WASHINGTON - If Sen. Wendell Ford has anything to do with it, this is the year Congress will settle a long-running dispute between airports and airlines over landing and terminal fees.
Rating agencies and airport bond issuers will be watching closely to see if the solution that Congress comes up with weakens the ability of airports to ensure a steady stream of revenues to pay debt service.
Ford, a Kentucky Democrat and chairman of the aviation subcommittee of the Senate Commerce, Science, and Transportation Committee, says he has tried to get the airports and airlines to agree to an equitable fee system, so far to no avail. He says he's going to keep trying.
Ford was speaking during debate on a bill the Senate passed April 19 to resume federal airport construction grants until lawmakers can agree on a long-term funding measure. They will try to do that over the next few weeks. Ford is hoping the final bill will contain a solution to the fee dispute.
The term "airport fee" covers a broad range of charges: Landing fees, terminal charges, and rents fron non-airline tenants such as concession shops, car rental agencies, and parking lots.
In general, most airports use one of two types of fee systems to recover their costs.
The first is the "residual" system, in which the airport recovers a part of its costs from fees on the non-airline tenants and the airlines guarantee that they will cover the balance.
In the second, or "compensatory," system, the airlines themselves agree to cover the cost of airport debt service, maintenance, and operating costs. That leaves the airport looking elsewhere to cover its capital costs. Ford says airports have found a gold mine in non-airline tenants, which regularly turn a profit. Some airports share those non-airline revenues with airlines; others do not.
In general, airlines complain that they are constantly overcharged by airports. Airlines say that under the compensatory system, airports are raking in bushels of money from concessions and car rental agencies without offering the airlines a break on fees.
Airlines also complain that airport fees are being diverted to non-airport uses. Cash-strapped local governments, they say, have discovered in their airports a major source of revenue to pay for other city services, and municipal hunger for airport revenues puts pressure on airports to keep raising fees.
Airlines have been fighting fee increases in the courts. On Jan. 25 they were dealt a severe blow when the Supreme Court issued a ruling in Northwest Airlines, et al., v. County of Kent, Mich. The justices rejected arguments by seven airlines that Kent County's fees were not fairly allocated and allowed the county to reap excessive profits.
Airport and rating agency officials hailed the decision as one that ensured airports would have plenty of revenue-raising flexibility. Ford, however, was said to be concerned that the airports would have too much flexibility. Capitol Hill watchers say the Kent decision has a lot to do with Ford's desire to find a legislative fix to the fee issue.
Which is largely why Ford added to last month's temporary funding bill a controversial provision giving Transportation Secretary Federico Pena the discretion, through June 30, to prevent any airport fee increase when an airline complains that the increase is unreasonable.
Municipal bond proponents say that the provision could make it harder for some airports to ensure debt service payments, and thus endanger their bond ratings.
Actually, the freeze provision was supposed to be much tougher. In the version that passed the Senate, Pena would have been required to respond to an airline's complaint by reviewing the proposed fee increase to determine whether it is reasonable. The original version required Pena to automatically disallow a proposed increase whenever an airline complained.
As one rating agency official put it, the airlines "do have the ear of Ford" and have "a good chance of getting some of their views heard" in the debate over fees.
Make no mistake, Ford is a man with a mission and he expects to succeed. As he said during the April 19 floor debate: "I believe there is a compromise [possible] on the airport fee issue, and I strongly believe that it is in the interest of the airline passenger to resolve this impasse."