[Federal Register Volume 72, Number 99 (Wednesday, May 23, 2007)]
[Rules and Regulations]
[Pages 28837-28851]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-9941]


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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 158

[Docket No. FAA-2006-23730; Amendment No. 158-4]
RIN 2120-AI68


Passenger Facility Charge Program, Debt Service, Air Carrier 
Bankruptcy, and Miscellaneous Changes

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final rule.

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SUMMARY: This final rule amends FAA regulations dealing with the 
Passenger Facility Charge (PFC) program to add more eligible uses for 
revenue, protect such revenue in bankruptcy proceedings, and eliminate 
charges to passengers on military charters. These changes respond to 
the Vision 100--Century of Aviation Reauthorization Act. This final 
rule also revises current reporting requirements to reflect 
technological improvements, and to clarify and update existing 
references and regulations. This final rule further streamlines the 
existing policies of the PFC program.

DATES: This amendment becomes effective June 22, 2007.

FOR FURTHER INFORMATION CONTACT: For technical questions concerning 
this final rule, contact Sheryl Scarborough, Airports Financial 
Analysis and Passenger Facility Charge Branch, APP-510, Federal 
Aviation Administration, 800 Independence Avenue, SW., Washington, DC 
20591; telephone: (202) 267-8825; facsimile: (202) 267-5302; e-mail: 
<a href="/cdn-cgi/l/email-protection#780b101d0a0114560b1b190a1a170a170d1f10381e1919561f170e"><span class="__cf_email__" data-cfemail="f7849f92858e9bd9849496859598859882909fb7919696d9909881">[email protected]</span></a>. For legal questions concerning this final 
rule, contact Beth Weir, Airports Law Branch, AGC-610, Federal Aviation 
Administration, 800 Independence Avenue, SW., Washington, DC 20591; 
telephone (202) 267-5880; facsimile: (202) 267-5769.

SUPPLEMENTARY INFORMATION: 

Authority for This Rulemaking

    The FAA's authority to issue rules regarding aviation safety is 
found in Title 49 of the United States Code. Subtitle I, Section 106 
describes the authority of the FAA Administrator. Subtitle VII, 
Aviation Programs, describes in more detail the scope of the agency's 
authority.
    This rulemaking is promulgated under the authority described in 
Subtitle VII, Part A, Subpart I, Section 40117. Under that section, the 
FAA is charged with prescribing regulations to impose a passenger 
facility fee to finance eligible airport-related projects. This 
regulation is within the scope of that authority because Vision 100 
requires the FAA to change the PFC program. Many actions in this 
document are in response to Vision 100.

Background

    On March 23, 2005, the FAA published a final rule establishing a 3-
year pilot program for non-hub airports to test new application and 
application approval procedures for the PFC program (70 FR 14928). The 
2005 final rule contains several changes designed to streamline the PFC 
application and amendment procedures for all PFC applications and 
amendments, thereby improving the entire PFC program.
    The FAA published the 2005 final rule to address Congressional 
mandates in the Vision 100--Century of Aviation Reauthorization Act 
(Vision 100). The non-hub pilot program, with the PFC application 
streamlining procedures, however, was only one of six mandates 
specified in Vision 100. The FAA separated the non-hub program and 
related changes from the other mandates because Congress had required 
the FAA to publish proposed rules on the pilot program within 180 days 
of enactment of Vision 100.
    On February 1, 2006, the FAA published the notice of proposed 
rulemaking (NPRM), ``Passenger Facility Charge Program, Debt Service, 
Air Carrier Bankruptcy, and Miscellaneous Changes'' (71 FR 5188) to 
address the remaining mandates in Vision 100. These mandates include:
    (1) Making low-emission airport vehicles and ground support 
equipment eligible for PFC funding,
    (2) Using PFCs to pay debt service on projects that are ``not an 
eligible airport-related project'' when there is a financial need at an 
airport,
    (3) Clarifying the PFC status of military charters,
    (4) Structuring PFC account requirements for carriers in 
bankruptcy, and
    (5) Making eligible the use of PFC revenue as local share for 
projects under the air traffic modernization cost-sharing program.
    In addition, the FAA is adopting other changes that streamline 
benefits beyond those contained in the 2005 final rule. These changes 
will:
    (1) Provide for the electronic filing of notices and reports,
    (2) Provide a process for periodic review and change of the carrier 
compensation level, and
    (3) Modify the content and due date for some public agency reports 
and notices.

Summary of Comments

    The FAA received 12 comments. All of the commenters generally 
support the proposed changes. These comments include suggested changes, 
as discussed below.
    Seven of the comments are from public agencies: Allegheny County 
Airport Authority, Pittsburgh, PA; Charlottesville-Albemarle Airport 
Authority, Charlottesville, VA; City and County of Denver, Denver, CO; 
Mahlon Sweet Field, Eugene, OR; Port Authority of New York and New 
Jersey, New York, NY; Norman Y. Mineta San Jose International Airport, 
San Jose, CA; and City of St. Louis, St. Louis, MO. Two comments are 
from aviation industry

[[Page 28838]]

groups: The Air Transport Association of America and the Airports 
Council International--North America. Two comments are from private 
citizens: Steven E. Myers and Kanisha K. Carty. One comment was 
submitted anonymously.
    In the discussion of comments below, the following applies:
    (1) Acronyms: The FAA uses the following acronyms or shortened 
names to identify the associated commenters:

    <bullet> Air Transport Association of America (ATA)
    <bullet> Airports Council International--North America (ACI)
    <bullet> Allegheny County Airport Authority (Pittsburgh)
    <bullet> Charlottesville-Albemarle Airport Authority 
(Charlottesville)
    <bullet> City of St. Louis (St. Louis)
    <bullet> City and County of Denver (Denver)
    <bullet> Mahlon Sweet Field (Eugene)
    <bullet> Norman Y. Mineta San Jose International Airport (San Jose)
    <bullet> Port Authority of New York and New Jersey (PANYNJ)

General Comments

    The FAA received general comments about the PFC program from 
Pittsburgh, ACI, and Charlottesville.
    Pittsburgh believes the FAA has not gone far enough to make the PFC 
program a much more efficient and effective capital funding source for 
all domestic commercial service airports. Pittsburgh contends there 
should be an increase in the PFC level with the maximum level indexed 
on a yearly basis to inflation. Pittsburgh also claims the use of PFCs 
should be expanded to any airport-related capital project.
    ACI believes the PFC program should become an ``impose and audit'' 
program where an airport would make the local decision to impose a PFC 
and then certify to the FAA the airport used the PFC revenues on 
eligible capital projects or debt service. ACI would also like to see 
the non-hub pilot program (Sec.  158.30) expanded to more airports.
    ACI also expressed concern about potential administrative problems 
which could arise from the lengthy payout process for projects financed 
by debt instruments. ACI argued it is concerned about the potential for 
an ``administrative accident'' that could impair the ability of an 
airport to continue to make its debt service payments for the full term 
of the indebtedness.
    Charlottesville is concerned about airlines requiring airports to 
accept PFC remittances by wire transfer. Charlottesville stated its 
bank charges the airport $0.26 per wire received. Charlottesville 
requested the FAA consider adding language to the proposed rulemaking 
to make the method of PFC remittance the airport's choice, not the 
airline's requirement.
    Pittsburgh's and ACI's comments regarding recasting the PFC program 
as an ``impose and audit program'' and expanding the non-hub pilot 
program to additional airports address areas outside the scope of this 
rulemaking. The proposals suggested by Pittsburgh and ACI would require 
changes to the PFC statute (49 U.S.C. 40117).
    ACI was unclear in its comments as to who, public agencies or the 
FAA, might have caused the ``administrative accidents'' during the 
closeout process. The FAA recently completed development and 
implementation of a program management system that should prevent the 
FAA from prematurely closing a PFC decision. The database requires the 
charge expiration date to be reached, and all projects to be physically 
and financially completed before the FAA can close a decision. 
Financial completion occurs after the approved amount of PFC revenue 
has been collected and the PFC portion of the project, including any 
debt instruments, paid. Public agencies may access and use the system 
to better monitor their PFC programs, thus minimizing administrative 
problems.
    Charlottesville's comments regarding the method of PFC remittance 
are also outside the scope of this rulemaking and were not included in 
the economic analysis. The FAA may consider this issue in a future 
rulemaking. However, it is unlikely that the FAA would consider a $0.26 
charge for each wire transfer as burdensome on the airport. Such a 
charge would cost the airport no more than $3.12 per air carrier each 
year. Weighed against the systematic convenience of a wire transfer 
which could reduce the chance of loss or delay, this cost appears 
reasonable.
    The FAA made no changes to part 158 because of these general 
comments.

Changes Mandated by Vision 100

Low-Emission Airport Vehicles and Ground Support Equipment

    This provision makes low-emission airport vehicles and ground 
support equipment eligible for PFC funding if the airport is located in 
an air quality nonattainment or maintenance area.
    Kanisha Carty recommended, for a future rulemaking, that airport 
projects to reduce emissions from vehicles and ground support equipment 
be made mandatory.
    PANYNJ does not agree with the low emission standards contained in 
the Voluntary Airport Low Emission (VALE) Technical Guidance document. 
PANYNJ argued the current VALE criteria are inflexible and unrealistic. 
PANYNJ believes there is a gap between the equipment the FAA has 
determined is eligible for VALE funding and the equipment actually 
available for purchase.
    ACI requested clarification of the eligibility for PFC funding of 
safety and security vehicles. ACI believes these types of vehicles were 
already eligible for full PFC funding and this preexisting eligibility 
is not clearly discussed in the NPRM. ACI also believes it would be 
beneficial to extend the eligibility to areas covered by Early Action 
Compacts. (Early Action Compacts are areas for which the effective date 
of the nonattainment designation has been deferred because the area is 
expected to reach or maintain attainment status by December 31, 2006. 
Note 6, List of U.S. Commercial Service Airports and Their 
Nonattainment and Maintenance Status.) ACI also pointed out a 
typographic error in Sec.  158.15(b)(8).
    Ms. Carty's recommendation would be a fundamental change in the PFC 
program that could require a statutory change, as the PFC program does 
not enforce Federal priorities for project selection. Even if the 
proposal does not require statutory changes, public comment would be 
required before the FAA could adopt such a change. Therefore, the 
proposal to make the VALE Program mandatory is not included in this 
rulemaking.
    The FAA's Airports Planning and Environmental Division and the 
Environmental Protection Agency, as directed by Vision 100, determined 
the types of equipment eligible under the VALE Program jointly. This 
guidance, found in the VALE Technical Report at http://www.faa.gov/airports_airtraffic/airports/environmental/vale/media/VALE_TR_v3_092206.pdf, was developed outside the parameters of this rulemaking. 
PANYNJ's comments have been forwarded to FAA's Airports Planning and 
Environmental Division for its consideration.
    This final rule adds a definition of ``Ground Support Equipment'' 
to Sec.  158.3 to cover those vehicles that are eligible for the VALE 
Program but are not otherwise eligible for PFC funding. Aircraft rescue 
and firefighting, security, and snow removal vehicles are not included 
in this definition because these vehicles are already PFC-eligible 
under Sec.  158.15(b)(1). To ease confusion over which vehicles are 
eligible for the VALE Program, the FAA is revising proposed Sec.  
158.15(b)(8) to clarify that the references to ``vehicles'' mean 
vehicles eligible under Sec.  158.15(b)(1).

