United States 

Environmental Protection 

Agency 

Economic Analysis for Proposed 

Effluent Limitation Guidelines and 

Standards for the Airport Deicing 

Category 

July 2009
U.S. Environmental Protection Agency 

Office of Water (4303T)/Office of Science and Technology 

Engineering and Analysis Division 

1200 Pennsylvania Avenue, NW 

Washington, DC 20460 

EPA-821-R-09-005 
Economic Analysis for Proposed Effluent Limitation Guidelines 

and Standards for the Airport Deicing Category 

TABLE OF CONTENTS 

 CHAPTER 1 INTRODUCTION ...........................................................................................................1-1

1.1 Scope and Purpose..................................................................................................................1-1

1.2 Report Organization ...............................................................................................................1-1

1.3 References ..............................................................................................................................1-2

 CHAPTER 2 PROFILE OF THE AIR TRANSPORTATION INDUSTRY.....................................2-1

2.1 Industry Overview..................................................................................................................2-1

2.1.1 Important Highlights..............................................................................................2-2

2.2 Airports...................................................................................................................................2-2

2.2.1 Number and Size....................................................................................................2-3

2.2.2 Airport Location and Climate Data........................................................................2-6

2.3 Airlines ...................................................................................................................................2-7

2.3.1 Number and Size....................................................................................................2-8

2.3.1.1 Number of Aircraft ................................................................................2-8

2.3.1.2 Definition and Number of Air Carriers..................................................2-9

2.4 Air Transportation Industry Trends......................................................................................2-12

2.4.1 Deregulation of Airlines.......................................................................................2-12

2.4.1.1 Development of Hub and Spoke Networks .........................................2-12

2.4.1.2 Emergence of Low-Cost Carriers ........................................................2-13

2.4.1.3 Effect on Airports Served ....................................................................2-14

2.4.2 Cyclical Nature of Air Travel Demand................................................................2-14

2.4.3 Growth in Air Travel............................................................................................2-16

2.4.3.1 Airport Capacity Constraint.................................................................2-16

2.4.3.2 Change in Airline Service....................................................................2-16

2.4.3.3 Introduction of Regional Jets...............................................................2-17

2.5 Survey Methodology and Counts by Industry......................................................................2-18

2.5.1 Airports ................................................................................................................2-18

2.5.1.1 Sample Frame ......................................................................................2-18

2.5.1.2 Airport Count by Category ..................................................................2-19

2.5.2 Airline/Airport Combinations ..............................................................................2-20

2.6 Airport Management ............................................................................................................2-20

2.6.1 Airport Ownership and Management...................................................................2-20

2.6.2 Airport Financial Management ............................................................................2-22

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2.6.2.1 Funding Methods.................................................................................2-22

2.6.2.2 Revenue Categories and Operating Profit............................................2-24

2.6.2.3 Cost Trends..........................................................................................2-26

2.6.2.4 Capital Financing.................................................................................2-26

2.6.2.5 Net Operating Revenues ......................................................................2-32

2.6.3 Airport Finance and the Economic Impact Analysis ...........................................2-33

2.7 Airline Financial Management.............................................................................................2-33

2.7.1 Historical Overview of Airline Profitability ........................................................2-33

2.7.2 Factors in Airline Profitability .............................................................................2-36

2.7.2.1 Industry Characteristics Affecting Profitability...................................2-36

2.7.2.2 Factors Controlled by the Airlines.......................................................2-37

2.7.2.3 Labor Costs..........................................................................................2-37

2.7.2.4 Fuel Costs ............................................................................................2-38

2.7.2.5 Landing Fees........................................................................................2-38

2.7.3 Industry Concentration.........................................................................................2-39

2.7.3.1 Market Power.......................................................................................2-39

2.7.3.2 Barriers to Exit.....................................................................................2-40

2.8 Airport-Airline Interactions..................................................................................................2-42

2.8.1 Effect of Airline Bankruptcies on Airports..........................................................2-42

2.8.2 Airport-Airline Cost Pass-Through Analysis.......................................................2-42

2.8.2.1 Airports to Airlines ..............................................................................2-43

2.8.2.2 Airlines to Passengers..........................................................................2-47

2.9 Alaska...................................................................................................................................2-49

2.9.1 Alaska International Airport System....................................................................2-51

2.9.2 Alaska Rural Airport System ...............................................................................2-51

2.9.2.1 RAS Airport Funding ..........................................................................2-51

2.9.2.2 AIP Spending.......................................................................................2-51

2.9.2.3 Other Funding Issues ...........................................................................2-53

2.9.2.4 Operation and Maintenance.................................................................2-53

2.9.3 Alaska and the Economic Impact Analysis..........................................................2-53

2.10 References ............................................................................................................................2-54

 CHAPTER 3 ECONOMIC IMPACT METHODOLOGY .................................................................3-1

3.1 Financing Capital Expenditures and Compliance Cost Annualization ..................................3-1

3.1.1 Financing Methods for Capital Expenditures.........................................................3-1

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3.1.2 General Airport Revenue Bonds ............................................................................3-3

3.1.3 Annualization of Capital Costs using GARB.........................................................3-3

3.1.4 Comparison of Impacts under GARB, AIP Grants and PFCs................................3-5

3.2 Economic Impact Analysis of Airports ..................................................................................3-6

3.2.1 Ratio of Annualized Compliance Costs to Operating Revenues............................3-6

3.2.2 Debt Service Coverage Ratio.................................................................................3-7

3.3 Economic Impact Analysis of Airlines...................................................................................3-8

3.3.1 Airline Cost Extrapolation .....................................................................................3-8

3.3.2 Baseline Air Carrier Financial Condition and the Impact Analysis.......................3-9

3.3.3 Airline Impacts I: Compliance Costs and Airline Revenues................................3-10

3.3.4 Airline Impacts II: Compliance Costs and Demand for Air Transportation 

Services ................................................................................................................3-12

