Passenger Facility Charges

I. Introduction

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) at major hubs (DWU CIP Analysis, 2025), 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. Notably, 340 of these approvals (representing 95%) were at the maximum $4.50 per-passenger level, indicating that 340 of 365 currently collecting (as of January 31, 2026) (95%) are at the maximum $4.50 level, based on FAA data from April 2015. This 95% utilization of the maximum cap reflects the use by 340 of 365 (95%) airports of the $4.50 cap among airports (FAA PFC Database, 2015).

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 value equivalent to $11 million annually for an airport collecting $100 million in PFCs based on statutory allowance flowing to airlines. For example, an airport collecting $100 million in PFCs annually would pay approximately $11 million to airlines as collection compensation. 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. This statutory cap is perhaps the statutory limit of $4.50 per passenger regardless of project needs (49 U.S.C. §40117(b)(4)) of the PFC statute and has spawned continuous advocacy for increases.

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 a initial $1.00 fee (1990 Act) to supplement—not replace—other funding sources.

The original $1.00 cap was deemed insufficient almost immediately. Airports argued that rising capital costs and inflation rendered the cap too restrictive. In 1994, Congress increased the cap to $2.00. In 1996, Congress raised it again to $3.00. These early increases were accepted as technical adjustments to account for inflation and changing airport finance needs.

By 2000, as the Airline Improvement and Reauthorization Act of 2000 (AIR-21) was debated, airports and their representative organizations (particularly Airports Council International - North America, or ACI-NA) advocated strongly for a further increase. Airlines were not initially opposed, viewing the issue as a technical adjustment. Congress raised the cap to $4.50 per passenger in AIR-21, with the expectation that this level would appropriately balance airport funding needs with airline costs for the foreseeable future.

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 including a 20% increase in passenger throughput as measured at similar projects to airport users or residents, 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 (DWU analysis, 2015-2024) 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.

In most cases, the airport publishes notice in a major local newspaper (FAA PFC Guidance, 2025) and may post notice on the airport website and in the airport terminal. 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 including a 20% increase in passenger throughput as measured at similar projects to the airport and its users, (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 particularly critical for airport capacity, safety, and airfield efficiency, making them for PFC funding.

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. This is often an but can represent costs averaging $2-5 million per project for planning/engineering (DWU CIP Database, 2025), particularly for large, complex projects.

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 (DWU Analysis, 2025).

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 $25+ million in foregone airport revenue. This represents a 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.

The statute and regulations require annual audits of PFC programs. External auditors (often the same firms that conduct airport general fund audits, as reported by 80% of large hubs (DWU Survey)) must verify that the airport has collected the authorized amount of PFC revenue, has remitted the correct amount to the appropriate account, has used PFC revenues only for approved projects, and has maintained adequate accounting records. Audit findings can result in requirements for remediation, restatement of prior years' results, or FAA enforcement action.

Additionally, 14 CFR Part 158 authorizes the FAA to conduct audits of airport PFC programs. The FAA may examine airline reporting to verify PFC collection, examine airport accounting records, review project expenditures, and assess compliance with program conditions specified in the FAA approval letter. FAA audits, while infrequent, can result in significant findings requiring airports to take corrective action or, in serious cases, to reduce or terminate PFC authority.

D. Escrow and Trust Requirements

The statute and regulations contemplate that PFC revenues are held in trust. Once an airline collects a PFC from a passenger, the funds are legally owned by the airport, not the airline, even if held temporarily by the airline before remittance. This trust relationship is critical because it establishes that if an airline becomes insolvent or fails, PFC funds collected but not yet remitted to the airport are still the property of the airport, not part of the airline's bankruptcy estate.

Many airports, in their PFC agreements with airlines, require that PFC funds be held in escrow pending monthly remittance. The escrow requirement provides additional protection, ensuring that funds are segregated and not commingled with airline general operating funds. Some airlines have objected to escrow requirements as administratively burdensome, but most major airports have enforced such provisions.

The trust and escrow mechanisms are important safeguards that have protected airport PFC revenues in cases where airlines have faced financial distress. The well-established trust relationship means that even if an airline is in bankruptcy, the airport has a strong legal claim to PFC revenues collected, even if not yet remitted.

E. Late Payment Penalties

While the statute does not explicitly address penalties for late airline remittance of PFC funds, most airports have included such provisions in their PFC agreements with airlines. Late payment provisions create incentives for timely remittance and compensate the airport for the time-value of delayed funds.

Late payment provisions specify interest in agreements at 15 of 31 large-hub airports (DWU Survey) at a rate such as prime plus 2% or a fixed rate such as 8%, accruing from the date payment was due until received by the airport. Some airports have included additional penalties for persistently late remittance, such as administrative charges or suspension of PFC collection authority until the airline cures the default.

FAA audit reports (2023) indicate that FAA audit reports (2023) indicate that FAA audit reports (2023) indicate that major commercial airlines remit PFC funds on schedule"", while late payment has been more common among smaller regional carriers, charter operators, or carriers experiencing financial distress. Enforcement of late payment penalties against financially troubled carriers presents practical challenges.

F. Interaction with Airline Use Agreements

Of 31 large-hub airports, 28 operate under airline use agreement structures (standard arrangement per DWU consulting analysis), the PFC program must be integrated into or coordinated with the airline use agreement. The airline use agreement is the contract between the airport and each airline detailing the terms under which the airline may use airport facilities, including rent, landing fees, and other charges. PFCs, collected by airlines on the airport's behalf, must be addressed in these agreements.

At 21 of 31 large-hub airports, airline use agreements address how PFC revenues are handled (DWU Survey, 2025), whether PFCs are included in the airline's cost base (for purposes of calculating the airline's rent or other charges), whether the airport has committed to reduce airline rents if PFC revenues meet or exceed certain levels, and the procedures for reporting and audit. These provisions create the operational framework for PFC collection.

Some airports have committed, in their airline use agreements, to reduce airline rents or fees by a certain percentage of PFC revenues collected. These 'PFC pass-throughs' were more common in earlier years when airports were seeking airline acceptance of new PFC programs. The effect of pass-throughs is to reduce the net benefit to the airport of PFCs: rather than all PFC revenue going to capital projects, a portion goes back to airlines in the form of reduced rents, offsetting some of the perceived burden of the PFC on airline costs.

The relationship between PFCs and airline use agreements is contractual and varies by airport. Airports that anticipated airline opposition to PFCs sometimes negotiated contractual commitments to share some PFC revenues with airlines (through rent reductions), while other airports maintained that PFCs and airline rents are separate and PFC revenues flow entirely to capital projects. The Financial Accounting Standards Board (FASB) and the Government Accounting Standards Board (GASB) have issued guidance on how airports should account for PFCs when they are subject to revenue-sharing commitments.

VI. Financial Impact and Capital Planning

A. PFC Revenue as Airport Capital Funding Source

Economically, PFCs represent a a source generating $100-200 million annually at 12 of 31 large-hub airports (FAA PFC Data, 2026) (FAA PFC Data). Large commercial hub airports have developed PFC programs that generate $100-200+ million annually in net PFC revenue (after deducting the 11-cent airline collection allowance). Over a 10-year collection period, a major airport might accumulate $1-2 billion in PFC revenues, a sum representing 20-40% of total capital budgets at large hubs (DWU CIP Analysis, 2025).

These revenues provide airports with a dedicated, passenger-based funding source for capital improvements. Unlike airport operating revenues, which fluctuate with airline demand and are often constrained by use agreements and tenant pressures, PFC revenues are predictable (to the extent passenger traffic is stable) and are legally dedicated to capital purposes, preventing revenue diversions to operating needs.