[[Page 28839]]

The FAA is also correcting the typographic error identified by ACI in 
paragraph Sec.  158.15(b)(8).
    Vision 100 specifically limits VALE projects to airports located in 
air quality nonattainment areas or maintenance areas as defined by 
sections 171(2) and 175A of the Clean Air Act, respectively. A 
statutory change is required to add areas covered by Early Action 
Compacts to this eligibility.

Use of PFC Revenue To Pay for Debt Service for Non-Eligible Projects

    This provision allows the use of PFC revenue to pay debt service on 
projects that are not eligible airport-related projects when there is a 
financial need at the airport.
    Eugene argued, in the case of an airline bankruptcy which results 
in the rejection of a significant portion of air carrier gate leases, 
``significant'' should be defined as rejection of 20 percent or more of 
the airport's leased gates. Eugene further holds that a significant 
reduction in air service should be defined as anything greater than a 
10 percent reduction in enplanements at the airport.
    Eugene also believes that this provision should be geared towards 
something less than catastrophic changes in the airport's financial 
position. Eugene maintained the triggering events should include an 
airport having difficulty meeting industry standards for financial 
stability. Eugene suggested indicators of financial instability should 
include high airline rates and charges, a high percentage of reliance 
on airline revenue, reductions in force, deferred maintenance, negative 
equity, insufficient capital reserves, and other negative impacts 
created by a significant change.
    Finally, Eugene suggested that requests for use of PFCs to pay debt 
service for otherwise ineligible projects be treated differently than 
other requests for PFC collection authority. Eugene suggested, under 
circumstances in which the airport asserts that a financial need has 
been demonstrated and the incumbent carriers unanimously agree the 
existing part 158 criteria have been met, the FAA should grant 
extraordinary flexibility in the application of this rule. Eugene 
requested that, if the application is denied under this process, the 
FAA's decision include an explanation of the denial.
    PANYNJ believes airports should be given the flexibility to use 
PFCs for any airport project that is connected to the movement of 
people and cargo for the purposes of commerce, trade, travel, and 
tourism. PANYNJ also argued airports should be given the flexibility to 
use PFCs to pay debt service on non-eligible projects if the airport 
determines this use would be good fiscal management and would enable 
airport management to effectively maintain and operate the airport.
    ATA pointed out three inconsistencies between the statute and the 
proposed regulatory language. ATA noted that 49 U.S.C. 40117(b)(6) 
refers to ``debt service on indebtedness'' but Sec. Sec.  158.13(e) and 
158.18 refer to ``debt service or indebtedness.'' ATA expressed concern 
that the proposed language in Sec. Sec.  158.13(e) and 158.18 referring 
to ``indebtedness incurred to carry out an airport project'' could be 
interpreted to permit the use of PFC funds for projects located off 
airport property. Finally, ATA noted that 49 U.S.C. 40117(b)(6) refers 
to ``the financial need of the airport'' but proposed Sec. Sec.  
158.13(e) and 158.18 refer to ``the financial need of the public 
agency.'' ATA is concerned this change from the statutory language 
could result in approval of debt service even if the financial need is 
not related to the airport.
    ACI requested clarification of the term ``reserve fund'' as it is 
used within the definition of ``financial need.'' ACI also requested 
clarification of the statement ``cannot meet its operational or debt 
service obligations.'' ACI is concerned the FAA meant an airport had to 
miss a required payment in order to qualify.
    ACI asked that several events be added to the list of events, 
provided in the NPRM preamble, which might contribute to a financial 
crisis at an airport. The first of ACI's suggested events is an airport 
being found in violation (including technical violation) of its bond 
covenant, trust indenture, or other financing requirements. ACI also 
would like to add the failure of an air carrier, whether or not in 
bankruptcy, to use the facilities at the airport for a significant 
period of time to the list of events contributing to a financial crisis 
at the airport. Two final triggering events suggested by ACI are the 
failure of a carrier to make timely payments to the airport and the 
failure of a carrier to collect or remit PFCs. ACI would also like the 
FAA to clarify when discussing air carriers in this context that the 
FAA means both domestic and foreign air carriers.
    ACI would also like to alter the proposed procedures airports must 
use to gain approval to use PFCs under this provision. ACI argued an 
airport should be allowed to use PFCs under this provision if the 
airport could demonstrate it otherwise would not be able to pay its 
debt service, meet coverage requirements, or otherwise be in violation 
of bond covenants based on prospective calculations. ACI argued if 
airports cannot rely on prospective calculations, PFCs would not be 
available for debt service until after a financial crisis. ACI also 
recommended airports not be required to go through the normal 
application process. Rather ACI recommended the following four-step 
process:
    (1) The airport declares that it is experiencing a financial 
crisis;
    (2) The airport notifies the FAA of the basis of the crisis;
    (3) The airport applies (existing) PFCs to the immediate need; and
    (4) The FAA reviews the application within 60 days of submission 
and either ``ratifies'' the airport's use of PFCs or requires some 
modification of the airport's use of PFCs.
    ACI concluded its comments on this provision by requesting that the 
proposed prohibition on an airport issuing new debt be revised. The 
first suggested revision would allow an airport to issue new debt to 
refund outstanding debt. The second revision would allow an airport to 
issue new debt if it can be shown that failure to do so would have 
greater financial repercussions.
    The comments submitted anonymously argued the proposed rule 
unnecessarily limits the use of PFCs to pay debt service on ineligible 
projects. The commenter also argued the FAA has not undertaken a 
substantive alternatives analysis on this provision. The commenter 
believes the FAA should provide ``significant justifications'' beyond 
the statutory mandate for the proposed rulemaking.
    In order to provide the maximum flexibility to each airport, the 
FAA has elected not to specify percentages with respect to a 
significant number of gates or reduction in air service since the 
appropriate percentage could vary from airport to airport. The FAA 
suggests an airport applying to collect and use PFCs under this 
provision determine what percentage of gates or air service is 
significant for its operations and defend that choice in its 
application.
    The FAA suggested several events in the preamble of the NPRM that 
might result in an airport finding itself in financial need. The FAA 
did not consider this listing to be comprehensive. An airport seeking 
to demonstrate its financial need is welcome to discuss any triggering 
events applicable to its unique situation.
    The FAA does not agree that all of the proposed indicators of 
financial instability provided by Eugene and ACI

[[Page 28840]]

are, in fact, indicators of instability. Some of these indicators, 
including reductions in force and deferred maintenance, could be 
indicators of prudent financial management and/or changing priorities. 
Furthermore, terms such as ``high airline rates and charges,'' ``a high 
percentage of reliance on airline revenue,'' ``the failure of an air 
carrier to use airport facilities for a significant period of time,'' 
and ``failure of a carrier to make timely payments to the airport'' are 
vague and subjective and must be considered on an airport-by-airport 
basis. The FAA encourages each airport applying to use PFC revenue 
under this provision to thoroughly discuss in its application those 
factors it believes most clearly indicate its financial need.
    After reviewing ATA's comments on Sec. Sec.  158.13(e) and 
158.18(a), the FAA has concluded that an unintended consequence of the 
wording ``indebtedness incurred to carry out an airport project'' could 
be airports applying to use PFC revenue to pay the debt services costs 
for projects located off airport property if those projects were 
labeled as ``airport projects.'' The FAA does not believe that Congress 
intended for this provision to be used on off-airport projects. 
Therefore, the FAA has returned to the statutory language, 
``indebtedness incurred to carry out at the airport a project,'' in 
this final rule. The FAA also acknowledges the typographic error, 
``debt service or indebtedness,'' and has returned this rule language 
to ``debt service on indebtedness.'' Finally, the FAA acknowledges that 
the term ``financial need of the public agency'' could lead to requests 
to use PFCs to pay debt service on an otherwise ineligible project due 
to a financial crisis unrelated to the airport. The FAA does not 
believe Congress intended for this provision to be on a non-airport 
related financial need. Therefore, the FAA has returned to the 
statutory language ``financial need of the airport,'' in this final 
rule.
    The term ``reserve fund'' used within the new definition of 
``financial need'' refers only to the operational or capital reserve 
fund and not any reserve funds required under financing documents. The 
FAA's definition of financial need as it concerns this provision 
concentrates on the ability of an airport to maintain airport/flight 
operations. However, the FAA does not intend that an airport miss 
required payments in order to demonstrate that it ``cannot meet its 
operational or debt service obligations.'' Rather, the FAA expects an 
airport attempting to demonstrate that it faces a financial crisis to 
discuss factors likely to affect its ability to make required payments 
in the future. Projections of revenue streams and cash flow would be 
relevant to that demonstration.
    The discussion in the preamble to the NPRM regarding the issuance 
of new debt does not prohibit the issuance of new debt. Rather, the FAA 
believes any airport that is granted authority to collect and use PFC 
revenue under this provision should use this revenue to help it return 
to a position of financial stability as quickly as possible. Therefore, 
as a part of its deliberations on the application, FAA will consider 
the airport's plans to return to financial stability. If an airport 
believes incurring new debt (for any purpose) will help it return to 
financial stability as soon as possible, it should discuss this factor 
in the application.
    The various proposals submitted by Eugene, PANYNJ, and ACI for the 
FAA on processing requests to collect and use PFC revenue to pay debt 
service for otherwise ineligible projects and defining eligibility are 
not being adopted in this final rule. Vision 100 clearly requires the 
FAA (representing the Secretary of Transportation) rather than the 
airport itself to determine that an airport is in financial need. 
Furthermore, Vision 100 does not provide any special processing 
language for this provision. Therefore, the processing provided for in 
49 U.S.C. 40117, which requires the FAA make its decision prior to an 
airport collecting or using PFC revenue, must be applied to this 
provision. Similarly, proposals for defining eligibility go beyond the 
scope of the statute and cannot be implemented by rulemaking. The FAA 
has, since the beginning of the PFC program, included its reasons for 
every partial approval and disapproval of a project in its decisions. 
The FAA will continue this practice for any requests submitted under 
this provision that are denied.
    The anonymous commenter's argument appears to be based on the 
assumption that the FAA would not consider alternatives in its 
financial needs analysis of an airport's proposal. The FAA stated in 
the preamble to the NPRM that we will analyze each proposal on a case-
by-case basis. This provision responds to a statutory mandate that is 
based on an airport's financial need. A structured model has the 
potential to be overly restrictive in a financial needs analysis. The 
FAA has chosen to make this provision flexible in order to allow each 
airport to tailor its application to its particular circumstances.

Clarification of Applicability of PFCs to Military Charters

    This provision clarifies the PFC status of military charters.
    ACI expressed concern that Sec.  158.9(a)(6), as written, would 
allow individual passengers flying on scheduled commercial air carrier 
flights to be exempt from paying PFCs.
    The FAA reviewed the proposed language in Sec.  158.9(a)(6) and 
does not agree with this comment. Section 158.9(a)(6) reads as follows: 
``Enplaning at an airport if the passenger did not pay for the air 
transportation that resulted in the enplanements because of Department 
of Defense (DOD) charter arrangements and payment.'' By the use of the 
word ``and,'' the language, as written, imposes two conditions for the 
exemption--the passenger is on a flight chartered by DOD and the flight 
is paid for by DOD. This language does not apply to individuals who pay 
for their own transportation nor does it apply to individuals who are 
not traveling under DOD charter arrangements.
    Accordingly, the FAA made no changes to Sec.  158.9(a)(6).