3.3.4.1 Price Elasticity of Demand ..................................................................3-13

3.3.4.2 Price Elasticity of Supply ....................................................................3-14

3.3.4.3 Calculation of Impacts.........................................................................3-15

3.3.4.4 Impact on Reduction in Demand for Air Transportation Services 

on Airport Revenues............................................................................3-16

3.4 References ............................................................................................................................3-16

 CHAPTER 4 POLLUTION CONTROL OPTIONS...........................................................................4-1

4.1 Effluent Limitation Guidelines and Standards .......................................................................4-1

4.2 Technology Basis for Deicing Options ..................................................................................4-2

4.2.1 Glycol Recovery Vehicle .......................................................................................4-2

4.2.2 Plug and Pump .......................................................................................................4-3

4.2.3 Centralized Deicing Pads .......................................................................................4-3

4.2.4 Anaerobic Fluid Bed Biological Treatment ...........................................................4-4

4.3 Analyzed Options...................................................................................................................4-4

4.4 References ..............................................................................................................................4-5

 CHAPTER 5 ECONOMIC IMPACT ANALYSIS RESULTS...........................................................5-1

5.1 National Compliance Costs ....................................................................................................5-1

5.2 Airport Impacts.......................................................................................................................5-2

5.2.1 Distribution of Projected Compliance Costs..........................................................5-2

5.2.2 Revenue Test Analysis...........................................................................................5-3

5.2.3 Debt Service Coverage Ratio Analysis..................................................................5-7

5.2.4 Impacts on Alaskan Airports................................................................................5-13

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5.2.4.1 Impacts on the Alaska International Airport System...........................5-13

5.2.4.2 Impacts on the Alaska Rural Airport System ......................................5-13

5.3 Airline Impacts.....................................................................................................................5-14

5.4 Market Impacts.....................................................................................................................5-22

5.5 Summary of Projected Impacts and Selection of the Proposed Option................................5-24

5.6 References ............................................................................................................................5-26

 CHAPTER 6 INITIAL REGULATORY FLEXIBILITY ANALYSIS .............................................6-1

6.1 Initial Assessment...................................................................................................................6-1

6.2 Regulatory Flexibility Analysis Components ........................................................................6-1

6.2.1 Legal Basis of and Need for the Rule ....................................................................6-2

6.2.2 Estimated Number of Small Business Entities to Which the Regulation 

Will Apply..............................................................................................................6-2

6.2.3 Description of the Proposed Reporting, Recordkeeping, and Other 

Compliance Requirements .....................................................................................6-3

6.2.4 Identification of Relevant Federal Rules That May Duplicate, Overlap, or 

Conflict with the Proposed Rule ............................................................................6-3

6.2.5 Significant Regulatory Alternatives.......................................................................6-3

6.3 Small Business Analysis ........................................................................................................6-3

6.3.1 Analysis of Small Airports.....................................................................................6-4

6.3.1.1 Definition of Small Airports..................................................................6-4

6.3.1.2 Number of Potentially Affected Small Airports ....................................6-4

6.3.1.3 Summary of Projected Compliance Costs for Small Airports ...............6-7

6.3.1.4 Impact of Compliance Costs on Small Airport Revenues .....................6-8

6.3.1.5 Impact of Compliance Costs on Debt Service Coverage Ratio of 

Small Airports .......................................................................................6-9

6.3.2 Analysis of Airlines .............................................................................................6-10

6.3.2.1 Definition of Small Airlines ................................................................6-10

6.3.2.2 Data Issues...........................................................................................6-11

6.3.2.3 Number of Potentially Affected Small Airlines...................................6-11

6.3.2.4 Impacts on Small Airlines....................................................................6-12

6.4 Regulatory Flexibility Analysis............................................................................................6-14

6.5 References ............................................................................................................................6-15
Economic Analysis for Proposed Effluent Limitation Guidelines 

and Standards for the Airport Deicing Category 

LIST OF TABLES 

Table 2-1 Direct Commercial Aviation Economic Impacts (2004) .................................................2-2

Table 2-2 Distribution of U.S. Airports in NPIAS (2004) ...............................................................2-4

Table 2-3 Commercial Service Aircraft Departures (Passenger) .....................................................2-5

Table 2-4 Commercial Service Aircraft Departures (Cargo) ...........................................................2-6

Table 2-5 Commercial Service Passenger Enplanements ................................................................2-6

Table 2-6 Number of Aircraft and Flight Hours (2006)...................................................................2-9

Table 2-7 Air Carrier Definitions...................................................................................................2-10

Table 2-8 Air Carrier Statistics (2006)...........................................................................................2-11

Table 2-9 Operational Highlights of the U.S. Scheduled Service Airline Industry .......................2-17

Table 2-10 Regional Jet Versus Turboprop Departures (Passenger Data).......................................2-18

Table 2-11 Airport Survey Sample Stratification.............................................................................2-19

Table 2-12 Airport Funding Methods (2004)...................................................................................2-23

Table 2-13 Portions of Revenue Collection Using Residual-Cost Approach When Airport 

Uses Mixed Approach Overall.......................................................................................2-24

Table 2-14 Airside and Non-airside Operating Revenues and as a Percent of Total Revenues.......2-25

Table 2-15 Average Revenues and Expenditures by Hub Size, 2002-2006.....................................2-26

Table 2-16 AIP Grants Awarded for Aircraft Deicing Related Projects..........................................2-28

Table 2-17 PFCs as Percent of Total Operating Revenues (2003-2006) and Total Value 

(2006).............................................................................................................................2-29

Table 2-18 Distribution of State Funding.........................................................................................2-29

Table 2-19 Sources of Airport Funding (2001-2005) ......................................................................2-30

Table 2-20 Capital Expenditure Financing (2001-2005) .................................................................2-30

Table 2-21 Five-Year Average Financials for Domestic Operations by Airline Type (2002-

