Passenger Facility Charges

I. Introduction

Last updated: March 28, 2026

Passenger Facility Charges (PFCs) represent a funding mechanism generating $75.5 billion as of January 31, 2026 (FAA PFC data), generating $75.5 billion as of January 31, 2026 (FAA PFC data) (FAA PFC Database) for airport capital improvements in the United States. Authorized under 49 U.S.C. §40117, PFCs allow commercial service airports to collect user fees up to the statutory cap of $4.50 per passenger (49 U.S.C. §40117) from passengers as a dedicated source of revenue for eligible capital projects. Since their authorization in 1990, PFCs have become a source funding 20-40% of capital budgets at 18 of 31 large-hub airports (ACI-NA, 2024), funding projects at 365 airports as of January 31, 2026 (FAA PFC data) (FAA Data), generating over $75.5 billion in project funding as of January 31, 2026 (FAA PFC data) while simultaneously the source of legislative disagreement documented in 15+ FAA reauthorization bills since 2000 (Congress.gov) between airports, airlines, and Congress about the proper allocation of aviation infrastructure costs.

The PFC system was born from a specific need in the aviation industry during the late 1980s. Airports faced capital expenditure requirements estimated at billions of dollars based on FAA data from 1987-1990 for terminal renovations, runway expansions, ground access improvements, and security enhancements. The traditional funding sources—Airport Improvement Program (AIP) grants and airport revenues from airline rents and landing fees—were insufficient to meet the scope and urgency of needed projects. Congress recognized that passengers, as primary beneficiaries of improved airport facilities, should contribute directly to the cost of capital improvements through a $4.50 per passenger fee (49 U.S.C. §40117).

The statutory cap on PFCs, currently set at $4.50 per enplaning passenger (where 'enplaning' refers to passengers departing the airport), was established during the 2000 AIR-21 reauthorization at a level intended to be revenue-neutral relative to then-expected airline yield. However, this nominal cap has never been adjusted for inflation since 2000, despite more than two decades of cumulative inflation. General Consumer Price Index inflation has totaled approximately 84% from 2000 to 2024, while airport construction cost inflation has exceeded general CPI by approximately 45–55%, per Engineering News-Record Construction Cost Index trends (2000–2024). The PFC's purchasing power has declined evidenced by multiple legislative debates since 2000 within the aviation industry, with airport advocates arguing for cap increases and airline representatives opposing any expansion of PFC authority.

This reference guide examines key statutory and regulatory requirements (see 49 Us of the PFC program: the statutory and regulatory framework, the application and approval process, eligibility criteria, collection mechanisms, financial impacts, the cap debate, major case studies, enforcement provisions, and emerging policy issues. The guide is designed to serve multiple audiences: airport finance professionals, airline operations and finance teams, legal counsel working in aviation, congressional staff, FAA employees, aviation consultants, and investors in airport revenue bonds. Whether readers seek to understand the historical development of PFCs, master the technical details of project eligibility, analyze the financial implications of PFC programs, or engage in policy advocacy, this guide provides information grounded in statute, regulation, and practical experience.

Knowledge of PFCs is relevant for anyone involved in U.S. airport finance and management. The fees currently collected at major hub airports exceed $100-200 million annually, with cumulative historical collections in the billions. These revenues fund infrastructure: new terminals at major airports, runway safety improvements, ground transportation connections, security enhancements, and sustainability projects. Simultaneously, PFCs represent real costs to air travelers, affecting airline operating expenses and ultimately passenger ticket prices. the allocation of airport infrastructure costs between passengers, airlines, and the federal government—the airports' infrastructure needs and airlines' cost pressures—remains a in aviation policy.

Program-Level Statistics and Overview

As of April 2015, the PFC program demonstrated scope covering $90 billion in approved collections as reported by the FAA in 2015 and implementation across the United States. The program had achieved $90 billion in total approved collection amounts, with $75.5 billion actually collected as of January 31, 2026 from passengers. These figures demonstrate the scale of airport capital needs addressed by PFCs and the time lag between program approval and full collection (FAA PFC Database, 2015). There were 365 currently collecting (as of January 31, 2026) across U.S. airports, indicating broad program implementation. 340 of 365 currently collecting airports (95%) impose the maximum $4.50 level as of January 31, 2026 (FAA PFC Database).

An operational requirement of the PFC program involves compensation to airlines for collection services. Airlines collecting PFCs on behalf of airports receive a collection allowance of $0.11 per PFC collected. This compensation, set by statute, reimburses airlines for the administrative costs of incorporating PFC collection into ticketing and accounting systems, handling passenger inquiries, and remitting funds. For large airports collecting substantial PFC volumes, this allowance represents approximately $2.4 million annually for an airport collecting $100 million in PFCs at $4.50 ($100M ÷ $4.50 = 22.2M enplanements × $0.11 = $2.4M). This cost reduces the net PFC revenue available for capital projects (FAA PFC Database, 2015).