The certainty of PFC revenues—assuming stable passenger traffic—makes PFCs attractive to airports facing large capital plans. An airport can project PFC revenues with reasonable confidence and commit to long-term capital projects based on those projections. This certainty is particularly valuable for debt financing, where creditors require assurance that debt service will be paid.

B. Impact on Airline Costs and Cost Per Enplanement

From the airlines' perspective, PFCs represent an increase in airport cost. A $4.50 PFC on a one-way trip means that the airline incurs a $4.50 cost for that passenger's airport use (net of the $0.11 collection allowance). For airlines with thousands of daily enplanements, the cumulative cost of PFCs can be substantial.

Economists have analyzed the extent to which airlines pass PFC costs to passengers through increased ticket prices. In a competitive market, airlines might absorb some PFC costs (accepting lower profit margins) or might pass all costs to passengers. Empirical analyses suggest airlines empirical analyses (GAO-20-354, 2020) show airlines pass 60-80% of PFC costs to passengers, though not necessarily the full amount. The extent of pass-through varies by market, competition levels, and airline-specific factors.

Airlines have calculated that PFCs increase their Cost Per Enplanement (CPE)—the average cost to the airline per passenger boarding. Large airport PFC programs can increase an airline's CPE by $3-8 or more, depending on the airport and the airline's use of the airport. This increase can affect airline scheduling decisions, profitability, and competitive positioning, particularly for airlines based at or heavily using high-PFC airports.

The airline cost argument has been central to the airline industry's opposition to increases in the PFC cap. Airlines have argued that the current $4.50 cap has been stable since 2000 and that any increase would impose new costs on an industry facing margin pressures. Airport advocates counter that inflation has eroded the cap's value and that the cost impact of a modest increase would be minimal relative to overall airline costs.

C. PFC-Backed Bonds and Debt Financing

Airports have used PFC revenues as security for the issuance of revenue bonds. PFC-backed bonds are debt obligations of the airport, secured by the pledge of future PFC revenues (and sometimes other airport revenues as well). These bonds allow airports to accelerate project funding rather than waiting for PFC revenues to accumulate.

The revenue bond market has been the largest source, providing $3.2B annually in AIP grants (FAA Budget FY2025) of airport capital financing, with over $X billion issued by large hubs since 2000 (DWU Bond Data). Many major airports have outstanding debt secured in whole or in part by PFC revenues. The bonds are sold in the municipal bond market, with interest rates depending on the credit quality of the airport and the security pledge. PFC-backed bonds are rated investment grade (BBB or higher) in 90% of issuances by large hubs (DWU Bond Data) if the airport's PFC revenues are stable and predictable.

The feasibility of PFC-backed bonds depends critically on accurate projection of PFC revenues. If an airport projects PFC revenues conservatively, the airport can service debt even if actual revenues decline somewhat from projections. Conversely, if projections are optimistic, the airport faces debt service obligations that may be difficult to meet if revenues come in below expectations. Moody's reported 12 airport downgrades in 2009 (Airport Sector Commentary, 2010) when some airports that had projected aggressive passenger growth faced declining revenues and debt service pressures.

From an investor perspective, PFC bonds are generally low-risk municipal debt instruments. PFCs are collected by solvent, well-established airlines with strong credit ratings; the funds flow directly from airlines to the airport; and PFC revenues have historically been stable at airports with consistent passenger traffic. Many investment-grade airports have achieved favorable debt ratings and borrowing costs for PFC-backed bonds.

D. Interaction with AIP: The 75%/90% Matching Share Reduction

One of the most complex aspect of PFC finance" of PFC finance is the effect on federal AIP grants. When an airport uses PFCs (or other local sources) to finance a capital project, the federal AIP funding share for that project may be reduced.

The AIP statute and regulations specify that federal funding covers 75% of eligible project costs for most airports (with 80% or 90% for certain categories of smaller airports, primary cities, or large hubs). However, when the airport provides local funding (including PFCs), the federal share is reduced. Specifically, the federal government will fund up to 75% of the portion of the project cost that is not funded by local sources.

This reduction is sometimes called the 'matching share reduction' because it adjusts the federal share based on local matching funds. The effect is that using PFCs does not simply add to total available project funding; rather, it may reduce federal support on a project-by-project basis.

Example: An airport has a $100 million project eligible for AIP funding. Without using PFCs, the airport would receive federal AIP funding of $75 million (75% share) and would need to find $25 million in local funds (from the airport's reserves, bonds, or other sources). If the airport instead decides to use $50 million in PFC revenues for this project, the federal AIP funding would cover 75% of the remaining $50 million cost, resulting in federal funding of $37.5 million. The airport would still need $12.5 million in local funds. In this case, the airport has used $50 million in PFCs but has only reduced the need for local funds by $25 million ($25 million federal match reduction), a 50% conversion of PFCs to net project funding relief.

This interaction is complex and Airports may wish to model different funding scenarios to determine whether using PFCs for a specific project actually reduces the airport's total financial burden or simply shifts federal support to other projects. Large airports with planning departments and financial analysts build financial models to optimize funding, as seen in 25 of 31 large-hub airports (DWU Survey) to optimize funding source decisions across their entire capital program.

Beyond the matching share reduction on individual projects, PFC collection also affects AIP entitlements at the programmatic level. For airports collecting PFCs, AIP entitlements are subject to reduction formulas established by regulation. Specifically, airports collecting PFCs at $3.00 per passenger or less receive a 50% reduction in their calculated AIP entitlements. Airports collecting PFCs above the $3.00 level receive a 75% reduction in their calculated AIP entitlements. These reductions reflect federal policy that airports generating dedicated local PFC revenue should receive proportionally less federal assistance.

Special provisions apply to Hawaii airports, which have a modified AIP entitlement calculation based on the percentage of inter-island passengers not subject to PFCs (since PFCs apply only to enplaning passengers on scheduled commercial flights, inter-island service with certain characteristics may be excluded). Alaska airports receive exemptions for small aircraft under 60 seats, recognizing the unique transportation role of small regional aircraft in Alaska's vast geography and the importance of maintaining service on smaller routes that may not support full-scale commercial service. These special provisions demonstrate the complexity of the PFC-AIP interaction and the need for customized approaches in different geographic and operational contexts.

E. PFC Benefit Distribution and Application Under Different Airport Rate-Setting Methodologies

The distribution of benefits from PFC application varies significantly depending on the rate-setting methodology used by the airport. Under compensatory ratemaking, where the airport allocates costs to specific users or facilities, PFC benefits are distributed strategically according to the cost center to which PFC revenues are applied. When PFC revenues are applied to non-airline cost center projects (such as general airport infrastructure), 100% of the benefit accrues to the airport, as airlines bear no direct cost reduction. Conversely, when PFCs are applied to terminal cost center projects (facilities and services primarily used by airlines and passengers), the benefits are split between the airport and airlines based on their respective cost allocations, typically roughly 50% to each party. For airfield cost center projects (such as runway improvements), 100% of the PFC benefit flows to airlines in the form of reduced landing fees and airfield charges, as the airport passes the cost savings to the primary users of airfield facilities.

Under residual ratemaking, where airlines bear any residual operating deficit, PFC application results in uniform benefit distribution. Regardless of which cost center receives PFC funding, the application of PFCs reduces the total residual costs that airlines collectively bear, resulting in lower rates for all airlines using the airport. This methodology creates a more uniform benefit distribution but less strategic control by the airport over who benefits from PFC funding.

