United States Government Accountability Office 

GAO Report to Congressional Committees


April 2005 AVIATION FEES 

Review of Air Carriers’ 

Year 2000 Passenger 

and Property 

Screening Costs 

GAO-05-558


a
Why GAO Did This Study 

Highlights 

Accountability Integrity Reliability 

www.gao.gov/cgi-bin/getrpt?GAO-05-558. 

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact McCoy 

Williams at (202) 512-6906 or 

williamsm1@gao.gov. 

Highlights of GAO-05-558, a report to 

congressional committees 

The Aviation and Transportation 

Security Act (ATSA) authorized the 

Transportation Security 

Administration (TSA) to impose an 

Aviation Security Infrastructure 

Fee (ASIF) on air carriers to help 

pay for the costs of aviation 

security services. To impose the 

ASIF, TSA issued an Interim Final 

Rule (IFR) and required air carriers 

to report their passenger and 

property screening costs incurred 

in 2000 on an attachment to the IFR 

referred to as Appendix A. The 

2000 screening costs reported by 

air carriers were going to be used 

to establish the ASIF. Based on 

industry estimates of $1 billion, 

TSA had estimated that the costs 

incurred by air carriers in 2000 

were $750 million, but the amounts 

reported by air carriers totaled 

$319 million, significantly less than 

expected. To provide the Congress 

with an independent assessment, 

the Department of Homeland 

Security Appropriations Act, 2005 

required GAO to review the amount 

of passenger and property 

screening costs incurred by air 

carriers in 2000. 

What GAO Recommends 

We recommend that the Secretary 

of Homeland Security direct the 

Assistant Secretary, TSA to 

consider the analysis and estimates 

in this study in determining the 

limitation on the aggregate air 

carrier fee consistent with ATSA. 

TSA concurred with our 

recommendation. TSA indicated 

that it will consider the analysis 

and estimates in our study, as we 

recommended. 

April 2005 

AVIATION FEES 

Review of Air Carriers’ Year 2000 

Passenger and Property Screening Costs 

What GAO Found 

We estimate at a 95 percent confidence level that the amount of passenger 

and property screening costs incurred by air carriers in 2000 for the 3 major 

cost components were between $425 million and $471 million, with a 

midpoint estimate of $448 million. The difference between our midpoint 

estimate and what the air carriers reported on the Appendix A and 

subsequently paid to TSA is $129 million, as shown in the table. 

GAO Estimate of 2000 Passenger and Property Screening Costs 

Dollars in millions 

Air carrier’s GAO 

Cost component Appendix A costs estimatea Difference 

Private screening contractors costs b $293 $334 $41 

Airport costs 5 80 75 

Air carriers’ internal costs 21 34 13 

Total $319 $448 $129 

Source: GAO analysis. 

a

See app. I, table 9, for confidence intervals.
 b

Includes airline employee costs if they performed the screening function directly.


Determining exact cost amounts was not feasible and assumptions were 

required for several reasons including the following: (1) 5 years have passed 

since the costs were incurred, (2) the air carriers’ accounting systems were 

not designed to capture specific passenger and property screening costs, and 

(3) certain cost categories required the application of assumptions to 

identify, categorize, or allocate cost. We focused on estimating for 2000 the 

three primary screening cost components listed below. 

• 	 Costs associated with the use of private screening contractors (or airline 

employees if they performed the screening function directly)—these 

were the most significant costs to the air carriers in 2000. Air carriers 

typically contracted with private screening companies to perform 

screening on their behalf, and the rates charged combined costs such as 

background checks, training, and uniforms. We estimated that air 

carriers incurred $334 million for this cost component, compared to 

$293 million reported by air carriers on the Appendix A. 

• 	 Airport costs related to passenger and property screening—the two 

major screening-related cost categories that airports charged air carriers, 

were costs for law enforcement officers and real estate costs for security 

checkpoints. Based on information obtained from a sample of airports, 

we estimated that air carriers incurred $80 million for this cost 

component, compared to $5 million reported on the Appendix A. 

• 	 Air carriers’ internal costs—these include, among other things, 

installation, operation, maintenance, and testing of screening equipment; 

ground security coordinators; security program management and 

contract administration; and legal and accounting support. Based on an 

analysis of the Appendix A and on information obtained through 

interviews, we estimated that the air carriers incurred $34 million in 

screening costs, compared to $21 million reported in the Appendix A. 

United States Government Accountability Office 
Contents


Letter 1 

Results in Brief 3 

Background 5 

Overall Estimate of Passenger and Property Screening Costs 7 

Conclusion 14 

Recommendation for Executive Action 14 

Agency Comments 14 

Appendixes 

Appendix I: Scope and Methodology 

Develop an Understanding 


Design of Analytical Framework 


Data Collection and Cost Estimation 


Project Work Plan


Confidence Intervals 


Limitations to the Analysis 


17 

17 

18 

18 

19 

25 

26 

Tables Table 1: 

Table 2: 

Table 3: 

Table 4: 

Table 5: 

Table 6: 

Table 7: 

Table 8: 

Table 9: 

GAO Estimate of 2000 Passenger and Property Screening 


Costs 4


Comparison of 2000 Passenger and Property Screening 


Costs Reported in the Appendix A to GAO Estimate 8


Costs Associated with the Use of Private Screening 


Contractors 9


Airport Costs Related to Passenger and Property


Screening 10


Air Carrier Internal Costs Related to Passenger and


Property Screening 13


Air Carrier Groupings 13


Screening Company Billings and Number of Screeners


Prior to September 11, 2001 19


Number of Airports in Stratified Sample 22


Summarization of Cost Estimate Point Estimates and 


Confidence Intervals 25


Page i GAO-05-558 Year 2000 Screening Costs 
Contents 

Abbreviations 

ASIF Aviation Security Infrastructure Fee


ATA Air Transport Association of America, Inc.


ATSA Aviation and Transportation Security Act


CAPPS Computer Assisted Passenger Prescreening System


CEO Chief Executive Officer


DHS Department of Homeland Security


DOT Department of Transportation


FAA Federal Aviation Administration


GSC Ground Security Coordinator


IFR Interim Final Rule


O&D Origin and Destination


OIG Office of Inspector General


SH&E Simat, Helliesen & Eichner, Inc.