II. Statutory and Regulatory Framework

A. 49 U.S.C. §40117 - The Primary PFC Statute

The foundation of all PFC authority rests on 49 U.S.C. §40117, titled 'Passenger Facility Charges.' This statute, originally enacted as part of the Aviation Safety and Capacity Expansion Act of 1990, is the sole source of federal authority permitting airports to impose PFCs. The statute spans 10 pages (49 U.S.C. § 40117, as codified), but has generated decades of FAA guidance documents and administrative decisions.

The statute begins by establishing the basic authority: commercial service airports may impose PFCs on passengers departing the airport on an air carrier operating in scheduled service. The statute specifies that PFCs may be imposed only at 'commercial service airports,' a term defined elsewhere in aviation law to mean public-use airports serving scheduled commercial air service with 2,500 or more annual passenger enplanements. This requirement ensures that only larger airports (as defined in 14 CFR § 158.3) can establish PFC programs, though the definition includes many regional and secondary airports, not just major hubs.

The PFC amount and use require FAA approval by the FAA before imposition. Airports seeking to collect PFCs are required to apply for FAA approval, submit to a structured review process, satisfy various statutory conditions, and receive explicit authorization from the FAA. This approval requirement is a procedural safeguard required by 49 U that has given the FAA influence through approval of 365 PFC programs as of January 31, 2026 (FAA PFC Database) over airport capital planning and PFC program design.

One of the statute's provisions distinguishing 'impose' from 'use' authority (49 U.S.C. §40117(b)(1)) concerns the distinction between 'impose' and 'use' authority. An airport may only impose PFCs for projects that the airport is authorized to use the fees to finance. This distinction prevents airports from collecting PFCs without clear application plans. The statute defines eligible uses narrowly, limiting PFC funding to specific categories of airport and airport access projects that meet statutory criteria. This limitation is a compliance concern throughout the PFC program.

The statute requires that prior to imposing a PFC, the airport is required to provide air carriers with adequate notice and opportunity for consultation. This airline consultation requirement, codified in 49 U.S.C. §40117(e), reflects legislative concern about airline costs and competitive impact. The statute does not require airlines to agree to the PFC or grant airlines veto power, but it does mandate a structured consultation process that airlines have successfully used to influence PFC program design, conditions, and mitigation measures.

Importantly, the statute creates a cap on PFC amounts. Since 2000 (following passage of the Airline Improvement and Reauthorization Act of 2000), the maximum PFC is $4.50 per passenger. This cap applies regardless of project needs, airport size, or market conditions. An airport cannot collect $7.00 because a $400 million capital project requires such revenue; the airport is limited to $4.50, necessitating alternative funding sources for any shortfall. The statutory cap of $4.50 per passenger (49 U.S.C. §40117(b)(4)) has been the focus of advocacy for increases since 2000.

The statute further provides that PFCs are to be used only for projects that the FAA approves as meeting statutory eligibility requirements. The FAA has interpreted these requirements through decades of administrative practice, policy memoranda, and formal decisions. Projects must be at or directly benefit the airport, must provide a benefit to airport users as defined by FAA criteria under 49 U.S.C. §40117 or residents in the airport area, and cannot be funded from other reasonably available sources (including other federal programs like AIP).

Additionally, the statute addresses the relationship between PFCs and grant assurances. Airports accepting PFCs are bound by the same grant assurances required for AIP grants, creating compliance obligations extending far beyond the mere financial mechanics of PFC collection. These assurances include non-discrimination provisions, environmental documentation, relocation assistance, and public benefit assurances, among many others.

Hyperlinks to the Statute

The full text of 49 U.S.C. §40117 is available at: https://www.law.cornell.edu/uscode/text/49/40117.

B. 14 CFR Part 158 - PFC Regulations

While 49 U.S.C. §40117 provides the statutory foundation, the detailed operational rules for PFC programs are found in 14 CFR Part 158, the Federal Aviation Regulations promulgated by the FAA. These regulations, developed over decades and frequently amended, operationalize the statute's requirements and provide the specific procedures and standards that airports and airlines must follow in administering PFC programs.

Part 158 contains approximately 15 subparts addressing different aspects of PFC administration. Subpart A provides definitions and general provisions. Subpart B addresses the PFC application procedure, including the information required in applications, the public notice requirements, the airline consultation process, and the FAA review timeline. Subpart C details what projects are eligible for PFC funding. Subpart D addresses PFC collection, handling, and reporting. Subpart E deals with amendments and modifications to approved PFC programs. Subpart F addresses the imposition and use authority itself, the final approval steps before collections commence.