Financial Management of Passenger Facility Fees

    This provision structures PFC account requirements for air carriers 
in bankruptcy.
    Denver expressed concern that the changes to the regulation 
proposed in the NPRM do not address who enforces compliance with the 
PFC statute and regulation when an air carrier files for bankruptcy 
protection.
    Denver requested that the regulations be modified to state that an 
airport has the legal standing to protect its PFCs. Denver requested 
the regulation specifically state an airport has a sufficient stake in 
the PFC program such that it is entitled to seek legal protection from 
a court with appropriate jurisdiction to compel an air carrier's 
compliance with the PFC regulation. In support of this request, Denver 
cited a recent bankruptcy case in which the bankrupt air carrier argued 
public agencies had no standing to enforce this provision of Vision 
100.
    Denver also requested Sec.  158.49 be modified to state that any 
party that holds PFCs for a public agency holds such PFCs in trust for 
the benefit of the public agency. Denver contended this relationship 
should extend to third parties, including credit card companies. Denver 
would also like the regulation to describe which parties beyond the 
covered air carrier shall be subject to the PFC regulations. Denver 
contended that Sec.  158.49(b) recognizes

[[Page 28841]]

the concept of an agent of the air carrier but does not define which 
third parties would be considered agents.
    Denver is concerned the proposed Sec.  158.49(c) does not require a 
separate trust account for PFCs but leaves open the possibility that an 
air carrier could simply create a sub-account within an existing trust 
account and claim compliance with the ``designate separate PFC 
account'' requirement. Denver is concerned sub-accounts in existing 
trust fund accounts are typically controlled by the secured creditors 
and are subject to provisions in complex agreements not made available 
to the public agencies.
    Denver claimed the regulation should clarify post-petition 
accounting requirements and require covered air carriers to demonstrate 
how the ``PFC reserve'' for each affected airport was calculated. 
Denver also requested that the regulation make clear that any funds in 
the PFC reserve are in the nature of trust funds. Denver holds that 
these PFC reserve funds should be available to pay PFCs in the event a 
covered air carrier fails to make its PFC payments. Denver contended 
funds in the PFC reserve should only be released for non-PFC purposes 
after all affected airports have received the appropriate PFC 
remittances. Denver also argued the funds in the PFC reserve should be 
equitably allocated to all affected airports if a covered air carrier 
ceases operations.
    In addition, Denver requested the regulation provide the procedure 
to allow an airport to recover its costs when an airport is forced to 
protect its PFCs. Denver claimed it has expended funds to hire outside 
and local counsel, file motions, appear in court, and otherwise incur 
costs to protect its PFC revenues in four bankruptcy cases since Vision 
100 was enacted. Denver believes it is unclear from the proposed 
regulation whether it should invoice a non-compliant air carrier, seek 
recovery through the FAA, or file a motion or complaint in the 
appropriate court. Denver suggests the regulation clarify that the 
right to compensation is a post-petition claim which should be treated 
as an administrative expense entitled to priority under 11 U.S.C. 
503(b). Denver further suggests that the regulation provide that the 
claim should be allowed irrespective of any requirement in the 
Bankruptcy Code that the airport prove a ``benefit to the estate.'' 
Denver also suggests that the claim should be allowed in the event the 
bankruptcy case converts from Chapter 11 to Chapter 7. Denver would 
also like clarification regarding which costs are eligible for 
reimbursement.
    ACI recommended the definition of ``covered air carrier'' be 
expanded beyond the category specified by Vision 100 to include air 
carriers in financial distress, even if they have not yet declared or 
been forced into bankruptcy. ACI goes on to recommend that an air 
carrier which fails to remit PFCs in a timely manner or fails to 
properly report PFC collections to any airport be required, from that 
point forward, to place its PFC collections daily into a segregated 
escrow account or trust fund absolutely dedicated to the airports for 
which the air carrier collected them.
    ACI also argued that an air carrier that ``cannot prove it can 
provide accurate accounting, on an airport-by-airport basis'' should be 
required to establish separate PFC trust accounts for each airport.
    ACI also requested clarification of Sec.  158.49(c)(1)(v), 
regarding reconciliation of an estimated PFC monthly balance. ACI is 
concerned this paragraph does not cover air carriers to reconcile the 
amounts in the PFC account if they deposit PFC revenues directly into 
the segregated PFC account.
    ACI also argued the word ``unnecessarily'' should be deleted from 
Sec.  158.49(c)(4). ACI believes Vision 100 clearly states that any 
failure by a carrier to comply with any provision of subsection (m) of 
Vision 100 that causes an airport to spend money to recover or retain 
its PFCs imposes an obligation on that carrier to compensate the 
airport for such costs.
    St. Louis is concerned with the language in Sec.  158.49(c)(3) 
regarding the prohibition on covered air carriers granting security or 
other interests in PFC revenues to third parties. St. Louis claimed it 
has been told by air carriers that this language would prevent the 
carrier from granting a security interest in the PFCs to the airports 
on whose behalf the charges are collected. St. Louis requested the FAA 
clarify Sec.  158.49(c)(3) since this section does not apply to public 
agencies but rather applies to banks and other airline creditors.
    ATA is concerned the definition of ``covered air carrier'' is 
overly broad because it does not protect air carriers from frivolous 
involuntary bankruptcy filings. ATA asserts that contracts which 
contain involuntary bankruptcy provisions typically include a grace 
period (usually 30 to 90 days) to obtain dismissal of any involuntary 
petition. ATA believes this grace period gives an air carrier time to 
resolve ``illegitimate bankruptcy petitions and petty disputes.'' ATA 
requested the definition of ``covered air carrier'' be modified to 
state an air carrier ceases to be a covered air carrier upon its exit 
from bankruptcy protection. ATA also requested the FAA allow for some 
flexibility in Sec.  158.49(c) to reflect the complex nature of airline 
financial management.
    Neither 49 U.S.C. 40117 nor 14 CFR part 158 restricts the legal 
remedies available to public agencies. Since the beginning of the PFC 
program, public agencies have had legal rights with respect to PFC 
revenue. Public agencies are entitled to avail themselves of all legal 
remedies to ensure they receive the PFC revenue to which they are 
entitled. Specific enforcement responsibilities are not described in 
the existing PFC statute, 49 U.S.C. 40117, and further clarification to 
assist public agencies would require legislative action. The FAA 
believes the air carriers' assertion that airports have no standing 
with regard to PFC revenue in bankruptcy cases is ill-founded. However, 
in the case of PFC collection issues, the FAA works with all air 
carriers to bring them into compliance with PFC collection, handling, 
and remittance requirements so that the public agencies need not resort 
to legal challenges. On those occasions where, for whatever reason, the 
air carrier has insufficient PFC revenue in its accounts to meet all of 
its PFC obligations, the FAA works with the affected public agencies to 
ensure they are treated equally and receives their proportionate share 
of the available revenue.
    In the context of the PFC regulation, an ``agent'' of an air 
carrier is a third party who is authorized to issue airline tickets for 
the air carrier. Credit card companies, banks, and other secured 
creditors that are not authorized to issue airline tickets are not 
agents of the air carrier. Collecting air carriers are statutorily 
prohibited (49 U.S.C. 40117(m)(3)) from granting any third party an 
interest in trust moneys such as PFCs. If, through an agreement with an 
air carrier, a third party holds 100 percent of ticket revenue (which 
would include applicable PFCs), it would appear that the air carrier is 
violating this statutory prohibition. The only authorized holders of 
PFC revenue are air carriers and public agencies.
    Section 158.49(c)(1) specifies that a covered air carrier must 
segregate its PFC revenue in a designated separate PFC account. This 
PFC account is intended to hold all PFC revenue separate from any other 
air carrier revenue so that it is easier to identify in bankruptcy 
proceedings. A subaccount within an existing account would not meet 
this requirement for a separate PFC account.

[[Page 28842]]

    The ``PFC reserve fund'' is not calculated on an airport-by-airport 
basis. Rather, the reserve is equal to the one-month average of the air 
carrier's total PFC collections for the 12 months preceding its filing 
for bankruptcy protection. The FAA is adding language to Sec.  
158.49(c)(1)(ii) to indicate that, in the event a covered air carrier 
ceases operations while still owing PFC remittances, the PFC reserve 
fund could be used to make those remittances. The FAA is also adding 
language that the remaining balance, after all PFC obligations are met, 
will be returned to the air carrier's general account after the carrier 
emerges from bankruptcy and ceases to be a covered air carrier.
    The FAA is removing the word ``unnecessarily'' from Sec.  
158.49(c)(4). As mentioned above, this provision applies only to the 
reasonable and necessary costs incurred by a public agency seeking to 
recover or retain payment of PFCs when a covered air carrier refuses to 
remit the PFCs.
    Vision 100 does not contain formal instructions for public agencies 
on how to recover funds expended to recover or retain PFCs from a 
covered air carrier. Federal oversight has served to assist public 
agencies in the initial recovery of PFCs. However, public agencies are 
entitled to avail themselves of all legal remedies, to include filing 
of a post-petition administrative claim to recoup funds used for 
recovery or retaining PFCs with the appropriate Bankruptcy Court. The 
FAA takes this opportunity to clarify that the public agency's expenses 
discussed in Sec.  158.49(c)(4) apply to those expenses that a public 
agency may incur when a covered air carrier refuses to remit PFCs. 
Bankruptcy law makes participation in a bankruptcy proceeding 
unavoidable for public agencies seeking to assure a carrier implements 
the PFC financial management requirements of Vision 100. Participation 
may be necessary even when the air carrier is willing to implement the 
provision. Expenses a public agency may choose to incur to generally 
represent its claims in a bankruptcy proceeding are not included in 
this provision.
    The FAA is not granting ACI's request to expand the definition of 
covered air carrier beyond those carriers filing for bankruptcy 
protection. ACI's request to include carriers in financial distress 
within the covered air carrier definition would require a statutory 
change. In addition, the FAA is not modifying part 158 to require an 
air carrier (not just a covered air carrier) that fails to remit PFCs 
or report PFC collections in a timely manner to place all PFC revenue 
daily in a segregated escrow account or a dedicated trust fund. This 
proposal goes beyond the scope of the NPRM and would require the 
opportunity for public comment before it could be adopted.
    The FAA did not include a requirement in Sec.  158.49(c)(1)(iv) 
that a covered air carrier undertake a monthly reconciliation of actual 
monthly PFC amount for those carriers that are depositing the daily PFC 
amount in the segregated PFC account. Covered air carriers that deposit 
the daily PFC amount are depositing the actual amount collected less 
the air carrier compensation fee. The FAA is requiring covered air 
carriers that opt for the estimated monthly collection amount in Sec.  
158.49(c)(1)(v) to undertake a monthly reconciliation. We are adopting 
this requirement because the actual amount could be different from the 
estimated amount and we want to ensure the PFC account contains the 
funds necessary for the covered air carrier to meet its PFC 
obligations.
    The FAA is partially granting the relief sought by ATA with regard 
to frivolous involuntary bankruptcy filings. The FAA is modifying the 
definition of covered air carrier to provide a 90-day grace period to 
allow an air carrier to seek dismissal of an involuntary bankruptcy 
filing before the air carrier becomes a covered air carrier. However, 
this grace period will be limited to those air carriers that are 
current on their PFC remittances. The FAA is also revising the 
definition of ``covered air carrier'' to indicate that an air carrier 
ceases to be a covered air carrier when it emerges from bankruptcy 
protection.

