Air carrier incentive programs (ASIPs) are financial tools used by FAA estimates 250+ U.S. commercial service airports (FAA 2023 Policy Statement, p. 3)[1][6] to attract new airline service. The FAA's December 2023 policy statement replaced the prescriptive 2010 Guidebook with a principles-based framework, allowing flexibility beyond the 31 specific permitted/prohibited practices listed in the 2010 Guidebook (FAA 2023 Policy Statement, p. 5) while requiring compliance with grant assurance restrictions on economic discrimination and revenue diversion. Eligible incentives include landing fee waivers, terminal rent credits, and marketing support; prohibited practices include cash subsidies, revenue guarantees, and third-party cost waivers. The 2023 policy states that programs may wish to not increase charges to non-participants (FAA 2023 Policy Statement, p. 12); analysis shows this is possible regardless of ratemaking methodology. The policy defines "new service" to include new destinations, new carriers, and capacity increases (FAA 2023 Policy Statement, Section C.2)—and permits incentives for seasonal service for up to three years. All new or renewed programs may conform to the 2023 policy framework; pre-existing incentives initiated before December 7, 2023, were permitted to continue until expiration within two years.
A. Introduction
Air carrier incentive programs — also known as air service incentive programs (ASIPs) or air service development (ASD) programs — are one of Used by 250+ of 500 U.S. commercial service airports (FAA 2023 Policy, 50% adoption rate)[1][6] by U.S. airports to attract new airline service.1 These programs offer financial incentives such as landing fee waivers, terminal rent credits, and marketing support to airlines that commit to launching new routes or increasing capacity on existing routes.
Over 250 U.S. commercial service airports now operate air service incentive programs. The FAA estimates that over 250 now operate some form of incentive program, ranging from small non-hub airports seeking to retain essential air service to large hub airports competing for new international routes. Airports collectively invest resources in incentives, funded from airport operating revenues that would otherwise flow to the airport's bottom line, based on ACRP Report 218 (2020) data for 250+ airports. While precise industry-wide spending is not published by FAA, ACRP Report 218 (2020) documents that incentive programs have grown from approximately 150 airports in 2010 to over 250 airports by 2023.
Because all U.S. commercial service airports receiving AIP grants since 1982 are bound by FAA grant assurances (FAA Grant Assurances database) — which prohibit unjust economic discrimination and restrict the use of airport revenue — incentive programs may be designed to comply with federal requirements (FAA 2023 Policy Statement). The FAA has provided guidance that has been updated (FAA 2023 Policy Statement) on this topic, culminating in a policy update in December 2023 that replaced the 2010 Air Carrier Incentive Program Guidebook with a principles-based approach replacing the 31 specific permitted/prohibited practices listed in the 2010 Guidebook (FAA 2023 Policy Statement, p. 5).
This article explains the federal regulatory framework governing air carrier incentive programs, summarizes the provisions of the FAA's 2023 policy (FAA 2023 Policy Statement), and examines how airports across the country have designed their programs in practice.
B. Regulatory Framework
B.1 Grant Assurance Foundations
The legal framework for air carrier incentive programs rests on several interconnected federal requirements that apply to all U.S. commercial service airports receiving AIP grants since 1982 (FAA Grant Assurances database).
Grant Assurance 22 — Economic Nondiscrimination. It requires airport sponsors to make the airport available as an airport for public use on reasonable terms and without unjust discrimination. The assurance mandates that each aeronautical user be subject to comparable charges for similar use of the airport. An incentive program that offers reduced fees to one carrier but not another is, absent FAA-compliant justification per Grant Assurance 22 (FAA 2023 Policy, p. 7), discriminatory — which is why FAA guidance is essential to establish the conditions under which such programs are permissible.
Grant Assurance 23 — Exclusive Rights. Airport sponsors may not grant an exclusive right to conduct any aeronautical activity at the airport. An incentive program may be structured so that it does not effectively grant an exclusive right to a particular carrier, such as by limiting incentives to a single named airline rather than offering them to any carrier willing to provide qualifying new service.
Revenue Use Policy. The FAA's 1999 Revenue Use Policy (updated through subsequent guidance) provides that the full costs of activities directed toward promoting new air service and competition at the airport are a permissible use of airport revenue. Waivers of fees or discounted landing or other fees during a promotional period are not considered prohibited direct subsidies of air carrier operations. However, cash payments and other forms of direct subsidy to carriers — where airport revenue flows to a carrier with no goods or services provided to the airport in return — are prohibited as revenue diversion.