TSA Transportation Security Administration


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Page ii GAO-05-558 Year 2000 Screening Costs 
Page 1 GAO-05-558 Year 2000 Screening Costs 

A

United States Government Accountability Office 

Washington, D.C. 20548 

April 18, 2005 

Congressional Committees 

The terrorist attacks of September 11, 2001, revealed serious long-standing 

weaknesses in the nation’s aviation security system and underscored the 

need for improvements in order to restore public confidence in air travel 

and to protect our homeland from future potential threats. Prior to 

September 11, 2001, providing aviation security was the responsibility of air 

carriers and airports as part of their cost of doing business. However, after 

September 11, 2001, aviation security changed substantially in the United 

States and the responsibility for passenger and property screening shifted 

to the federal government. 

In an effort to make improvements to the aviation security system, 

President Bush signed the Aviation and Transportation Security Act 

(ATSA)1

 on November 19, 2001. ATSA created the Transportation Security 

Administration (TSA) whose duties included assuming responsibility for 

the certain aviation security functions previously performed by air carriers. 

To help pay for the costs associated with providing these functions, ATSA 

required TSA to impose a uniform fee on passengers. ATSA limited the 

passenger fee, known as the September 11th Security Fee, to $2.50 per 

passenger enplanement to a maximum of $5.00 for a one-way trip. To the 

extent collections from the passenger fee did not cover TSA’s costs to 

provide specified aviation security services, ATSA authorized TSA to 

impose a fee on air carriers, called the Aviation Security Infrastructure Fee 

(ASIF).

2

 However, ATSA3 required TSA to determine a statutory cap for the 

ASIF in the aggregate equal to the total amount air carriers had paid for 

passenger and property screening during calendar 2000, the last full 

calendar year prior to September 11, 2001.4 

1

 Pub. L. No. 107-71, 115 Stat. 597 (Nov. 19, 2001). 

2

 49 U.S.C. § 44940(a)(1), (2)(A). 

3

 49 U.S.C. § 44940(a)(2)(B)(i). 

4

 For purposes of this review and the calculation of the ASIF, property is defined as mail, 

cargo, carry-on and checked baggage and any other articles transported by an air carrier 

excluding property transported under the “Known Shipper Program.” 

Page 1 GAO-05-558 Year 2000 Screening Costs 
To establish the ASIF, TSA issued an Interim Final Rule (IFR)5

 in


February 2002, requiring air carriers to complete and submit an attachment 


to the IFR, titled “Calendar Year 2000 Costs Paid for Passenger and 


Property Screening” (referred to as Appendix A), in which they were to


itemize costs incurred for passenger and property screening during 2000. 


TSA planned to use the information from Appendix A to assist it in 


determining the statutory cap for the ASIF in the aggregate. TSA also 


planned to use the information to establish each air carrier’s fee, which air


carriers were required to remit to TSA each month beginning in 2002.


At the time the IFR was being developed, TSA forecasted that total airline­


incurred industry costs for passenger and property screening for calendar 


year 2000 would be $750 million. This estimate was based on information 


that the Air Transport Association of America, Inc. (ATA)

6

 and other airline 


industry representatives provided to the Congress and GAO in 2001. That


information indicated that before September 11, 2001, the airline industry 


was spending approximately $1 billion annually on all airline security. 


However, when TSA reviewed the cost information submitted by air


carriers on Appendix A, the sum of the airline reported costs totaled 


approximately $319 million, significantly less than what TSA had expected.


Today, funding for aviation security programs remains a central issue 


because passenger and air carrier security fees are not sufficient to fully 


cover TSA’s costs to provide aviation security. TSA’s fiscal year 2004 


appropriations for aviation security provided over $3.7 billion for civil


aviation security services, of which over $3.1 billion was for screening 


activities.7

 By contrast, TSA only collected about $1.8 billion from 


passenger security fees and the $319 million from the airlines that was


credited to the appropriation, meaning the federal government funded the 


remaining $1.6 billion out of general revenues. In order to provide the 


Congress with an independent assessment of calendar year 2000 costs paid 


for passenger and property screening, the Department of Homeland 


Security (DHS) Appropriations Act, 20058

 required that we review the 


5

 Aviation Security Infrastructure Fees, 67 Fed. Reg. 7926 (Feb. 20, 2002). 

6

 ATA is the largest trade organization of U.S. air carriers, representing 23 U.S airline 

members and 5 foreign-based airlines in 2000. 

7

 Department of Homeland Security Appropriations Act, 2004, Pub. L. No. 108-90, 117 Stat. 

1137, 1141 (Oct. 1, 2003). 

8

 Pub. L. No. 108-334, 118 Stat. 1298, 1303 (Oct. 18, 2004). 

Page 2 GAO-05-558 Year 2000 Screening Costs 
amount of passenger and property screening costs incurred in calendar 

year 2000 by domestic and foreign carriers departing from U.S. airports and 

report on the results of our work within 6 months of the passage of the act. 

To assist us in evaluating these costs within this time frame, we contracted 

with Simat, Helliesen & Eichner, Inc. (SH&E), a consulting firm with 

significant aviation industry expertise, through a competitive award 

process. SH&E subcontracted with PricewaterhouseCoopers LLP for 

additional accounting and finance expertise and with Abt Associates for 

additional statistical capabilities. To provide a basis for the contractors’ 

work, we developed an audit strategy to independently determine a 

reasonable estimate of the 2000 passenger and property screening costs 

incurred by the airlines. We oversaw the project and worked closely with 

contractors as they planned and executed their work. To ensure a sound 

approach to the study, we reviewed the contractors’ work plans, sampling 

plans, questionnaires, and workpapers. We participated in significant 

meetings, provided continual oversight and feedback, and received 

periodic briefings from the contractors. We performed our work in 

accordance with generally accepted government auditing standards from 

October 2004 through April 2005. Additional details regarding our scope 

and methodology are in appendix I. 

Results in Brief	 We estimate at a 95 percent confidence level that passenger and property 

screening costs in 2000 for the major cost components were between 

$425 million and $471 million, with a midpoint estimate of $448 million. The 

difference between this midpoint estimate and the amount the air carriers 

reported on the Appendix A and subsequently paid to TSA is $129 million, 

as shown in table 1. 

