation Policy Staff
Name
Areas of Expertise
Division
Telephone
Bart Elias
— Next Generation Air Traffic
RSI
7-7771
System (NGATS)
— FAA Facilities and Equipment
(F&E)
— FAA Management and
Operations
— Airport and Airspace Demand
and Capacity Analysis
— Aviation Safety
— Aircraft Noise Policy and
Quiet Aircraft Technology
John Fischer
— FAA Financing and Aviation
RSI
7-7766
Taxes
— Airport and Airways Trust
Fund (AATF)
— Essential Air Service and
Small Community Air Service
Development Programs
— Airline Economic Issues
Bob Kirk
— FAA Financing and Aviation
RSI
7-7769
Taxes
— Airport and Airways Trust
Fund (AATF)
— Airport Improvement Program
(AIP)
— Airport Finance
Linda Luther
— Airport Environmental Issues
RSI
7-6852
(Streamlining)
Carol Hardy Vincent
— Air Tour Management
RSI 7-8651
Program
— Aviation Impacts on National
Parks
Jim McCarthy
— Aircraft Emissions
RSI
7-7225
Brent Yacobucci
— Aviation Fuels
RSI
7-9662
— Alternative Fuels for Aircraft
and Ground Support Vehicles
Jon Shimabukuro
— Labor Law and Policy
ALD
7-7990
— FAA Labor Relations
Todd Tatelman
— Aviation Law (Domestic and
ALD
7-4697
International)

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Federal Aviation Administration
Reauthorization: An Overview of Selected
Legislative Provisions in Proposed
Legislation
The report is intended to provide a brief summary and analysis of major
legislative provisions under consideration in the ongoing Federal Aviation
Administration reauthorization process. The report is organized into six major
program areas: aviation system finance; airport finance; FAA management and
organizational issues; system capacity and safety; environmental issues; and
miscellaneous programs and provisions. In several cases, provisions that appear in
various unrelated sections of proposed legislation have been rearranged in this report
in an effort to group and discuss related items in an issue-driven or programmatic
context. Since this report is primarily written as a means of communicating key
legislative provisions under consideration in the ongoing FAA reauthorization
process, it does not go into detail regarding the specific policy issues behind these
legislative proposals. However, CRS has prepared two separate reports that provide
discussion of the policy context for the current FAA reauthorization debate. For an
overview of various selected issues related to the current FAA reauthorization debate
see CRS Report RL33789, Federal Aviation Administration: An Abridged Look at
Reauthorization Issues in the 110th Congress, and for more detailed background on
these issues, see CRS Report RL33698, Reauthorization of the Federal Aviation
Administration: Background and Issues for Congress.
Funding authorization for aviation programs set forth in Vision 100 — Century
of Aviation Reauthorization Act (P.L. 108-176, hereafter referred to as Vision 100)
will expire at the end of FY2007. Also, authorization of the existing tax and fee
structure that provides revenue for the aviation trust fund is set to expire at the end
of FY2007. Consequently, FAA reauthorization has been identified as a priority
during the first session of the 110th Congress by congressional leadership, and the
legislative process toward reauthorizing the FAA began in February 2007 with the
submittal to Congress of a legislative proposal by the administration and initial
congressional hearings regarding FAA reauthorization.
Overview of the FAA Proposal
On February 14, 2007, the FAA submitted proposed legislation to reauthorize
funding for FAA functions and related aviation programs and reform the financing
of the national airspace system. The FAA’s proposed bill (H.R. 1356, hereafter

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CRS-2
referred to by bill number or as the FAA proposal)1, entitled The Next Generation Air
Transportation System Financing Reform Act of 2007, proposes a new system for
financing aviation system operations and capital improvements that includes various
fee-for-service charges (user fees), directed primarily at commercial system users,
and excise taxes (primarily fuel taxes) for general aviation system users. The FAA
proposal also includes several modifications to airport revenues, including increases
in the maximum passenger facility charges (PFCs) that airports can impose on
passengers, and initiatives intended to modify and simplify the apportionment of
grants to airports.
The FAA proposal also recommends several management and organizational
reforms, most notably the proposed establishment of an air transportation system
advisory board, and the authority to create a commission, similar to the military’s
Base Realignment and Closure (BRAC) commissions, to make independent
recommendations regarding the realignment and consolidation of various FAA
facilities and services. The proposal also includes proposed statutory language
intended to better integrate the work of the Joint Planning and Development Office
(JPDO) on the Next Generation Air Transportation System (NGATS) design and
implementation into the FAA’s ongoing planning and acquisition activities. Also,
the proposal includes language to increase the flexibility in delivering various air
traffic services and capabilities to system users by allowing airports and private
entities to play a more direct role in acquiring, deploying, and maintaining facilities
and services to augment the FAA’s air traffic communications, navigation, and
surveillance capabilities.
With regard to addressing system and airport capacity and safety, the FAA
proposal seeks statutory authority to control congestion at certain airports through
market-based mechanisms, such as slot auctions and peak-period pricing. The
proposal would direct the Department of Transportation (DOT) to study the
appropriateness of a market-based system at New York’s Laguardia Airport (LGA),
and if deemed appropriate, would permit the airport operator to implement a market-
based approach to controlling congestion. The FAA proposal also seeks to establish
a pilot program to evaluate market-based mechanisms to relieve congestion at up to
15 other airports.
With regard to addressing the environmental impacts of aviation, the FAA
proposal includes language that seeks to: provide funding for research into
technology or processes that would reduce noise, air emissions, and water quality
impacts; provide grants for programs or projects intended to mitigate or minimize
regulated environmental impacts; and provide grants or specify regulatory procedures
to assist airports in complying with environmental requirements. The FAA proposal
also recommends establishing a consortium for fostering innovation to develop
cleaner, quieter, and more efficient next-generation aircraft. Further, the FAA
proposal seeks to limit the scope of the Air Tour Management Program, designed to
mitigate noise and other adverse impacts from air tours over national park units, to
1 Representative Oberstar introduced the FAA proposal (H.R. 1356), by request, on March
6, 2007.