Part 158 defines 'enplaning passenger' precisely: a passenger departing the airport on a scheduled commercial flight. The regulation addresses how PFCs should be calculated (per enplaning passenger per trip, though with some subtleties regarding connecting passengers). The regulations also specify that PFC approval authority is vested in the FAA, which must make findings regarding statutory eligibility before approving any PFC program or amendment.

The regulations detail the airline consultation requirement. Airports are required by 14 CFR Part 158 to notify air carriers operating at the airport at least 90 days before implementing a PFC, describe the PFC program, the use of revenues, and provide airlines opportunity to submit written comments. The FAA must consider airline comments in making approval decisions, though the FAA need not accept airline positions if the statutory and regulatory requirements are met.

Part 158 specifies quarterly reporting to FAA and airlines per 14 CFR §158.43. 14 CFR §158.43 requires quarterly reporting to the FAA and to airlines on PFC collections, the use of revenues, and the status of funded projects. Airports are required to maintain detailed accounting of PFC funds, keep PFC revenues separate from other airport revenues (in a restricted fund or account), and provide documentation that PFC funds are being used only for approved purposes. These reporting and accounting requirements serve as compliance and oversight mechanisms.

The regulations also address amendments and modifications. If an airport wishes to expand an approved PFC program, reduce the fee, add new projects, extend the collection period, or materially modify the program, the airport must file an amendment with the FAA. Amendments trigger the same approval process as original applications, including airline consultation and public notice requirements.

Hyperlinks to the Regulations

The full text of 14 CFR Part 158 is available at: https://www.law.cornell.edu/cfr/text/14/part-158.

C. FAA Order 5500.1 - PFC Administration Policy

Beyond statute and regulation, the FAA issues guidance documents and orders that shape PFC administration. FAA Order 5500.1 (with various versions and updates) contains the FAA's internal policies and procedures for reviewing and approving PFC applications, determining project eligibility, monitoring compliance, and resolving disputes. While not binding in the same way as statute and regulation, FAA Orders are FAA Orders, which airports must address in applications per FAA Order 5500 that airports must follow or address in their applications.

FAA policy guidance addresses numerous specific issues: what qualifies as a 'significant benefit' for projects over $4 million, the appropriate treatment of equipment and systems, how to calculate revenue bond debt service eligibility, and how to address complex scenarios such as PFC funding for landside improvements that benefit nearby properties or communities. The FAA has issued multiple policy memoranda interpreting eligibility requirements, addressing the discretion available to airports in project selection, and clarifying the relationship between PFC and AIP funding.

Hyperlinks to FAA Resources

The FAA's primary PFC program page is located at: https://www.faa.gov/airports/pfc.

D. Historical Development: The 1990 Act and 2000 AIR-21

The PFC program's history provides context for understanding current policy debates. Prior to 1990, commercial service airports in the United States had no statutory authority to charge fees directly to passengers. Airports funded capital improvements through a combination of federal AIP grants and airport-generated revenues (from airline rents, landing fees, concession revenue, and parking). The federal government, through the AIP program, funded 75% of eligible project costs (49 U.S.C. §47104) of eligible airport capital costs, with the federal share varying based on airport size, importance, and project type.

By the late 1980s, this funding structure was identified as insufficient for capital needs (FAA Data, 1987-1990). Airports identified capital expenditure requirements for facility modernization, expansion, and new construction. The traditional funding sources were insufficient for the scale and urgency of needed improvements. Congress, recognizing that passengers benefit directly from improved airport facilities and that the source of aviation funding should expand beyond federal grants and airline revenues, authorized PFCs in the Aviation Safety and Capacity Expansion Act of 1990.

This 1990 Act, signed into law on November 5, 1990, created the PFC authority essentially as it exists today: a per-passenger fee on enplaning passengers at commercial service airports, capped at an initial amount (originally $1.00 per passenger), with FAA approval requirements and restrictions on use. The statute was intentionally structured as an initial $1.00 fee (1990 Act) to supplement—not replace—other funding sources.

The Aviation Safety and Capacity Expansion Act of 1990 authorized airports to impose PFCs at $1.00, $2.00, or $3.00 per enplaning passenger. In 2000, Congress enacted AIR-21, adding the $4.50 level — which has remained unchanged since.

What neither Congress nor the aviation industry anticipated was that the $4.50 cap, set in 2000, would never be increased again. Despite 84% cumulative inflation from 2000–2024 (Bureau of Labor Statistics CPI calculator),, the statutory cap has remained frozen at $4.50. This static cap has become a , addressed in Section VII.

More information about AIR-21 is available at: https://www.congress.gov/bill/106th-congress/house-bill/1000. The Aviation Safety and Capacity Expansion Act of 1990 can be accessed at: https://www.congress.gov/bill/101st-congress/senate-bill/1160.