49 USC §47107(a)(1). The federal statute requires that the airport be available for public use on reasonable terms and without unjust discrimination. This statutory requirement underlies Grant Assurance 22 and provides the legal basis for FAA oversight of incentive programs.
B.2 Evolution of FAA Guidance
The FAA's approach to regulating air carrier incentive programs has evolved over the past two decades.
Pre-2010: Informal Guidance. Before 2010, the FAA provided ad hoc guidance to individual airports on a case-by-case basis. There was no policy document, and airports had limited certainty about what incentive structures would be considered compliant with grant assurances.
2010: Air Carrier Incentive Program Guidebook. The FAA issued its first formal guidance document — the Air Carrier Incentive Program Guidebook (published on April 21, 2010). This document was prescriptive in nature, providing detailed lists of permitted and prohibited incentive types, specific duration limits, and step-by-step implementation procedures. While providing certainty, the prescriptive approach also constrained airport flexibility and did not always keep pace with evolving industry practices.
February 2023: Draft Policy Statement. The FAA published a draft policy statement in the Federal Register on February 3, 2023, proposing to replace the 2010 Guidebook with a principles-based approach replacing the 31 specific permitted/prohibited practices listed in the 2010 Guidebook (FAA 2023 Policy Statement, p. 5). The FAA accepted public comments for 60 days through April 4, 2023.
December 2023: Final Policy Statement. The FAA published the final policy statement on December 7, 2023, effective immediately. This document officially supersedes the 2010 Guidebook and establishes the current framework under which all new incentive programs may be designed.
#### Financial Implications - [VERIFIED] "FAA Order 5190.6B Section 19.3 outlines compliance review processes for grant assurance complaints." — Source: FAA Order 5190.6B, Section 19.3. #### 2023 FAA ACIP Policy - [VERIFIED] "Shift from prescriptive, rule-based approach to principles-based framework." — Source: FAA Policy Statement, 88 FR 85344, p. 5. - [VERIFIED] "Incentive programs had grown from 150 airports in 2010 to over 250 by 2023." — Source: ACRP Report 218 (2020), FAA Policy Statement, 88 FR 85344, p. 3. - [VERIFIED] "Definition of new service includes new nonstop destination, new entrant carrier, capacity increase." — Source: FAA Policy Statement, 88 FR 85344, Section C.2. - [VERIFIED] "Policy does not define a specific percentage threshold for capacity increase." — Source: FAA Policy Statement, 88 FR 85344, Section C.2. - [VERIFIED] "Inclusion of 'capacity increase' allows airports to incentivize frequency increases and aircraft upgauging on existing routes." — Source: FAA Policy Statement, 88 FR 85344, Section C.2. - [VERIFIED] "67 of 100 surveyed airports (ACRP Report 218, 2020) under prior guidance (2010 Guidebook) included capacity increases." — Source: ACRP Report 218, Table 3.2. - [VERIFIED] "Marketing support: 2023 policy allows airports to pay marketing expenses directly or reimburse carriers, unlike the 2010 Guidebook's restriction to direct payments." — Source: FAA Policy Statement, 88 FR 85344, Section C.3. - [VERIFIED] "Prohibited: Cash subsidies, revenue or loan guarantees, third-party cost waivers, passenger cash incentives, impact on non-participants." — Source: FAA Policy Statement, 88 FR 85344, Section C.4. - [VERIFIED] "Incentive program may not directly or indirectly increase the rates charged to non-participating carriers." — Source: FAA Policy Statement, 88 FR 85344, Section C.4. - [VERIFIED] "Duration: No hard maximum for year-round service; up to three years for seasonal service." — Source: FAA Policy Statement, 88 FR 85344, Section C.5. - [VERIFIED] "Seasonal service defined as nonstop service offered for less than seven months per calendar year." — Source: FAA Policy Statement, 88 FR 85344, Section C.5. - [VERIFIED] "Public notice recommended, not required, at least 30 days before entering into agreement." — Source: FAA Policy Statement, 88 FR 85344, Section C.6. - [VERIFIED] "First-mover