Page 3 GAO-05-558 Year 2000 Screening Costs 
Table 1: GAO Estimate of 2000 Passenger and Property Screening Costs 

Dollars in millions 

Air carrier’s GAO 

Cost component Appendix A costs estimatea Difference 

Private screening contractors costsb $293 $334 $41 

Airport costs 5 80 

Air carriers’ internal costs 21 34 

Total $319 $448 $129 

Source: GAO analysis. 

a

See app. I, table 9, for related confidence intervals.


b

Includes airline employee costs if they performed the screening function directly.


During our review, we considered certain prior estimates of total security 

costs that had been made by ATA and other airline officials. These 

estimates suggested that annual security costs totaled approximately 

$1 billion prior to September 11, 2001. ATA stated that the amounts were 

generalized estimates for all domestic and international industry security 

costs, not just passenger and property screening. ATA further explained 

that they were “best guesses” that reflected security costs for functions in 

addition to passenger and property screening. We determined that there 

was no documented basis for these estimates and instead developed our 

estimate for 2000 based on a review of the three primary cost components 

for passenger and property screening shown in table 1. 

We are recommending that the Secretary of Homeland Security direct the 

Assistant Secretary, TSA to consider the analysis and estimates in this 

study in determining the limitation on the aggregate air carrier fee 

consistent with ATSA (49 U.S.C. § 44940(a)(2)(B)(i)). 

TSA indicated from reviewing a draft of this report that it will consider the 

analysis and estimates in our study, as we recommended. 

Page 4 GAO-05-558 Year 2000 Screening Costs 

75 

13 
Background	 ATSA established TSA as an agency within the Department of 

Transportation and transferred responsibility for civil aviation security 

from the Federal Aviation Administration (FAA) to this newly created 

agency. As mandated by ATSA, TSA is responsible for security in all modes 

of transportation, including conducting the day-to-day operations related to 

security screening for passenger air transportation previously conducted 

by air carriers. 

Prior to the creation of TSA, air carriers were responsible for conducting 

passenger and property screening at U.S. airports. Typically air carriers 

carried out the screening function through contracts with security 

companies. The screening process in place at that time included identifying 

certain passengers for more intense scrutiny with the use of Computer 

Assisted Passenger Prescreening System (CAPPS). In addition, passengers 

were asked a series of questions, such as whether they packed their own 

bags, to help prevent attacks in which passengers unknowingly carry 

dangerous items onto an aircraft. At the security checkpoint, passengers 

were screened by walk-through metal detectors and with metal-detecting 

hand wands if the walk-through metal detectors’ alarms were activated. 

Passenger carry-on baggage was screened with X-ray equipment. Other 

procedures that were sometimes performed included screening checked 

baggage for bulk quantities of explosives using X-ray computed 

tomography equipment and the use of positive passenger-bag matching to 

remove bags not owned by those aboard the aircraft. 

According to data provided by FAA, prior to September 11, 2001, 

screening procedures were performed at U.S. airports by approximately 

19,500 screeners. Passenger and property screening was one of the most 

substantial aviation security responsibilities assumed by TSA with the 

passage of ATSA. ATSA required that screening of individuals and property 

at U.S. airports be conducted by federal employees and companies under 

contract with TSA. In February 2002, the agency assumed the responsibility 

for passenger and property screening at all U.S. commercial airports, 

except at five airports participating in a pilot program, which would 

operate with private security contractor personnel. To continue the daily 

operations until a federal screener workforce was hired, trained, and 

deployed, TSA contracted with incumbent screener companies. On 

March 1, 2003, pursuant to the Homeland Security Act of 2002,9

 TSA began 

9

 Pub. L. 107-296, 116 Stat. 2135 (Nov. 25, 2002). 

Page 5 GAO-05-558 Year 2000 Screening Costs 
to perform its transportation security functions as an agency of the 

Department of Homeland Security. 

Prior to September 11, 2001, we were conducting work at the request of the 

Subcommittee on Aviation, House Committee on Transportation and 

Infrastructure, to assess the screening operations of air carriers and to 

determine who should be responsible for screening.10 One of the areas 

under evaluation was the cost of passenger and property screening under 

various alternatives, including how much it would cost to have the federal 

government take over screening functions. In April 2001, we contacted ATA 

to obtain information on screening costs incurred by air carriers. ATA 

contacted member carriers and requested that they provide information on 

their costs associated with the security screening of passengers and 

checked baggage. Based on the information it said was provided by its 

members, ATA sent us a memo dated August 22, 2001, stating that “ATA 

believes that the estimated costs of implementing federal security 

requirements and conducting required security programs amounts to 

nearly $1 billion per year for the entire industry.” In addition, the memo 

included some detail on the direct security costs incurred by ATA members 

annually, which reportedly totaled $511.8 million. 

During a congressional hearing held on September 19, 2001, Delta’s then 

Chief Executive Officer (CEO) corroborated the $1 billion security cost 

estimate when he stated in response to a question raised by a member of 

Congress that “relative to the security measures, we as an industry 

probably spend on the order of a billion dollars or so per year now on 

security.”11 Subsequently, responding to TSA’s proposal to increase the 

ASIF, ATA stated that the amounts cited by airline executives were 

generalized estimates for all domestic and international industry security 

costs; not just passenger and property screening. ATA further explained 

that the estimates were “best guesses” that reflected security costs for 

functions in addition to passenger and property screening. 

10 GAO, Aviation Security: Weaknesses in Airport Security and Options for Assigning 

Screening Responsibility, GAO-01-1165T (Washington, D.C.: Sept. 21, 2001). 

11 Statement of Leo F. Mullin, Chairman and CEO of Delta Airlines at congressional hearing 

held on September 19, 2001, before the House Committee on Transportation and 

Infrastructure, H.R. 2891, To Preserve the Continued Viability of the United States Air 

Transportation System. 

Page 6 GAO-05-558 Year 2000 Screening Costs 
When we requested documentation supporting this estimate as part of our 

current review, ATA responded that the estimate provided in its August 

2001 memo to us was a rough estimate of security costs based on limited 

information provided by a handful of air carriers in response to a less-thanrigorous survey. ATA added that it did not have and could not obtain 

detailed and consistent cost data due to the various ways in which air 

carriers provided security services. Further, ATA stated that air carriers 

were not consistent in recording and accounting for the security-related 

costs in their internal systems. The substantial difference between costs 

reported earlier by the aviation industry and those reported by air carriers 

in their Appendix A submissions precipitated the legislative mandate that 

GAO review passenger and property screening costs. Details of our review 

and our estimate of calendar year 2000 passenger and property screening 

costs follow. 