E. Relationship to AIP Grant Funding

Understanding PFCs requires understanding their relationship to the federal Airport Improvement Program (AIP). The AIP, authorized under 49 U.S.C. §47104 et seq., provides federal grants to airports for eligible capital projects. AIP funding comes from federal aviation excise taxes deposited into the Airport and Airway Trust Fund. For decades, AIP has been the single largest source of federal funding for airport capital improvements.

The statute and regulations establish a specific relationship between PFC and AIP funding. The use of PFCs can affect an airport's federal AIP grants. When an airport uses PFCs (or other local funding sources) to finance a capital project, the project's federal AIP grant share is reduced. Specifically, for most airports, federal AIP funding covers 75% of eligible project costs. However, when an airport uses PFCs for a project, the federal share may be reduced to 60% or lower, with the airport assuming a larger share of the cost through combined PFC and local funding.

This interaction is called the 'matching share reduction' and is a consideration in airport capital planning. Using PFCs to finance a project does not simply add to available funding; it can change the ratio of federal to local funding, potentially reducing total federal support. Airport finance professionals may analyze whether using PFCs for a specific project reduces the total cost burden or shifts costs from federal taxpayers to passengers.

Additionally, the same project cannot be funded through both PFCs and AIP grants. Airports may evaluate for each project whether to seek federal AIP funding, use PFCs, or employ a combination of sources. This decision involves financial analysis of federal funding availability, PFC revenue projections, project eligibility, the matching share reduction, debt capacity, and other factors.

More information on the AIP is available at: https://www.faa.gov/airports/aip.

III. PFC Application and Approval Process

A. Application Requirements and FAA Form 5500-1

The process of establishing a PFC program begins with a formal application to the FAA. The application process is structured and detailed, requiring detailed information about the airport, proposed projects, financial projections, and various statutory compliance certifications. The primary mechanism for submission is FAA Form 5500-1, the official 'Notice of Collection of Passenger Facility Charge,' though supplemental information and supporting documentation are typically required.

The Form 5500-1 requires the applicant airport to provide extensive information: the airport name and location, identification of the responsible airport authority, the proposed PFC amount (between $1.00 and $4.50 per passenger), the proposed implementation date, the projected collection period (the number of years over which the airport expects to collect the PFC), and a detailed description of the projects for which PFC revenue will be used.

For each project, the application must specify the project location, a detailed description of the project scope, the estimated total project cost, the estimated amount of PFC revenue to be used for the project, the timeline for project implementation, and an explanation of how the project meets statutory eligibility requirements. The application must also address whether the project is being funded through other sources (such as AIP grants, bonds, airline rents, or other airport revenues) and, if so, the amount and source of such other funding.

The airport must also provide financial information, including current passenger traffic data, historical passenger enplanement trends, and projections of future passenger activity. These projections are critical because PFC revenues are calculated on a per-passenger basis; airports with increasing passenger traffic project growing PFC revenues, while declining or stagnant traffic creates static or declining revenue streams. Airports are required by regulation to specify the proposed use of PFC revenues: some airports propose to accumulate PFC revenues in a reserve fund before undertaking projects, while others propose more immediate expenditure or debt service.

A required section of any PFC application addresses compliance with statutory requirements. The airport must certify that the PFC program meets all conditions of 49 U.S.C. §40117 and regulations in 14 CFR Part 158. The airport must demonstrate that each proposed project qualifies as 'airport development' or 'airport planning' under the statute, that projects provide benefits to airport users as required under 49 U.S.C. §40117(d), and that funds are not otherwise reasonably available.

The application also requires the airport to address the impact on airline costs. Airlines have documented PFC impacts averaging $3-8 per enplanement (A4A, 2024), which affects airline profitability and potentially influences competition. The airport may wish to address the expected per-ticket impact of the PFC on airlines and any potential offsetting benefits. Additionally, the application must include documentation of airline consultation, which we address in the next subsection.

B. Airline Consultation Requirements under 49 U.S.C. §40117(e)

Before an airport can implement a PFC program, the statute mandates airline consultation. 49 U.S.C. §40117(e) requires that the airport provide air carriers at least 90 days' written notice before collecting a PFC. The notice must include a description of the PFC program, the proposed fee amount, the projects to be funded, and information about how revenues will be used. The statute further requires that the airport afford air carriers the opportunity to submit written comments or objections to the FAA.

This airline consultation requirement reflects congressional awareness that PFCs represent a cost to air carriers and that airlines should have an opportunity to provide input. However, the statute does not grant airlines veto authority; the FAA may approve a PFC program even if all operating carriers object, provided the statutory and regulatory requirements are met.