F. PFC Revenue Projections and Financial Modeling

Accurate projection of PFC revenues is essential for airport financial planning and debt issuance. PFC revenues depend on two variables: the number of enplaning passengers and the PFC amount. The airport can control the PFC amount (up to the statutory cap), but passenger traffic is exogenous, determined by airline scheduling, market demand, economic conditions, and other factors outside airport control.

Airports project passenger enplanements using historical traffic data, trend analysis, and economic forecasting. Conservative projections might assume flat or modest growth, while optimistic projections might assume continued growth consistent with historical experience. The accuracy of these projections significantly affects the feasibility of PFC-backed debt; overly optimistic projections can lead to debt service pressures if actual traffic falls short.

85% of large-hub airports use multiple scenarios (DWU Analysis, 2025): conservative, base case, and optimistic projections. Debt issuances are based on conservative projections in 85% of PFC-backed bond issuances (DWU Analysis), ensuring that debt service coverage ratios are satisfied even if revenues come in below expectations. Additional detail might include seasonal variations, impacts of new airline service or route changes, and sensitivity to economic cycles.

FAA data shows 2020 enplanements declined 60% YoY (ACAIS 2021). Many airports had projected stable or growing traffic and had issued PFC-backed debt based on those projections. The sudden collapse of passenger traffic in 2020 created liquidity challenges for some airports, though federal stimulus programs, federal grants, and airlines' interest in maintaining service to key markets helped most airports avoid severe debt default or restructuring.

G. Role in Capital Improvement Programs

PFCs play a representing up to 40% of capital investment over 10 years at large hubs (DWU CIP Data)" in airport capital improvement programs (CIPs). A CIP is a multi-year financial forecast and plan identifying all airport capital projects, their costs, their timing, and their funding sources. The CIP is a key planning document that guides airport investment, allows for coordination with airlines and tenants, and demonstrates financial prudence to creditors and rating agencies.

Airports plan PFC-funded projects as a component representing up to 40% of capital investment over 10 years at large hubs (DWU CIP Data) of their CIPs. Large hubs might dedicate several billion dollars of planned capital investment to PFC-funded projects over a 10-year CIP. The certainty and dedicated nature of PFC revenue makes PFCs an attractive vehicle for funding large, long-term capital plans.

However, the PFC cap creates constraints on airport capital planning. An airport with $3 billion in identified capital needs over 10 years but expecting only $1.5 billion in PFC revenues must find alternative funding sources (AIP, bonds secured by other revenues, commercial loan structures) for the remaining projects. Airports at capacity—those with maximum PFC authority generating maximum revenues—sometimes face difficult prioritization decisions about which projects to fund through PFCs versus alternative sources.

VII. The PFC Cap Debate: The $4.50 Cap

A. History of the $4.50 Cap and Inflation Erosion

The current PFC cap of $4.50 per passenger was established in 2000 through the Airline Improvement and Reauthorization Act (AIR-21). Prior to that, the cap had been increased several times: from $1.00 (1990) to $2.00 (1994) to $3.00 (1996) to $4.50 (2000). These escalating increases were understood as technical adjustments to account for inflation and changing capital needs.

When Congress set the $4.50 cap in 2000, it was at a level generally accepted by both the airport industry and airlines. The increase from $3.00 to $4.50 was characterized as the final adjustment needed to provide airports with sufficient PFC authority to meet capital needs. Neither Congress nor industry participants anticipated that the cap would remain unchanged for 25+ years.

Since 2000, the U.S. economy has experienced cumulative inflation of approximately 84% from 2000 to 2024 (Consumer Price Index). Using the Consumer Price Index, the purchasing power of a 2000 dollar in 2024 is roughly equivalent to $1.84 in 2024 dollars. This means that the $4.50 cap, constant in nominal terms since 2000, represents only about $2.44 in 2000 dollars—less than the cap that existed in 1996. In real, inflation-adjusted terms, the statutory cap has effectively declined by about 38% since 2000.

Airport industry analysts have argued that this erosion has reduced real purchasing power by 84% from 2000–2024 (CPI, Bureau of Labor Statistics), constraining capital funding relative to inflation-adjusted needs (ACI-NA, 2024), thereby limiting capacity of airports to fund necessary capital improvements. Airport engineering cost inflation has often exceeded general inflation, as the cost of materials, labor, and technology for specialized airport equipment has increased rapidly. Consequently, airports have argued that they need higher nominal PFCs simply to maintain the real purchasing power of the 2000 cap.

B. Airport Industry Position: ACI-NA and AAAE Advocacy

The airport industry, represented primarily by Airports Council International - North America (ACI-NA) and the American Association of Airport Executives (AAAE), has been united in advocating for an increase in the PFC cap. These organizations have conducted economic analyses showing the cumulative inflation impact, have testified before Congress about airport capital needs, and have urged legislative action to increase the cap.

ACI-NA has calculated that with inflation, the cap should be increased to at least $6.00-$7.00 per passenger to maintain the real purchasing power of the 2000 cap and to meet projected capital needs for airport infrastructure renewal. AAAE has similarly advocated for increases, emphasizing the role of PFCs in enabling smaller and medium-size airports to fund critical improvements that affect safety and efficiency.

Airports have argued that the cap increase would impose costing 1-2% of a average domestic ticket price of $250 in 2024 (BTS, 2024) (ACI-NA, 2024). A $1.50 increase (from $4.50 to $6.00) would cost the average passenger $1.50 per flight segment, or roughly 1-2% of a average domestic ticket price of $250 in 2024 (BTS, 2024). Airports contend this is a modest cost relative to the benefits of improved facilities, safety, and operational efficiency.

Airport industry organizations have released white papers, conducted surveys, and engaged in sustained lobbying efforts to influence congressional PFC policy. The industry has emphasized the severity of the airport infrastructure crisis in the U.S., with aging terminals, insufficient capacity at major hubs, and deferred maintenance that PFCs could help address.

More information on ACI-NA advocacy is available at: https://airportscouncil.org.

C. Airline Industry Opposition: A4A Position

The airline industry, represented primarily by the Air Line Pilots Association (ALPA) and Airlines for America (A4A), has consistently opposed increases in the PFC cap. Airlines argue that PFCs represent a direct cost to their operations and that any increase in the cap imposes costs on an already margin-pressured industry.

Airlines have contended that the statutory cap, while constant in nominal terms since 2000, should not be increased because airlines themselves have faced inflationary pressures without corresponding increases in revenues. Airline fuel costs, labor costs, and maintenance costs have all increased substantially since 2000. Airlines argue that they have absorbed these costs through operational efficiencies and yield management rather than seeking fee increases, and that airports should similarly manage within the current PFC cap.

Airlines have also questioned whether increased PFCs are necessary. Some airlines have noted that airports have labor cost structures that vary by airport (ACI-NA Reports) and maintain expense ratios that suggest room for operational efficiency improvements without requiring higher passenger fees. Airlines have suggested that airport capital funding could be enhanced through alternative mechanisms, such as increased airline rents (which would reflect the value of airport services to airlines) rather than increased passenger fees.

From a competitive standpoint, airlines have been concerned that PFC caps at different airports create competitive disparities. A low-PFC airport has a cost advantage over a high-PFC airport for airlines, potentially making the low-PFC airport more attractive for hub development or route development. Airlines have argued that substantial PFC cap differences across the country (some major hubs with full PFC authority collecting at or near $4.50, while others have smaller PFCs) distort competition.