Changes Associated With Technological Improvements

    This provision updates various PFC procedures to take advantage of 
technological improvements since the PFC program's inception in 1990 
including the use of electronic or paperless airline ticketing, the use 
of electronic mail to send documents, and Web sites to post 
information.
    ATA argued that the proposed definition of the point of issuance of 
airline tickets would result in negative unintended consequences 
including extensive airline ticketing programming changes and unequal 
tax treatment for international passengers depending on the form of 
payment.
    ATA also supported the database development discussed in the NPRM. 
ATA recommended that the FAA work with a committee of airport and 
airline representatives to design airport and airline modules. ATA 
suggested that having the airports and airlines participate in the 
design of the modules they will use would help to achieve widespread 
buy-in to this new database. ATA also recommended the FAA develop 
standards and procedures for airports, airlines, and other reporting 
entities that need access to reports, summaries, and other information 
necessary to ensure accurate information is being input in the 
database.
    The FAA proposed the definition of point of issuance of airline 
tickets as part of a strategy to ensure PFCs collected for tickets with 
wholly U.S. itineraries are collected using the procedures in Sec.  
158.45 rather than the procedures in Sec.  158.47. A second part of 
this strategy was a proposal to insert language in Sec.  158.47 
regarding tickets for wholly U.S. travel. Based on the concerns raised 
by ATA, the FAA has decided to drop the proposed definition of point of 
issuance of airline tickets in Sec.  158.3. The FAA believes that the 
proposed revisions to Sec.  158.47 are sufficient to ensure that all 
applicable PFCs will be collected.
    Since the NPRM was published, the FAA has completed development of 
the public agency module of the PFC database. The module was deployed 
in June 2006. The FAA plans to work closely with air carriers regarding 
design and development of the air carrier module, and welcomes ATA's 
participation.
    As each module of the database is developed and deployed, the FAA 
is gathering business rules and data standards applicable to that 
module. The FAA will work with all system users to determine the most 
effective method of publication for these rules and standards.

Changes To Streamline PFC Procedures, Codify PFC Policies, or Address 
Issues or Questions About the PFC Program

PFC Administrative Costs

    This provision directs public agencies wishing to use PFC revenue 
to pay for allowable PFC administrative support costs to treat those 
costs as a separate and distinct PFC project in a PFC application or 
notice of intent.
    San Jose believes that PFC administrative support costs should be a 
part of the project costs. San Jose suggests that its administrative 
costs are minimal compared to its overall PFC program. San Jose also 
argued that it would not be cost effective to submit and maintain a 
separate application for PFC administrative support costs.
    ACI requested that the FAA clarify that the costs of administering 
a PFC

[[Page 28843]]

project; i.e., managing a construction project, remain eligible and 
should continue to be included in the general projects.
    The FAA agrees with San Jose that it would not be cost effective 
for a public agency to submit and maintain a separate application for 
PFC administrative support costs. However, the proposal in the NPRM 
does not require public agencies to submit and maintain a separate PFC 
application for these costs. Rather, the proposal would require that 
PFC administrative support costs be treated as a separate project in an 
application, not a separate application, if the public agency wishes to 
reimburse itself for these costs using PFC revenue. PFC administrative 
support costs include the cost to prepare a PFC application or notice 
of intent as well as amendments, and other actions associated with that 
application or notice; prepare and distribute quarterly reports; and 
annual audits of its PFC program. PFC administrative support costs do 
not include construction or project management associated with a 
specific development project. Construction or project management costs 
may be treated either as an incidental cost within the development 
project or as a separate stand-alone project within an application.
    The FAA made no changes to part 158 because of the comments 
received on this section.

Duration of Authority To Impose a PFC Before Project Implementation

    This provision clarifies the required timing of PFC project 
implementation.
    ACI believes the proposed revisions are confusing and recommends 
alternate language. ACI also argued the time period for when the 
decision date is used rather than the charge effective date should be 
30 days rather than the 60 days specified in the NPRM due to other 
recent or proposed changes regarding charge effective dates.
    The FAA has reviewed the proposed revision in the NPRM and ACI's 
suggested alternative language. As a result of this review, the FAA has 
made minor revisions to the regulatory language to reduce confusion. 
However, the FAA has retained the 60-day time period as proposed. 
Section 158.43(b)(3), as revised in this rulemaking, requires the 
charge effective date be the first day of the month and at least 30 
days after the approval date. For example, an application approved 
April 2, would have a charge effective date of June 1, 59 days after 
the decision date. Thus, the FAA has concluded that a 60-day time 
period is the correct differential between the charge effective and 
decision dates.

Amendment of Approved PFC

    This provision modifies the PFC amendment procedures to set a 
minimum dollar threshold for amendments requiring additional air 
carrier consultation and public notice and comment. For projects with 
original approved amounts at or above this threshold and for projects 
that are amended to or above this threshold, an increase of more than 
25 percent would trigger the need for consultation and public comment. 
For projects with original approved amounts below this threshold, 
public agencies would not need to consult with air carriers and provide 
the opportunity for public comment, regardless of the percentage 
increase in costs proposed.
    ATA recommended that, for projects with an original approved amount 
under $1 million, a limit of 50 percent be placed on the percentage of 
increase in the approved project amount allowed before the public 
agency is required to undertake additional airline consultation and 
public notice and comment. ATA also recommended that public agencies be 
required to undertake additional airline consultation and public notice 
for any project with an original approved amount of less than $1 
million whenever the approved amount for that project is amended to 
over $1 million.
    The FAA understands the concerns underlying ATA's comments and 
recommendations. Our intention in proposing a consultation-triggering 
threshold is to eliminate the burden on public agencies and air 
carriers that is related to the required consultation for low-cost 
projects. In the NPRM, the FAA attempted to devise a threshold that 
would capture significant changes to projects without also capturing 
small projects. The FAA is aware of only a few projects in the entire 
history of the PFC program that have been approved as low-cost projects 
and later amended to significantly over $1 million. After further 
review and consideration, the FAA concludes that the threshold proposed 
in the NPRM is reasonable and practical.
    However, in addition to the threshold proposed in the NPRM, the FAA 
has decided to adopt ATA's proposal to require additional air carrier 
consultation and public notice and comment when the PFC amount of a 
project is amended to over $1 million.
    The FAA declines to adopt ATA's proposal regarding a 50 percent 
limit on the amendment amount for projects under $1 million at this 
time. However, the FAA will closely monitor future amendments. The FAA 
will also pay particular attention to projects originally approved for 
low PFC amounts and later increased significantly. The FAA may 
undertake future rulemaking on amendments if it concludes public 
agencies are using the amendment thresholds to deliberately avoid 
future air carrier consultation and public notice.

Nonrefundable Tickets

    This provision clarifies that failure to travel on a nonrefundable 
or expired airline ticket is not a change in itinerary. Ticket 
purchasers holding nonrefundable or expired tickets are not entitled to 
a refund of any associated PFCs if the ticket purchaser is not entitled 
to any fare refund.
    Steven Myers is concerned the proposal regarding nonrefundable 
tickets is based on ticket costs. Mr. Myers argued PFCs should be 
refundable or nonrefundable to all travelers regardless of the airfare. 
Mr. Myers is also concerned this proposal would disproportionately 
affect minority and low-income travelers. He argued that, if this 
proposal disproportionately affects minority and low-income travelers, 
it should be subject to appropriate National Environmental Policy Act 
(NEPA) analysis.
    While the FAA agrees with Mr. Myers that nonrefundable tickets tend 
to cost less than refundable tickets, the FAA does not agree that 
nonrefundable tickets tend to be used disproportionately by lower 
income travelers. Most travel web sites provide an initial sort of 
ticket options by fare. Generally, most travelers' first review of 
flights shows the more restricted or nonrefundable fares; therefore, 
most travelers searching for coach class tickets are likely to have 
been presented with the option of purchasing a nonrefundable ticket.
    However, the FAA's proposed clarification that passengers holding 
nonrefundable or expired tickets are not entitled to a refund of any 
associated PFCs is not based on ticket price. Rather it is based on 
proposed travel in conjunction with air carrier fare and refund rules. 
Air carriers offer many different fare types with specific rules 
associated with each fare type. Some of those fare rules specify that a 
passenger is not entitled to a cash refund of the fare if the passenger 
does not travel as ticketed. The FAA is ensuring that PFCs are treated 
similarly. Mr. Myers is reminded that where a fare is applied to 
another ticket, so too is the PFC.

[[Page 28844]]

    This provision applies to all travelers and thus does not 
disproportionately affect minority or low-income travelers. Under the 
circumstances, NEPA is not triggered.

Air Carrier Collection Compensation

    This provision establishes a procedure for the FAA to periodically 
review and set the air carrier collection compensation level.
    ATA requested clarification of the term ``audited air carrier 
collection'' in Sec.  158.53(c)(1). It questions whether the FAA would 
require an opinion from the carriers' auditors as to the accuracy of 
the costs. ATA further questioned whether the air carriers' auditors 
would be able to provide this opinion if the carriers' accounting 
systems do not capture this information specifically for PFC 
collection, handling, and remittance.
    ATA also requested the regulations state that any future handling 
fee revision adopted as a result of the FAA's periodic review of 
collection compensation may not be reduced below the current $0.11. 
Alternatively, ATA suggested the submission of cost data be made 
mandatory to ensure the FAA has a complete set of industry data to use 
as the basis for re-setting the handling fee. ATA also suggests the FAA 
establish a 5-year cycle for review of the handling fee, establish a 
set of air carrier data points that will be used in establishing the 
fee, and publicize this endeavor so that air carriers can track the 
data prospectively rather than having to look back every 5 years.
    ACI is concerned that any change in the carrier compensation level 
may have an adverse affect on public agencies that have pledged their 
PFCs to bond payments. ACI is also concerned that escrow costs may be 
interpreted as being the cost a carrier in bankruptcy incurs to set up 
trusts for PFCs in accordance with Sec.  158.49(b).
    ACI argued Sec.  158.53 should be modified so that any carrier, 
whether or not in bankruptcy, which has failed to properly remit PFCs 
to any airport would not be entitled to receive compensation for the 
collection or remittance of any PFCs for any airport until that carrier 
has ``made good the PFCs it owes.''
    ACI also argued that, when considering any adjustment to the 
collection compensation level, the FAA should disregard any costs 
submitted by carriers that have failed to properly collect or remit 
PFCs. ACI believes the FAA should deduct the aggregate amount the 
airports have had to expend to collect PFCs from carriers that have 
improperly withheld them along with the amount of PFCs improperly 
withheld.
    The FAA mistakenly used the term ``audited costs'' in the preamble 
to the NPRM. Rather, the FAA intended to indicate costs submitted by a 
carrier should include a certification from the airline's Chief 
Financial Officer or independent auditor that the costs submitted are 
accurate.
    The FAA also mistakenly used the term ``escrow costs'' in the 
preamble to the NPRM. The FAA does not intend to allow the inclusion of 
costs related to the provisions of Sec.  158.49(c) in the calculation 
of the carrier compensation rate.
    The FAA is not aware of any adverse affects experienced by public 
agencies as a result of previous changes in the carriers' compensation 
rate. However, the FAA's proposed procedures for review of compensation 
rates will provide the opportunity for public agencies to comment on 
how any proposed change to the rate might affect the public agency 
before that proposed change goes into effect.
    Under 49 U.S.C. 40117, the FAA is required to calculate the 
carriers' collection compensation rate based on an average of the 
carriers' reasonable and necessary costs of collecting, handling, and 
remitting the PFCs. Therefore, the FAA cannot agree to set the current 
compensation rate of $0.11 per PFC collected as the permanent minimum 
rate as requested by ATA. Nor can the FAA agree to forgo consideration 
of certain carriers' costs when determining the average of their costs, 
as requested by ACI.
    The FAA continues to keep the submission of cost data by carriers 
as a voluntary effort. However, the FAA agrees it would be less 
burdensome on the carriers if the FAA published a schedule well in 
advance of the next FAA review of the compensation rate. Therefore, the 
FAA expects to publish a Federal Register notice at an appropriate time 
in the future providing this information. As for specific data elements 
air carriers should consider tracking, Sec.  158.53(c)(1) includes a 
list of cost categories applicable to the FAA's calculation of the air 
carrier PFC compensation rate. The FAA has added a new Sec.  
158.53(c)(2). The FAA will review data submitted by air carriers, if 
data represents at least 75 percent of PFCs collected nationwide. Based 
on analysis of this data, the FAA may set a new compensation level. 
This paragraph will ensure that the FAA does not make a decision based 
on grossly incomplete industry data.
    The FAA has determined that ACI's proposal that a carrier not be 
entitled to compensation until it properly remits all PFCs it owes is 
not practical given the collection, handling, and remittance procedures 
in place. First, carriers are entitled to keep the interest earned on 
the PFC revenue between the time the PFC is collected from the 
passenger and the time it is remitted to the airport. A carrier could 
not be identified as failing to properly remit PFCs to any airport 
until after the carrier earned this interest. Second, the airports 
would need to set up some sort of clearinghouse to process payments to 
carriers and to monitor carrier remittances to all airports. Finally, 
carriers are entitled to compensation based on the PFCs collected. This 
compensation is currently taken at the time of ticket issuance. ACI's 
proposal would appear to delay this compensation by at least two months 
due to the need to determine if a carrier had remitted the PFCs 
properly (remittance occurs at the end of the month following 
collection) and then collect all compensation payments from the 
airports. Any significant change to part 158 such as this must first be 
subject to public scrutiny and comment. This proposal has not been 
subject to such scrutiny. The FAA is accordingly not adopting ACI's 
proposal regarding withholding carrier compensation in this rulemaking.