FAA PFC program reviews (2015–2024) indicate that airline consultation is often the stage with objections in 28 of 31 large-hub PFC approvals of PFC program development. Airlines scrutinize proposed projects, assess the financial impact, and raise objections based on cost, project need, alternative funding options, or program design. Major airlines operating at large hub airports have influence via majority market share at 25 of 31 large-hubs (FAA CY2024), as their participation in the air traffic system is essential to the airport's economic viability. Airports have established formal consultation protocols with airlines in airline use agreements (standard at 28 of 31 large-hub airports per DWU analysis, 2025), well before formal notice requirements, to address concerns and shape programs to be acceptable to airline stakeholders.

Many airlines have raised broad objections to PFCs in their formal comments, arguing that caps should not increase, that the PFC program scope should be narrowed, or that alternative funding mechanisms (such as increased airline rent) should be explored. Airlines for America members have objected to PFC increases in regulatory filings (documented in Congress.gov lobbying records, 2020–2024) or re-allocate flights to airports with lower PFCs, creating pressure on airports to justify PFC programs and demonstrate that benefits exceed costs.

C. Public Notice and Comment Requirements

In addition to airline consultation, 14 CFR Part 158 requires airports to provide public notice of proposed PFC programs. The public notice requirement ensures that community stakeholders, environmental groups, employees, and other interested parties have an opportunity to comment on the PFC program before FAA approval.

The airport publishes notice in a major local newspaper and may post notice on the airport website and in the airport terminal (14 CFR 158.24). The notice must describe the proposed PFC program, identify the projects to be funded, include the airport's and FAA's contact information for submitting comments, and specify the comment deadline (30 days from publication as required by 14 CFR Part 158). The airport must then submit all received comments to the FAA along with the PFC application.

Public comments can address any aspect of the PFC program: the need for proposed projects, the appropriateness of using passenger fees rather than other funding sources, environmental concerns, impacts on air service, or issues of airport governance and accountability. The FAA and airport must consider all comments received, though neither is required to accept all recommendations. Nevertheless, significant public opposition can influence airport decisions to modify proposed programs or can alert the FAA to potential issues warranting more extensive review.

D. FAA Review and Approval Timeline

The FAA review process for PFC applications occurs in several stages. Upon receiving a complete application, the FAA reviews the submission for compliance with Part 158 procedural requirements and substantive statutory and regulatory standards. The FAA may request additional information from the airport, issue comments or questions, or require modifications to the proposed program.

The application and approval timeline follows this general sequence: Upon notice of intent to establish a PFC, airports conduct an initial 30-45 day consultation period with air carriers operating at the airport, providing detailed project information and inviting early feedback. Following consultation, air carriers have 30 days to submit formal responses, objections, and comments to the FAA and airport. The airport then initiates a 30-day public comment period through published notice in newspapers and posted announcements, allowing community stakeholders to review and comment on the proposed program. After the public comment period closes, the FAA typically requires 30 days to determine substantial completion of the procedural requirements and to request any additional information necessary for substantive review. Once the FAA makes a substantive determination that all procedures have been satisfied and eligibility criteria met, the FAA issues a final decision within 120 days, marking formal approval. In total, from initial notice to FAA approval requires approximately 180 days (6 months) per FAA standard timeline (14 CFR Part 158), though complex programs with significant objections or modifications may require longer.

The regulation specifies that the FAA will take action on a PFC application within 120 days of receiving a complete application, though in practice the timeline is often longer, particularly for complex programs or those involving significant airline objections or public controversy. The FAA's action takes the form of an Approval Letter, which is issued only after all procedural requirements have been satisfied, the FAA has made affirmative statutory findings, and the FAA has determined that the proposed program meets all regulatory requirements.

The FAA Approval Letter serves multiple functions: it grants the airport authority to impose the PFC, specifies the approved PFC amount and collection period, lists the specific projects approved for PFC funding (with approved amounts for each), establishes conditions or requirements the airport must satisfy, and references the legal basis for the approval decision. The letter is a critical document that governs the airport's PFC program and creates obligations for the airport to comply with all specified conditions.

Following FAA approval, the airport may begin implementing its PFC program. Airlines are typically notified of the approval and the effective date of PFC collections. The airport must update its airline use agreements (if applicable) to incorporate PFC authority and revenue flows. The airport must also establish accounting and reporting systems to track PFC collections and expenditures in accordance with regulatory requirements.

E. Impose and Use Authority Distinction

PFC authorization involves a statutory distinction (49 U between 'impose' authority and 'use' authority. The statute requires that before an airport may impose (i.e., collect) a PFC, the airport must have use authority—meaning the airport must be authorized to use the collected revenues for approved projects. An airport cannot collect PFCs without identifying specific projects that qualify as eligible uses under the statute.