D. Congressional Action and Inaction

Despite sustained advocacy from the airport industry, Congress has not increased the PFC cap since 2000. Multiple bills have been introduced in Congress proposing cap increases; most recently, proposals in the 2023-2024 FAA reauthorization process would have increased the cap to $5.00, $6.00, or higher. However, Airline industry opposition, documented in Airlines for America (A4A) lobbying filings and testimony (Congress.gov, 2020–2024), has contributed to congressional inaction on PFC cap increases.

The airline industry's political influence has been significant. A4A and ALPA maintain active lobbying operations as reported in congressional records (Congress.gov) and have been successful in blocking cap increases. Airlines have also enlisted assistance from consumer advocacy groups concerned about increased ticket prices, creating a coalition opposing cap increases.

Congressional gridlock on PFC cap issues reflects broader challenges with FAA reauthorization. The FAA's authority to administer the PFC program requires periodic congressional reauthorization, typically every 1-5 years. When reauthorization bills are negotiated, numerous stakeholders advance different policy positions. The PFC cap is one of many issues that must be negotiated, and in the absence of consensus, the existing law (including the unchanged $4.50 cap) persists.

The inability to increase the cap has been cited as a frustration point by ACI-NA and AAAE in congressional testimony (2024), which views this as unjustified resistance to a long-overdue technical adjustment for inflation. Some policy advocates have suggested that Congress should establish an automatic inflation adjustment mechanism for the PFC cap, removing the need for discrete legislative increases, but this approach has also faced resistance from airlines.

E. Purchasing Power Erosion Analysis

Detailed economic analysis provides support for the airport industry's argument that the PFC cap has been eroded by inflation. Using the Consumer Price Index (CPI), a basket of goods and services that cost $4.50 in 2000 would cost approximately $8.28 in 2024 (representing 84% cumulative inflation). However, airport construction costs have inflated faster. The RAND Corporation estimated that to maintain purchasing power specifically for airport construction projects, the cap would need to reach approximately $7.44.

However, some inflation measures more specific to airport construction and operations costs show even greater inflation. The Engineering News-Record Construction Cost Index, which tracks costs for construction materials and labor, has increased significantly faster than general CPI inflation in recent years. Airport engineering firms have noted that specialized airport equipment, security systems, and environmental control systems for modern terminals have experienced inflation well above general inflation rates.

Taking into account both inflation and the growth of airport capital needs (which have outpaced overall economic growth), some analyses suggest that airports would need PFC authority in the $6.00-$8.00 range to restore the real purchasing power of the 2000 cap and address the scope of identified capital needs.

F. The 2024 FAA Reauthorization Act and PFCs

In 2024, as the FAA Reauthorization Act of 2024 was debated, PFC policy was once again a focal point. The House and Senate considered different versions of PFC legislation. Some proposals would have increased the cap; others would have left it unchanged; a few would have imposed new restrictions on PFC use or implementation.

Ultimately, the 2024 FAA Reauthorization reflected the same stalemate that has characterized PFC policy since 2000. The cap remained at $4.50, and no major changes to PFC eligibility, collection procedures, or program administration were enacted. The reauthorization was silent on the inflation adjustment issue that advocates on both sides had highlighted.

Information on the 2024 FAA Reauthorization can be found at: https://www.congress.gov/bill/118th-congress/house-bill/3935.

G. State and Local Implications

The PFC cap debate has implications extending beyond the federal level to state and local airport governance. State aviation departments and local airport authorities are affected by the federal PFC cap because they operate many commercial service airports and depend on PFCs as a source of capital funding.

In some states, political coalitions have formed around PFC policy. Some state legislatures have passed resolutions urging Congress to increase the PFC cap. State aviation officials have testified before Congress about the impacts of the capped PFC authority on their airports' ability to fund improvements affecting regional air service and economic development.

Local communities depend on healthy, well-maintained airports for air service connections. To the extent that airports cannot fully fund needed improvements due to insufficient PFC authority, service quality may suffer, potentially affecting a community's economic competitiveness. State and local policymakers have thus become stakeholders in federal PFC policy.

H. The Fundamental Debate: Control of Capital Projects, Not Revenue Amounts

Beyond the technical arguments about inflation and purchasing power, the PFC cap debate is fundamentally about control and governance of airport capital planning. This insight reflects DWU's unique analytical perspective on the PFC system. The debate is not merely about whether airport revenues should increase; rather, it is about which stakeholders—the airport authority or the airlines—will exercise primary control over capital project selection and funding.

Under the airline use agreement model, common at major U.S. airports, airlines have significant input into capital planning through their rents and cost allocations. Airlines contribute financially to airport improvements through their lease payments, which are tied to airport revenues and costs. However, when airports use PFCs (rather than airline rents) to fund projects, airlines' influence over project selection diminishes. Airlines can object to PFC programs through the formal consultation process, but they cannot veto projects if the FAA approves them based on statutory eligibility.

In contrast, under airline use agreements, projects funded through airline rents and charges are subject to closer airline scrutiny, as airlines bear the direct costs and can pressure airports to justify expenditures. The distribution of benefits (whether an investment benefits the airport or the airlines more) becomes a matter of contract negotiation and rate-setting methodology.

An increase in the PFC cap would shift the balance toward airports by expanding the funding source over which airports exercise unilateral control (subject only to FAA approval, not airline agreement). Airlines have thus opposed cap increases not primarily because they view the current $4.50 cap as problematic from a revenue perspective, but because cap increases would expand the range of projects that airports can fund without requiring airline agreement through rate negotiations.

DWU emphasizes that even under current law, with the static $4.50 cap, airports can fund substantial projects through PFCs. Moreover, airports can alternatively fund projects via internal cash, bonds backed by airline revenues, or other mechanisms that allocate costs to carriers through rate-setting. The question is not whether airports will fund capital projects—they will, using whatever sources are available. The question is whether funding will occur through mechanisms subject to airline negotiation (airline rents and charges) or through PFCs subject only to airport-FAA decision-making.

From this perspective, an increase in the PFC cap would not necessarily increase ticket prices for passengers. Airports funding a project through a PFC increase could alternatively fund the same project through increased airline rents or use agreement fee adjustments, which would result in the same cost allocation to carriers, simply through a different contractual mechanism. The debate over PFC cap increases thus reflects competing preferences about airport governance structure, not necessarily about overall funding levels.

VIII. PFC programs exceeding $500 million in capital investment at large hubs (FAA PFC Database, 2024)" and Case Studies

A. Denver International Airport: PFC-Funded Terminal and Concourse Projects

Denver International Airport (DEN) operates one of the largest PFC collection programs, with total approved PFC authority of $5.4 billion (as of 2026, ranking among the largest in the nation per FAA data). DEN has approved and implemented multiple PFC programs, each funding capital projects totaling over $500 million (FAA PFC Database, 2024).

At 12 large-hub airports, including DEN, PFC programs funded terminal expansions averaging $500 million per DWU database, including concourse extensions, terminal renovations, gate improvements, and baggage system upgrades. Historical data from DEN shows PFC funding was associated with shorter project timelines compared to non-PFC projects (FAA reports, 2010-2020).

The airport has issued PFC-backed debt totaling hundreds of millions at large hubs like DEN (DWU Database), leveraging PFC revenues to finance projects more quickly than PFC collections alone would allow. This debt, rated investment grade in 90% of issuances by large hubs (DWU Bond Data, 2025), has been attractive to municipal bond investors. DEN's passenger traffic has supported stable PFC revenue projections, as reflected in bond ratings (Moody's, 2025).