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CRS-3
those parks where air tour impacts have been identified as a concern or could become
a more substantial issue.
The FAA proposal also includes language that would significantly modify the
existing Essential Air Service Program (EAS), that subsidizes air carrier service to
small and isolated communities, primarily by setting more stringent criteria for
program eligibility and restricting further expansion of the program.
FAA Finance
In H.R. 1356, the Next Generation Air Transportation System Financing Reform
Act of 2007, the FAA proposes the most significant change in aviation finance since
the federal program was created by the 1970 Act. For a detailed examination of the
existing aviation finance system and the proposed changes to this system see CRS
Report RL33913, Aviation Finance: Federal Aviation Administration (FAA)
Reauthorization and Related Issues by John W. Fischer. The FAA proposal provides
for a three year authorization period (FY2008 - FY2010) during which the FAA
would transition from its existing trust fund/general fund based financing system to
a system based on new direct fees and existing excise taxes, as well as general fund
monies. Although the trust fund would be continued, its overall role in funding the
agency is significantly reduced. The proposal uses a mix of direct fees (referred to as
user fees by the FAA and throughout this section), excise taxes, and general funds,
to pay for the FAA’s ATO related activities. The proposal funds the FAA’s safety
activities primarily from general funds, but also allows the FAA to collect user fees
related to its registration and certification activities for this purpose. Excise taxes
would be used to support the continued aviation trust fund which is dedicated
primarily toward funding AIP, but also supports part of RE&D and Essential Air
Service (EAS) programs.
The FAA proposal does not set new user fee rates for ATO services. Rather it
enunciates a framework for how fees can be set and creates an Air Transportation
System Advisory Board (Board) to assist the FAA Administrator in establishing
appropriate fee levels and mechanisms. Ultimately, however, the Administrator
would be the sole decision maker on fee setting issues.
The proposal adopts a new financial structure for the FAA that would
correspond to the new program funding regime. To facilitate this structure: it would
create two new accounts in the Treasury to receive the newly imposed user fees;
allows for the establishment of a reserve fund; and allows the FAA to issue bonds to
speed-up F&E equipment acquisition. Agency funding would still be subject to
annual congressional appropriations.
The FAA proposal is controversial, and several aviation interest groups came
out against it almost as soon as it was introduced.2 The proposal, however, has
2 Wolfe, Kathryn. “FAA’s Funding Proposal Doesn’t Fly With Entire Aviation Industry,
Lawmakers.” CQ Today - Transportation and Infrastructure. Feb. 16, 2007.

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supporters, especially the ATA, which views it as a positive step forward.3
Congressional hearings on H.R. 1356, which embodies the FAA proposal, have been
scheduled in both the House and the Senate.
Proposed Tax and Fee Structure
The principal feature of the FAA proposal is the creation of a direct user fee
system to pay for the majority of the Agency’s costs associated with its ATO
activities. The FAA proposal, however, does not recommend a specific user fee
structure. Instead, it lists the criteria that must be considered in setting fee levels and
leaves it to the Board and ultimately the FAA Administrator to actually set the fees.
The proposal requires that the Administrator consult with affected parties prior to
establishing a fee structure, but gives the affected parties no further role in the
process.4
ATO User Fees. Specific ATO user fees can be set for enroute, oceanic, and
terminal area flight activity. Enroute and oceanic fees can be based on “distance
traveled or any other method that is consistent with the treaties and international
agreements to which the United States is a party.” Since much of the rest of the
world uses aircraft weight and the distance flown as part of its fee setting process, it
would appear that a similar fee setting regime could be implemented here.5
Overflight fees (for aircraft transiting U.S. airspace) would be eliminated and these
flights would be subject to the enroute and oceanic fee system.
Fee setting for terminal area activities could be somewhat more complicated
because the proposal would allow for fees to be differentiated at various locations
and at different times of the day. Factors that could be included in the terminal fee
structure can include aircraft takeoffs/landings (at airports with over 100,000
passenger boardings per year), aircraft weight, operations at a large hub airport (1%
of total U.S. enplanements), time of day or day of week at congested large hubs, and
different fees for daytime and nighttime operations.
User fees would be imposed on all commercial users of ATO services
irrespective of aircraft type. For the purposes of determining which tax certain
aircraft might pay, the applicability of IRS regulations would delineate between
commercial and noncommercial users. Although GA aircraft operate outside of the
ATO user fee system most of the time, they would be subject to terminal-related fees
at congested large hub airports.
The FAA proposal would require that fees be set in relation to the costs incurred
for providing ATO services. In setting the fees mentioned above the FAA would be
prohibited from using flight altitude as a fee setting factor. Under the proposal, it
3 [http://www.airlines.org/news/releases/2007/statement_12-14-07.htm?PF=true]
4 It would appear that the Board, with wide industry representation, is supposed to be part
of the consultation process, although this is unstated in the bill.
5 The airline industry, and groups such as the air cargo industry, have traditionally opposed
weight-based tax structures.

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CRS-5
could offer incentives, by way of reduced fees, for the purchase and use of equipment
that enhances an aircraft’s safe and efficient operation in the air traffic system. In
addition, it could seek sufficient user fee revenues to establish a reserve fund to be
available if system revenues fail to reach projected levels.
The ATO would also receive funding from excise taxes. The proposal suggests
that a 70 cent per gallon fuel tax be imposed on all GA users (kerojet or aviation
gasoline). Of this 56.4 cents per gallon is dedicated to ATO activities and 13.6 cents
is reserved for the aviation trust fund. These fees are to be indexed to inflation
beginning in 2009 and can be modified by the Administrator in future years. The
FAA believes that it is no longer necessary to differentiate the tax rate for turbine
(avgas) and piston (aviation gasoline) aircraft users because of the much higher fuel
use rates of turbine aircraft.
Safety and Operations User Fees. Safety and non-ATO operations
activities would be primarily funded by Treasury general funds. In addition,
however, the FAA is to impose registration fees for specified services at rates
detailed in the proposed legislation. By way of example, aircraft registration would
be subject to a $130 fee and issuing an airman medical certificate would cost $42.
Many of the activities listed here were previously provided at nominal fee levels.
Fees are also to be imposed for FAA certification activities. Specific fees for
activities such as certification of a large foreign repair station or a maintenance
technical school are not enumerated in the legislation. Rather, the Administrator is
to set fees at levels that correspond to the costs imposed on the FAA for providing
the certification service in question.
Trust Fund Excise Taxes. The largest source of revenues for the trust fund
would come from a 13.6 cent per gallon tax on all aircraft irrespective of fuel type.
These taxes are to be adjusted for inflation and can also be adjusted, up or down, if
the FAA cost allocation process so dictates.
The other principal source of funding for the trust fund is by continuation of the
international arrivals/departure fee which is set at $6.39 per event. This tax can also
be adjusted for inflation and/or cost allocation reasons.
Although the FAA proposal is based primarily on direct user fees, there is a
transition period during which the trust fund would continue to provide some funding
for ATO and all other FAA activities, albeit at a diminishing level.
Air Transportation System Advisory Board (Board)
The FAA proposal would creates a 13 member Board charged with advising the
Administrator on user fee and other issues at his or her request. The Board’s
membership would include the Administrator, a Department of Defense
representative, three members representing “the public interest,” an airport member,
three airline members representing different size air carriers, a cargo airline member,
a GA member, a business aviation member, and a representative of the aviation
manufacturing industry. Appointment of all members is made by the Secretary of