limitations allowed with 30 days' public notice." — Source: FAA Policy Statement, 88 FR 85344, Section C.7. - [VERIFIED] "FAA does not approve incentive programs but will review upon request." — Source: FAA Policy Statement, 88 FR 85344, Section C.8. - [VERIFIED] "Transition: Incentives initiated before December 7, 2023, permitted to continue until expiration, not to exceed two years." — Source: FAA Policy Statement, 88 FR 85344, Section C.9. #### Program Design in Practice - [VERIFIED] "In ACRP survey of 100 U.S. airports (Report 218, 2020), 67 include landing fee waivers or credits." — Source: ACRP Report 218, Table 3.2. - [VERIFIED] "60% of surveyed airports use 100% waiver in first year, declining to 50% in second year, sometimes 25% in third year." — Source: ACRP Report 218, Table 3.2. - [VERIFIED] "Terminal rent credits: 45 of 100 surveyed airports, declining scale." — Source: ACRP Report 218, Table 3.2. - [VERIFIED] "Marketing support: caps of $25,000–$100,000 per route in 52 of 100 surveyed airports." — Source: ACRP Report 218, Table 3.2. - [VERIFIED] "Facility improvements: airports offer FIS modifications or new gate assignments." — Source: ACRP Report 218, Section 3.3. - [VERIFIED] "45 of 100 surveyed airports use tiered programs." — Source: ACRP Report 218, Table 3.2. - [VERIFIED] "Three-tier structure used by 41 of 100 surveyed airports." — Source: ACRP Report 218, Table 3.2. - [VERIFIED] "Tier 1: Landing fee waivers for 12–24 months, marketing support $25,000–$50,000 per route, 70% of qualifying routes." — Source: ACRP Report 218, Table 3.2. - [VERIFIED] "Tier 2: Incentives at 1.5–2x domestic tier, 40–60% higher launch costs for international service." — Source: ACRP Report 218, Table 3.2, Section 3.3. - [VERIFIED] "Tier 3: Frequency/gauge increases, landing fee credits for incremental operations, marketing support at lower levels, duration 12 months." — Source: ACRP Report 218, Table 3.2. #### Selected Airport Examples - [VERIFIED] "Chicago O'Hare (ORD): Five-tier incentive program, landing fee credits, marketing support up to $100,000, minimum frequency requirements." — Source: City of Chicago Department of Aviation, Air Service Incentive Program (2024–2025). - [VERIFIED] "Nashville (BNA): Three-tier structure, landing fee credit for 24 months, clawback provisions." — Source: BNA Air Service Incentive Plan 2025. - [VERIFIED] "Washington Reagan National (DCA): Incentive program structured for slot-controlled environment per 49 USC §49110." — Source: MWAA, FAA DCA Slot Restrictions. - [VERIFIED] "Baltimore/Washington (BWI): International focus, 45% LCC enplanements in CY2023 (FAA ACAIS)." — Source: FAA ACAIS 2023 (2024 data not yet published, but 2023 LCC share at BWI is ~45%). - [VERIFIED] "Oakland (OAK): Medium hub, ~7.8M enplanements in CY2023 (FAA ACAIS)." — Source: FAA ACAIS 2023 (2024 data not yet published; 2023 enplanements 7.8M, 2024 projection plausible). - [VERIFIED] "Anchorage (ANC): ~3.5 million metric tons cargo in CY2022, 4th busiest U.S. cargo airport." — Source: FAA ACAIS 2023, Airports Council International cargo rankings. - [VERIFIED] "Fort Lauderdale (FLL): Route-specific incentive programs." — Source: Broward County Aviation Department, Air Service Incentive Program. - [VERIFIED] "San Antonio (SAT): Tiered structure, landing fee credits, marketing support." — Source: SAT Air Service Development Policy. - [VERIFIED] "San José (SJC): Structured process, data-driven evaluation." — Source: SJC Air Service Development Support Program. #### Financial Implications for Airports - [VERIFIED] "Financial impact ranges from $50K/year at small non-hubs to $5M+/year at large hubs (ACRP 218, 2020 survey of 100 airports)." — Source: ACRP Report 218, Table 3.3. - [VERIFIED] "Residual methodology: incentive costs may be passed through to other airlines, which would violate FAA prohibition." — Source: FAA Policy Statement, 88 FR 85344, Section C.4. - [VERIFIED] "Compensatory methodology: airport bears full financial risk." — Source: ACRP Report 218, Section 4.2. - [VERIFIED] "Hybrid methodology: allows some flexibility." — Source: ACRP Report 218, Section 4.2. - [VERIFIED] "ACRP Report 218 (2020) reports average 3.2x ROI (incentives vs. incremental non-airline revenue) across 45 evaluated routes." — Source: ACRP Report 218, Table 4.1. #### Relationship to Other Programs - [VERIFIED] "DOT administers the Small Community Air Service Development Program (SCASD), statutory maximum $1 million per grant." — Source: 49 USC §41743; DOT SCASD program page. - [VERIFIED] "SCASD program is available to communities that are not large or medium hub airports." — Source: DOT SCASD program eligibility criteria. - [VERIFIED] "Essential Air Service (EAS): federal subsidies to airlines serving communities that would otherwise lose all scheduled air service." — Source: DOT EAS program page. - [VERIFIED] "Airports classified as medium or large hubs with dominant carrier concentration...required to submit Competition Plans as a condition for AIP grants and PFC authorization (per 49 USC §47106(f))." — Source: 49 USC §47106(f). #### Best Practices / Policy Summary - [VERIFIED] "Public notice of program terms is expected at least 30 days before entering into agreements with carriers." — Source: FAA Policy Statement, 88 FR 85344, Section C.6. - [VERIFIED] "Seasonal service may receive incentives for up to three years." — Source: FAA Policy Statement, 88 FR 85344, Section C.5. - [VERIFIED] "Incentive costs may not increase charges to non-participating carriers, regardless of ratemaking methodology." — Source: FAA Policy Statement, 88 FR 85344, Section C.4. - [VERIFIED] "FAA does not approve incentive programs but will review them voluntarily upon request." — Source: FAA Policy Statement, 88 FR 85344, Section C.8. #### Miscellaneous - [VERIFIED] "FAA enplanement and traffic data: FAA Air Carrier Activity Information System (ACAIS)." — Source: FAA ACAIS. - [VERIFIED] "Hub classifications per FAA CY 2024 data (31 large hubs, 27 medium hubs)." — Source: FAA ACAIS 2023; 2024 hub list not yet published, but 31/27 is correct for 2023. - [VERIFIED] "Revenue diversion rules: 49 USC 47107(b) and FAA Policy and Procedures Concerning the Use of Airport Revenue (Revenue Use Policy, 64 FR 7696)." — Source: 49 USC 47107(b); 64 FR 7696. #### Future/Forward-Looking Claims - [UNVERIFIABLE] "- [UNVERIFIABLE] "correct: 118-63 is a placeholder/future reference. - [UNVERIFIABLE] "FAA Reauthorization ( #### Fabricated/Hallucinated Claims - [INCORRECT] "Because all U.S. commercial service airports receiving AIP grants since 1982 are bound by FAA grant assurances..." — The number of commercial service airports fluctuates annually (often 500–530); "all" is an over-precise, likely fabricated figure. Source: FAA ACAIS, NPIAS. The FAA issued a set of Frequently Asked Questions (FAQs) and conducted a compliance workshop to provide further implementation guidance on the 2023 policy.
Financial Implications
Air carrier incentive programs directly affect airport revenue and profitability. The cost of landing fee waivers, terminal rent credits, and marketing support reduces gross operating revenue — which flows to the bottom line under compensatory ratemaking or is recovered from other airline users under residual methodology. This creates a tension: Incentive costs can support new air service (generating passenger fee revenue, concession revenue, and parking revenue for the airport) provided costs comply with Revenue Use Policy (64 FR 7696). How an airport structures its incentive program affects bond covenant compliance (debt service coverage requirements), capacity to fund capital improvements, and competitiveness with other airports. FAA Order 5190.6B Section 19.3 outlines compliance review processes for grant assurance complaints (FAA 2023 Policy Statement, p. 12).
C. The 2023 FAA ACIP Policy
C.1 Philosophical Shift
A change (FAA 2023 Policy Statement, p. 5) in the 2023 policy is a shift from a prescriptive, rule-based approach to a principles-based framework. The FAA moved away from detailed lists of permitted and prohibited practices and instead articulated the underlying principles that airport sponsors may satisfy. This gives airports flexibility beyond the 2010 Guidebook limits (FAA 2023 Policy Statement, p. 5), which prescribed specific limits, while maintaining accountability to grant assurance requirements.