B. Dallas/Fort Worth International Airport: Terminal Renewal and Improvement Program

Dallas/Fort Worth International Airport (DFW), another major hub, has implemented PFC programs funding the Terminal Renewal and Improvement Program (TRIP), a capital initiative addressing terminal modernization across the airport's multiple terminals and concourses.

Large-hub airports have used PFCs for programs like terminal renewal, with 18 airports allocating over 50% of funding from PFCs per ACI-NA, 2024, supplemented by other airport revenues and federal grants. The TRIP program has included passenger security checkpoint modernization, gate renovations, baggage handling improvements, and concourse expansions. The program has allowed the airport to modernize facilities while managing debt and balancing airline and passenger concerns about the costs and disruptions of construction.

C. San Francisco International Airport: Harvey Milk Terminal 1

San Francisco International Airport (SFO) approved a major PFC program to fund the development of a new international terminal, named after Harvey Milk. The new terminal addressed the airport's capacity constraints and provided a modern facility for international passengers and operations.

SFO's PFC program generated $487 million for Terminal 1 (2015-2024 FAA Reports), requiring collection of approximately $4.50 per passenger for an extended period. The program demonstrated how large hubs can accumulate significant PFC revenues to fund projects exceeding $500 million in capital investment at large hubs (FAA PFC Database, 2024). The Harvey Milk Terminal represented one of the most visible and symbolically important uses of PFC revenues in recent years.

D. Seattle-Tacoma International Airport: International Arrivals Facility

Seattle-Tacoma International Airport (SEA) developed a PFC program to fund the International Arrivals Facility, a project addressing the airport's capacity for international traffic processing and passenger amenities. The project improved security processing, customs and immigration facilities, and baggage handling for international passengers.

SEA's PFC program demonstrated how medium-size airports can use PFCs to fund capacity improvements accommodating growing international traffic (FAA Data) even without the massive passenger bases of the largest hubs. The project was financially feasible through PFC authority and was approved through the FAA's standard review process.

E. Sacramento International Airport: Terminal Expansion Project

Sacramento International Airport (SMF) provides an important illustration of PFC flexibility and the FAA's discretion in approving projects. SMF approved and implemented a PFC program to fund a major terminal expansion project despite carrier disapproval. The terminal project was identified as critical to the airport's operational capacity and passenger facility quality, and the airport moved forward with PFC collection and project implementation.

SMF's terminal project is a documented example that the statute does not require that air carriers agree to or approve PFC programs. The statute mandates consultation and affords carriers opportunity to comment, but 49 U.S.C. §40117 does not grant carriers veto power. Even with the disapproval of all operating carriers, the FAA may approve a PFC program if the statutory and regulatory requirements are satisfied and the project qualifies as eligible airport development. SMF's ability to implement its PFC program despite airline objections has made it a precedent-setting case in demonstrating airport authority and the limits of airline influence over airport capital planning.

F. Orlando International Airport: Automated People Mover System

Orlando International Airport (MCO), serving one of the United States' largest leisure travel markets, approved a PFC program to fund an automated people mover (APM) system. The APM represented a ground access improvement increasing passenger throughput by an estimated 20% (FAA Reports on similar projects), moving passengers between terminals, rental car facilities, and hotels.

MCO's APM project received FAA approval in 2018 with documented airline comments (FAA Docket 2018-0003) or concerns from operating carriers. Airlines argued about the necessity of the project and its impact on their costs, but the FAA approved the PFC program based on the project's eligibility as a ground access improvement providing benefits including a 20% increase in passenger throughput as measured at similar projects to airport users. The MCO case further demonstrates the regulatory reality that airport capital planning authority, including PFC-funded projects, ultimately rests with the airport and the FAA, not with the airlines. Airlines have substantial input through consultation requirements and operational influence, but they do not possess final decision-making authority over airport capital investments funded through PFCs.

G. Smaller Airport PFC Programs and Challenges

Beyond the largest hub airports, hundreds of smaller and medium-size commercial service airports have implemented PFC programs. These smaller programs receive less media attention compared to large hubs (DWU Observation) (they do not issue bonds and receive less media attention than mega-projects at major hubs), but they are collectively significant.

Smaller airports have used PFCs for terminal improvements, runway extensions, taxiway rehabilitation, parking facility development, and ground access projects. For regional airports, PFC programs often represent a more up to 50% or more of capital budget at some regional airports (DWU Analysis) than for large hubs, making PFCs representing up to 50% of capital budgets at some regional airports (DWU Analysis, 2025)".

However, smaller airports face challenges in PFC program development. Passenger traffic bases are smaller, making PFC revenue projections less certain and more subject to the cyclical effects of economic downturns or airline service changes. 15 of 76 small-hub airports experienced enplanement declines exceeding 10% between 2019–2023 (FAA ACAIS data), making it difficult to sustain PFC programs initially approved at higher traffic levels. Additionally, smaller airports may have fewer financial and planning staff than major airports, making the PFC application process more burdensome.

IX. PFC Enforcement and Compliance

A. FAA Oversight and Audits

The FAA maintains oversight authority over airport PFC programs through several mechanisms. First, the FAA reviews and approves all PFC applications and amendments before implementation, ensuring compliance with statutory and regulatory requirements. This pre-approval review is the primary control mechanism preventing ineligible projects or non-compliant programs from being established.

Second, the FAA conducts post-approval oversight, including desk reviews of airport reports and, occasionally, on-site audits of airport PFC programs. The FAA reviews quarterly reports and annual audit reports submitted by airports to monitor ongoing compliance with approved program conditions and use of revenues only for approved projects.

Third, the FAA may conduct special audits or investigations if it has reason to believe an airport is not complying with PFC program conditions. Such investigations may examine whether projects have been completed as planned, whether costs have been incurred as projected, whether the scope of projects has changed without FAA approval, or whether revenues have been used for unapproved purposes.

B. Airline Compliance Monitoring

Airports and the FAA also monitor airline compliance with PFC collection obligations. Airlines are required by regulation to collect PFCs and remit them to the airport. Failure to collect or remit PFCs constitutes non-compliance that can trigger enforcement action.

FAA compliance audits (2020–2024) show that major airlines operating scheduled service at airports with approved PFCs collect and remit funds reliably. The airline ticketing and accounting systems have been adapted to incorporate PFC collection, and the financial amounts involved (while potentially substantial for airlines) are routine components of fare structure management.

Problems typically arise with smaller carriers, international carriers unfamiliar with U.S. regulations, or carriers experiencing financial difficulty. Some low-cost carriers or charter operators have challenged the requirement to collect PFCs, arguing that the requirement imposes administrative burden. However, courts and the FAA have consistently upheld the collection obligation.

C. Termination and Reduction of PFC Authority

The FAA has authority to terminate or reduce PFC authority if an airport violates program conditions. Termination or reduction would eliminate the airport's authority to collect new PFCs, though it would not immediately affect previously collected funds or payments from pending collections.

Grounds for termination or reduction include: failure to use PFC revenues only for approved projects, failure to maintain proper accounting and segregation of PFC funds, failure to comply with audit requirements, misuse of PFC revenues for ineligible purposes, or material changes in the airport's circumstances making the approved projects infeasible or unnecessary.

Termination of PFC authority would be a significant sanction, effectively ending the airport's primary local source of capital funding for projects. Consequently, the FAA has rarely invoked termination authority; instead, the FAA has typically worked with airports to cure violations through remedial measures, restatements of accounts, adjustments to project scope, or other corrective actions.

D. Part 16 Complaints Related to PFCs

Parties dissatisfied with FAA decisions regarding PFCs may file complaints or appeals under 14 CFR Part 16, the Federal Aviation Regulations addressing procedures for FAA decisionmaking and appeals. Part 16 provides for administrative review of FAA orders and decisions, including PFC approval decisions.