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Transportation. In addition, the proposal would prescribe the Board members terms
and provides guidance on its administrative functioning.
The Board can advise the Administrator on a wide range of FAA programs and
activities. At the outset, however, it would appear that the Board’s principal duty is
to help with the creation of the new user fee system. According to provisions of the
FAA proposal, “prior to establishing or modifying fees ...... the Administrator shall
consult with and seek the recommendations of the type and level of such fees.” A
procedure is established whereby the Administrator, who has ultimate fee setting
responsibility, can disagree with the Board’s recommendations and establish fees by
publishing the reasons for disagreement in the Federal Register.
It would be up to the Administrator to determine how, and how much, they
might wish to use the Board’s expertise. There is nothing in the legislation as
proposed that automatically gives the Board any power to exercise its advisory role,
especially in a public forum. This is because the Board’s actions would not be subject
to the public meeting and other administrative provisions of Title 5 U.S.C. Further,
it is not clear that the Board would have access to information about cost allocation
and other subjects, except to the extent that the Administrator wishes to make this
material available to the Board.
Budget and Structural Provisions
As suggested by the new tax and fee proposal, the FAA would be reorganized
from a budgetary perspective. ATO assessed user fees are to be deposited into a
newly created Treasury ATO account. Similarly, registration and certification fees
are to be deposited in a newly created Treasury safety and operations account. The
trust fund, however, remains intact.
The new user fees would require a new collection system to insure that they are
deposited in the appropriate account. The Administrator would be charged with
developing this system, perhaps with the help of the Board. The FAA proposal
would give the Administrator some enforcement powers to assist in the collection
effort long term.
FAA spending would still require annual appropriation by Congress. The
relationship between the FAA and congressional appropriations committees would
apparently be unchanged. From a budgetary standpoint, however, it appears that the
offsetting collections process created by the proposal would remove FAA spending
from the discretionary part of the budget. At least one outside source has suggested
that the new funding arrangement could run afoul of the newly created pay-as-you-go
rules adopted by the House of Representatives.6 In short, it is unclear at this point
how the new funding arrangement proposed here would play out as part of the
congressional budget and appropriations process.
6 Transportation Weekly. “Administration FAA Bill Likely Violates House Pay-As-You-Go
Budget Rule.” Feb. 28, 2007, p. 13.

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CRS-7
Congressional finance committees (House Ways and Means and Senate
Finance) could lose their existing jurisdiction over some aspects of the FAA tax and
fee setting. These committees would likely retain their jurisdiction over the excise
taxes to be deposited in the aviation trust fund, but could have no role or oversight
over the newly established user fees. Authorizing committees normally have
jurisdiction over offsetting collection programs of the type that would be created for
the ATO, and for safety and operations. As proposed, however, all fee-setting
powers would reside with the Administrator, meaning that a specific oversight role
for the authorizing committees is not defined in the legislation.
Bonding Authority. The Secretary of Transportation would have the ability
to issue Treasury bonds to facilitate a rapid implementation of the NGATS program.
Up to $5 billion could be issued at interest rates established by the Treasury. To
finance the bonding the Secretary could increase user fees by an amount needed to
repay the bonds with interest. These additional revenues would not go into the new
Treasury accounts mentioned earlier, but would flow directly to the Treasury. Full
repayment would be required by the end of FY2017.
The concept of using bonds to speed up the acquisition of F&E capital items has
been discussed for years. The dedicated revenue stream to the ATO account would
make bonding possible as part of the FAA’s program for the first time. It has been
argued that having this authority would allow the FAA to better program its
acquisition requirements over an extended period of time, as opposed to the potential
uncertainty of the annual appropriations process. In addition, access to additional
funds should give the Agency the ability to pursue a number of technology and
equipment upgrades at the same time. The main argument against bonding is that the
interest payments make it a more expensive way to pay for infrastructure than direct
appropriations would be.
Agency Funding
The FAA proposal provides overall authorization levels for the FY2008 -
FY2010 period of nearly $28 billion. This number, however, cannot be meaningfully
compared to previous legislation because it excludes much of the funding required
by the prospectively user-fee funded ATO, and safety and operations activities.
These activities would now be linked to actual system costs which cannot be
determined this far in advance. To the extent that the authorized levels can be
compared they suggest a significant cut in AIP and EAS funding.
Airport Financing
The Airport Improvement Program (AIP) provides federal grants for airport
development and planning. AIP funding is usually limited to capital improvements
related to aircraft operations. Commercial revenue-producing portions of airports and
airport terminals are improvements that are generally not eligible for AIP funding.
AIP money cannot usually be used for airport operational expenses or bond
repayments. AIP funds are distributed either as formula grants or as discretionary
grants. Small airports are much more dependent on AIP grants than large and

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CRS-8
medium hub airports. The larger airports can more easily generate revenue from user
fees and have historically had the financial wherewithal to successfully access the
bond market. For background and legislative history of federal aid to airports,
including a description of the AIP program, as well as an overall discussion of AIP
issues, see CRS Report RL33891, Airport Improvement Program: Issues for
Congress, by Robert S. Kirk.
The Passenger Facility Charge (PFC) program provides a source of non-federal
funds intended to complement AIP spending. The PFC is a local tax imposed, with
federal approval, by an airport on each boarding passenger. PFC funds can be used
for a broader range of projects than AIP grants and are more likely to be used for
“ground side” projects. PFCs can also be used for bond repayments.
The AIP and PFC programs are the sources of funds for airport capital
development that have the most federal involvement. Other sources are bonds, state
and local grants, and airport revenue.
The George W. Bush Administration has proposed major changes in both the
AIP and PFC programs in its FAA reauthorization proposal. The FAA proposal
would, in effect, reduce the size and scope of the AIP program, while increasing the
role of PFCs in airport finance. The proposal would broaden allowable costs under
both programs. The distribution of AIP grants would undergo major changes and the
local matching share for AIP grants would be changed for some airports.
AIP Program Changes
The funding levels for AIP, under the FAA proposal, reflect a reduction of
AIP’s role in airport finance. The proposal recommends $2.75 billion for FY2008,
$2.9 billion for FY2009, and $3.05 billion for FY2010. The authorization for
FY2007 under Vision 100 was $3.7 billion, the amount actually made available
(obligation limitation under P.L. 110-5) for AIP was $3.515 billion. The FAA’s
section-by-section analysis suggests that the increase in the PFC ceiling and the
elimination of the AIP entitlements for large and medium airports (discussed later in
this report) reduces the need for AIP funding. In recent years, the George W. Bush
Administration annual budget proposals have consistently reduced spending on AIP
only to have it just as consistently restored to near its authorized level by Congress.
Some observers in the transportation community have suggested that cutting the
popular AIP program is a way of keeping down the annual totals set forth in the
FAA’s reauthorization proposal. Also, given that the Administration’s financing
proposal for the Airport and Airway trust fund would support AIP spending through
aviation fuel taxes, the lower spending for AIP, could mean that a smaller increase
in the aviation fuel taxes could be proposed than if the FAA proposal funded AIP at
the FY2007 authorized level of $3.7 billion.7 Over time, the link of the AIP spending
level to the fuel tax could make it difficult to increase the program’s funding because
this could require raising the fuel taxes that support the program. Also, should AIP
be authorized at the current authorization level or higher it could change the
7 See FAA, Next Generation Air Transportation System Financing Reform Act of 2007:
Section-by-Section Analysis, 37.