Environmental Analysis

    Steven Myers stated he could not locate paragraph 3f of FAA Order 
1050.1E, referred to in the Environmental Analysis section of the NPRM. 
FAA mistakenly referred to an incorrect paragraph number. The correct 
reference should have been paragraph 312d of FAA Order 1050.1E. The FAA 
corrected the paragraph reference in the Environmental Analysis section 
of the final rule.

Corrections and Other Minor Changes to the Proposed Rule

    This final rule also corrects typograpgical errors that appear in 
the rule text of the proposed rule. The following is a list of these 
corrections to the rule text.
    1. Sec.  158.3, Notice of intent--Put ``/'' between ``and'' and 
``or.''
    2. Sec.  158.13(c)--Put ``Sec.  '' before ``Sec.  158.15(b).''
    3. Sec.  158.13(d)(2)--Change ``Sec.  158.13(b)(1)'' to ``Sec.  
158.13(d)(1).''
    4. Sec.  158.13(g)--Change ``Airport Improvement Program'' to 
``Airport Grant Program.''
    5. Sec.  158.15(b)(6)--Delete ``or'' at the end of this paragraph.
    6. Sec.  158.15(7)--Delete punctuation after ``Projects.''

[[Page 28845]]

    7. Sec.  158.18(a)--Change ``PFC on payments'' to ``PFC to make 
payments.''
    8. Sec.  158.20(b)--Start paragraph ``Once the database development 
is completed, with air carrier capability, public.''
    9. Sec.  158.37(b)(1)(ii)(C)--Add ``or'' at the end of the 
paragraph.
    10. Sec.  158.37(b)(1)(ii)(D)--Add ``; or'' at the end of the 
paragraph.
    11. Sec.  158.37(b)(5)--Change ``a change'' to ``an increase.''
    12. Sec.  158.39(a)--Add ``the'' between ``use'' and ``excess.''
    13. Sec.  158.47(c)(3) should be Sec.  158.47(c)(4).
    14. Sec.  158.49(c)(1)(iv)--Change ``its PFCs'' to ``the PFCs it 
collects.''
    15. Sec.  158.53(b)--Change ``account'' at the end of the first 
sentence to ``PFC Revenue.''
    16. Sec.  158.53(c)(1)--Change ``file in the first sentence to 
``provide.''
    17. Sec.  158.53(c)(2)--Change ``filed'' to ``provided.''
    18. Sec.  158.65(b)(2) Add ``following'' between ``the'' and 
``month'' at the end of the first sentence.
    19. Sec.  158.67(c)(2)--Change ``PFC is specifically addressed by 
the auditor'' to auditor specifically addresses the PFC.''

Paperwork Reduction Act

    As required by the Paperwork Reduction Act of 1995 (44 U.S.C. 
3507(d)), the FAA submitted a copy of the new information collection 
requirement(s) in this final rule to the Office of Management and 
Budget (OMB) for its review. OMB approved the collection of this 
information and assigned OMB Control Number 2120-0557. This final rule 
addresses the remaining mandates in Vision 100. Part 158 recordkeeping/
reporting requirements affect two groups of respondents--air carriers 
and public agencies. There are 450 respondents who will respond an 
estimated 2,400 times annually. It should be noted that air carriers 
have been collecting, keeping records and reporting on other aviation 
related fees (passenger tax, customs user fees, international 
transportation tax and immigration user fees) for many years. As a 
result, various sophisticated manual and computer systems are currently 
in place and have been modified to implement the PFC program. The total 
reporting burden hours is 22,805. The total recordkeeping burden is 
1,220 hours. There were no comments directed to the information 
collection burden.
    An agency may not collect or sponsor the collection of information, 
nor may it impose an information collection requirement unless it 
displays a currently valid OMB control number.

International Compatibility

    In keeping with U.S. obligations under the Convention on 
International Civil Aviation, it is FAA policy to comply with 
International Civil Aviation Organization (ICAO) Standards and 
Recommended Practices to the maximum extent practicable. The FAA has 
determined that there are no ICAO Standards and Recommended Practices 
that correspond to these final regulations.

Regulatory Evaluation, Regulatory Flexibility Determination, 
International Trade Impact Assessment, and Unfunded Mandates Assessment

    Changes to Federal regulations must undergo several economic 
analyses. First, Executive Order 12866 directs that each Federal agency 
shall propose or adopt a regulation only upon a reasoned determination 
that the benefits of the intended regulation justify its costs. Second, 
the Regulatory Flexibility Act of 1980 (Pub. L. 96-354) requires 
agencies to analyze the economic impact of regulatory changes on small 
entities. Third, the Trade Agreements Act (Pub. L. 96-39) prohibits 
agencies from setting standards that create unnecessary obstacles to 
the foreign commerce of the United States. In developing U.S. 
standards, this Trade Act requires agencies to consider international 
standards and, where appropriate, that they be the basis of U.S. 
standards. Fourth, the Unfunded Mandates Reform Act of 1995 (Pub. L. 
104-4) requires agencies to prepare a written assessment of the costs, 
benefits, and other effects of proposed or final rules that include a 
Federal mandate likely to result in the expenditure by state, local, or 
tribal governments, in the aggregate or by the private sector, of $100 
million or more annually (adjusted for inflation with base year of 
1995). This portion of the preamble summarizes the FAA's analysis of 
the economic impacts of this final rule. We suggest readers seeking 
greater detail read the full regulatory evaluation, a copy of which we 
have placed in the docket for this rulemaking.
    In conducting these analyses, FAA has determined this rule: (1) Has 
benefits that justify its costs; (2) is not an economically 
``significant regulatory action'' as defined in section 3(f) of 
Executive Order 12866; (3) is not ``significant'' as defined in DOT's 
Regulatory Policies and Procedures; (4) will not have a significant 
economic impact on a substantial number of small entities; (5) will not 
create unnecessary obstacles to the foreign commerce of the United 
States; and (6) will not impose an unfunded mandate on state, local, 
tribal governments, or on the private sector by exceeding the threshold 
identified above. These analyses are summarized below.
    This final rule addresses the remaining provisions not addressed in 
previously issued final rules mandated by Vision 100-Century of 
Aviation Reauthorization Act (Vision 100) and will include changes to 
administrative procedures to improve the efficiency of the PFC program.
    The total cost of this final rule is estimated to be $1.1 million 
($983,000 present value), and the quantified cost savings are estimated 
to be $3.6 million ($2.5 million present value). In addition, a number 
of unquantified benefits will be attributable to the Vision 100 
statutory provisions and streamlining procedures. The net cost savings 
of this final rule are estimated to be $2.5 million ($1.6 million 
present value) over the ten-year analysis period.

Regulatory Flexibility Determination

    The Regulatory Flexibility Act of 1980 (Pub. L. 96-354) (RFA) 
establishes ``as a principle of regulatory issuance that agencies shall 
endeavor, consistent with the objectives of the rule and of applicable 
statutes, to fit regulatory and informational requirements to the scale 
of the businesses, organizations, and governmental jurisdictions 
subject to regulation. To achieve this principle, agencies are required 
to solicit and consider flexible regulatory proposals and to explain 
the rationale for their actions to assure that such proposals are given 
serious consideration.'' The RFA covers a wide-range of small entities, 
including small businesses, not-for-profit organizations, and small 
governmental jurisdictions.
    Agencies must perform a review to determine whether a rule will 
have a significant economic impact on a substantial number of small 
entities. If the agency determines that it will, the agency must 
prepare a regulatory flexibility analysis as described in the RFA.
    However, if an agency determines that a rule is not expected to 
have a significant economic impact on a substantial number of small 
entities, section 605(b) of the RFA provides that the head of the 
agency may so certify and a regulatory flexibility analysis is not 
required. The certification must include a statement providing the 
factual basis for this determination, and the reasoning should be 
clear.
    The FAA uses the size standards from the Small Business 
Administration (SBA), which classifies ``small'' entities based on 
either annual revenues or