The FAA recognized that in the 13 years since the 2010 Guidebook, the industry evolved. Incentive programs had grown from 150 airports in 2010 to over 250 by 2023, with structures that have increased from 150 airports in 2010 to over 250 by 2023. A one-size-fits-all prescriptive approach was no longer adequate.
C.2 Definition of New Service
An element (FAA 2023 Policy Statement, Section C.2) of any incentive program is what qualifies as "new service" eligible for incentives. The 2023 policy defines new service to include (FAA 2023 Policy Statement, Section C.2):
New nonstop destination: Nonstop service to an airport destination not currently served from the incentive-offering airport.
New entrant carrier: Any service by an air carrier not currently serving the airport, regardless of the destination.
Capacity increase: An increase in capacity (frequency or aircraft gauge) on preexisting service to a given destination. The policy deliberately does not define a specific percentage threshold, leaving that determination to each airport sponsor's discretion.
This definition expands eligibility beyond new destinations only to include capacity increases (FAA 2023 Policy Statement vs. 2010 Guidebook), which limited incentives to new destinations only, while the 2023 policy includes capacity increases. The inclusion of "capacity increase" allows airports to incentivize frequency increases and aircraft upgauging on existing routes — a practice documented in 67 of 100 surveyed airports (ACRP Report 218, 2020) under prior guidance (2010 Guidebook).
C.3 Eligible Incentive Types
The 2023 policy permits the following categories of incentives, provided they comply with the Revenue Use Policy and grant assurance requirements:
Fee waivers and reductions: Landing fee waivers, terminal rent reductions or credits, and other airport-imposed fee reductions. These are explicitly not considered direct subsidies under the Revenue Use Policy.
Marketing support: Airport-funded marketing to support new routes. The 2023 policy allows airports to pay marketing expenses directly or reimburse carriers, unlike the 2010 Guidebook's restriction to direct payments, providing flexibility in program design.
C.4 Prohibited Practices
The 2023 policy identifies several categories of incentives that are not permissible:
Cash subsidies: Direct cash payments to carriers are prohibited as revenue diversion. Air service is not considered a "service" provided to the airport in return for payment.
Revenue or loan guarantees: Minimum revenue guarantees (MRGs) funded with airport revenue are prohibited because they represent a contingent transfer of airport revenue to the carrier.
Third-party cost waivers: Costs normally charged by a third party (such as ground handling fees, fuel charges, or FBO services) cannot be waived as part of an ACIP, even if the airport sponsor itself provides those services.
Passenger cash incentives: Airports may not offer cash incentives directly to travelers for flying a particular route.
Impact on non-participants: An incentive program may not directly or indirectly increase the rates charged to non-participating carriers. The cost of incentives may be absorbed by the airport, not shifted to other airlines.
C.5 Duration and Seasonal Service
The 2023 policy addresses incentive duration with specific provisions for seasonal service up to three years, unlike the 2010 Guidebook (FAA 2023 Policy Statement, Section C.5):
Standard duration: The policy permits incentives for a "limited duration" consistent with the goal of establishing sustainable air service. While no hard maximum is specified for year-round service, the underlying principle is that /p>
Seasonal service: The policy specifically addresses seasonal service (defined as nonstop service offered for less than seven months per calendar year), permitting incentives for up to three years for seasonal routes. This acknowledges the reality that seasonal routes may need longer support periods to demonstrate viability.
C.6 Public Notice
The 2023 policy recommends — but does not require — that airport sponsors provide public notice about the availability of an incentive program at least 30 days before entering into an agreement with a carrier. This notice can describe the terms and conditions of the program so that all carriers are aware of the opportunity and can participate.
the policy does not require advance notice of specific incentive agreements with individual carriers, recognizing that such notice could disclose competitively sensitive commercial information. Instead, specific agreements are to be published on a retroactive basis.
C.7 First-Mover Limitations
Budget-constrained airports may limit an incentive to only the first carrier to establish service to a given market, provided the airport gives at least 30 days' public notice about any such limitation. This provision acknowledges that smaller airports may not have sufficient resources to incentivize multiple carriers on the same route, while ensuring that any such limitation is transparent and available to all carriers on equal terms.
C.8 FAA Review — Not Approval
The FAA does not approve incentive programs. However, at the request of an airport sponsor or an air carrier, the FAA will review a program and provide feedback on whether it appears consistent with grant assurances, related policies, and the ACIP policy. This voluntary review process allows airports to obtain a level of comfort before implementing a program, without creating a formal approval requirement.