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implications of the programmatic changes in AIP proposed by the Administration,
should they be enacted.
The FAA proposal made significant changes in both the entitlement formulas
and in the distribution of discretionary funds.
Changes in Formula Funding. The FAA proposal would make a number
of changes in the distribution of AIP funds that airports are entitled (hence the term
entitlements) to based on administrative formulas.
Elimination of the $3.2 Billion AIP Program Level “Trigger”. Under
current law the formula apportionments (also referred to as entitlements) fund two
levels of entitlements: a lower entitlement level when the overall AIP funding is
below $3.2 billion and a higher level when the program is funded at $3.2 billion or
more. Basically the FAA proposal eliminates the lower level in favor of the higher
formula distribution levels and higher minimum and maximums (the general aviation
apportionment is treated somewhat differently, see below). The proposal would also
eliminate the $3.2 billion trigger itself. The trigger mechanism was designed, in part,
to encourage funding of AIP above the $3.2 billion level. Since the FAA proposes
funding AIP below the $3.2 billion level, not making this change would, in effect,
cut most primary airports’ entitlement funding in half and would reduce general
aviation entitlements also. During the life of the trigger, AIP funding has always
been above $3.2 billion, making the lower entitlement formulas existence a moot
point since FY2001.
Primary Airport Entitlements. The FAA proposal would phase out the
formula funding that is provided for large and medium hub airports under current law
by FY2010. To provide a transition period for these airports, their formula funding
is continued at 50% of the calculated level for FY2008 and FY2009. The section-by-
section of the FAA proposal notes that this reduction is more than offset by the
increase in the PFC ceiling (discussed later in this report). In addition, large and
medium airports that impose PFCs above the $4.50 level are to forego or “turnback”
100% of their AIP entitlement funding during FY2008-FY2009. In FY2010, large
and medium hub airports would receive no entitlement funds and therefore the
turnbacks would end.
Virtual Primary Airports. The bill would also repeal the special rule,
enacted after the September 11, 2001 terrorist attacks, that allowed some airports
(referred to as virtual primary airports) that fell below the required minimum
passenger levels needed to maintain their primary airport status but were allowed to
continue receiving their primary airport entitlements. The FAA’s section-by-section
analysis argues that seven years after the attack it is unlikely that these 44 airports
will again attain primary airport status.
General Aviation Entitlements. There are two components of the general
aviation entitlements: the State Apportionment and the General Aviation
apportionment (sometimes referred to as the Nonprimary Entitlement). Under current
law 20% of AIP funds are to be apportioned for both components. The FAA
proposal would separate the underlying funding sources of the two components and
make a number of other changes. Under current law the nonprimary entitlement is

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CRS-10
apportioned from the designated 20% of AIP funds first and then the remaining funds
are used for the State Apportionment.
State Apportionment. The FAA proposal would provide 10% of the amounts
made available for apportionment for the state apportionment distribution only. The
state apportionment distribution would be determined as they are now (according to
a state-based population and area formula). The proposal would also provide for a
$300 million minimum apportionment. If the $300 million minimum could not be
met, the nonprimary entitlements (see discussion below) would be reduced on a
prorated basis to make funds available for the state apportionment.
The Nonprimary Entitlement.
Under current law all nonprimary airports
receive the lessor of $150,000 or one fifth the estimated five year development costs
estimated in the most recent NPIAS. The FAA proposal would change this to
providing three tiers of entitlement funding distribution based on the number of
registered aircraft based at the airport:
! $400,000 for airports having 100 or more based aircraft;
! $200,000 for airports having 50 to 99 based aircraft or three or more
jet aircraft;
! $100,000 for airport having 10 to 49 based aircraft.
NPIAS airports with fewer than 10 aircraft would not be eligible for a
nonprimary entitlement but could still qualify for state apportionment funds and
could compete for discretionary grants and these grants would retain a 95% federal
share. The nonprimary entitlements would not be funded from the 10% of available
funds reserved for the state apportionment but would be funded from the general
amounts available for apportionment under AIP (these amounts also fund the primary
airport and cargo entitlements). The below-trigger language is eliminated.
Alaska Supplemental Entitlement. Under the FAA proposal the “above
trigger” level of funding would be provided.
Cargo Service Airport Entitlement. Cargo service airports would continue
to receive 3.5% of AIP funding (the existing, above-trigger percentage) and the
landed weight-based formula would be retained. The below-trigger provision is
eliminated.
Changes in Discretionary Funding. The discretionary fund includes the
AIP funding that is not distributed under the apportioned entitlements as well as the
forgone passenger facility charge (PFC) revenues that are not directed to the small
airport fund. Related PFC changes are discussed later in this report
Minimum Discretionary Fund. The FAA proposal would set the minimum
that can be made available for discretionary grants at $520 million per year. Should
there be insufficient funds available after the distribution of the formula funds to
achieve the $520 million the formula fund distributions would be reduced across all
entitlement programs by the percentage needed to make up the discretionary fund
shortfall. The total discretionary funding for FY2005 (not counting the Small Airport
Fund money) was $859.3 million out of a total amount available for AIP grants of

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CRS-11
$3.383 billion. As mentioned earlier, the FAA proposal would fund AIP at $2.75
billion for FY2008. The $520 million minimum discretionary fund level may reflect
this lower proposed AIP spending.
Environmental Set-Aside. The FAA proposes to replace the discretionary
fund 35% noise set-aside with a broader environmental set-aside that would be 8%
of all AIP apportioned funds. Examples of projects that would be eligible are water
quality mitigation projects and environmental research. Based on FY2005 AIP
funding distribution the a set-aside based on 8% of apportioned funds would have
provided less than the 35% discretionary fund set-aside.
Small Airport Fund. The FAA proposal would eliminate the small airport
fund. The revenues supporting the fund are derived from the forgone entitlement
funding from medium and large hub airports that they forego in return for the
imposition of PFCs. Since the FAA is proposing to phase out the entitlements for
these airports the funding source for the Small Airport Fund will no longer exist in
FY2010. Small Airport Fund monies are used in a manner similar to discretionary
funds.
Small Airport Set-Aside. Twenty percent of discretionary funds would be
set-aside for small hub, nonhub, nonprimary commercial service, reliever, or general
aviation airports. The set-aside is to compensate for the loss of the Small Airport
Fund.
Military Airport Program (MAP) and Reliever Airport Set-Asides.
Both these set-asides would be eliminated. The special AIP eligibilities for MAP
would continue.
AIP Eligibility Changes. The FAA proposal would redefine “revenue
producing aeronautical support facilities” in a way to make “fuel farms, new hangar
buildings, self-service credit card aeronautical fueling systems, airplane wash racks,
major rehabilitation of a hangar owned by a sponsor, or other aeronautical support
facilities” AIP-eligible for nonprimary airports. Relocation of airport-owned
facilities that must be moved because of design standards beyond the sponsor’s
control would be eligible for AIP funding. Up to $10 million in AIP grants could be
made to make grants for commercial space infrastructure development. The cost of
environmental review of airport-proposed environmentally-beneficial aircraft flight
procedures would be AIP eligible.
AIP Grant Assurances. The FAA proposal makes two changes to AIP grant
assurances under 49 U.S.C. 47107. The proposal allow for the use of AIP
entitlement funds to replace or move a facility at an airport if the cause of the need
was beyond the owner’s control, for example, a new design standard that could make
the facility a safety hazard.
The second proposed change deals with the disposition of profits made from the
sale of land that was originally acquired for a noise compatibility purpose but is no
longer needed for noise compatibility. Current law requires that the federal share of
the proceeds, proportional to the federal share of the original land acquisition cost,
be deposited in the trust fund. The proposed change would allow the proceeds to be