[[Page 28846]]

employment. An airport operator (North America Industry Classification 
System (NAICS) 488119) is classified as a small entity if it has annual 
revenues of $6 million or less. According to financial reports filed 
with the FAA in 2003, 195 airports received PFC revenues with annual 
operating revenues of $6 million or less. These small airports account 
for over 60 percent of all airports receiving PFC revenues and, 
therefore, constitute a substantial number of small entities. The 
average revenue for these airports was $1.7 million and the median 
revenue was $1.1 million for 2003. The entire cost to all airports is 
estimated to be $17,100, thus no small airport could experience a 
significant economic impact. Small airports will benefit 
proportionately from the establishment of the national internet 
database, and could also benefit from section 158.13(g), which permits 
the use of PFC revenues to fund the non-Federal share of air traffic 
modernization projects, thus easing the local financial burden. Four 
airports at which military enplanements exceed one percent of all 
enplanements are small entities. The deferred collection of PFC will 
result in an extension of the period of collection but will not result 
in any loss of revenue. The FAA has determined the final rule will not 
have a significant economic impact on small commercial airports.
    The SBA standard classifies a scheduled and nonscheduled passenger 
air carrier (NAICS 481111) to be a small entity if it has 1,500 
employees or less. FAA has identified 57 air carriers with 
authorization to carry passengers that meet this classification. These 
small air carriers provide scheduled services under their own code at 
nearly 100 airports that have PFCs. In addition, some small entities 
provide air service on behalf of a large air carrier under a code 
sharing agreement. The large carrier handles all the ticketing and 
accounting procedures. There are a number of provisions of the PFC 
program that mitigate any impact on a small air carrier. Section 158.9 
prohibits the imposition of a PFC on Essential Air Services (EAS) 
routes on flights between two or more points in Hawaii or Alaska aboard 
an aircraft with less than 60 seats. There are 150 EAS routes, a number 
of which are served by small carriers. Section 158.11 also permits 
airports to request that a class of carriers that constitutes not more 
than one percent of total enplanements not collect PFCs. Thus some 
small carriers will not be affected by the final rule under these 
provisions. Since no small carrier voluntarily submitted PFC collection 
compensation information to the NPRM issued on November 20, 2002, the 
FAA assumed none of the small carriers will incur the cost of 
participating in the final compensation collection provision. In 
addition, small carriers that do collect PFCs will not be adversely 
affected. Any adjustments to modify ticketing or other administrative 
costs that small air carriers may incur as a result of this final rule 
are at least partially if not fully recoverable under the existing 
compensation provisions of the rule. The FAA has determined the final 
rule will not have a significant economic impact on small air carriers.
    Therefore, as the Administrator of the FAA, I certify that this 
final rule will not have a significant economic impact on a substantial 
number of small entities.

International Trade Impact Assessment

    The Trade Agreements Act of 1979 prohibits Federal agencies from 
establishing any standards or engaging in related activities that 
create unnecessary obstacles to the foreign commerce of the United 
States. Legitimate domestic objectives, such as safety, are not 
considered unnecessary obstacles. The statute also requires Federal 
agencies to consider international standards and, where appropriate, 
use the foreign standards as the basis for U.S. standards. Foreign 
carriers would be required to collect PFCs on wholly domestic U.S. 
travel that U.S. carriers are already required to collect, and the 
foreign carriers will be entitled to the same compensation provisions 
as U.S. carriers. The FAA has assessed the potential effect of this 
final rule and determined that it will impose the same costs on 
domestic and international entities and thus have a neutral trade 
impact.

Unfunded Mandates Assessment

    The Unfunded Mandates Reform Act of 1995 (the Act) is intended, 
among other things, to curb the practice of imposing unfunded Federal 
mandates on state, local, and tribal governments.
    Section 202(a) (2 U.S.C. 1532) of Title II of the Act requires that 
each Federal agency, to the extent permitted by law, prepare a written 
statement assessing the effects of any Federal mandate in a proposed or 
final agency rule that may result in the expenditure by state, local, 
tribal governments, in the aggregate, or by the private sector, of $100 
million or more (adjusted annually for inflation) in any one year; such 
a mandate is deemed to be a ``significant regulatory action.'' The FAA 
currently uses an inflation-adjusted value of $128.1 million in lieu of 
$100 million. Section 203(a) of the Act (2 U.S.C. 1533) provides that 
before establishing any regulatory requirements that might 
significantly or uniquely affect small governments, an agency shall 
have developed a plan under which the agency shall: (1) Provide notice 
of the requirements to potentially affected small governments, if any; 
(2) enable officials of affected small governments to provide 
meaningful and timely input in the development of regulatory proposals 
containing significant Federal intergovernmental mandates; and, (3) 
inform, educate, and advise small governments on compliance with the 
requirements. With respect to (2), Section 204(a) of the Act (2 U.S.C. 
1534) requires the Federal agency to develop an effective process to 
permit elected officers of state, local, and tribal governments (or 
their designees) to provide the input described.
    This final rule does not contain such a mandate. The requirements 
of Title II do not apply.

Executive Order 13132, Federalism

    The FAA has analyzed this final rule under the principles and 
criteria of Executive Order 13132, Federalism. We determined that this 
action will not have a substantial direct effect on the States, or the 
relationship between the national Government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government, and therefore does not have federalism implications.

Environmental Analysis

    FAA Order 1050.1E identifies FAA actions that are categorically 
excluded from preparation of an environmental assessment or 
environmental impact statement under the National Environmental Policy 
Act in the absence of extraordinary circumstances. The FAA has 
determined this rulemaking action qualifies for the categorical 
exclusion identified in paragraph 312d and involves no extraordinary 
circumstances.

Regulations That Significantly Affect Energy Supply, Distribution, or 
Use

    The FAA has analyzed this final rule under Executive Order 13211, 
Actions Concerning Regulations that Significantly Affect Energy Supply, 
Distribution, or Use (May 18, 2001). We have determined that it is not 
a ``significant energy action'' under the executive order because it is 
not a ``significant regulatory action'' under Executive Order 12866, 
and it is not likely to have a significant adverse effect on the 
supply, distribution, or use of energy.

[[Page 28847]]

Availability of Rulemaking Documents

    You may get an electronic copy using the Internet by:
    (1) Searching the Department of Transportation's electronic Docket 
Management System (DMS) web page (http://dms.dot.gov/search);
    (2) Visiting the FAA's Regulations and Policies web page at http://www.faa.gov/regulations_policies/; or
    (3) Accessing the Government Printing Office's web page at http://www.gpoaccess.gov/fr/index.html.
    You may also get a copy by sending a request to the Federal 
Aviation Administration, Office of Rulemaking, ARM-1, 800 Independence 
Avenue SW., Washington, DC 20591, or by calling (202) 267-9680. Make 
sure to identify the amendment number or docket number of this 
rulemaking.
    Anyone is able to search the electronic form of all comments 
received into any of our dockets by the name of the individual 
submitting the comment (or signing the comment, if submitted on behalf 
of an association, business, labor union, etc.). You may review DOT's 
complete Privacy Act statement in the Federal Register published on 
April 11, 2000 (Volume 65, Number 70; Pages 19477-78) or you may visit 
http://dms.dot.gov.

Small Business Regulatory Enforcement Fairness Act

    The Small Business Regulatory Enforcement Fairness Act (SBREFA) of 
1996 requires FAA to comply with small entity requests for information 
or advice about compliance with statutes and regulations within its 
jurisdiction. If you are a small entity and you have a question 
regarding this document, you may contact your local FAA official, or 
the person listed under the FOR FURTHER INFORMATION CONTACT heading of 
this preamble. You can find out more about SBREFA on the Internet at 
http://www.faa.gov/regulations_policies/ rulemaking/sbre--act/.

List of Subjects in 14 CFR Part 158

    Air carriers, Airports, Passenger facility charge, Public agencies, 
Collection compensation.

The Amendment

0
Because of the above, the Federal Aviation Administration amends part 
158 of Title 14, Code of Federal Regulations, as follows:

PART 158--PASSENGER FACILITY CHARGES (PFC'S)

Subpart A--General

0
1. The authority citation for part 158 continues to read as follows:

    Authority: 49 U.S.C. 106(g), 40116-40117, 47106, 47111, 47114-
47116, 47524, 47526.


0
2. Amend Sec.  158.3 as follows:
0
a. Revise the definitions for Air travel ticket, Approved project, and 
State to read as set forth below.
0
b. Add definitions for Covered air carrier, Financial need, Ground 
support equipment, Notice of intent (to impose a PFC or use PFC 
revenue), and PFC administrative support costs in alphabetical order to 
read as set forth below.


Sec.  158.3  Definitions.

* * * * *
    Air travel ticket includes all documents, electronic records, 
boarding passes, and any other ticketing medium about a passenger's 
itinerary necessary to transport a passenger by air, including 
passenger manifests.
* * * * *
    Approved project means a project for which the FAA has approved 
using PFC revenue under this part. The FAA may also approve specific 
projects contained in a single or multi-phased project or development 
described in an airport capital plan separately. This includes projects 
acknowledged by the FAA under Sec.  158.30 of this part.
* * * * *
    Covered air carrier means an air carrier that files for bankruptcy 
protection or has an involuntary bankruptcy proceeding started against 
it after December 12, 2003. An air carrier that is currently in 
compliance with PFC remittance requirements and has an involuntary 
bankruptcy proceeding commenced against it has 90 days from the date 
such proceeding was filed to obtain dismissal of the involuntary 
petition before becoming a covered air carrier. An air carrier ceases 
to be a covered air carrier when it emerges from bankruptcy protection.
* * * * *
    Financial need means that a public agency cannot meet its 
operational or debt service obligations and does not have at least a 2-
month capital reserve fund.
* * * * *
    Ground support equipment means service and maintenance equipment 
used at an airport to support aeronautical operations and related 
activities. Baggage tugs, belt loaders, cargo loaders, forklifts, fuel 
trucks, lavatory trucks, and pushback tractors are among the types of 
vehicles that fit this definition.
* * * * *
    Notice of intent (to impose or use PFC revenue) means a notice 
under Sec.  158.30 from a public agency controlling a non-hub airport 
that it intends to impose a PFC and/or use PFC revenue. Except for 
Sec. Sec.  158.25 through 30, ``notice of intent'' can be used 
interchangeably with ``application.''
* * * * *
    PFC administrative support costs means the reasonable and necessary 
costs of developing a PFC application or amendment, issuing and 
maintaining the required PFC records, and performing the required audit 
of the public agency's PFC account. These costs may include reasonable 
monthly financial account charges and transaction fees.
* * * * *
    State means a State of the United States, the District of Columbia, 
the Commonwealth of Puerto Rico, the Virgin Islands, American Samoa, 
the Commonwealth of the Northern Mariana Islands, and Guam.
* * * * *

0
3. Amend Sec.  158.9 by revising paragraphs (a)(4) and (5) and by 
adding paragraph (a)(6) to read as follows:


Sec.  158.9  Limitations.

    (a) * * *
    (4) On flights, including flight segments, between 2 or more points 
in Hawaii;
    (5) In Alaska aboard an aircraft having a certificated seating 
capacity of fewer than 60 passengers; or
    (6) Enplaning at an airport if the passenger did not pay for the 
air transportation that resulted in the enplanement due to Department 
of Defense charter arrangements and payments.
* * * * *

0
4. Amend Sec.  158.13 by revising paragraphs (b), (c), (d), and (e) and 
adding paragraphs (f), (g), and (h) to read as follows:


Sec.  158.13  Use of PFC revenue.