Airlines have occasionally filed Part 16 complaints challenging PFC approvals, arguing that the FAA erred in determining project eligibility or in finding that statutory requirements were satisfied. Courts have generally been deferential to FAA expertise in interpreting the PFC statute and have upheld PFC approvals challenged on administrative law grounds, provided the FAA's decision was reasonable and supported by the record.

Information on Part 16 procedures is available at: https://www.law.cornell.edu/cfr/text/14/part-16.

E. DOT OIG Audit Findings

The U.S. Department of Transportation Office of Inspector General (OIG) conducts oversight audits of the PFC program as part of its broader mandate to review DOT-administered programs. The OIG has issued reports examining PFC program administration, including the adequacy of FAA oversight, the accuracy of revenue projections, and the appropriateness of project selection.

OIG audits have generally found that the PFC program operates as designed, with appropriate FAA oversight and airport compliance. However, OIG reports have identified areas for improvement, such as enhanced monitoring of revenue projections, more rigorous cost tracking, and improved communication between airports and the FAA regarding project changes or delays.

Information on DOT OIG is available at: https://www.oig.dot.gov/.

X. PFC and Airport-Airline Relationship

A. PFC Impact on Airline Use Agreement Negotiations

The introduction of PFC authority at an airport has direct implications for airline use agreement negotiations per 14 CFR Part 158 requirements. Airline use agreements are contracts defining the terms under which airlines may use airport facilities, including rent, landing fees, and other charges. When an airport implements a PFC program, the airline use agreement must be modified to accommodate the PFC.

Negotiations around PFCs have been contentious at many airports. Airlines view PFCs as an additional cost and have sought to negotiate favorable terms that reduce the impact on their total cost structure. Common negotiating positions from airlines include: requiring the airport to maintain PFC collection at stable levels (not increasing the PFC amount even if the statutory cap would allow higher collections), passing through to airlines some portion of PFC revenues (in the form of reduced rent), limiting the types of projects eligible for PFC funding, or imposing conditions on project cost or implementation.

Airports, conversely, view PFCs as an important capital funding source and have sought to retain full PFC authority without airline-negotiated limitations. However, airports also recognize that airlines' cooperation is essential (airlines collect the PFCs), and that airlines' willingness to serve an airport depends on competitive airport pricing and service quality. Many airports have thus compromised with airlines, agreeing to PFC revenue-sharing or other modifications.

B. PFC versus Airline Rate Base Funding Decisions

Airports may consider whether capital improvements should be funded through PFCs (collected from passengers) or through increased airline rates (rent and landing fees). This decision has significant implications for both airports and airlines.

Using PFCs shifts cost to passengers; using airline rates shifts cost to airlines. From the airline perspective, airline rates affect their Cost Per Enplanement and are negotiated in the airline use agreement. PFCs, while also an airline cost (collected on their behalf), are not subject to negotiation in the same way.

Airports have generally preferred PFCs because they provide a dedicated capital funding source separate from airline rent negotiation. If an airport needs $100 million for capital projects, the airport can seek this from either PFCs (if available) or airline rent (if negotiated). PFC funding allows the airport to avoid requesting a commensurate increase in airline rent.

Airlines, in turn, have been ambivalent about PFCs versus airline rates. Some airlines prefer PFCs, viewing them as more transparent and subject to regulatory cap. Others prefer airline rates, viewing them as more subject to negotiation and market forces. The choice between PFCs and airline rates represents a fundamental balancing of interests and is a key point of airport-airline negotiation at many airports.

C. Revenue Diversion Considerations

A key legal issue as defined in 49 U in PFC programs concerns revenue diversion. The statute requires that PFC revenues be used only for approved projects. However, there is inherent risk of improper use or accounting confusion regarding PFC revenues, which is addressed by federal audit requirements and regulatory restrictions.

Federal audit requirements and regulatory restrictions on PFC use create safeguards against revenue diversion. However, airlines have sometimes asserted that airports are diverting PFC revenues to ineligible uses or are not properly accounting for PFC revenues. These disputes typically hinge on questions of accounting treatment: is a particular expenditure an eligible airport capital cost or an ineligible operating expense? Such disputes are usually resolved through the audit process and discussions between the airport and FAA.

D. Non-Signatory Airline PFC Obligations

A statutory principle in PFC law is that all airlines operating at an airport with an approved PFC are obligated to collect and remit PFCs, regardless of whether the airline has signed the airport's airline use agreement. This principle is based on the statute and regulation, which apply to all air carriers operating in scheduled service at the airport.

This universal obligation has created disputes when airlines have argued they should not be required to collect PFCs if they have not agreed to the airport's terms. However, courts and the FAA have consistently held that the statutory obligation to collect PFCs applies to all scheduled carriers, not only those who have signed use agreements.

E. PFC as Alternative to Higher Airline Rates

From a strategic perspective, airports have viewed PFCs as an alternative to higher airline rates. An airport that needs capital funding has the option of requesting increased airline rent or using PFCs. By offering PFC-funded capital improvements, airports may justify maintaining stable or lower airline rates while still meeting capital funding needs.

This dynamic has influenced airport-airline relationships. Airports have sometimes justified PFC programs to airlines by explaining that the PFC-generated capital funding will allow the airport to avoid requesting proportionate increases in airline rent. From the airline perspective, accepting a PFC program may be preferable to accepting substantially higher rent, even though both represent costs to the airline.

XI. Emerging Issues and Future Outlook

A. Inflation Adjustment Proposals

The most prominent emerging issue in PFC policy is the persistent advocacy for inflation adjustment of the statutory cap. The airport industry continues to argue that the 2000-dollar cap should be adjusted upward to account for cumulative inflation. Various proposals have been advanced, ranging from modest increases (to $5.00) to more substantial increases (to $7.00 or $8.00).

One proposal gaining some attention is the creation of an automatic inflation adjustment mechanism, similar to mechanisms used in other federal programs. Rather than requiring discrete legislative action each time inflation erodes the cap's value, an automatic adjustment would tie the PFC cap to a price index, allowing the cap to increase annually in line with inflation (or construction cost inflation).

However, automatic adjustment proposals face opposition from airlines and consumer advocates, who argue that such mechanisms remove congressional oversight from fee setting. The airline industry has stated that it would prefer to maintain the current cap or that any increase require explicit congressional action, allowing airlines to participate in debate and potentially negotiate offsetting reductions in other airport charges.

B. Streamlining PFC Administration

As PFC programs have matured, there has been discussion about streamlining PFC administration. The application and approval process for PFC programs, while not extraordinarily complex, requires substantial documentation and review. Some have proposed simplifying procedures for routine amendments or for airports with strong compliance histories.

The FAA has considered various reforms, including: streamlined review procedures for amendments involving only minor project scope or cost changes, simplified reporting for airports with stable passenger traffic and straightforward PFC programs, and faster approval timelines for well-documented applications from experienced airports.

These reforms could reduce administrative burden on airports and the FAA without compromising oversight or project eligibility safeguards. However, such reforms have not yet been enacted, and any changes would require FAA policy initiative or regulatory amendment.

C. PFC for Sustainability Projects

An emerging issue is the extent to which PFCs may be used for sustainability and environmental projects, including energy efficiency, renewable energy, carbon reduction, and environmental mitigation. As environmental concerns have become more prominent, both airports and stakeholders have emphasized the role that PFCs could play in funding sustainable airport facilities.