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CRS-12
reinvested in another project, for, in preferential order: 1) an approved noise
compatibility project at the airport; 2) an environmentally related project at the
airport; 3) another eligible AIP project at the airport; 4) transfer to another airport for
a noise compatibility project; or 5) payment to the trust fund.
Federal Share. The FAA proposal would make a number of changes in the
federal-local matching share requirements. The proposal would change current law
to add the phrase “ may not exceed” to all federal share percentages. Under current
law some airports’ project shares were fixed percentage shares. FAA argues that this
change would allow it to “leverage AIP funds more efficiently and provide support
for a broader number and type of projects.”8 Some small airport advocates may be
concerned that this provision could allow FAA to routinely offer discretionary grants
at less than the maximum allowable (usually 90% under the FAA proposal) federal
share on some projects. The FAA proposal would also lower the maximum federal
share for runway, taxiway and apron (ramp) projects at large and medium hub
airports from 75% to 50%. Other AIP eligible projects at these airports would retain
their 75% maximum federal share. A special rule is proposed for airports recently
reclassified a medium hub because of increased passenger enplanements that allows
them to retain their eligibility for up to 90% federal share for two years. As
mentioned earlier, under the FAA proposal, the approximately 800 NPIAS airports
that have fewer than 10 based aircraft would lose their AIP formula entitlements.
These airports would receive a 95% federal share on any discretionary AIP grants
that they might be awarded. The FAA proposal would allow the 9/11 related increase
95% federal share for AIP grants to small airports to lapse. The federal maximum
share at these airports would be 90%. As mentioned earlier, general aviation airports
that have lost their nonprimary minimum entitlements because they have fewer than
10 based aircraft (approximately 800 airports) would be allowed an up to 95% federal
share on their discretionary or state apportionment grants.
Passenger Facility Charges (PFCs)
The FAA proposal would expand the project eligibility for PFC funded projects
and raise the cap on the amount that can be charged per boarding passenger. The
proposal also includes provisions to streamline the PFC program review and approval
process.
Project Eligibility. The FAA proposes to make eligible any capital cost that
an airport could pay for with airport revenue eligible. The proposal would
specifically make ground access projects, including rail mass transit projects
(whether publically or privately owned), eligible for PFC funding. These transit
projects would require DOT approval, however. The proposal would also simplify
the review and approval process. Airlines may object to this broadening of PFC
eligibility.
Increasing the PFC Cap. The FAA proposal would increase the maximum
charge to $6 per passenger boarding. Any charge over $4.50 would require medium
and large hub airports to forego 100% of their AIP entitlement funding. Airports
8 FAA, Section-by-Section Analysis, 9-10.

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CRS-13
participating in the pilot program for the transfer of navigational equipment to airport
control may adopt a $7 PFC.
Competition Plans. The FAA proposes eliminating the requirement that no
AIP or PFC grant may be approved for a covered airport unless the airport has
submitted a written competition plan to the FAA.
Other Airport-Related Provisions
Privatization. The FAA proposal would make changes to the Airport
Privatization Pilot Program. The number of airports that could participate would be
increased from 5 to 15 and there would be no restrictions by airport category (the
existing program allows for only one large airport to participate and Chicago Midway
airport has reserved that authority).
Since the program was enacted in 1996 (Section 149 of the Federal Aviation
Reauthorization Act of 1996, P.L. 104-264), only one airport has been privatized,
Stewart International Airport (New York). The FAA and others supportive of the
pilot program have argued that the current program gives airlines effective veto
power over privatization transactions. Current law requires that the airport sponsor
may only recover from the sale or lease the amount that may be approved by at least
65% of the air carriers serving the airport; and by air carriers that account for 65%
of the total landed weight at the airport for the year. The FAA proposal would
eliminate these requirements and only require that the airport show the FAA that they
had consulted with: for primary airports, each air carrier and foreign air carrier
serving the airport and, for non-primary airports, consulted with at least 65 percent
of the owners of aircraft based at the airport.
The proposal eliminates the airline approval requirement of airport fee increases
that exceed inflation and eliminates the provision that requires that the percentage
general aviation fee increases not be larger than the percentage increases for air
carriers. Also eliminated would be the existing prohibition on the abrogation of a
labor agreement in consequence of the sale or lease of an airport under the program.
Finally, the private operator could set fees to recover all capital and operating costs
except for the sale or lease price, which would require air carrier approval.
Sale of Private Airport to a Public Sponsor. Although written in general
terms, this provision appears to facilitate the return of Stewart International Airport
to public ownership (the Port Authority of New York and New Jersey plans to
purchase the remainder of the lease at Stewart). Essentially, the proposed provision
would exempt the proceeds (i.e. profit) from the sale of a privatized airport to a
public authority from the AIP assurance that requires that all airport revenue be
expended for capital and operating costs at the airport.
Airport Development Rights Pilot Program. The FAA proposal would
allow this Vision 100 initiated program to expire at the end of FY2007. The pilot
program allowed for the purchase of a privately owned public use airport’s
development rights as a means of keeping the airport open and operating. FAA
argues that the program has not been a success and suggests a better strategy would

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CRS-14
be to find a public sponsor to purchase the airport rather than just the development
rights. Some general aviation supporters may still be supportive of the pilot program.
ADS-B Support Pilot Program. This FAA proposed program would allow
for AIP state/insular area formula entitlement funds (at a 90% federal share) to be
used for airport purchase of Automatic Dependent Surveillance-Broadcast (ADS-B)
equipment. The ground stations where this equipment would be installed are not
airport specific (most AIP projects are required to be within airport boundaries).
ADS-B is part of FAA’s air traffic modernization system. The use of AIP funds
would supplement other FAA funding sources for ADS-B ground station
deployment. The FAA argues that “states, regions and airports would benefit
because the program would provide ADS-B coverage to areas that would not be
reached under the FAA’s direct procurement.” Project sponsorship would be limited
to states, metropolitan planning organizations (MOOS), or consortiums of two or
more airports. Not more than 10 airports could apply. In the past, the use of AIP
funds for air traffic equipment has met resistance by some program supporters,
usually on the grounds that air traffic control capital costs are not within the AID’s
original programmatic intent and should be paid for elsewhere in the FAA budget.
FAA Management and Organizational Issues
In addition to the proposal to establish an air transportation system advisory
board, major provisions of the FAA proposal addressing management and
organizational issues include:
! Measures designed to achieve better integration of NGATS planning
and implementation into the FAA’s ongoing planning and
acquisition activities;
! Measures to establish a mechanism for considering possible
realignment and consolidation of various FAA facilities and
services; and
! Provisions to increase the flexibility in the design and
implementation of NGATS by allowing airports and private entities
to play a more direct role in acquiring, deploying, and maintaining
facilities and services to augment the FAA’s air traffic
communications, navigation, and surveillance capabilities.
Planning and Oversight of Next Generation Air
Transportation System Development
A central issue permeating the current reauthorization debate is the adequacy of
management and organizational processes to facilitate development of the NGATS.
The NGATS is being developed to address system-wide capacity needs, and is
scheduled to be completed prior to 2025. A provision in Vision 100 created the
multi-agency Joint Planning and Development Office (JPDO) and charged it with the
task of defining, developing, and implementing the NGATS plan.