Overall Estimate of 

Passenger and 

Property Screening 

Costs 

With the assistance of our contractors, we estimate at a 95 percent 

confidence level that the airline industry’s costs to provide passenger and 

property screening in calendar year 2000 for the 3 major cost components 

was between $425 million and $471 million, with a midpoint estimate of 

$448 million. This amount is $129 million more than the $319 million 

reported and paid by the air carriers to TSA. 

We found that determining exact cost amounts was not feasible for several 

reasons, including the following: 

• Five years had passed since the costs were incurred. 

•	 The air carriers’ accounting systems were not designed to capture 

specific passenger and property screening costs at the level of detail 

TSA had requested. 

•	 Certain cost categories required the application of assumptions to 

identify, categorize, or allocate cost. 

Given this, we focused on estimating for 2000 the 3 primary screening cost 

components covered in Appendix A: (1) costs associated with the use of 

private screening contractors (or airline employees if they performed the 

screening function directly), (2) airport costs related to passenger and 

property screening that were passed on to air carriers, and (3) air carrier 

internal costs associated with screening functions. Our estimate of each of 

these costs components is shown in table 2. 

Page 7 GAO-05-558 Year 2000 Screening Costs 
Table 2: Comparison of 2000 Passenger and Property Screening Costs Reported in 

the Appendix A to GAO Estimate 

Dollars in millions 

Air carrier’s GAO 

Cost component Appendix A costs estimatea Difference 

Private screening contractors costsb $293 $334 $41 

Airport costs 5 80 

Air carriers’ internal costs 21 34 

Total $319 $448 $129 

Source: GAO analysis. 

a

See app. I, table 9, for related confidence intervals.


b

Includes airline employee costs if they performed the screening function directly.


In 2000, air carriers were responsible for providing and paying for the costs 

associated with screening passengers and property prior to boarding 

aircraft. Air carriers typically contracted with private companies to 

perform these services on their behalf. Airports were required to restrict 

access to the preboarding sterile area and to provide law enforcement 

officers to respond to potential incidents at the screening checkpoints 

within a certain time frame. To varying degrees, such airport-incurred costs 

were passed on to air carriers through airport rates and charges. In 

addition, air carriers incurred certain internal costs in carrying out these 

functions, such as the costs of managing and providing legal support for the 

security company contracts. 

Page 8 GAO-05-558 Year 2000 Screening Costs 

75 

13 
Costs Associated with the 

Use of Private Screening 

Contractors 

Table 3: Costs Associated with the Use of Private Screening Contractors 

Dollars in millions 

Calendar year 2000 cost Air carrier’s GAO


component Appendix A costs estimatea Difference


Private screening contractors costsb $293 $334 $41 

Source: GAO analysis. 

a

See app. I, table 9, for related confidence intervals.


b

Includes airline employee costs if they performed the screening function directly.


Labor costs associated with screening passengers and property were the 

most significant screening-related cost to the air carriers in 2000. Air 

carriers typically contracted with private screening companies to perform 

these services on their behalf, and the rates charged combined many costs, 

such as background checks, training, and uniforms. In some instances, air 

carrier employees performed the screening. We estimate at a 95 percent 

confidence level that the costs associated with the use of private screening 

contractors (or air carrier employees if they performed the screening 

function directly) during 2000 were between $313 million and $355 million, 

with a midpoint estimate of $334 million. This is about $41 million more 

than the $293 million reported on Appendix A by the air carriers for this 

cost component. 

To estimate these direct screening costs, we identified the major 

companies providing screening services in 2000 and requested their billing 

records. Over 70 companies provided screening services in 2000, with 

10 companies representing over 80 percent of the industry and 

2 companies comprising almost half of the industry. We asked the top 10 

companies how much they had billed for screening services by air carriers 

and received usable information from 9 of them. Although we received over 

7,000 invoices from the remaining and largest company during 2000, the 

data were incomplete and could not be used to project estimates for the 

remaining companies. For the 9 companies that did provide useable data, 

we determined that they had billed the air carriers approximately 

$208 million for screening-related services in 2000. These companies also 

provided numerous non-screening-related services (for example, 

wheelchair assistance and skycap service), which we excluded from our 

Page 9 GAO-05-558 Year 2000 Screening Costs 
estimate. Using a regression analysis12 from the useable data, we estimate 

total screening company costs are $334 million. We performed two other 

tests on the data to assess whether our overall assumptions used to 

estimate these costs were reasonable. Both of these methods yielded 

results that were within the range provided by the regression analysis. 

Airport Costs Related to 

Passenger and Property 

Screening 

Table 4: Airport Costs Related to Passenger and Property Screening 

Dollars in millions 

Calendar year 2000 cost Air carrier’s GAO


component Appendix A costs estimatea Difference


Airport costs $5 $80 $75 

Source: GAO analysis. 

a

See app. I, table 9, for related confidence intervals. 

Regarding the second cost category—airport costs related to passenger 

and property screening that were passed on to the air carriers—we 

estimate at a 95 percent confidence level that air carriers incurred costs 

between $71 million and $89 million, with a midpoint estimate of 

$80 million. This was well above the $5 million reported by the air carriers. 

12 Regression analysis is a statistical method of measuring the extent to which variations in 

one variable are associated with variations in other variables. 

Page 10 GAO-05-558 Year 2000 Screening Costs 
The two major cost categories that airports charged to the air carriers as 

screening-related costs were costs for law enforcement officers and real 

estate costs associated with security checkpoints. To estimate these airport 

costs, we selected a representative sample of the approximately 430 U.S. 

airports that screened passengers in 2000 and extrapolated13 the 

information obtained to the whole industry. The stratified sample included 

the 20 airports with the largest number of estimated screened passengers 

plus an additional 50 airports. The 70 sampled airports accounted for 

approximately 75 percent of the total estimated 530.4 million screened 

passengers during 2000 at U.S. airports. 

For each airport in the sample, we attempted to interview the appropriate 

airport officials and collect (1) specific screening-related costs charged to 

or incurred by the air carriers, (2) airport rate-making methodologies, and 

(3) air carrier use agreements. We used the information obtained to 

estimate total airport charges and believe that our methodology and 

underlying data provide a reasonable basis for our estimate. Fifty-nine of 

the 70 airports, including 19 of the 20 largest airports, and 40 of the 

50 additional airports, provided data that we used to extrapolate to the 

remaining airports. 