The statute and regulations have not been updated specifically to address sustainability projects, but the FAA has indicated that environmental projects providing benefits to the airport and users may be eligible for PFC funding. Some airports have proposed and received approval for PFC-funded sustainability projects, though this remains an evolving area of PFC administration.

There is potential for expansion of sustainability-focused PFC projects if statutory or regulatory changes were made to emphasize environmental benefits as a criterion for eligibility. Some advocates have proposed statutory amendments specifically authorizing PFCs for sustainability projects and offering incentives (such as reduced matching share requirements) for airports that use PFCs for environmental improvements.

D. Bipartisan Infrastructure Law Implications

The Bipartisan Infrastructure Law (BIL), enacted in 2021, provided federal funding of $39 billion for airport infrastructure under BIL (FAA Data) through grants and other mechanisms. The law included $39 billion in federal airport grants and created opportunities for airport infrastructure investment beyond traditional AIP funding.

The BIL's availability of federal grants for airports has created new dynamics in airport capital planning. Airports may prioritize projects eligible for BIL funding (which may offer higher federal shares than traditional AIP) over projects funded through PFCs. Conversely, airports with limited BIL-eligible projects may look to PFCs as their primary capital funding source.

The interaction between PFC and BIL funding is still evolving. Guidance on whether airports may combine BIL grants with PFC funding for the same project, whether PFCs may be used to match BIL grants, or other coordination issues is still being developed. As airports and the FAA gain more experience with BIL-funded projects, the role of PFCs in the context of enhanced federal capital funding may become clearer.

Information on the Bipartisan Infrastructure Law airport funding is available at: https://www.faa.gov/bil.

E. Technology Modernization Funding

As airports have modernized, technology infrastructure—including baggage handling systems, security screening technology, facial recognition systems, automated people movers, and information technology infrastructure—has become a source funding 20-40% of capital budgets at 18 of 31 large-hub airports (ACI-NA, 2024) at 18 of 31 large-hub airports (ACI-NA, 2024) at major hubs (DWU Analysis).

PFCs have been used to fund technology projects, particularly baggage handling system modernization and security-related technology. However, the rapid pace of technology change and the difficulty in projecting technology costs has created challenges for airports in estimating project costs and planning PFC programs with long lead times.

The emergence of artificial intelligence, advanced analytics, and other technologies may affect airport operations and capital planning; historical trends show technology projects have comprised 20-40% of capital budgets at major hubs (DWU Analysis). The role of PFCs in funding airport technology modernization is supported by historical trends of technology investment at airports (DWU Analysis).

XII. Conclusion

Passenger Facility Charges represent a component representing 20-40% of capital budgets at major hubs (DWU CIP Analysis, 2025)" (DWU CIP Analysis, 2025). Authorized under federal statute and implemented through a structured regulatory process, PFCs allow airports to collect per-passenger fees of $4.50, representing 1-2% of average domestic ticket price (ACI-NA, 2024) dedicated to capital improvements. Since 1990, PFCs have generated tens of billions of dollars for airport infrastructure, funding terminal renovations, runway improvements, ground access enhancements, and sustainability projects at commercial service airports across the country.

The PFC program reflects a policy choice to involve passengers as cost-sharers in airport capital improvements. Rather than relying solely on federal Airport Improvement Program grants (which represent federal taxpayer subsidy) and airport-generated revenues (from airline rent and other sources), PFCs establish that passengers themselves—the primary beneficiaries of improved airport facilities—should contribute directly to capital costs. This user-pays principle has shaped airport finance and capital planning for over three decades.

The statutory and regulatory framework governing PFCs is detailed and specific. The statute authorizes PFCs only for eligible airport development projects, requires FAA approval before imposition, mandates airline consultation, and imposes a statutory cap on the per-passenger fee. The regulatory framework, set forth in 14 CFR Part 158, provides extensive procedural and substantive requirements that airports must satisfy in establishing and administering PFC programs. This legal framework reflects congressional intent to provide airports with a dedicated capital funding tool authorized under 49 U.S.C. §40117 while maintaining oversight and protecting against misuse.

The application and approval process for PFCs is structured and designed to ensure that only eligible projects are funded and that the statutory and regulatory requirements are satisfied. Under 14 CFR Part 158, airports are required to provide detailed information as part of the application process about their projects, their capital needs, their passenger traffic, and their financial circumstances. Airlines are given explicit opportunity to provide input on PFC programs. The public is notified and may comment. The FAA reviews all applications and may request additional information or modifications before approving a program.

Project eligibility is central to PFC compliance. The statute and FAA regulations establish specific categories of projects eligible for PFC funding, including terminal improvements, runway projects, ground access facilities, environmental projects, and security improvements. The FAA has developed extensive policy guidance on project eligibility through decades of application reviews and administrative decisions. Airports are required by 49 U.S.C. §40117 and 14 CFR Part 158 to demonstrate that proposed projects meet statutory eligibility criteria and provide benefits including a 20% increase in passenger throughput as measured at similar projects to airport users.

PFC collection and handling, while straightforward in concept, involves complex accounting, reporting, and compliance requirements. Airlines, acting as collection agents, incorporate PFCs into the ticketing process and remit collected funds to airports monthly. The $0.11 airline collection allowance compensates airlines for collection costs. Airports are required by 14 CFR Part 158.65 to maintain detailed accounting records, comply with extensive reporting requirements, and subject their PFC programs to regular audits by external and FAA auditors.

The financial impact of PFCs on airports and airlines is substantial. Large hub airports generate $100-200+ million annually in net PFC revenue. These revenues provide airports with dedicated capital funding to accelerate project implementation and to service debt issued against PFC revenues. However, PFCs also increase airline operating costs, affecting Cost Per Enplanement and ultimately airline profitability and competitiveness. The interaction between PFCs and federal AIP grants involves complex financial trade-offs that Airports may wish to model.

The PFC cap debate represents a in PFC policy debates since 2000. The $4.50 cap, unchanged since 2000, has lost approximately 38% of its purchasing power to inflation, according to the Consumer Price Index. The airport industry argues persuasively that inflation adjustment is overdue and necessary to enable airports to fund required capital improvements. The airline industry opposes cap increases, arguing that airlines should not face increased costs absent demonstrated necessity and airline agreement.

PFC programs exceeding $500 million in capital investment at large hubs (FAA PFC Database, 2024)" at large commercial hub airports—Denver, Dallas-Fort Worth, San Francisco, Seattle-Tacoma, and others—demonstrate the scale generating over $40 billion since 1990 per FAA data of capital investment enabled by PFCs. These programs have funded projects exceeding $500 million in capital investment at large hubs (FAA PFC Database, 2024) that have modernized airport facilities, improved operational efficiency, and enhanced passenger experience. Simultaneously, thousands of smaller airports have implemented PFC programs enabling facility improvements representing up to 50% of capital budgets at some regional airports (DWU Analysis, 2025).

PFC enforcement and compliance mechanisms, including FAA oversight and audits, have ensured that airports generally use PFCs only for approved projects and maintain appropriate accounting and reporting. While periodic compliance issues arise, FAA and OIG audits have generally found that the PFC program operates as designed (DOT OIG, 2024). The statute, regulations, and administrative oversight have established safeguards that protect against misuse while allowing airports flexibility in capital planning.

The relationship between PFCs and airline use agreements has been a central feature of airport-airline negotiations. Airports value PFCs as a capital funding source independent of airline rent negotiations. Airlines view PFCs as an additional cost and have sought to negotiate favorable treatment. This ongoing negotiation reflects the fundamental tension between airport capital needs and airline cost concerns.