2006)..............................................................................................................................2-34

Table 2-22 Financial Highlights of the Airline Industry (U.S. Airlines, scheduled service, in 

millions except as noted) ...............................................................................................2-35

Table 2-23 Changes in Domestic Operating Profit and Net Income, 2002 to 2006.........................2-36

Table 2-24 Landing Fees by Hub ($/1000 lb landed weight)...........................................................2-39

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Table 2-25 Average Departures and Enplanements by Hub Size, 2002-2006 .................................2-45

Table 2-26 Ratio of Airport Operating Expense to Revenues, 5-Year Average (2002-2006) .........2-46

Table 2-27 Average Capital Expenditure and Financing by Hub Size, 2002-2006 .........................2-46

Table 2-28 Commercial Service Aircraft Departures (Alaska)........................................................2-50

Table 2-29 Commercial Service Passenger Enplanements (Alaska) ...............................................2-50

Table 2-30 Commercial Service Aircraft Passengers per Departure (Alaska).................................2-50

Table 2-31 Alaska Rural Airports AIP Spending Plan.....................................................................2-52

Table 2-32 Total AIP Spending by Project Type - Alaska Rural Airport System ...........................2-52

Table 2-33 FY 2001 Capital & Operating Budget for the AK DOT&PF ........................................2-53

Table 4-1 BAT Options for Primary Commercial Service Airports with more than 1,000 

Annual Jet Departures......................................................................................................4-5

Table 5-1 Estimated Option Costs for In-scope Airports (millions, 2006 dollars) ..........................5-2

Table 5-2 Summary Cost Statistics for In-scope Airports ...............................................................5-3

Table 5-3 Airports in Top Quartile of Projected Compliance Costs ................................................5-4

Table 5-4 Compliance Costs as Percent of Operating Revenues, In-scope Airports .......................5-7

Table 5-5 Airports with Projected Annualized Costs Exceeding 3 Percent of Operating 

Revenues..........................................................................................................................5-8

Table 5-6 Multi-Airport Authorities ..............................................................................................5-10

Table 5-7 Projected Impacts to Debt Service Coverage Ratio of Multi-Airport Authorities 

Incurring Costs for Various Cost Pass-Through Assumptions (unweighted)................5-12

Table 5-8 Projected Impacts to Debt Service Coverage Ratio of Single Airport Owners 

Incurring Costs for Various Cost Pass-Through Assumptions ......................................5-12

Table 5-9 Impacts on the Alaska International Airport System (IAS)...........................................5-13

Table 5-10 Impacts on the Alaska Rural Airport System (RAS) .....................................................5-14

Table 5-11 Number of Airlines with Negative Profits and Income .................................................5-15

Table 5-12 Average Financial Data for Potentially Affected Air Carriers, 2004-2006 (in 

millions).........................................................................................................................5-16

Table 5-13 Ratio of Compliance Costs to Air Carrier Operating Revenue, 2004 Financial 

Data................................................................................................................................5-16

Table 5-14 Ratio of Compliance Costs to Air Carrier Operating Revenue, 2005 Financial 

Data................................................................................................................................5-17

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Table 5-15 Ratio of Compliance Costs to Air Carrier Operating Revenue, 2006 Financial 

Data................................................................................................................................5-18

Table 5-16 Air Carriers with Positive Operating Profits and Net Incomes; 2006 Financial 

Data and Airline Type....................................................................................................5-19

Table 5-17 Ratio of Compliance Costs to Air Carrier Operating Profit, 2006 Financial Data ........5-20

Table 5-18 Ratio of Compliance Costs to Air Carrier Net Income, 2006 Financial Data................5-21

Table 5-19 Compliance Costs Incurred by Air Carriers Without 2006 Financial Data and 

International Air Carriers...............................................................................................5-21

Table 5-20 Air Carrier 2006 Financial Data and Average Estimated Annual Compliance 

Costs ..............................................................................................................................5-22

Table 5-21 Impacts to Air Carrier Revenues and Revenue Miles Assuming 100 Percent Cost 

Pass-Through, 2006 .......................................................................................................5-24

Table 5-22 Summary of Impacts Under Analyzed Options .............................................................5-24

Table 6-1 Small and Non-small Airports, Surveyed (Unweighted) .................................................6-5

Table 6-2 Small and Non-small Airports, Excluding Alaska, Weighted .........................................6-6

Table 6-3 Numbers of Small and Nonsmall Airports In Scope........................................................6-7

Table 6-4 Total Compliance Costs for Small Airports In Scope......................................................6-7

Table 6-5 Small Airports in Top Quartile of Projected Compliance Costs......................................6-7

Table 6-6 Impacts on Small Airports (Weighted Figures) ...............................................................6-8

Table 6-7 Small Airports with Projected Compliance Costs Exceeding 3 Percent of 

Operating Revenues.........................................................................................................6-9

Table 6-8 Projected Impacts to Debt Service Coverage Ratio of Small Single AirportOwners Incurring Costs .................................................................................................6-10

Table 6-9 Small Business Administration Size Standards for Airline Industry.............................6-10

Table 6-10 2006 Departures Data for Non-Small and Small Airlines, as Defined by 

Employment...................................................................................................................6-11

Table 6-11 Numbers of Non-Small and Small Airlines by Airline Type: 2004...............................6-12

Table 6-12 Numbers of Non-Small and Small Airlines by Airline Type: 2005...............................6-12

Table 6-13 Numbers of Non-Small and Small Airlines by Airline Type: 2006...............................6-12

Table 6-14 Impacts on Operating Revenues of Small Airlines........................................................6-13

Table 6-15 Impacts on Operating Profits of Small Airlines.............................................................6-14

Table 6-16 Impacts on Net Income of Small Airlines......................................................................6-14

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LIST OF FIGURES 

Figure 2-1 FAA Categories of Airports.............................................................................................2-3