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CRS-15
Over the past three years, the JPDO has collaborated with governmental and
industry partners to draft a concept for NGATS development. Some critics have
argued that the pace of this effort has been too slow, while others have voiced
concerned that the scope of the JPDO concept — encompassing “curbside-to-
curbside” movement of airline passengers, rather than just block to block handling
of all aircraft types within the national airspace system — may be inappropriate. Still
others have raised concerns over the organizational and management structure of the
JPDO, specifically regarding the JPDO potential lack of influence over management
and budgetary processes of participating agencies. While these agencies are
ultimately charged with the task of carrying out the engineering work to build the
NGATS as well as the operational responsibilities to run and maintain the national
airspace system and its many components, including, but not limited to air traffic
control services and airport security functions, the link between their respective
budgets and the NGATS program is not clearly defined.
Various options to address these concerns that have been identified include
establishing a lead systems integration (LSI) entity to oversee the engineering of the
NGATS systems, and possibly establishing specific reporting requirements, perhaps
through the budget and appropriations process, in which the various agencies
involved could identify how budgetary elements would support NGATS development
and how cross-agency efforts would be coordinated and aligned.
Addressing the overarching objective of facilitating implementation of the
NGATS engineering effort, the FAA proposal includes language designed to give the
JPDO greater input into FAA systems development and operational decision making,
by making the JPDO director a voting member of the FAA’s Joint Resources Council
as well as the Air Traffic Organization’s (ATO’s) Executive Council. The FAA
proposal also includes language that would more closely integrate the JPDO’s plans
and progress on the NGATS with the FAA’s ongoing modernization and capacity
enhancement initiatives. Specifically, the FAA proposal would require an annual
Operational Evolution Partnership (OEP) plan to be developed to provide details of
how the FAA is implementing next generation concepts, and would also include in
the FAA’s annual report to Congress details on how each of the JPDO participating
agencies’ respective budgets will support NGATS development.
Realignment and Consolidation of FAA Facilities and
Operations
The FAA proposal includes language giving the FAA authority to establish a
commission, to be known as the Realignment and Consolidation of Aviation
Facilities and Services Commission, that would be tasked with making independent
recommendations to the President regarding the realignment and consolidation of
FAA facilities and services. The commission would be comprised of five members
appointed by the Secretary of Transportation to serve three-year terms, with one
serving as a member-elected chairperson of the commission. In order to conduct its
work, the commission would be permitted to hire experts and consultants on either
a temporary or intermittent basis, subject to DOT approval.

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CRS-16
The proposal outlines a process for evaluating and implementing recommended
FAA facility and service consolidation in a manner designed to minimize political
influence on the process, much like the military BRAC process which it is closely
modeled after. The overall objective would be to identify and implement
recommended realignment and consolidation activities that would help reduce FAA
capital, operating, maintenance, and administrative costs without adversely impacting
system safety.
The FAA proposal includes details of the process and a timeline for carrying out
a systemwide review and implementation of realignment and consolidation of FAA
facilities and services. First, within six months after establishing the commission,
the commission would be required to publish its final criteria for making
recommendations regarding realignment and consolidation. Thereafter, the FAA
would be required to publish a list of recommendations to the commission for
realignment and consolidation. The commission would subsequently review the
FAA’s recommendations and consider public comments on these recommendations.
Based on this review, the commission would then make its own independent
recommendations and justify these recommendations in a report to the President.
If the President concurs with the commissions recommendations, the President
would transmit the recommendations, along with a presidential certification of
approval, to Congress. If, on the other hand, the President disapproves, the President
would be required to transmit to the commission and to Congress the reasons for
disapproval. The commission may then address the President’s report and make
revised recommendations. If the President still disapproves, the entire process would
then be terminated. If the President approves of all of the revised recommendations,
the President would then forward them, along with indication of presidential approval
to Congress. Congress, in turn, would have the opportunity to review the
recommendations and would have 60 days to disapprove of the plan through passage
of a joint resolution. If Congress does not disapprove, then the FAA would be
statutorily required to carry out the realignment and consolidation activities detailed
in the presidentially approved commission plan. The FAA would be required to
initiate implementation of the approved actions within two years and would be
required to complete the realignment and consolidation activities within six years.
While the proposed process closely follows the military BRAC process, which
has generally been regarded as a successful approach to realignment and
consolidation of military bases and units, the prospect of implementing such a
process to assess FAA facilities and services may be regarded as controversial during
the reauthorization debate, particularly in local regions that may stand to lose FAA
facilities and jobs as an outcome of the process. Consideration of the process in
legislation may also be opposed by labor organizations representing FAA employees,
although nothing in current statute generally prohibits the FAA from engaging in
organizational consolidation and realignment, as evidenced by the FAA’s recent
consolidation of its regional service areas in 2006.
Partnerships for Next Generation Technology Deployment
One option under consideration is to allow private sector investment in
communications, navigation, surveillance and other services provided within the

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CRS-17
context of the national airspace system. For example, under such provisions,
telecommunications providers may opt to deploy technologies to augment in-cockpit
air traffic surveillance, capabilities and datalink weather and other flight-related
information to airborne aircraft. Under such a scheme, these providers may be able
to offer certain fee-for-service capabilities to aircraft to augment a core set of
required aircraft communication, navigation, and surveillance capabilities. Another
option being considered is to allow for airport ownership and control of certain
communications, navigation, and surveillance equipment that has been historically
acquired, deployed, and maintained by the FAA.
In the FAA proposal, the Administration has offered language addressing these
various proposals. Specifically, language in the FAA proposal would permit non-
government entities to provide communications, navigation, surveillance, or other
services to the extent that such arrangements would improve safety and efficiency,
reduce regulatory burdens on system users, encourage competition, make these
services available to the largest feasible number of users, and take into consideration
the unique role served by general aviation. Further, a provision of the bill proposes
that a pilot program be established at up to ten large or medium hub airports under
which the FAA would transfer, without cost, ownership of terminal area navigation
equipment to the airport. The participating airport would, in turn, be responsible for
operation and maintenance of the equipment. Under this pilot program, airports
would be required to agree that they would maintain the equipment according to FAA
standards, allow the FAA to conduct periodic inspections, and upgrade facilities and
equipment when they become obsolete. Airports would be permitted to recoup costs
associated with operating and maintaining such equipment through PFCs, and pilot
program airports would be authorized to impose a PFC of up to $7, $1 greater than
the proposed PFC maximum level.
Another proposed pilot program, outlined in the FAA proposal, would be
established to promote airport acquisition and deployment of Automated Dependent
Surveillance — Broadcast (ADS-B) ground stations to supplement the FAA’s own
acquisition of these facilities (see ADS-B Support Pilot Program, above). Under
the pilot program, airports would be eligible to receive AIP grant money to fund the
acquisition and installation of ADS-B ground equipment, even though it is
acknowledged that such equipment is not airport-specific. The FAA envisions ADS-
B — a technology through which aircraft could transmit their precise position,
direction of flight, and speed to ground stations and other aircraft — as a potential
replacement for radar as the primary means for air traffic surveillance and control.
The FAA also views ADS-B as a possible safety system for improving pilot situation
awareness of air traffic, thereby mitigating the risk of midair collisions, particularly
among general aviation aircraft.
While such provisions may expand FAA’s options and flexibility with regard
to deploying and maintaining next generation air traffic equipment, these approaches
may raise operational issues regarding ownership and operational control of these
facilities, which are anticipated to be networked and highly integrated into the
NGATS. These provisions may also raise liability issues regarding cases of
equipment failures and failures to perform to technical specifications.