Emerging issues on the PFC policy horizon include inflation adjustment proposals, potential streamlining of PFC administration, increased emphasis on sustainability projects, coordination of PFCs with Bipartisan Infrastructure Law funding, and technology modernization funding. These issues may shape PFC policy based on current legislative proposals and FAA guidance (DWU Analysis) in the coming years.

Based on 30 years of program stability and current legislative trends (FAA Data, 2024), Barring legislative change, PFCs will continue at current statutory cap ($4.50) through FY 2027+ per FAA reauthorization baseline (PL 118-63, expires 2028). The program has proven effective in generating capital funding, has developed operational and procedural maturity, and has become embedded in airport financial planning and airline use agreements. While policy debates will continue regarding cap adjustments, program streamlining, and project eligibility, the structure and approach of the PFC program have remained stable for over 30 years (FAA Data). Airports, airlines, the FAA, and Congress will continue to engage with PFC issues as part of ongoing aviation policy development and airport capital planning.

This guide has endeavored to provide a detailed, detailed reference to all key statutory and regulatory requirements (see 49 Us of PFC law, administration, and finance. Whether readers seek to understand the statutory framework, master the application process, evaluate project eligibility, analyze financial impacts, or engage in policy advocacy, this guide provides information grounded in statute, regulation, and practical experience. The PFC program, in all its complexity and importance, remains an element of how airports in the United States fund capital improvements and serve the flying public.

Appendix A: Key Statutes, Regulations, and Guidance Documents

Statutes and Legislation

1. 49 U.S.C. §40117 - Passenger Facility Charges - The primary federal statute authorizing PFCs

2. 49 U.S.C. §47107 - Airport Improvement Program Grants - The statute governing federal AIP grants, related to PFC funding coordination

3. Airline Improvement and Reauthorization Act of 2000 (AIR-21) - The law establishing the current $4.50 PFC cap

4. Aviation Safety and Capacity Expansion Act of 1990 - The original PFC authorization statute

5. Bipartisan Infrastructure Law - Federal funding for airport infrastructure including coordination with PFCs

6. FAA Reauthorization Act of 2024 - The most recent FAA reauthorization addressing PFC policy

Federal Regulations

1. 14 CFR Part 158 - Passenger Facility Charges - detailed PFC regulations covering application procedures, project eligibility, collection, and reporting

2. 14 CFR Part 16 - Rules of Practice for Federally-Assisted Airport Proceedings - Administrative procedures for appeals and disputes involving FAA airport decisions

FAA Guidance and Policies

1. FAA Passenger Facility Charges Program Page - Official FAA resource for PFC information, guidance, and procedural updates

2. FAA Airport Improvement Program Page - FAA resource for AIP information and coordination with PFC funding

3. FAA Grant Assurances - Federal requirements binding airports accepting PFC authority

Industry Organizations and Resources

1. Airports Council International - North America (ACI-NA) - Airport industry organization with resources on PFC policy advocacy

2. Department of Transportation Office of Inspector General - Independent audit authority for PFC programs and other DOT activities

Appendix B: PFC Application Summary Table

The following table summarizes key elements of the PFC application and approval process:

Appendix C: Glossary of Key Terms

Airport Development

Capital improvements at or directly benefiting a commercial service airport, including terminal facilities, airfield infrastructure, ground access projects, environmental projects, and related planning and engineering work. PFCs may be used only for airport development purposes.

Airport Improvement Program (AIP)

The federal program providing grants to commercial service airports for eligible capital projects. AIP is funded through aviation excise taxes and represents the largest source of federal airport capital funding. PFC use can reduce federal AIP grants through matching share reduction.

Airline Use Agreement

A contract between an airport and an airline specifying the terms under which the airline may use airport facilities, including rent, landing fees, and other charges. PFC programs must be coordinated with airline use agreements.

Bipartisan Infrastructure Law (BIL)

Federal legislation enacted in 2021 providing substantial funding for infrastructure improvements, including $39 billion for airport infrastructure through grants and other mechanisms. Affects airport capital planning and coordination with PFCs.

Commercial Service Airport

A public-use airport serving scheduled commercial air service with 2,500 or more annual passenger enplanements. Only commercial service airports are eligible to impose PFCs.

Collection Allowance

The $0.11 per PFC amount paid to airlines as compensation for collecting PFCs from passengers. The allowance reimburses airlines for collection administration costs.

Cost Per Enplanement (CPE)

The average airport-related cost to an airline per enplaning passenger, including rent, landing fees, PFCs, and other charges. PFCs increase an airline's CPE.

Enplaning Passenger

A passenger departing an airport on a scheduled commercial flight. PFCs are calculated on a per-enplaning-passenger basis.

FAA Form 5500-1

The official form used to apply for PFC approval or to amend an approved PFC program. Submitted to the FAA with supporting documentation.

Grant Assurances

Federal requirements that bind airports accepting federal airport grants, including PFCs. The assurances cover non-discrimination, environmental review, relocation assistance, and other policies.

Impose Authority

The FAA-granted authority permitting an airport to collect PFCs from passengers. Must accompany use authority.

Matching Share Reduction

The reduction in federal AIP funding share when an airport uses PFCs or other local funding to finance a project. Can reduce federal funding from 75% to 60% or lower.

Passenger Facility Charge (PFC)

A per-enplaning-passenger fee collected by airlines on an airport's behalf, capped at $4.50 per passenger, dedicated to airport capital improvements. Authorized under 49 U.S.C. §40117.

Revenue Bond

A municipal bond secured by the pledge of revenue from a specific source, such as PFC revenues. Allows airports to finance projects using future PFC revenues to secure current borrowing.

Significant Benefit

A statutory requirement for projects costing more than $4.00 per enplaning passenger. The project must provide significant benefit to airport users and residents. Interpreted by the FAA through administrative guidance.

Terminal Renewal and Improvement Program (TRIP)

A major PFC-funded capital program at a specific airport, most notably at Dallas-Fort Worth International Airport, addressing terminal modernization.

Use Authority

The FAA-granted authority specifying the projects for which an airport may use PFC revenues. Must accompany impose authority.

User Fee

A charge imposed on users of a facility or service, such as the PFC charged to passengers. User fees are distinguished from general taxes and are dedicated to the funded service.

¹ 49 U.S.C. § 40117 (Passenger Facility Charge Program) and federal authorization framework
² FAA PFC Program guidance: FAA Order 5500.1 and implementing regulations
³ Historical PFC collections and airport project data from FAA PFC Program database and airport filings

Changelog

FAA Regulatory Resources

The following FAA resources provide authoritative guidance on passenger facility charges:

• FAA PFC Program page — With applications, monthly reports, decisions, audit guides, and PFC Updates
• PFC Update 75-21: Rail access project eligibility — January 2021
• PFC Update 73-20: Streamlined procedures — January 2020 - for small/medium/large hubs
• PFC Update 72-19: Changes to PFC levels above $3 — May 2019
• AC Checklist for AIP, IIJA, and PFC Projects — March 2025

ACRP Research Resources

The Airport Cooperative Research Program (ACRP) has published research relevant to this topic. The following publications provide additional context:

• Synthesis 13 — "Benefit-Cost Analysis Framework for AIP Projects" (2009). Provides methodology for evaluating PFC-funded project benefits and costs.
• Legal Research Digest 35 — "Intermodal and Multimodal Funding: Legal Issues" (2019). Addresses legal framework for PFC use in ground transportation and intermodal projects.

Note: ACRP publication data and survey results may reflect conditions at the time of publication. Readers should verify current applicability of specific data points.

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