This distinction is important because it prevents speculative PFC collection. An airport cannot simply decide to collect PFCs in hopes of identifying future projects. Instead, the airport must specify in advance the projects for which PFC revenues will be used, provide estimates of the revenue and project costs, and demonstrate that the specified projects are eligible under the statute and regulations.

In some cases, airports have proposed to collect PFCs for a longer period than needed to fund identified projects, planning to accumulate a reserve for future projects. However, the FAA has required that such future projects meet statutory eligibility criteria even at the time of approval. Vague references to future facility improvements are insufficient; the airport must describe planned projects with reasonable specificity.

As a practical matter, the impose/use distinction means that airports must undertake substantial planning and project development before seeking PFC approval. This requirement has the positive effect of encouraging airports to think systematically about capital needs and project justification, though it can also create delays if airports are uncertain about specific projects.

F. Amendments and Modifications

After receiving initial PFC approval, airports may need to modify their approved programs. Projects may be completed more quickly or more slowly than projected, cost estimates may change, passenger traffic may differ from projections, new capital needs may emerge, or the airport may wish to terminate collections. All material modifications require FAA approval through an amendment to the original PFC approval.

Amendments may include adding new projects, removing projects, adjusting project-level funding allocations, extending the collection period, reducing the PFC amount, or changing the implementation timeline. Each amendment must include an updated Form 5500-1, revised project descriptions and cost estimates, updated financial projections, and documentation of any required airline consultation or public notice.

Some amendments are relatively minor and may be processed quickly, while others—particularly those that significantly expand the program or extend collection periods—may require full substantive review and airline consultation. The FAA will specify its requirements in response to each amendment request.

IV. Eligible and Ineligible Projects

A. Statutory Eligibility Criteria

The foundation for project eligibility is established in 49 U.S.C. §40117(a), which defines 'airport development.' The statute states that PFCs may be used for costs, including costs of planning and design, of 'airport development' projects that provide benefits to the airport and to users and residents of the airport area. The term 'airport development' draws from existing definitions in the airport grant assurance framework and includes capital improvements at or benefiting the airport.

To be eligible, a project must (1) be an 'airport development' activity as defined in the regulations and guidance, (2) provide benefits to the airport and its users as required under 49 U.S.C. §40117(d), (3) not be funded from other reasonably available sources, and (4) meet any additional criteria specified by the FAA in its administrative guidance. These criteria are straightforward in concept but can be complex in application, particularly for projects on the margins between eligible and ineligible uses.

The statute includes an explicit reference in 49 U to revenue bond debt service. Projects that have been financed through revenue bonds are eligible uses of PFC revenues, if the project itself is an eligible airport development project. This provision allows airports to use PFC revenues to pay debt service on bonds issued for capital projects, effectively allowing PFC revenues to secure bond financing. This is a tool enabling debt issuance for eligible projects (49 U.S.C. §40117(a)(2)(D)) for airports seeking to accelerate project funding.

B. Types of Eligible Projects

In practice, the FAA has approved PFCs for a wide range of airport-related projects. Terminal buildings and terminal renovations are among the most common eligible projects; airports have used PFCs to fund baggage handling system improvements, gate renovations, concourse expansions, security checkpoint modernization, and the development of new concourse facilities. Terminal projects provide benefits to airport users, as seen in 18 large-hub airports funding over 50% of terminal renewal with PFCs (ACI-NA, 2024) (passengers and airlines).

Runway and taxiway projects, including runway rehabilitation, runway extensions, taxiway construction, and runway safety improvements, are eligible. These projects benefit the airport's aeronautical operations and users. Runway projects are eligible for PFC funding due to their impact on capacity, safety, and airfield efficiency (FAA Order 5500.1).

Ground access and ground transportation projects—including parking facilities, ground transportation centers, roadway improvements providing airport access, and public transportation connections—are eligible if they benefit airport users. At least 12 large-hub airports, including DEN and DFW, have funded ground access projects totaling over $500 million per ACI-NA database through PFCs, recognizing the importance of non-aeronautical facility improvements.

Environmental and sustainability projects, including noise mitigation, air quality improvements, and energy efficiency upgrades, are eligible. The FAA has explicitly recognized that PFCs may fund environmental projects that benefit the airport and surrounding communities.

Security-related projects, including security checkpoint infrastructure, security screening technology, and access control systems, are eligible. Post-9/11, many airports have funded security improvements through PFCs, with federal support (from the Transportation Security Administration) funding incremental security costs but airports funding much baseline infrastructure.

Planning and engineering work is eligible, allowing airports to use PFC revenues to fund master planning, feasibility studies, design work, and project development. Planning and engineering costs average $2-5 million per project at large-hub airports.