Figure 2-2 U.S. Airports and Number of SOFP Days .......................................................................2-7

Figure 2-3 Cyclical Nature of Airline Operating Profits Since Deregulation .................................2-15

Figure 2-4 Airport Ownership .........................................................................................................2-21

Figure 2-5 Comparison of Past Airport Funding to Future Development Costs .............................2-31

Figure 2-6 Comparison of Larger Airports’ Past Funding to Future Development Costs...............2-32

Figure 2-7 Airline Operating Costs as Percentage of Total (2007) .................................................2-37
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 1. Introduction 

and Standards for the Airport Deicing Category 

CHAPTER 1 

INTRODUCTION 

1.1 Scope and Purpose 

The U.S. Environmental Protection Agency (EPA) proposes and promulgates water effluent discharge 

limits (effluent limitation guidelines and standards) for industrial sectors. This Economic Analysis 

document (EA) summarizes the costs and projected economic impacts of technologies that form the bases 

for setting limits and standards for airport anti-icing/deicing operations. EPA does not mandate use of 

these technologies. Instead, EPA’s analysis demonstrates that the proposed effluent limitation guidelines 

and standards can be met and are economically achievable using specified technologies; industry is free to 

adopt whatever technologies it chooses to meet the limits. 

The Federal Water Pollution Control Act (commonly known as the Clean Water Act [CWA, 33 U.S.C. 

§1251 et seq.]) establishes a comprehensive program to “restore and maintain the chemical, physical, and 

biological integrity of the Nation’s waters” (§101(a)). EPA is authorized under sections 301, 304, 306, 

and 307 of the CWA to establish effluent limitation guidelines and pretreatment standards of performance 

for industrial dischargers. 

EPA is publishing proposed effluent limitation guidelines for the airport deicing category in this 

rulemaking effort. 

1.2 Report Organization 

This Economic Analysis (EA) document is organized as follows: 

• Chapter 2—Profile of the Air Transportation Industry 

Provides background information on the industry sectors affected by this regulation. 

• Chapter 3—Economic Impact Methodology 

Summarizes the economic methodology by which EPA examines incremental pollution 

control costs and their associated impacts on industry. 

• Chapter 4—Pollution Control Options 

Presents short descriptions of the regulatory options considered by EPA. More detail is 

provided in the Technical Development Document (U.S. EPA, 2009). 

• Chapter 5—Economic Impact Analysis Results 

Using the methodology described in Chapter 3, EPA presents the annualized costs associated 

with control of aircraft deicing fluid (ADF)-contaminated runoff and stormwater, using the 

technologies outlined in Chapter 4. EPA then summarizes the projected economic impacts 

generated by the regulatory costs, including impacts on airports and airlines. In other words, 

this chapter presents the findings on which EPA based its proposed determination of 

economic achievability under the CWA. 

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Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 1. Introduction 

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July 2009 1-2

• Chapter 6—Initial Regulatory Flexibility Analysis 

Pursuant to the Regulatory Flexibility Act. as amended by the Small Business Regulatory 

Enforcement Fairness Act, EPA examines whether the regulatory options will have a 

significant adverse impact on a substantial number of small entities. 

1.3 References 

U.S. EPA. 2009. Technical Development Document for Proposed Effluent Limitation Guidelines and 

Standards for the Airport Deicing Category. EPA-821-R-09-004. 
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 2. Profile of the 

and Standards for the Airport Deicing Category Air Transportation Industry 

CHAPTER 2 

PROFILE OF THE AIR TRANSPORTATION INDUSTRY 

Airport deicing/anti-icing operations are performed by airlines, airports, or contracted out to fixed-based 

operators (i.e., contract service providers). Typically, airlines and fixed-based operators are responsible 

for aircraft deicing/anti-icing operations, while airports are responsible for the deicing/anti-icing 

operations of airfield pavement. Compliance with environmental regulations may be shared between 

airlines and airports as co-permittees. 

This chapter presents a profile of the significant economic and financial aspects of the air transportation 

industry as it relates to airport/aircraft deicing operations. The demand for deicing operations is a derived 

demand; that is, deicing operations are performed solely to provide the service of safely transporting 

passengers and cargo by air. Thus, the economic conditions underlying airport/aircraft deicing operations 

are those of the air transportation industry itself. 

A variety of data sources were used in the preparation of this analysis. Many profile statistics were 

obtained from the U.S. Department of Transportation (DOT) Bureau of Transportation Statistics (BTS) 

Air Carrier Financial Reports (Form 41 Financial Data), Air Carrier Statistics (Form 41 Traffic), and Air 

Carrier Summary Data (Form 41 and 298C Summary Data) databases and the Federal Aviation 

Administration (FAA) Form 5100-127 (Airport Operating and Financial Summary). EPA has also 

included relevant data collected from its questionnaires, which were sent to a sample of airports and 

airlines regarding their operations and finances. Additionally, many literature sources were consulted in 

the development of this profile. These references are provided in Section 2.10. 

The structure of this chapter is as follows: Section 2.1 provides a brief overview of air transportation in 

the context of the U.S. economy, and summarizes some key points from the detailed industry profile that 

follows. Sections 2.2 and 2.3 introduce the airport and airline sectors respectively, presenting important 

definitions as well as the types and numbers of potentially affected entities. Although the air 

transportation industry has been largely deregulated for 30 years, to understand the current industry 

structure it is helpful to know how those tumultuous years since the onset of economic deregulation 

shaped the industry. Thus, Section 2.4 briefly reviews industry trends over the past 30 years. Section 2.5 

describes EPA’s data collection effort. Sections 2.6 and 2.7 discuss the nature of the economic 

environment in which airports and airlines operate, as well as current financial conditions. Section 2.8 

considers how airports interact financially with their airline customers, particularly how costs might be a 

passed from one entity to another. Finally, the nature of air transportation in Alaska differs considerably 

from the lower 48 contiguous states; Section 2.9 presents information on Alaskan airports and airlines. 