Costs for Law Enforcement Based on the review of information from the 59 airports, we estimate at a 

Officers	 95 percent confidence level that air carriers incurred costs for law 

enforcement officers with screening-related responsibilities between 

$56 million and $76 million, with a midpoint estimate of $66 million. This is 

significantly higher than the $1.5 million reported by the air carriers. 

According to the air carriers, they did not report these costs for two main 

reasons: (1) information on law enforcement officers’ costs and time spent 

completing specific duties was not readily available; thus many air carriers 

did not attempt to estimate these costs and (2) they contend that they are 

still paying law enforcement officers’ costs. 

The estimate for this cost component would have been even higher if all 

airports had passed on law enforcement officers’ charges to the air 

carriers. For example, at Los Angeles International Airport, the largest 

U.S. airport in terms of screened passengers, none of the costs associated 

with providing law enforcement officers were passed on to the air carriers. 

These costs were covered by nonairline revenues, such as concession 

13 See our scope and methodology in app. I for an explanation on how we extrapolated the 

results of our sample evaluation. 

Page 11 GAO-05-558 Year 2000 Screening Costs 
revenues. In contrast, at Dallas Fort Worth and many other airports, 

100 percent of law enforcement officer costs associated with checkpoint 

security were directly billed to the air carriers. In these cases, 100 percent 

of the charge was used in calculating our estimate. Other sampled airports 

combined law enforcement officers’ costs with other terminal costs and 

varied in how they passed costs on to air carrier tenants. If the airport 

allocated a portion of its airportwide law enforcement officers’ budget to 

the terminal cost center, we estimated the share of terminal law 

enforcement officer costs related to passenger and property screening, and 

then included in our estimate only the share of such costs that was passed 

on to the airlines based on the airports’ rates and charges methodology. 

Costs for Security Checkpoint Airport charges for the leased space where screening checkpoints were 

Space	 located varied greatly among the sampled airports. However, we observed 

some general tendencies. If the checkpoint was located in space that was 

rented by air carrier tenants, we calculated the real estate cost based on 

square footage and the applicable rental rate. On the other hand, if the 

checkpoint was located in airport space for which air carrier tenants were 

not directly charged, we estimated the cost based on the airport’s rate 

structure. Specifically, if the costs for public space were absorbed by the 

airport or were not factored into the cost pool used to determine air carrier 

space rental rates, we did not assign any cost to the airlines to calculate our 

estimate. Whereas, if the costs for public space were rolled into the cost 

pool to determine airline rental rates, then the air carrier indirectly paid for 

the space and we included the cost in our estimate. Based on the sample of 

59 airports, we estimate at a 95 percent confidence level that air carriers 

incurred security real estate costs between $11 million and $15 million, 

with a midpoint estimate of $13 million compared to the $3.4 million 

reported on Appendix A by the air carriers. 

Page 12 GAO-05-558 Year 2000 Screening Costs 
Air Carrier Internal Costs 

Related to Passenger and 

Property Screening 

Table 5: Air Carrier Internal Costs Related to Passenger and Property Screening 

Dollars in millions 

Calendar year 2000 cost Air carrier’s GAO


component Appendix A costs estimatea Difference


Air carriers’ internal costs $21 $34 $13 

Source: GAO analysis. 

a

See app. I, table 9, for related confidence intervals. 

Air carrier internal costs include, among other things, installation, 

operation, maintenance, and testing of screening equipment; ground 

security coordinators; security program management and contract 

administration; and legal and accounting support. To estimate the air 

carrier internal costs, we first grouped the air carriers into categories based 

on types of operations as shown in table 6. 

Table 6: Air Carrier Groupings 

Type Description Examples 

Legacy Major hub and spoke carriers American, Delta, United 

Low cost Primarily nonhub carriers Southwest, JetBlue 

Regional Carriers operating regional jet and commuter aircraft Comair, Mesa, Skywest 

Foreign Non-U.S. airlines Air Canada, British Airways 

Other Niche carriers Hawaiian, U.S. Airways Shuttle 

Source: GAO analysis. 

We then reviewed and analyzed the air carrier Appendix A cost 

submissions, interviewed 12 air carriers that together account for 

63 percent of total estimated screened passengers in 2000. In addition, we 

reviewed workpapers prepared by independent auditors as part of the audit 

of certain air carriers’ Appendix A submissions. Based on the information 

obtained from these sources, we designed cost-estimating methodologies 

and applied them to air carriers based on their grouping, relying on the 

assumption that air carriers of the same type would have similar cost 

structures. For example, legacy carriers with major hubs would likely incur 

certain costs, such as operational maintenance of screening equipment, 

Page 13 GAO-05-558 Year 2000 Screening Costs 
which other regional or low-cost carriers might not typically incur. This 

estimation resulted in approximately $13 million more in air carrier 

internal costs in our estimate than the air carriers reported in the 

Appendix A. 

Conclusion	 We estimate that passenger and property screening costs incurred by air 

carriers in calendar year 2000 for the major cost components were 

$448 million, resulting in a difference of $129 million from air carrierreported costs of $319 million. As such, TSA is not obtaining all of the 

proceeds of the ASIF authorized by ATSA. 

Recommendation for 	 We are making one recommendation for executive action that will allow 

TSA to more fully collect the ASIF, as authorized by ATSA. Specifically, we Executive Action	 recommend that the Secretary of Homeland Security direct the Assistant 

Secretary, Transportation Security Administration, to consider the analysis 

and estimates in this study in determining the limitation on the aggregate 

air carrier fee consistent with ATSA (49 U.S.C. § 44940(a)(2)(B)(i)). 

Agency Comments 	 We requested comments on a draft of this report from the Secretary of 

Homeland Security or his designee. TSA indicated that it will consider the 

analysis and estimates in our study as we recommended. TSA also provided 

us with techincal comments, which we incorporated where appropriate. 

We are sending copies of this report to the Secretary of Homeland Security 

and the Assistant Secretary, Transportation Security Administration. We 

will also make copies available to others upon request. In addition, the 

report is available at no charge on the GAO Web site at http://www.gao.gov. 