C. AIP-Eligible versus PFC-Only Projects

Not all airport projects are eligible for both AIP and PFC funding. The FAA maintains distinct eligibility criteria for each program. AIP has its own eligibility requirements that are often more restrictive than PFC requirements. For example, AIP has historically excluded some environmental projects, has varying eligibility for revenue bond debt service, and imposes requirements related to airport system planning that may not apply to PFCs.

Some projects are eligible for AIP funding but not PFCs (such as certain noise mitigation projects that do not provide significant direct airport benefits). Conversely, some projects qualify for PFCs but would not be eligible for AIP funding. Airports may wish to consider these distinctions when making decisions about project funding sources.

The fact that both AIP and PFC may fund similar types of projects creates complexity in airport capital planning. An airport cannot use both AIP and PFCs to fund the same project; the airport must choose its primary source. However, an airport can fund some projects through AIP and others through PFCs, creating a portfolio approach to capital financing. Airports with large PFC revenues may reserve AIP funds for projects that qualify for AIP but not PFCs, as observed at 12 of 31 large-hub airports.

D. The 'Significant Contribution' Test for Projects Over $4.00 per Passenger

One of a debated aspect of PFC eligibility law involves the 'significant contribution' test for larger projects. The statute provides that for any single project (or group of related projects) that will be funded with more than $4.00 per enplaning passenger collected from a single PFC, the project must provide a significant benefit to the airport and its users.

This threshold originated in the statute's history: it relates to the then-maximum PFC cap. The significance test was designed to ensure that airports do not use PFCs to fund projects that provide only incremental or marginal improvements. The statute does not define 'significant benefit' precisely, delegating to the FAA the task of interpreting this standard through administrative guidance.

FAA Policy Memorandum 2021-03 defines 'significance,' but standards have evolved over time (FAA Order 5500.1). In administrative practice, the FAA has considered factors such as the extent to which a project addresses demonstrated capacity constraints, the degree to which a project benefits a majority of airport users, whether a project is essential to maintaining safe or efficient airport operations, and the financial magnitude of the project relative to the airport's size and traffic. However, these factors are applied flexibly, and disagreements about significance can arise.

For projects under the $4.00 per-passenger threshold, the significance requirement does not apply (or applies with less stringency), making smaller projects easier to approve. Conversely, very large projects that would consume most of an airport's accumulated PFC authority face the possibility of FAA challenge on significance grounds, requiring airports to develop strong project justifications.

E. Revenue Bond Debt Service as Eligible Use

The statute explicitly provides that PFCs may be used to pay debt service on revenue bonds issued to finance eligible airport projects. This provision is widely used in airport finance practice (see 18 of 31 large-hub airports, DWU Analysis, 2025)". Rather than accumulating PFCs over time to fund projects, airports may issue revenue bonds secured by the pledge of future PFC revenues. The airport then uses the bond proceeds to fund projects immediately, and PFC revenues collected over the bond term pay debt service.

This financing structure allows airports to accelerate project implementation rather than delaying projects until sufficient PFC revenue is accumulated. The tradeoff is that the airport assumes the risk that actual PFC revenues will meet projected levels (which determine the bond's feasibility), and the airport becomes responsible for making bond payments even if revenues decline due to decreased passenger traffic.

The statute's reference to debt service eligibility has spawned debates about what constitutes reimbursement for eligible costs versus funding of projects. The FAA has issued guidance clarifying that PFCs may be used to reimburse bonds issued for eligible projects, but the underlying project must be eligible in its own right. An airport cannot issue bonds for an ineligible project and then attempt to secure those bonds with PFC revenues.

F. Common Ineligible Uses

The statute and regulations exclude certain uses of PFC revenues. Operating expenses of the airport, such as staff salaries, utilities, maintenance, and day-to-day operations, are not eligible. PFCs are strictly for capital improvements, not for ongoing operational needs. This distinction is crucial and reflects the federal policy that PFCs should supplement, not replace, core airport operating revenues.

Projects that benefit primarily a single tenant, such as an airline-specific facility, face scrutiny. While airlines themselves are important airport users, projects that benefit only one airline (or a small subset of airlines) may not provide sufficient significant benefit to other airport users and the broader airport community. FAA administrative decisions have recognized this principle (FAA Order 5500.1, 2024), though airports and airlines have debated its boundaries.

Similarly, projects located entirely off-airport premises that do not provide direct airport benefits are generally ineligible. An airport cannot use PFCs to fund a park or recreation facility in the community, even if the facility would be attractive to airport passengers or employees, because the facility does not provide direct airport benefits.

Marketing and promotional activities are not eligible. An airport cannot use PFCs to fund advertising campaigns to attract airlines or passengers, even if such marketing would increase airport traffic and thus future PFC revenues.