2.1 Industry Overview 

The U.S. commercial aviation industry plays an integral role in the nation’s economy; in 2004, the 

industry (including commercial air transportation and support services) was responsible for 5.8 percent of 

U.S. gross output, 5.0 percent of personal earnings, and 8.8 percent of national employment (CampbellHill 2006) as listed in Table 2-1. 

July 2009 2-1
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 2. Profile of the 

and Standards for the Airport Deicing Category Air Transportation Industry 

Table 2-1. Direct Commercial Aviation Economic Impacts (2004) 

Sector 

Output 

(Billion $) Jobs 

Commercial air transportation $154 691,000 

Air transportation support services and government agencies $18 121,000 

Aircraft-related manufacturing $75a 241,000 

Total $247 1,053,000 a

 Annual sales for commercial use, excludes military-related and general aviation production. 

Source: Campbell-Hill 2006 

For the purpose of the proposed effluent limitation guidelines, EPA has narrowed the definition of the air 

transportation industry to include only airports and airlines. 

2.1.1 Important Highlights 

As a preview to the information provided in the remainder of this chapter, the following list highlights 

some of the major air transportation related issues: 

• Approximately 60 large airports are responsible for the vast majority of air traffic in the U.S., 

as will be described in Section 2.2. 

• A shift in aircraft fleet composition has occurred with more use of regional jets, and 

retirement of older, less efficient larger planes. (See Section 2.3 for more details). 

• Two very different airline business models are operating in competition—“legacy” airlines 

(carriers from the regulated industry days) and “low-cost” carriers, each with their own 

unique operational characteristics as discussed in Section 2.7. 

• Low-cost carriers and passengers are increasing utilization of secondary airports to avoid 

larger, congested airports, where capacity is constrained. (See Section 2.4 for more details). 

• Airline profits have been highly cyclical since deregulation as described in Section 2.7. 

• The events of September 11, 2001, are only one factor in a series of events that have caused 

the years since 2001 to be some of the worst financial years in airline history. 

2.2 Airports 

The applicable North American Industry Classification System (NAICS) code for airports is 488119: 

Other Airport Operations. The U.S. Census Bureau describes this industry as establishments primarily 

engaged in (1) operating international, national, or civil airports, or public flying fields or (2) supporting 

airport operations, such as runway maintenance services, hangar rental, and/or cargo handling services. 

The 2002 Economic Census provides a snapshot of the airport industry at 1,484 establishments (Census 

2005). The Census Bureau estimates revenues of approximately $3.7 billion and 57,300 paid employees. 

Since FAA and BTS provide more refined data collection for the air transportation industry, EPA relies 

on these data sources for a majority of the data provided in this section. 

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Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 2. Profile of the 

and Standards for the Airport Deicing Category Air Transportation Industry 

2.2.1 Number and Size 

The United States has approximately 19,850 airports nationwide, ranging from large commercial airports 

to privately owned landing strips (FAA 2006). Of this number, the FAA has designated 3,431 airports 

(17 percent of the total) to be part of the National Plan of Integrated Airport Systems (NPIAS). NPIAS 

includes 67 proposed airports expected to open in the next 5 years in addition to 3,364 existing airports. 

The NPIAS designation identifies those airports significant to the United States’ aviation infrastructure, 

which makes them eligible for federal funding. FAA makes its determination for inclusion in NPIAS 

based on the airport’s activity level and location. 

This analysis frequently uses FAA’s classification of airports, as illustrated in Figure 2-1. FAA created 

its classification system for apportioning Airport Improvement Program (AIP) funding, where airport 

classes are primarily determined by passenger activity. Although deicing operations and deicing/antiicing fluids (also known as aircraft deicing fluids, or ADF) generation are a function of aircraft 

operations, not passenger activity, the two measures are highly correlated, and FAA’s classification 

system provides a useful indication of airport size for EPA’s purposes. 

National Airport System

3,364 airports (plus 67 proposed airports)

Designated by FAA as important to national air transportation

Commercial Service Airports

517 airports (plus 8 proposed)

- publicly owned

- scheduled passenger service

- at least 2,500 boardings per year

General Aviation & Reliever Airports

2,847 airports (plus 59 proposed)

- no scheduled passenger service

- less than 2,500 boardings per year

- at least 10 based aircraft

Primary Airports

382 airports (plus 2 proposed)

- more than 10,000 boardings per year

Nonprimary Airports

135 airports (plus 6 proposed)

- at least 2,500 boardings per year

- no more than 10,000 boardings per year

Large hubs (30 airports): 1% or more of total national boardings per year

Medium hubs (37 airports): 0.25% to 1% of total national boardings per year

Small hubs (72 airports): 0.05% to 0.25% of total national boardings per year

Nonhubs (243 airports): less than 0.05% of total national boardings per year

Figure 2-1. FAA Categories of Airports 

Source: FAA 2006 

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July 2009 2-4

FAA defines commercial service airports as publicly owned airports that receive scheduled passenger 

service and have at least 2,500 annual passenger boardings. Commercial service airports can be: primary, 

which have more than 10,000 annual boardings, or non-primary, which have at least 2,500 but no more 

than 10,000 annual boardings.1

 Primary commercial service airports are further broken down by percent 

of total national boardings into large hubs, medium hubs, small hubs and nonhubs.2

General aviation (GA) airports have no scheduled passenger service and less than 2,500 annual passenger 

boardings. General aviation reliever airports are located near commercial service airports and service 

general aviation aircraft that would normally utilize a more congested airport. Of the 2,847 existing GA 

airports in the NPIAS, 274 are assigned “reliever” status. FAA classifies the approximately 16,500 nonNPIAS airports as low activity landing areas. These landing areas are excluded from further discussion in 

this analysis since they are not significant in terms of stormwater discharges. Military airports have also 

been excluded from this economic analysis because they have different operational and financial 

characteristics. EPA is working with the Department of Defense to determine the nature and significance 

of deicing/anti-icing operations at military airports. 