Page 14 GAO-05-558 Year 2000 Screening Costs 
Should you or your staff have any questions on matters discussed in this 

report, please contact me at (202) 512-6906 or williamsm1@gao.gov or 

Casey Keplinger, Assistant Director, at (202) 512-9323 or 

keplingerc@gao.gov. Other major contributors to this report were Sharon 

Byrd, Heather Dunahoo, Jeff Jacobson, Carla Lewis, Gloria Medina, Zakia 

Simpson, and Bethany Smith. 

McCoy Williams 

Director, Financial Management and Assurance 

Page 15 GAO-05-558 Year 2000 Screening Costs 
List of Congressional Committees 

The Honorable Judd Gregg


Chairman


The Honorable Robert C. Byrd


Ranking Minority Member


Subcommittee on Homeland Security


Committee on Appropriations


United States Senate


The Honorable Conrad Burns


Chairman


The Honorable John D. Rockefeller IV


Ranking Minority Member


Subcommittee on Aviation


Committee on Commerce, Science, and Transportation


United States Senate


The Honorable Harold Rogers


Chairman


The Honorable Martin Olav Sabo


Ranking Minority Member


Subcommittee on Homeland Security


Committee on Appropriations


House of Representatives


The Honorable John L. Mica


Chairman


The Honorable Jerry F. Costello


Ranking Democratic Member


Subcommittee on Aviation


Committee on Transportation and Infrastructure


House of Representatives


Page 16 GAO-05-558 Year 2000 Screening Costs 
Appendix I 

Scope and Methodology


To assist us in evaluating passenger and property screening costs incurred 

by air carriers in 2000, we contracted with Simat, Helliesen & Eichner, Inc. 

(SH&E), a consulting firm with significant aviation industry expertise, 

through a competitive award process. SH&E subcontracted with 

PricewaterhouseCoopers LLP for additional accounting and finance 

expertise and with Abt Associates for additional statistical capabilities. To 

provide a basis for the contractors’ work, we developed an audit strategy to 

independently determine a reasonable estimate of the 2000 passenger and 

property screening costs incurred by the airlines. We oversaw the project 

and worked closely with contractors as they planned and executed their 

work. To ensure a sound approach to the study, we reviewed the 

contractors’ work plans, sampling plans, questionnaires, and workpapers. 

We participated in significant meetings, provided continual oversight and 

feedback, and received periodic briefings from the contractors. 

Develop an 

Understanding 

To develop an understanding of the passenger and property screening 

process and the issues involved in measuring associated costs, we 

conducted numerous interviews and informational meetings with key 

stakeholders, including representatives of the Transportation Security 

Administration (TSA); the Department of Transportation’s (DOT) Office of 

Inspector General (OIG); the Department of Homeland Security’s (DHS) 

OIG; and the Air Transportation Association of America, Inc., as well as 

current and former Federal Aviation Administration (FAA) security 

officials. We also interviewed subject matter experts, current and former 

airline officials with security-related responsibilities at both the corporate 

headquarters and airport station levels, finance and operations officials at 

major airports, and other individuals. 

We reviewed numerous documents that were publicly available or made 

available to us for the purposes of this study. These included public and 

airline industry comments on the imposition of the Aviation Security 

Infrastructure Fee; regulatory documents concerning FAA requirements for 

passenger and property screening in calendar year 2000 and other 

regulatory documents; prior studies and testimonies on passenger and 

property screening; TSA analyses of passenger and property screening 

costs; and the workpapers of the DHS OIG, which was conducting a 

separate review of airline passenger and property screening costs in 2000. 

We thoroughly reviewed and analyzed cost data that had been submitted by 

airlines on Appendix A submissions to understand the types of costs that 

were identified, the relative magnitude of those costs, and how the costs 

Page 17 GAO-05-558 Year 2000 Screening Costs 
Appendix I 

Scope and Methodology 

were determined. We also used the Appendix A submissions to perform an 

initial benchmarking analysis to identify obvious outliers and potential 

gaps in certain cost categories. 

Design of Analytical 	 We determined the primary cost drivers for providing passenger and 

property screening services in 2000 and designed an approach to measure Framework	 these costs. Based on the understanding of the screening process acquired 

during the planning stage of our review, we identified three primary cost 

components: 

1.	 Costs associated with the use of private screening contractors (or 

airline employees if they performed the screening function directly). 

2. Airport costs related to passenger and property screening. 

3. Internal airline costs. 

Data Collection and 

Cost Estimation 

A database of screened passengers by airport and airline in calendar year 

2000 was prepared to provide the basis for developing unit cost rates for 

use in the expansion of sampled results to an overall U.S. system total. 

These data were estimated using publicly available airline passenger 

traffic data sources, including the DOT Passenger Origin-Destination 

Survey; the DOT T-100 Flight Segment database; the DOT Part 298C 

Passenger Data; and origin-destination passenger data as adjusted by 

Database Products, Inc. 

We determined that an origin and destination (O&D) measure was the most 

appropriate metric for use in the analysis, since other traffic measures, 

such as enplanements, include a substantial number of connecting 

passengers at hub airports who do not pass through screening. However, 

we did include inbound international passengers who connect to domestic 

flights and are re-screened at U.S. gateway airports. The screened 

passenger estimates also include certain domestic to international 

connecting passengers who require a second screening because they 

change terminals when connecting to their international flights. The 

database identifies calendar year 2000 screened passengers by airport, 

airline, and traffic category. As possible, the database was validated by 

analysis and reconciliation with other data sources. The screened 

Page 18 GAO-05-558 Year 2000 Screening Costs 
Appendix I 

Scope and Methodology 

passenger database was used as a basis for expansion of sample data in 

each of the three primary cost analyses. 

Project Work Plan	 Our project work plan included three major work elements designed to 

independently quantify the costs incurred by airlines within each of three 

identified primary cost areas, which are explained below. 

Screening Industry Cost We compiled and classified billing records from nine private screening 

Analysis	 companies that generated over $200 million in calendar year 2000 

screening revenues and represented approximately 62 percent of the 

overall U.S. passenger and property screening market. We assumed that 

companies provided full billing records and could not independently verify 

the data. A summary of these data is provided in table 7. 

Table 7: Screening Company Billings and Number of Screeners Prior to 

September 11, 2001 

Screening company Billings Screening employees 

1 $67,151,628 4,201 

2 41,975,478 2,833 

3 57,312,687 2,426 

4 9,606,700 

5 8,196,675 

6 3,334,114 

7 7,528,050 

8 6,961,848 

9 6,318,085 

Total $208,385,265 12,075 

Source: GAO analysis. 