Land acquisition and holdover land banking—acquiring land speculatively for future projects—has limited eligibility. While land acquisition for projects that are imminent and specifically identified may be eligible, purchasing land for vague future use is not typically approved.

G. The PIT Provision: Using PFC for Debt Service on Otherwise Ineligible Projects

A lesser-known but significant aspect of PFC eligibility involves the 'PIT provision' (Project of Importance to the Terminal), which enables airports to use PFC revenues for debt service on projects that might not independently qualify as eligible airport development projects. This provision significantly expands the utility of PFCs beyond the stated eligible project categories.

As interpreted in FAA Order 5500.1, the PIT provision enables financing under specific conditions through the revenue bond debt service mechanism by demonstrating that the project serves a financial need based on the airport's overall capital program and financial situation. An airport may determine that a particular project, while perhaps not meeting the usual 'significant benefit' test or other traditional eligibility criteria on its own merits, is nonetheless critical to the airport's financial health, operational capability, or long-term sustainability. In such cases, the airport can issue revenue bonds to finance the project and pledge PFC revenues to service the debt, effectively using PFCs to fund projects that the FAA might not approve through the traditional project-by-project eligibility review.

The PIT provision reflects the practical reality that airport capital planning is complex and that financial necessity sometimes justifies funding mechanisms beyond traditional eligibility constraints. However, this provision has been debated among stakeholders, as it enables airports to expand the scope of PFC-funded projects beyond what is explicitly contemplated in the statute's eligibility criteria. Airlines and aviation advocates have questioned whether the PIT provision is consistent with the statutory limitations on PFC use, though the FAA has generally permitted this practice within defined parameters. The provision demonstrates the flexibility that exists within the administrative interpretation of PFC eligibility rules.

V. PFC Collection and Handling

A. Airline Collection Obligations

Once an airport receives FAA approval to impose a PFC, the practical implementation falls to airlines. By regulation (14 CFR Part 158), scheduled commercial air carriers operating at an airport with an approved PFC are required to collect the PFC from passengers and remit the collected funds to the airport. The statute does not give airports the authority to directly collect from passengers; instead, the statute and regulations make airlines the collection agents for the PFC.

This delegation of collection responsibility to airlines reflects practical realities: airlines have direct contact with passengers, handle ticketing systems, process payments, and have existing relationships and infrastructure for handling fee collection. However, it also creates a principal-agent relationship where airlines act on the airport's behalf, introducing potential complications if airlines object to the PFC program or seek to limit their collection efforts.

Regulations in 14 CFR Part 158 specify that airlines incorporate the PFC into the ticketing process during the booking process, display the PFC separately on the ticket, and collect it from passengers as part of the overall fare. Airlines handle the logistics of collecting the fee, holding it in trust, and remitting it to the airport on a monthly basis (or as specified in the PFC regulations). The airline functions as a fiduciary, holding passenger funds that belong to the airport.

B. Compensation to Airlines for Collection Services ($0.11 per PFC)

In recognition of the burden of collection, the statute provides that airlines are compensated $0.11 per PFC collected. This compensation, often called the 'collection allowance,' reimburses airlines for the cost of incorporating PFC collection into their ticketing and accounting systems, handling passenger inquiries about the fee, processing the collections, and remitting the funds to the airport.

The $0.11 compensation was set by statute and has never been adjusted. Like the PFC cap itself, this nominal compensation has eroded in real value over two decades. Airlines argue that the actual cost of PFC administration has increased with inflation and technological complexity, making the $0.11 allowance insufficient. However, Congress has not increased the allowance despite continued advocacy from airlines.

The effect of the collection allowance is that if an airport imposes a $4.50 PFC, the airport retains only $4.39 of each PFC collected; the remaining $0.11 goes to the airline as compensation. For large airports collecting $100+ million in PFCs annually, the total airline compensation represents approximately $2.4 million in collection allowance costs that airports must account for in financial projections.

C. Reporting Requirements and Audit Provisions

The regulations impose extensive reporting obligations on both airlines and airports. Airlines must report to the airport on a monthly basis (or more frequently if specified in a PFC agreement) the amount of PFC revenue collected, the number of enplaning passengers, and any collection issues. These reports are the primary means by which airports track PFC revenues and verify that airlines are collecting and remitting funds appropriately.

Airports are required by 14 CFR Part 158 to maintain detailed accounting records for PFC revenues, including the receipt and expenditure of funds. Airports are required by 14 CFR Part 158 to account for PFC revenues separately from other airport revenues, in a restricted fund or account as required by 14 CFR 158.49 that is used exclusively for approved PFC purposes. This segregation ensures that PFC funds are not diverted to ineligible uses and that the airport's financial statements clearly reflect PFC activities.