Table 2-2 presents the number of airports in NPIAS, broken down by FAA definition, and percent of 

boardings and based aircraft for calendar year (CY) 2004. This table emphasizes the dominance of large 

hubs (those with more than 1 percent of total U.S. enplanements) in the air transportation network. The 

30 large hubs accounted for almost 69 percent of all passenger boardings. Altogether the 67 large and 

medium hub commercial service airports account for almost 90 percent of all passenger boardings. 

Table 2-2. Distribution of U.S. Airports in NPIAS (2004) 

Airport Type 

Number of 

Airports 

Percentage of 

Enplanements 

Percentage of 

Based Aircrafta

Commercial Service Large Hub 30 68.7% 1.1% 

Commercial Service Medium Hub 37 20.0% 3.0% 

Commercial Service Small Hub 72 8.1% 4.7% 

Commercial Service Nonhub 243 3.0% 10.6% 

Non-primary Commercial Service 135 0.1% 2.4% 

General Aviation Relievers 274 0.0% 28.8% 

General Aviation 2,573 0.0% 41.2% 

Existing NPIAS Airports 3,364 99.9% 91.8% a

 Based on active aircraft fleet of 214,591 aircraft in 2005. 

Source: FAA 2006 [Note: Airport counts will differ depending on the source and year of data represented] 

FAA’s designation of hub status depends on the percent of total passenger boardings occurring at each 

airport, resulting in variation in the number of airports in each hub category from year to year. For its 

analysis, EPA utilizes the CY 2004 airport classifications, which identified 382 primary commercial 

service airports, 67 of which are large and medium sized hubs. EPA chose to focus the proposed rule on 

the commercial service airports because aircraft at general aviation airports rarely fly in weather requiring 

deicing and therefore are anticipated to generate relatively little ADF-contaminated stormwater. Aircraft 

must be approved by the FAA for flight in icing conditions, which involves a rigorous testing program, 

 

1

 FAA defines passenger boardings as the number of revenue passenger boardings on aircraft engaged in commerce. 

The term “boarding” is interchangeable with the term “enplanement” (U.S. EPA 2000). 2

 Airlines may also designate certain airports as “hubs.” However, these airline designations relate to the airport’s 

usage to facilitate connections between airline routes. Unless otherwise noted, this analysis utilizes the FAA hub 

definition. 
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and Standards for the Airport Deicing Category Air Transportation Industry 

July 2009 2-5

and relatively few light aircraft, which are the majority of aircraft at general aviation airports,3 carry this 

approval (AOPA 2002). EPA did, however, include general aviation airports with an average of five or 

more cargo-only departures in the analysis because these operations tend to use jet aircraft and fly in 

wintry weather. EPA designated such airports as general aviation/cargo airports. 

Large certificated4

 carriers must report monthly traffic statistics and quarterly financial data to BTS, 

which provides the data to the public. Small certificated carriers report scheduled service on a quarterly 

basis, and although they also report financial statistics, data are not published due to confidentiality 

agreements. Since the financial statistics for airlines, presented later in this section, were based on data 

from the BTS T-100 data and BTS Form 41 Air Carrier Financial Reports database, it is limited to large 

certified carriers only. 

Tables 2-3, 2-4, and 2-5 are based on analysis of the BTS T-100 data for commercial service airlines. As 

Table 2-3 illustrates, large and medium hub airports posted moderate growth in passenger aircraft 

departures from 2003 through 2005, but saw declines in 2006. Small hub and nonhub airports started to 

experience this decline in departures in 2004. Table 2-4 shows cargo-only departures are highly variable 

over the 2003 through 2006 time period. Table 2-5 presents passenger boardings for 2003 through 2006. 

Table 2-3. Commercial Service Aircraft Departures (Passenger) 

Airport Number of Departures Annual Growth Rates 

Type 2003 2004 2005 2006 2004 2005 2006 

Large Hub 5,973,386 6,359,189 6,446,213 6,274,990 6.46% 1.37% -2.66% 

Medium 

Hub 1,698,917 1,769,476 1,792,848 1,762,224 4.15% 1.32% -1.71% 

Small Hub 1,041,900 1,107,831 1,103,882 1,041,607 6.32% -0.36% -5.64% 

Nonhub 804,034 826,234 811,182 764,375 2.76% -1.82% -5.77% 

Nonprimary 76,413 75,052 69,091 72,321 -1.78% -7.94% 4.67% 

Total 9,594,650 10,137,782 10,223,216 9,915,517 5.66% 0.84% -3.01% 

Source: EPA analysis of BTS T-100 database 

 

3

 In 1998, single-engine propeller aircraft comprised 70 percent of the general aviation fleet (GAO 2001). 4

 A certificated air carrier is one “holding a Certificate of Public Convenience and Necessity issued by DOT to 

conduct scheduled services interstate. Nonscheduled or charter operations may also be conducted by these carriers.” 

The term “certificated air carrier” is interchangeable with “certified air carrier.” (BTS 2008c). More detail is 

provided in Section 2.3.1.2 of this report. 
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and Standards for the Airport Deicing Category Air Transportation Industry 

Table 2-4. Commercial Service Aircraft Departures (Cargo) 