Page 19 GAO-05-558 Year 2000 Screening Costs 

 615 

 565 

 509 

 477 

 275 

 174 
Appendix I 

Scope and Methodology 

Using the data collected for the nine screening companies, we used a 

regression model to estimate total screening costs. The basic form of a 

simple linear regression model is as follows: 

ˆ ˆ ˆ Yi = β 0 + β1 xi

where :

Yˆ

i = the i

th value of the Variable to be estimated

β

ˆ

0 = the estimated value of Y when x = 0

ˆ

β1 = the slope of the line (the increase in Y when x = 1)

xi = the i

th value of the predictor Variable

Since it is reasonable to assume that a company with zero employees 

would have zero screening costs, we have used a model that assumes the 

intercept term (beta zero) is zero.

1

 Based on the data for the nine screening 

companies, the estimated beta 1 parameter is 17,014. In other words, for 

every employee, the model predicts $17,014 in screening costs. 

Thus, screening costs can be estimated through the following: 

Screening costs per company = $17,014 × number of screening employees 

This model shows a strong correlation between the number of screening 

employees and the screening costs per company and provides a statistically 

significant relationship between the number of screening employees and 

screening costs per company. A comparison of the predicted values and the 

actual values shows a difference of about 1.4 percent for the 9 screening 

companies. In addition, model diagnostics indicate that the model provides 

a reasonable fit to the data. 

Using this model, we calculated a predicted value for each of the 

10 screening companies with no billing data and the remaining screening 

employees not identified within the top 19 screening companies. 

1

 We considered a regression model including an intercept parameter; however, the 

estimated parameter is not statistically significant from zero. 

Page 20 GAO-05-558 Year 2000 Screening Costs 
Appendix I 

Scope and Methodology 

A 95 percent confidence interval around the estimate ranges from 

$313 million to $355 million. 

We considered several options for estimating total screening costs, such as 

a simple ratio of billings to employees and a regression model based on 

number of passengers rather than number of employees. However, we used 

the regression method based on number of employees because it provided 

the most precise estimate (i.e., the narrowest confidence interval). 

Airport Cost Analysis	 We interviewed, collected financial data, and analyzed screening-related 

costs at 59 U.S. airports, including 19 of the 20 largest airports and a cross 

section of other airports of different sizes. These 59 airports accounted for 

approximately 70 percent of total U.S. screened passengers in 2000. 

Through the interviews, we collected information on airport rate-making 

methodologies, airline use agreements, and specific screening-related costs 

that were recovered from the airlines in calendar year 2000. The data 

obtained were used to quantify screening costs at the sample airports and 

then extrapolated to the total U.S. airport system. An overview of the 

approach to estimating airport costs is summarized below. 

•	 Developed an understanding of airport responsibilities for passenger 

and property screening and identified the types of screening-related 

costs were incurred at airports that may have been passed on to the 

airlines. 

•	 Conducted informational interviews with senior officials at selected 

airports. 

• Designed a stratified sample of U.S. airports. 

• Developed interview protocol and guidelines. 

• Scheduled interviews with airport officials. 

• Conducted interviews. 

• Obtained backup documentation and clarification. 

• Quantified costs by airport and calculated unit cost rates. 

• Extrapolated sample results to U.S. airport system total. 

Page 21 GAO-05-558 Year 2000 Screening Costs 
Appendix I 

Scope and Methodology 

The stratified sample of airports used to develop our estimate was drawn 

from the 400 largest U.S. airports, based on outbound O&D passengers,2 

which represented 99.9 percent of total estimated screened passengers at 

U.S. airports in calendar year 2000. The 400 airports were divided into 

5 strata based on the volume of outbound O&D passengers. Because the 

20 largest airports accounted for approximately one-half of total U.S. O&D 

passengers, all 20 of these major airports were included in the airport 

sample. 

Fifty airports were randomly sampled from strata 2 to 5. The sample 

contained 20 airports from Stratum 2, and 10 airports each from strata 3 

to 5. Airports in strata 2 to 5 were then divided into 10 groups, each with 

5 airports from the various strata, to ensure that a representative, unbiased 

sample would be interviewed, even if there were not enough time to 

interview all of the sample airports. However, interviews were ultimately 

attempted with all sample airports in strata 2 to 5 as shown in table 8. 

Table 8: Number of Airports in Stratified Sample 

Stratum Estimated screened passengers Percentage of total No. of airports Sample airports 

1 270,557,510 51.0% 20 20 

2 136,932,121 25.8% 27 20 

3 69,321,908 13.1% 34 10 

4 33,284,409 6.3% 60 10 

5 20,305,673 3.8% 289 10 

Total 530,401,621 100.0% 430a 

Source: SH&E. 

a

After the sample design was completed, a complete list of airports that had passenger and property 

screening in 2000 was provided by former FAA officials now with TSA. That list identified 430 airports, 

compared to the 400 airports from which the stratified sample was drawn. The additional 30 airports 

accounted for only 0.1 percent of estimated screened passengers. 

The goal of the airport survey was to collect cost information for at least 

50 of 70 sample airports (including Stratum 1 airports) in order to 

extrapolate the results to the total population of U.S. airports. We 

interviewed representatives from 59 of the 70 sample airports. Airports 

2

 Outbound O&D passengers were used as a proxy of screened passengers to develop the 

airport sample, which proceeded in parallel with the estimation of the number of screened 

passengers in calendar year 2000. 

Page 22 GAO-05-558 Year 2000 Screening Costs 

70 
Appendix I 

Scope and Methodology 

whose representatives were not interviewed were generally unable to 

participate because of schedule issues. For two airports, we relied on DHS 

OIG workpapers, in lieu of a study team interview. 

The estimated airport screening costs borne by airlines were correlated 

with airport size. Our sampling and analysis strategy was designed to use 

this relationship to obtain the highest possible precision from the sample 

airport observations. Sixty of the 68 airports we attempted to contact 

provided usable responses within the time limits of this study. Across the 

strata, response rates ranged from 70 percent to 95 percent. Accordingly, 

we assigned each responding airport a sampling weight equal to the 

number of airports in its stratum (N) divided by the number of responding 

airports (n) to extrapolate to the total airport population. 