* * * * *
    (b) PFC administrative support costs. Public agencies may use PFC 
revenue to pay for allowable administrative support costs. Public 
agencies must submit these costs as a separate project in each PFC 
application.
    (c) Maximum cost for certain low-emission technology projects. If a 
project involves a vehicle or ground support equipment using low 
emission technology eligible under Sec.  158.15(b), the FAA will 
determine the maximum cost that may be financed by PFC revenue. The 
maximum cost for a new vehicle is the incremental amount between the 
purchase price of a new low emission vehicle and the purchase

[[Page 28848]]

price of a standard emission vehicle, or the cost of converting a 
standard emission vehicle to a low emission vehicle.
    (d) Bond-associated debt service and financing costs. (1) Public 
agencies may use PFC revenue to pay debt service and financing costs 
incurred for a bond issued to carry out approved projects.
    (2) If the public agency's bond documents require that PFC revenue 
be commingled in the general revenue stream of the airport and pledged 
for the benefit of holders of obligations, the FAA considers PFC 
revenue to have paid the costs covered in Sec.  158.13(d)(1) if--
    (i) An amount equal to the part of the proceeds of the bond issued 
to carry out approved projects is used to pay allowable costs of such 
projects; and
    (ii) To the extent the PFC revenue collected in any year exceeds 
the debt service and financing costs on such bonds during that year, an 
amount equal to the excess is applied as required by Sec.  158.39.
    (e) Exception providing for the use of PFC revenue to pay for debt 
service for non-eligible projects. The FAA may authorize a public 
agency under Sec.  158.18 to impose a PFC for payments for debt service 
on indebtedness incurred to carry out an airport project that is not 
eligible if the FAA determines that such use is necessary because of 
the financial need of the airport.
    (f) Combination of PFC revenue and Federal grant funds. A public 
agency may combine PFC revenue and airport grant funds to carry out an 
approved project. These projects are subject to the record keeping and 
auditing requirements of this part, as well as the reporting, record 
keeping and auditing requirements imposed by the Airport and Airway 
Improvement Act of 1982 (AAIA).
    (g) Non-Federal share. Public agencies may use PFC revenue to meet 
the non-Federal share of the cost of projects funded under the Federal 
airport grant program or the FAA ``Program to Permit Cost-Sharing of 
Air Traffic Modernization Projects'' under 49 U.S.C. 44517.
    (h) Approval of project following approval to impose a PFC. The 
public agency may not use PFC revenue or interest earned thereon except 
on an approved project.

0
5. Amend Sec.  158.15 by revising paragraphs (b)(5) and (6) and adding 
paragraphs (b)(7) and (8) to read as follows:


Sec.  158.15  Project eligibility at PFC levels of $1, $2, or $3.

* * * * *
    (b) * * *
    (5) Noise compatibility measures eligible for Federal assistance 
under 49 U.S.C. 47504, without regard to whether the measures are 
approved under 49 U.S.C. 47504;
    (6) Construction of gates and related areas at which passengers are 
enplaned or deplaned and other areas directly related to the movement 
of passengers and baggage in air commerce within the boundaries of the 
airport. These areas do not include restaurants, car rental and 
automobile parking facilities, or other concessions. Projects required 
to enable added air service by an air carrier with less than 50 percent 
of the annual passenger boardings at an airport have added eligibility. 
Such projects may include structural foundations and floor systems, 
exterior building walls and load-bearing interior columns or walls, 
windows, door and roof systems, building utilities (including heating, 
air conditioning, ventilation, plumbing, and electrical service), and 
aircraft fueling facilities next to the gate;
    (7) A project approved under the FAA's ``Program to Permit Cost-
Sharing of Air Traffic Modernization Projects'' under 49 U.S.C. 44517; 
or
    (8) If the airport is in an air quality nonattainment area (as 
defined by section 171(2) of the Clean Air Act (42 U.S.C. 7501(2)) or a 
maintenance area referred to in section 175A of such Act (42 U.S.C. 
7505a), and the project will result in the airport receiving 
appropriate emission credits as described in 49 U.S.C. 47139, a project 
for:
    (i) Converting vehicles eligible under Sec.  158.15(b)(1) and 
ground support equipment powered by a diesel or gasoline engine used at 
a commercial service airport to low-emission technology certified or 
verified by the Environmental Protection Agency to reduce emissions or 
to use cleaner burning conventional fuels; or
    (ii) Acquiring for use at a commercial service airport vehicles 
eligible under Sec.  158.15(b)(1) and, subject to Sec.  158.13(c), 
ground support equipment that include low-emission technology or use 
cleaner burning fuels.
* * * * *

0
6. Add Sec.  158.18 to read as follows:


Sec.  158.18  Use of PFC revenue to pay for debt service for non-
eligible projects.

    (a) The FAA may authorize a public agency to impose a PFC to make 
payments for debt service on indebtedness incurred to carry out at the 
airport a project that is not eligible if the FAA determines it is 
necessary because of the financial need of the airport. The FAA defines 
financial need in Sec.  158.3.
    (b) A public agency may request authority to impose a PFC and use 
PFC revenue under this section using the PFC application procedures in 
Sec.  158.25. The public agency must document its financial position 
and explain its financial recovery plan that uses all available 
resources.
    (c) The FAA reviews the application using the procedures in Sec.  
158.27. The FAA will issue its decision on the public agency's request 
under Sec.  158.29.

0
7. Add Sec.  158.20 to read as follows:


Sec.  158.20  Submission of required documents.

    (a) Letters and reports required by this part may be transmitted to 
the appropriate recipient (the public agency, air carrier, and/or the 
FAA) via e-mail, courier, facsimile, or U.S. Postal Service.
    (1) Documents sent electronically to the FAA must be prepared in a 
format readable by the FAA. Interested parties can obtain the format at 
their local FAA Airports Office.
    (2) Any transmission to FAA Headquarters, using regular U.S. Postal 
Service, is subject to inspection that may result in delay and damage 
due to the security process.
    (b) Once the database development is completed with air carrier 
capability, public agencies and air carriers may use the FAA's national 
PFC database to post their required quarterly reports, and, in that 
case, do not have to distribute the reports in any other way.

Subpart B--Application and Approval

0
8. Revise Sec.  158.29(a)(1)(ii) and (b)(1)(ii) to read as follows:


Sec.  158.29  The Administrator's decision.

    (a) * * *
    (1) * * *
    (ii) The project will achieve the objectives and criteria set forth 
in Sec.  158.15 except for those projects approved under Sec.  158.18.
* * * * *
    (b) * * *
    (1) * * *
    (ii) The project will achieve the objectives and criteria set forth 
in Sec.  158.15 except for those projects approved under Sec.  158.18.
* * * * *

0
9. Amend Sec.  158.30 by revising the section heading to read as 
follows:


Sec.  158.30  PFC Authorization at Non-Hub Airports.

* * * * *

[[Page 28849]]


0
10. Amend Sec.  158.31 by revising the introductory text and paragraph 
(b) to read as follows:


Sec.  158.31  Duration of authority to impose a PFC after project 
implementation.

    A public agency that has begun implementing an approved project may 
impose a PFC until--
* * * * *
    (b) The total PFC revenue collected plus interest earned thereon 
equals the allowable cost of the approved project;
* * * * *

0
11. Amend Sec.  158.33 by revising paragraphs (a)(2), (c)(1) 
introductory text, and (c)(2), and adding paragraph (a)(3) to read as 
follows:


Sec.  158.33  Duration of authority to impose a PFC before project 
implementation.

    (a) * * *
    (2) 5 years after the charge effective date; or
    (3) 5 years after the FAA's decision on the application (if the 
charge effective date is more than 60 days after the decision date) if 
an approved project is not implemented.
* * * * *
    (c) * * *
    (1) 3 years after the charge effective date; or 3 years after the 
FAA's decision on the application if the charge effective date is more 
than 60 days after the decision date unless--
* * * * *
    (2) 5 years after the charge effective date; or 5 years after the 
FAA's decision on the application (if the charge effective date is more 
than 60 days after the decision date) unless the public agency has 
obtained project approval.
* * * * *
0
12. Amend Sec.  158.37 by revising the section heading, revising 
paragraphs (b)(1)(i)(A), (b)(1)(ii)(C), (b)(1)(ii)(D), (b)(1)(ii)(E) 
and (b)(5), redesignating paragraphs (b)(1)(i)(B) and (C) as 
(b)(1)(i)(C) and (D), and adding new paragraphs (b)(1)(i)(B) and 
(b)(1)(ii)(F) to read as follows:


Sec.  158.37  Amendment of approved PFC.

* * * * *
    (b) * * *
    (1) * * *
    (i) * * *
    (A) Amend the approved PFC amount for a project by more than 25 
percent of the original approved amount if the amount was $1,000,000 or 
greater, (B) Amend the approved PFC amount for a project by any 
percentage if the original approved amount was below $1,000,000 and the 
amended approved amount is $1,000,000 or greater,
* * * * *
    (ii) * * *
    (C) To institute an increase of 25 percent or less of the original 
approved amount if the amount was more than $1,000,000; or
    (D) To institute an increase of any amount if the original approved 
amount of the project was less than $1,000,000 and if the amended 
approved amount of the project remains below $1,000,000; or
    (E) To establish a new class of carriers under Sec.  158.11 or 
amend any such class previously approved; or
    (F) To delete an approved project.
* * * * *
    (5) Justification, if the amendment involves an increase in the PFC 
amount for a project by more than 25 percent of the original approved 
amount if that amount is $1,000,000 or greater, an increase in the PFC 
amount by any percentage if the original approved amount was less than 
$1,000,000 and the amended approved amount is $1,000,000 or greater, a 
change in the approved project scope, or any increase in the approved 
PFC level to be collected from each passenger.
* * * * *

0
13. Amend Sec.  158.39 by revising paragraphs (a) and (d) to read as 
follows:


Sec.  158.39  Use of excess PFC revenue.

    (a) If the PFC revenue remitted to the public agency, plus interest 
earned thereon, exceeds the allowable cost of the project, the public 
agency must use the excess funds for approved projects or to retire 
outstanding PFC-financed bonds.
* * * * *
    (d) Within 30 days after the authority to impose a PFC has expired 
or been terminated, the public agency must present a plan to the 
appropriate FAA Airports office to begin using accumulated PFC revenue. 
The plan must include a timetable for submitting any necessary 
application under this part. If the public agency fails to submit such 
a plan, or if the plan is not acceptable to the Administrator, the 
Administrator may reduce Federal airport grant program apportioned 
funds.

Subpart C--Collection, Handling and Remittance of PFCs

0
14. Amend Sec.  158.43 by revising paragraphs (b)(3) and (c) to read as 
follows:


Sec.  158.43  Public agency notification to collect PFCs.

* * * * *
    (b) * * *
    (3) The charge effective date will always be the first day of the 
month; however, it must be at least 30 days after the date the public 
agency notified the air carriers of the FAA's approval to impose the 
PFC.
* * * * *
    (c) The public agency must notify air carriers required to collect 
PFCs at its airport and the FAA of changes in the charge expiration 
date at least 30 days before the existing charge expiration date or new 
charge expiration date, whichever comes first. Each notified air 
carrier must notify its agents, including other issuing carriers, of 
such changes.
* * * * *

0
15. Amend Sec.  158.45 by revising paragraph (a)(3) to read as follows:


Sec.  158.45  Collection of PFCs on tickets issued in the U.S.

    (a) * * *
    (3) Issuing carriers and their agents shall collect PFCs based on 
the itinerary at the time of issuance.
    (i) Any change in itinerary initiated by a passenger that requires 
an adjustment to the amount paid by the passenger is subject to 
collection or refund of the PFC as appropriate.
    (ii) Failure to travel on a nonrefundable or expired ticket is not 
a change in itinerary. If the ticket purchaser is not permitted any 
fare refund on the unused ticket, the ticket purchaser is not permitted 
a refund of any PFC associated with that ticket.
* * * * *
0
16. Amend Sec.  158.47 by revising paragraphs (a) and (c)(4) to read as 
follows:


Sec.  158.47  Collection of PFCs on tickets issued outside the U.S.