Airport Number of Departures Annual Growth Rates 

Type 2003 2004 2005 2006 2004 2005 2006 

Large Hub 207,887 212,971 204,131 200,338 2.45% -4.15% -1.86% 

Medium 

Hub 194,115 194,908 193,087 197,563 0.41% -0.93% 2.31% 

Small Hub 82,571 83,537 76,934 73,100 1.12% -7.90% -4.98% 

Nonhub 85,519 88,645 81,067 91,393 1.37% -8.54% 12.7% 

Nonprimary 8,379 8,551 7,082 7,960 2.09% -17.2% 12.4% 

Total 578,471 588,612 562,301 570,354 1.75% -4.47% 1.43% 

Source: EPA analysis of BTS T-100 database 

Table 2-5. Commercial Service Passenger Enplanements 

Airport Passenger Enplanements Annual Growth Rates 

Type 2003 2004 2005 2006 2004 2005 2006 

Large 

Hub 474,573,405 514,416,974 536,384,310 539,513,169 8.40% 4.27% 0.53% 

Medium 

Hub 117,260,549 124,964,548 130,048,827 130,207,784 6.57% 4.07% 0.12% 

Small 

Hub 50,344,945 55,117,982 56,722,694 56,259,611 9.48% 2.91% -0.82% 

Nonhub 18,897,491 20,772,050 21,657,701 20,924,686 9.92% 4.26% -3.38% 

Nonprimary 515,371 563,408 604,481 696,769 9.32% 7.29% 15.3% 

Total 661,591,761 715,834,962 745,418,013 747,602,019 8.20% 4.13% 0.29% 

Source: EPA analysis of BTS T-100 database 

While boardings grew from 2003 to 2005, gains were much smaller or negative from 2005 to 2006, with 

the exception of double-digit growth at nonprimary commercial service airports. Large hub airports 

posted positive growth every year since 2003. The overall growth from 2003 to 2006 for passenger 

boardings was 13.0 percent over four years. Although passenger boardings and passenger service aircraft 

departures tend to be highly correlated, airlines can increase boardings without increasing departures by 

using larger planes or obtaining higher load factors (the percent of available seats that are used by 

revenue-paying passengers). Thus, from 2005 to 2006, passenger boardings grew even though the 

number of departures declined. 

2.2.2 Airport Location and Climate Data 

Airport location as it relates to climate is important to examine because airports with high levels of snow 

and freezing rain are more likely to have substantial deicing operations and the volume of ADFcontaminated stormwater produced will be larger than at airports in warmer locales. EPA used weather 

data from the National Oceanic and Atmospheric Administration (NOAA) Climate Maps of the United 

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States to generate the number of snow or freezing precipitation (SOFP) days5

 at airports nationwide. 

Figure 2-2 presents a map of primary commercial service airports by hub size and SOFP days. This 

information was used to stratify the airport sample frame to ensure small and nonhub airports that 

potentially perform significant deicing operations would be adequately represented in the survey sample. 

The survey and sampling plan are discussed in Section 2.5. 

Figure 2-2. U.S. Airports and Number of SOFP Days 

2.3 Airlines 

The NAICS code applicable to airlines is: 481: Air Transportation, which includes air transportation of 

passengers and/or cargo using aircraft. The subsector distinguishes scheduled from nonscheduled air 

transportation. Scheduled air carriers fly regular routes on regular schedules and operate even if flights are 

only partially loaded. Nonscheduled carriers often operate during nonpeak time slots at more congested 

airports. These establishments have more flexibility with respect to choice of airport, hours of operation, 

load factors, and similar operational characteristics. Nonscheduled carriers provide chartered air 

transportation of passengers, cargo, or specialty flying services. The Census Bureau does not gather data 

 

5

 EPA combined NOAA 30 year averages (1961 to 1990) of the number of days with snow fall exceeding one inch 

and the number of days with some form of freezing precipitation to create the composite snow or freezing 

precipitation days measure used in this analysis. 
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 2. Profile of the 

and Standards for the Airport Deicing Category Air Transportation Industry 

from large certificated passenger carriers since that data is collected by BTS. Therefore this analysis relies 

on data collected by BTS and FAA to represent airline statistics. 

2.3.1 Number and Size 

Civil aviation can be divided into two groups: air carriers and general aviation. Air carriers are defined as 

companies or other organizations that carry passengers or cargo for hire or compensation. General 

aviation constitutes all other civil aviation. This section looks at both the number of aircraft that comprise 

the U.S. fleet, and the number of airlines operating in the United States. 

2.3.1.1 Number of Aircraft 

Aircraft utilized by air carriers are distinguished from general aviation aircraft by size, frequency, and 

intensity of use. At the end of 2006, the U.S. airline fleet consisted of 7,626 aircraft (FAA 2007), 

composed of: 

• 3,886 mainline passenger aircraft (more than 90 passenger seats) 

• 2,743 regional passenger aircraft 

• 997 cargo aircraft 

From 2005 to 2006, the mainline passenger fleet fell by 39 aircraft, with an overall loss of 576 large 

aircraft since 2000. In contrast, the mainline cargo fleet rose by six aircraft in 2006, with fleet size now 

increasing for two years in a row. In response to rapidly increasing fuel prices, airlines have been forced 

to reduce capacity by either grounding aircraft, or retiring larger aircraft in favor of smaller, more 

efficient models. 

The Air Transport Association (ATA) (2008a) reports that the cost per gallon of jet fuel has increased 

more than 216 percent since 2000, while fuel costs as a share of total operating expenses have increased 

from 9.9 percent in the first quarter to 2002 to 26.5 percent in third quarter 2007. As a result, domestic 

airlines—including United, American, and Continental—have grounded planes, reduced schedules, and 

deferred or canceled future deliveries. During the first six months of 2008, American Airlines announced 

plans to retire up to 50 MD-80s, while U.S. Airways announced plans to cut capacity by retiring larger 

Boeing 757s and 737s in favor of fewer smaller planes. Other airlines have followed suit, with Delta, 

Continental, Northwest, and jetBlue all announcing plans to cut domestic capacity and/or accelerate plans 

for retirement of older, less efficient planes over the coming months (Associated Press 2008). The 

regional fleet has increased by nearly 470 aircraft since 2000, while turboprop and piston fleets have 

declined by 648 aircraft over the same time period. 

As shown in Table 2-6, commercial aircraft are utilized more intensively than general aviation aircraft. 