Airline Internal Cost 

Analysis 

The objective of the airline internal cost analysis was to prepare an 

independent estimate of airline internal costs related to passenger and 

property screening that were not captured through the separate analyses of 

contract screener industry costs and airport costs. To develop an 

understanding of airline responsibilities for passenger and property 

screening and to identify internal cost functions, we reviewed FAA 

regulations and the Air Carrier Standard Security Plan for calendar year 

2000. We also interviewed airline officials who had been in security-related 

positions in calendar year 2000. 

The analysis is based on several sources of information, including the 

airline Appendix A submissions and accompanying notes. We relied on 

information obtained from interviews that were conducted with officials 

from 12 airlines that accounted for 63 percent of total estimated calendar 

year 2000 screened passengers at U.S. airports. Finally, we reviewed and 

relied upon workpapers prepared by the airlines’ independent auditors and 

information compiled by the DHS OIG during its recent review. 

The airline internal cost analysis focused on 11 cost categories from 

Appendix A: 

• Line 16—Screening Equipment Installation 

• Line 17—Operating, Maintenance and Testing of Screening Equipment 

• Line 24—Ground Security Coordinators 

Page 23 GAO-05-558 Year 2000 Screening Costs 
Appendix I 

Scope and Methodology 

• Line 25—Security Program Management 

• Line 26—Security Contract Administration and Oversight 

• Line 28—Legal Support 

• Line 29—Accounting Support 

• Line 30—Other Administrative Support 

• Line 31—Insurance 

• Line 34—Fees for Oversight of Consortium Contracts 

• Line 35—Other (includes fines) 

In performing the analysis, airlines were classified into five groups to 

identify potential differences in operating and cost characteristics: 

•	 Legacy: Major hub and spoke carriers (e.g., American, Delta, and 

United). 

• Low Cost: Primarily nonhubbing carriers (e.g., Southwest and JetBlue). 

•	 Regional: Carriers operating regional jet and commuter aircraft (e.g., 

Comair, Mesa, and Skywest). 

•	 Foreign: Non-U.S. airlines (e.g., Air Canada, British Airways, and 

Mexicana). 

•	 Other: Niche carriers (e.g., Hawaiian, Midwest Express, and 

US Airways Shuttle). 

We developed two analytical approaches for estimating airline internal 

costs. The first approach applies to 6 of the Appendix A costs categories 

(Lines 16, 17, 25, 26, 28, and 29) and utilizes information reported in 

Appendix A and the accompanying footnotes to estimate total industrywide 

airline internal costs. Airline interviews and auditor workpaper reviews 

indicated that the air carriers that submitted costs for these six line items 

generally followed reasonable and logical methodologies to develop their 

estimates. Therefore, we relied on average unit cost rates for airlines that 

did identify these line item costs and applied those to nonreporting and 

Page 24 GAO-05-558 Year 2000 Screening Costs 
Appendix I 

Scope and Methodology 

nonfiling carriers within individual carrier groupings to estimate the 

unreported costs. 

A separate bottom-up approach was used to estimate costs for 

Line 24-Ground Security Coordinators (GSC) and Line 35-Other Costs 

(including FAA fines). Costs for GSC functions were developed from study 

team estimates of the total number of qualified GSCs in 2000, applicable 

training requirements, the total number of checkpoints at U.S. airports in 

2000, the average amount of time spent on monthly checkpoint audits and 

daily tasks, and an average fully burdened wage rate for GSC airline 

employees. For Line 35-Other Costs (including FAA fines), we used the 

midpoint of Appendix A costs, which were known to be understated, and 

FAA Quarterly Enforcement Reports to estimate industry costs for this 

category. 

Independent estimates were not prepared for 3 costs categories (Lines 30, 

31, and 34), since it was concluded that the amounts reported in 

Appendix A were representative of overall airline industry costs. 

Confidence Intervals	 The confidence intervals for each of the statistically derived estimates 

referred to throughout the report are presented in table 9. 

Table 9: Summarization of Cost Estimate Point Estimates and Confidence Intervals 

Dollars in millions 

Cost estimate Point estimate Confidence interval at a 95% confidence level +(-) 

Private screening contractors costsa $334 $21 

Airport costs 80 

Law enforcement officers 66 

Security checkpoint space 13 

Air carriers’ internal costs 34 0 

Overall estimate and confidence interval 

of passenger and property screening 

costs $448 $23 

Source: GAO analysis.


Note: Numbers may not add due to rounding.


a

Includes airline employee costs if they performed the screening function directly.


Page 25 GAO-05-558 Year 2000 Screening Costs 

9 

10 

 2 
Appendix I 

Scope and Methodology 

Limitations to the 

Analysis 

In preparing the cost estimates, we generally relied upon representations 

and information provided by air carriers, government agencies, airports, 

and screening companies. Procedural limitations were encountered related 

to (1) the amount of time that has passed since calendar year 2000, 

(2) access and availability of cost or accounting records, (3) access and 

availability of individuals due to employee turnover, (4) corporate 

structural changes (i.e., bankruptcy, acquisitions, etc.), and (5) record 

retention policies. Certain cost categories required the application of 

assumptions to identify, categorize, or allocate cost due to the structure, 

limitations, or both of the air carrier, airport, or screening company 

accounting systems. While nearly all entities contacted were cooperative, 

the following information or documents requested were not provided 

consistently from all air carriers and other stakeholders: (1) air carrier 

calendar year 2000 Section 108 Security Plans, (2) identification or 

allocation of time and expense related to ground security coordinators, 

(3) full and complete billing records and supporting documentation for all 

screening companies, and (4) full and complete information on airport 

rates and charges structures at individual airports and records on airport 

rental payments received from airlines. 

We also identified certain security-related functions for which we were not 

able to measure the cost given the lack of available information and the 

limited time frame to complete the work. Examples of such costs include 

(1) security-related real estate costs for airline-owned terminals; (2) costs 

associated with Computer Assisted Passenger Prescreening System 

(CAPPS); and (3) costs related to Positive Passenger Bag Match. Although 

analyzing the costs of these additional functions would likely increase our 

estimate, we were unable to determine costs associated with these 

functions within our time frame and believe that we have captured the 

primary cost components. 

We requested comments on a draft of this report from the Secretary of 

Homeland Security or his designee, as discussed in the Agency Comments 

section. 

We performed our work in accordance with generally accepted government 

auditing standards from October 2004 through April 2005. 

(195058) Page 26 GAO-05-558 Year 2000 Screening Costs 
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