    (a) For tickets issued outside the U.S., an air carrier or foreign 
air carrier may follow the requirements of either Sec.  158.45 or this 
section, unless the itinerary is for travel wholly within the U.S. Air 
carriers and foreign air carriers must comply with Sec.  158.45 where 
the itinerary is for travel wholly within the U.S. regardless of where 
the ticket is issued.
* * * * *
    (c) * * *
    (4) Issuing carriers and their agents shall collect PFCs based on 
the itinerary at the time of issuance.
    (i) Any change in itinerary initiated by a passenger that requires 
an adjustment to the amount paid by the passenger is subject to 
collection or refund of the PFC as appropriate.
    (ii) Failure to travel on a nonrefundable or expired ticket is not 
a change in itinerary. If the ticket purchaser is not permitted any 
fare refund on the unused ticket, the ticket

[[Page 28850]]

purchaser is not permitted a refund of any PFC associated with that 
ticket.
* * * * *

0
17. Amend Sec.  158.49 by revising paragraph (b), redesignating 
paragraph (c) as (d) and revising it, and adding new paragraph (c) to 
read as follows:


Sec.  158.49  Handling of PFCs.

* * * * *
    (b) Collecting carriers must account for PFC revenue separately. 
PFC revenue may be commingled with the air carrier's other sources of 
revenue except for covered air carriers discussed in paragraph (c) of 
this section. PFC revenues held by an air carrier or an agent of the 
air carrier after collection are held in trust for the beneficial 
interest of the public agency imposing the PFC. Such air carrier or 
agent holds neither legal nor equitable interest in the PFC revenues 
except for any handling fee or interest collected on unremitted 
proceeds as authorized in Sec.  158.53.
    (c)(1) A covered air carrier must segregate PFC revenue in a 
designated separate PFC account. Regardless of the amount of PFC 
revenue in the covered air carrier's account at the time the bankruptcy 
petition is filed, the covered air carrier must deposit into the 
separate PFC account an amount equal to the average monthly liability 
for PFCs collected under this section by such air carrier or any of its 
agents.
    (i) The covered air carrier is required to create one PFC account 
to cover all PFC revenue it collects. The designated PFC account is 
solely for PFC transactions and the covered air carrier must make all 
PFC transactions from that PFC account. The covered air carrier is not 
required to create separate PFC accounts for each airport where a PFC 
is imposed.
    (ii) The covered air carrier must transfer PFCs from its general 
accounts into the separate PFC account in an amount equal to the 
average monthly liability for PFCs as the ``PFC reserve.'' The PFC 
reserve must equal a one-month average of the sum of the total PFCs 
collected by the covered air carrier, net of any credits or handling 
fees allowed by law, during the past 12-month period of PFC collections 
immediately before entering bankruptcy.
    (iii) The minimum PFC reserve balance must never fall below the 
fixed amount defined in paragraph (c)(1)(ii) of this section.
    (iv) A covered air carrier may continue to deposit the PFCs it 
collects into its general operating accounts combined with ticket sales 
revenue. However, at least once every business day, the covered air 
carrier must remove all PFC revenue (Daily PFC amount) from those 
accounts and transfer it to the new PFC account. An estimate based on 
\1/30\ of the PFC reserve balance is permitted in substitution of the 
Daily PFC amount.
    (A) In the event a covered air carrier ceases operations while 
still owing PFC remittances, the PFC reserve fund may be used to make 
those remittances. If there is any balance in the PFC reserve fund 
after all PFC remittances are made, that balance will be returned to 
the covered air carrier's general account.
    (B) In the event a covered air carrier emerges from bankruptcy 
protection and ceases to be a covered air carrier, any balance 
remaining in the PFC reserve fund after any outstanding PFC obligations 
are met will be returned to the air carrier's general account.
    (v) If the covered air carrier uses an estimate rather than the 
daily PFC amount, the covered air carrier shall reconcile the estimated 
amount with the actual amount of PFCs collected for the prior month 
(Actual Monthly PFCs). This reconciliation must take place no later 
than the 20th day of the month (or the next business day if the date is 
not a business day). In the event the Actual Monthly PFCs are greater 
than the aggregate estimated PFC amount, the covered air carrier will, 
within one business day of the reconciliation, deposit the difference 
into the PFC account. If the Actual Monthly PFCs are less than the 
aggregate estimated PFC amount, the covered air carrier will be 
entitled to a credit in the amount of the difference to be applied to 
the daily PFC amount due.
    (vi) The covered air carrier is permitted to recalculate and reset 
the PFC reserve and daily PFC amount on each successive anniversary 
date of its bankruptcy petition using the methodology described above.
    (2) If a covered air carrier or its agent fails to segregate PFC 
revenue in violation of paragraph (c)(1) of this section, the trust 
fund status of such revenue shall not be defeated by an inability of 
any party to identify and trace the precise funds in the accounts of 
the air carrier.
    (3) A covered air carrier and its agents may not grant to any third 
party any security or other interest in PFC revenue.
    (4) A covered air carrier that fails to comply with any requirement 
of paragraph (c) of this section, or causes an eligible public agency 
to spend funds to recover or retain payment of PFC revenue, must 
compensate that public agency for those cost incurred to recover the 
PFCs owed.
    (5) The provisions of paragraph (b) of this section that allow the 
commingling of PFCs with other air carrier revenue do not apply to a 
covered air carrier.
    (d) All collecting air carriers must disclose the existence and 
amount of PFC funds regarded as trust funds in their financial 
statements.

0
18. Revise Sec.  158.53 to read as follows:


Sec.  158.53  Collection compensation.

    (a) As compensation for collecting, handling, and remitting the PFC 
revenue, the collecting air carrier is entitled to:
    (1) $0.11 of each PFC collected.
    (2) Any interest or other investment return earned on PFC revenue 
between the time of collection and remittance to the public agency.
    (b) A covered air carrier that fails to designate a separate PFC 
account is prohibited from collecting interest on the PFC revenue. 
Where a covered air carrier maintains a separate PFC account in 
compliance with Sec.  158.49(c), it will receive the interest on PFC 
accounts as described in paragraph (a)(2) of this section.
    (c)(1) Collecting air carriers may provide collection cost data 
periodically to the FAA after the agency issues a notice in the Federal 
Register that specifies the information and deadline for filing the 
information. Submission of the information is voluntary. The requested 
information must include data on interest earned by the air carriers on 
PFC revenue and air carrier collection, handling, and remittance costs 
in the following categories:
    (i) Credit card fees;
    (ii) Audit fees;
    (iii) PFC disclosure fees;
    (iv) Reservations costs;
    (v) Passenger service costs;
    (vi) Revenue accounting, data entry, accounts payable, tax, and 
legal fees;
    (vii) Corporate property department costs;
    (viii) Training for reservations agents, ticket agents, and other 
departments;
    (ix) Ongoing carrier information systems costs;
    (x) Ongoing computer reservations systems costs; and
    (xi) Airline Reporting Corporation fees.
    (2) The FAA may determine a new compensation level based on an 
analysis of the data provided under paragraph (c)(1) of this section, 
if the data is submitted by carriers representing at least 75 percent 
of PFCs collected nationwide.
    (3) Any new compensation level determined by the FAA under

[[Page 28851]]

paragraph (b)(2) of this section will replace the level identified in 
paragraph (a)(1) of this section.

Subpart D--Report, Recordkeeping and Audits

0
19. Amend Sec.  158.63 by revising paragraphs (a) and (c) to read as 
follows:


Sec.  158.63  Reporting requirements: Public agency.

    (a) The public agency must provide quarterly reports to air 
carriers collecting PFCs for the public agency with a copy to the 
appropriate FAA Airports Office. The quarterly report must include:
    (1) Actual PFC revenue received from collecting air carriers, 
interest earned, and project expenditures for the quarter;
    (2) Cumulative actual PFC revenue received, interest earned, 
project expenditures, and the amount committed for use on currently 
approved projects, including the quarter;
    (3) The PFC level for each project; and
    (4) Each project's current schedule.
* * * * *
    (c) For medium and large hub airports, the public agency must 
provide to the FAA, by July 1 of each year, an estimate of PFC revenue 
to be collected for each airport in the following fiscal year.

0
20. Revise Sec.  158.65 to read as follows:


Sec.  158.65  Reporting requirements: Collecting air carriers.

    (a) Each air carrier collecting PFCs for a public agency must 
provide quarterly reports to the public agency unless otherwise agreed 
by the collecting air carrier and public agency, providing an 
accounting of funds collected and funds remitted.
    (1) Unless otherwise agreed by the collecting air carrier and 
public agency, reports must state:
    (i) The collecting air carrier and airport involved,
    (ii) The total PFC revenue collected,
    (iii) The total PFC revenue refunded to passengers,
    (iv) The collected revenue withheld for reimbursement of expenses 
under Sec.  158.53, and
    (v) The dates and amounts of each remittance for the quarter.
    (2) The report must be filed by the last day of the month following 
the calendar quarter or other period agreed by the collecting carrier 
and public agency for which funds were collected.
    (b) A covered air carrier must provide the FAA with:
    (1) A copy of its quarterly report by the established schedule 
under paragraph (a) of this section; and
    (2) A monthly PFC account statement delivered not later than the 
fifth day of the following month. This monthly statement must include:
    (i) The balance in the account on the first day of the month,
    (ii) The total funds deposited during the month,
    (iii) The total funds disbursed during the month, and
    (iv) The closing balance in the account.

0
21. Amend Sec.  158.67 by revising paragraph (c)(2) to read as follows:


Sec.  158.67  Recordkeeping and auditing: Public agency.

* * * * *
    (c) * * *
    (2) Conducted as part of an audit under Office of Management and 
Budget Circular A-133 (the Single Audit Act of 1984, Pub. L. 98-502, 
and the Single Audit Act Amendments of 1996, Pub. L. 104-156) provided 
the auditor specifically addresses the PFC.
* * * * *

Subpart E--Termination

0
22. Revise Sec.  158.81 to read as follows:


Sec.  158.81  General.

    This subpart contains the procedures for termination of PFCs or 
loss of Federal airport grant funds for violations of this part or 49 
U.S.C. 40117. This subpart does not address the circumstances under 
which the authority to collect PFCs may be terminated for violations of 
49 U.S.C. 47523 through 47528.


Sec.  158.97  [Removed]

0
23. Remove Sec.  158.97.

0
24. Amend appendix A to part 158 by revising paragraphs 10 and 12 of 
section B of this appendix to read as follows:

Appendix A to Part 158--Assurances

* * * * *
    * * *

    10. Recordkeeping and Audit. It will maintain an accounting 
record for audit purposes for 3 years after physical and financial 
completion of the project. All records must satisfy the requirements 
of 14 CFR part 158 and contain documentary evidence for all items of 
project costs.
* * * * *
    12. Compliance with 49 U.S.C. 47523 through 47528. It 
understands 49 U.S.C. 47524 and 47526 require that the authority to 
impose a PFC be terminated if the Administrator determines the 
public agency has failed to comply with those sections of the United 
States Code or with the implementing regulations published under the 
Code.

    Issued in Washington, DC, on May 14, 2007.
Marion C. Blakey,
Administrator.
 [FR Doc. E7-9941 Filed 5-22-07; 8:45 am]
BILLING CODE 4910-13-P


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