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CRS-18
System Capacity and Safety
System capacity and safety remain as overarching issues behind much of the
reform sought in the proposed FAA reauthorization. However, in terms of requested
statutory changes specifically addressing system capacity and safety issues, major
provisions offered in the FAA’s proposal have focused on obtaining the authority to
implement market-based approaches to controlling congestion at selected high-
density airports. Specifically, the FAA proposal seeks statutory authority to control
congestion at certain airports through market-based mechanisms, such as slot
auctions and peak-period pricing. The proposal would direct the DOT to study the
appropriateness of a market-based scheme at New York’s Laguardia Airport (LGA),
and if deemed appropriate, would permit the airport operator, the Port Authority of
New York and New Jersey, to implement a market-based approach to controlling
congestion. The FAA proposal also seeks to establish a pilot program to evaluate
market-based mechanisms to relieve congestion at up to 15 other airports.
Controlling Congestion at New York’s Laguardia Airport
A statutory provision that set specific capacity controls in the form of “slots” at
Laguardia Airport (LGA) expired on January 1, 2007. Statutory slot controls at other
airports had previously expired, leaving Washington Reagan National Airport (DCA)
as the only airport in the country with statutorily imposed slots.
In response to the sunset of the statutory slot provision for LGA, the FAA issued an
order establishing temporary limits to prevent congestion-related delays at LGA. The
FAA imposed similar restrictions at Chicago’s O’Hare airport (ORD) to alleviate
congestion and delay and maintain operational safety. In the FAA proposal, the
Administration has drafted language that would authorize the DOT to determine
whether the use of a market-based mechanism for controlling access to LGA, such
as a slot auction or congestion pricing, would be an appropriate means for allocating
takeoffs and landings among the airport’s users. If such a mechanism is determined
to be appropriate, then the DOT shall permit the Port Authority of New York and
New Jersey to implement a market-based approach to controlling flights at LGA
under guidelines that would be established by DOT rulemaking. The FAA proposal,
however, raises some potential intergovernmental relations questions. These concern
the ability of the FAA to delegate what could be considered air traffic rationing
authority to the airport operator. These issues may need to be addressed before this
section could be implemented.
Market-Based Strategies for Alleviating Congestion
In addition to the authority sought to implement market-based congestion
controls at LGA, the FAA proposal also seeks to establish a pilot program to evaluate
market-based mechanisms to relieve congestion at up to 15 other airports. As
previously mentioned, besides LGA, the FAA has imposed temporary restrictions on
air carrier flight operations at ORD in an effort to mitigate congestion and delay and
maintain operational safety.

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As airline operations become increasingly concentrated at a relatively small
number of airports throughout the nation, market-based approaches have been viewed
favorably by aviation experts as a means for controlling congestion. Critics,
however, remain concerned that the cost of operating under these market-based
schemes could negatively affect service to smaller communities. Specifically, routes
to smaller communities may have more difficulty being profitable if a market-based
price associated with connections to major hubs is factored into the cost of service.
This may result in a loss of service to some communities if the costs of implementing
market-based mechanisms make these routes unprofitable. The FAA proposal does
not make any special accommodations for service to small communities in the
context of these market-based approaches, although such options may be considered
during congressional debate.
Environmental Issues
Aviation and airport operations have air quality, water quality, and community
noise impacts. To address issues associated with these impacts, and to assist airport
operators with complying with local, state, and federal regulations related to those
impacts, the FAA would:
! Provide funding for research into technology or processes that would
reduce noise, air emissions, and water quality impacts (§§ 102, 601,
and 606);
! Provide grants for programs or projects intended to mitigate or
minimize regulated environmental impacts (§ 604); and
! Provide grants or specify regulatory procedures to assist airports in
complying with environmental requirements (§§ 602, 603, and 605).
Further, the FAA proposal includes provisions seeking to modify the Air Tour
Management Program, a program designed to regulate commercial air tours over
national park units primarily in an effort to mitigate noise and other adverse impacts.
These provisions seek to narrow the scope of this program to park service units
where noise or other adverse impacts from air tours has been identified or could
become a more substantial issue.
Research Funding
Section 601 of the proposed legislation would permanently authorize the Airport
Cooperative Research Program (ACRP).9 The proposed legislation would increase
funding from $10 million to $15 million per year (§ 102) . Five million dollars per
year of the ACRP funds would be set-aside for research activities related to the
airport environment, including reductions in noise and air emissions, and addressing
water quality issues.
9 The ACRP was authorized as a four-year pilot program under Vision 100 (49. U.S.C.
44511(f)). Funds for the program are authorized under the Airport and Airway Trust Fund
Authorizations, under the Airport Planning and Development and Noise Compatibility
Planning and Programs.

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Section 606 would require FAA to enter into a consortium with the Partnership
for Air Transportation Noise and Emissions Reduction (PARTNER)10 to develop
Continuous Low Energy, Emissions and Noise (CLEEN) engine and airframe
technology. Performance objectives for this technology would include a 25%
increase in aircraft fuel efficiency; a 50% reduction in nitrogen oxide emissions
associated with aircraft landings and takeoffs; a 10 decibel (dB) reduction, compared
to 1997 levels, in subsonic aircraft noise; a feasability determination regarding the
use of alternative fuels in aircraft systems; and a determination regarding the ability
to retrofit or re-engine aircraft to use new engine technologies. Funding for this
program would be authorized under the Next Generation Air Transportation System
program at “sums as necessary to carry out [the program].”
Mitigation Grants
Section 604 of the FAA proposal would provide grants for up to six
environmental mitigation demonstration pilot projects. Eligible projects would
include those that would reduce aircraft noise, airport emissions, or airport water
quality. The federal share of the projects would be 50% of the project costs, up to
$2.5 million, and would be apportioned under the AIP.
Grants and Procedural Changes to Assist with Environmental
Compliance
Section 602 of the FAA proposal would amend the state block grant program11
by specifying that federal environmental requirements would apply to the program.
The proposal also specifies that any federal agency that must grant any approval (i.e.,
permit or license) to a state must consult with that state during the approval process.
Further, the federal agency would be required to use any state-prepared
environmental analysis associated with that approval.
Sections 603 and 605 of the FAA proposal address methods of implementing
and/or expediting requirements of the National Environmental Protection Act
(NEPA)12 and airport noise compatibility planning requirements (Title 14 Code of
Federal Regulations (CFR), Part 150, commonly referred to as Part 150
requirements). Section 603 would amend current requirements13 by allowing the
FAA to accept funds from an airport sponsor to hire additional staff to:
10 PARTNER is an aviation cooperative research organization sponsored by FAA, NASA,
and Transport Canada, operating out of the Massachusetts Institute of Technology.
11 49 U.S.C. § 47128.
12 Among other provisions, NEPA requires airport operators to consider the environmental
impact of any proposed action that may require federal funding or approvals. It also requires
them to look at all reasonable alternatives to meet a given project’s purpose and need, before
final decisions are made. For more information, see FAA’s “NEPA Implementing
Instructions for Airport Projects,” Order 5050.4B, April 2006, at [http://www
.faa.gov/airports_airtraffic/airports/resources/publications/orders/environmental_5050_4/].
13 49 U.S.C. § 47173.

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! conduct “special environmental studies” related to a federally funded
airport project;
! conduct studies or reviews to support noise compatibility measures
approved under the Part 150 requirements; and
! implement environmental mitigation efforts specified in a project’s
final decision delineated at the completion of the NEPA process.
Section 605 of the FAA Proposal would amend the existing noise compatibility
program requirements14 to allow grants to airport operators to assist them with
meeting environmental review requirements applicable to proposals to implement
flight procedures. Further, § 605 of the proposal would allow a project sponsor to
provide FAA with funds to hire additional staff as necessary to expedite completion
of the environmental review necessary to implement flight procedures.
The Air Tour Management Program
The National Parks Air Tour Management Act of 2000 (Title VIII, P.L. 106-
181, hereafter Air Tour Act) regulates commercial air tours over most units of the
National Park System. It requires the Federal Aviation Administration (FAA) and
the National Park Service (NPS) to create management plans for air tours at
individual park units and within a half-mile of their boundaries. The purpose of a
plan is to mitigate or prevent any significant adverse impacts of commercial air tours
to natural and cultural resources, visitor experiences, and adjacent tribal lands.
The Air Tour Act final rule15 requires air tour operators to apply for authority
to fly over national park and adjacent tribal lands. The FAA received applications
for commercial air tours over 106 of the 390 park units, and has granted interim
operating authority to all applicants. An application triggers development of an Air
Tour Management Plan (ATMP) by the FAA and NPS for each unit where there is
no existing plan.16 Development of an ATMP requires an environmental analysis
under the National Environmental Policy Act of 1969 (NEPA, 42 U.S.C. §§4321-
4370f). The FAA and NPS currently are developing their first ATMPs for five areas.
A January 2006 Government Accountability Office (GAO) report addressed the
impact of the delay in implementing the Air Tour Act.17 The report concluded that
the delay has limited the ability of tour operators to make major business decisions.
GAO identified four areas to improve implementation, including amendment of the
Air Tour Act to give the agencies discretion in determining which park units may
need ATMPs.
The FAA proposal includes several suggested changes affecting commercial air
tours over park units (codified in 49 U.S.C. §40128) that seek to expedite and
14 49 U.S.C. § 47504.
15 67 Fed. Reg. 65661 (Oct. 25, 2002).
16 The FAA provides ATMP information on its website at [http://www
.atmp.faa.gov/default.htm].
17 The report is available on the GAO website at [http://www.gao.gov/new
.items/d06263.pdf].

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streamline agency actions, in part due to the difficulty in completing ATMPs. One
change would allow that in lieu of an ATMP, the NPS Director and FAA
Administrator could enter into a voluntary agreement with a commercial air tour
operator that would govern commercial air tours over a park unit. An agreement
would address protection of park resources and visitor use of parks in the context of
aviation safety. It would be prepared with public review and consultation, and
implemented “without further administrative or environmental process.” The NPS
and FAA heads could rescind a voluntary agreement if it did not adequately protect
park resources, visitor experiences, or aviation safety. A second change would
exempt park units with 50 or fewer annual air tour flights from the requirement for
an ATMP or voluntary agreement, although the NPS Director could disallow an
exemption. These provisions could be opposed as lessening public participation in
the decision making process and weakening environmental analysis of agency
decisions.
Other provisions in the FAA proposal would provide more interim operating
authority because interim conditions have prevailed for longer than had been
anticipated. One change would allow the agencies to modify interim operating
authority, for instance to allow more tours, and another would allow new entrant air
tour operators provided that certain conditions were met (e.g., FAA agreement of no
adverse impact on aviation safety.) These decisions could be made “without further
environmental process,” and thus also could be opposed as reducing environmental
analysis of agency actions. Still another provision in the FAA proposal would
establish a reporting requirement for commercial air tour operators with regard to the
number of air tours over park units and other data requested by the FAA and NPS.
Miscellaneous Programs and Provisions
The FAA proposal also includes language that would significantly modify the
existing Essential Air Service Program (EAS), a DOT-managed program that
subsidizes air carrier service to small and isolated communities, primarily by setting
more stringent criteria for program eligibility and restricting further expansion of the
program.
The Essential Air Service Program
The Essential Air Service (EAS) program provides subsidies to air carriers for
providing service between selected small communities and hub airports. The
program was originally established in 1978 as part of airline deregulation to ensure
a minimum level of air service to smaller communities that might otherwise lose
service because of economic factors. While the Bush Administration has suggested
limiting EAS funding to $50 million and requiring local cost-sharing as a condition
for a community’s continued participation in the program, in recent years the
program has grown as Congress has provided additional funding, appropriating $110
million in both FY2006 and FY2007.
Vision 100 included several mechanisms and incentives designed to move
communities out of the standard EAS program. Communities have not sought to

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participate in these incentive regimes, however, suggesting that the incentives
themselves may need to be reconsidered if they are to be effective. Vision 100 also
included a somewhat controversial provision that created a trial program that would
have required community financial participation as a condition for continued access
to EAS funding in some instances. Each annual appropriations bill since passage of
Vision 100, however, has prevented the use of any appropriated funds to implement
the cost-sharing pilot program.
The FAA proposal includes provisions to substantially modify the EAS
program, primarily by setting more stringent criteria for program eligibility and
restricting further expansion of the program. Specifically, the FAA proposal would
limit participation to only those airports that were receiving EAS subsidy on the date
of enactment of reauthorization legislation. At present, additional airports may enter
into the EAS program, provided they previously had scheduled air carrier service as
specified in statute.18 The FAA also proposes to eliminate from participation any
airports located less than 70 highway miles from a large or medium hub airport.
Further, the FAA proposal would eliminate from the EAS program any airports that
are less than 210 miles from the nearest medium or large hub whose per-passenger
subsidy exceeds $200. The proposal also includes language intended to simplify the
process involved in terminating air carrier service to an EAS-eligible community.
The provisions in the FAA proposal to modify the EAS program may be
particularly controversial because the program has historically been viewed favorably
by Congress, particularly among members representing rural states and districts.
However, from a practical standpoint, the program may be difficult to justify given
that per-passenger subsidies are quite high for service to certain locations receiving
service, and airlines often have difficulty filling seats on many EAS routes.
Therefore, while provisions in the FAA proposal to restrict expansion of the program
may be particularly controversial, other options to increase EAS program flexibility
and alternatives to traditional basic EAS service may be considered during
congressional debate.
18 See 49 U.S.C. §41731.

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