Although the commercial airline fleet comprises only 4 percent of the aircraft associated with general 

aviation, total commercial hours flown per aircraft (on average) is almost 20 times that of a general 

aviation aircraft. 

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Table 2-6. Number of Aircraft and Flight Hours (2006) 

Aircraft Type Number of Aircraft Total Flight Hours Hours Per Aircraft 

Commercial, Cargo and Commuter Carriersa

Total (Fixed-wing) 7,149 17,846,835 2,496

Turbojet 5,916 16,095,937 2,721 

% of Total 83% 90% 

Turboprop 880 1,462,290 1,662 

% of Total 12% 8% 

General Aviation 

Total (Fixed-wing) 182,186 22,764,959 125 

1- Engine Piston 145,036 13,975,869 96 

% of Total 80% 61% 

2-Engine Turbojet 10,379 4,077,209 393 

% of Total 6% 18% 

2-Engine Turboprop 5,487 1,309,643 239 

% of Total 3% 6% a Not including Part 135 On-Demand Air Taxis. 

Source: FAA 2007b and FAA 2007c. 

2.3.1.2 Definition and Number of Air Carriers 

Commercial air carriers can be divided into four categories based on FAA and U.S. Department of 

Transportation (DOT) requirements: large certificated carriers, small certificated carriers, commuter 

carriers, and air taxis. These categories are primarily determined by the combination of financial 

(“fitness”) and safety (“operating”) criteria carriers are required to meet. 

Fitness criteria are set by DOT. Large and small certificated carriers require a Federal Aviation Act 

Section 401 fitness certificate (hence the term “certificated carrier”). Under DOT’s criteria, the 

differences between large and small certificated carriers are: (1) aircraft size, and (2) international 

operations. Large certificated carriers operate aircraft that have more than 60 seats, or a payload capacity 

in excess of 18,000 pounds, or conduct international flights. Small certificated carriers operate aircraft 

that have 60 seats or less, or a payload capacity less than 18,000 pounds, and do not conduct international 

flights. 

Commuters and air taxis do not require a fitness certificate but must register with DOT under 14 CFR 

Part 298. Commuter air carriers and air taxis are distinguished by the type of service provided. Air taxis 

primarily provide on-demand service. Commuter air carriers are defined as air taxis that also provide 

published scheduled service of at least five round trips per week between at least two locations. 

Operating criteria are set by FAA and are based on aircraft size and type. Carriers operating aircraft 

carrying more than nine passengers, or more than 7,500 pounds payload, or are powered by turbojets must 

meet the requirements of Federal Air Regulation (FAR) Part 121 (14 CFR 121). FAR Part 135 operating 

certificates are required for aircraft carrying nine passengers or less, or less than 7,500 pounds payload, 

and is not a turbojet. Table 2-7 summarizes the combination of fitness and operating requirements for 

each classification. 

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Table 2-7. Air Carrier Definitions 

Defined by Combination of Following 

Air Carrier 

Type Description Fitness Criteria 

Operating 

Criteria 

Large 

Certificated 

Aircraft with more than 60 seats, or payload capacity 

greater than or equal to 18,000 pounds, or conduct 

international flights 

DOT Section 401 

Certificate 

FAR Part 121a

Small 

Certificated 

Aircraft with 60 seats or less, or payload capacity less 

than 18,000 pounds, and conduct domestic flights only 

DOT Section 401 

Certificate 

FAR Part 121a or 

FAR Part 135b

Commuter Air taxi with published scheduled service of at least five 

round trips per week between at least two locations 

Registered under 

14 CFR 298 

FAR Part 121a or 

FAR Part 135b

Air Taxi Primarily on demand service Registered under 

14 CFR 298 

FAR Part 121a or 

FAR Part 135b

a

 Aircraft carries more than nine passengers, or more than 7,500 pounds payload, or is a turbojet. 

b

 Aircraft carries nine passengers or less, less than 7,500 pounds payload, and is not a turbojet. 

Although the distinction between large certificated and other types of air carriers is clear-cut, the 

distinction between small certificated and commuter air carriers is more ambiguous. Both are able to 

operate the same type of aircraft and offer the same type of service. The decision to become a small 

certificated carrier rather than a commuter is largely at the discretion of the operator, and hinges on 

complex legal issues beyond the scope of this analysis (U.S. EPA 2000). Because BTS data and data 

availability use this distinction, EPA will present results in this form in the EA. However, these two types 

of air carriers can intuitively be considered very similar for understanding operational patterns and 

differences between their operations and larger carriers. 

For the purpose of reporting air carrier statistics, BTS further characterizes large certificated carriers by 

annual revenue as shown below: 

• Major carriers are airlines with annual operating revenues of more than $1 billion. 

• National carriers are airlines with annual operating revenues of between $100 million and $1 

billion. 

• Regional carriers are airlines with annual operating revenues of less than $100 million. They 

can be further categorized into large regional carriers (revenues of $20 million to $100 

million) and small regional carriers (revenues of less than $20 million). 

National and regional carriers tend to focus their service in particular regions of the country. Major 

airlines generally provide nationwide and often worldwide service. National and regional airlines often 

provide “feeder” services to major airlines by carrying passengers from smaller airports not served by 

major airlines to the major airlines’ operational hubs. Through code-sharing agreements, the regional 

airlines can schedule such feeder flights under the major airline’s scheduling code. This allows the major 

airlines to appear to have scheduled service to more cities or more frequent flights to a city, while the 

regional airlines gain by having its service appear to the traveler as being provided by a major airline. 

Through the code-sharing agreements, major and national/regional airlines often have more 

complementary relationships than competitive ones. 

Foreign-owned airlines have become increasingly interested in capturing a share of the U.S. air travel 

activity. Current legislation prohibits foreign airlines from moving passengers between points only in the 

United States. However, “open skies” advocates are working toward allowing foreign airlines to compete 

for domestic U.S. travel (Kaps 2000). 

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As is the case for airports, the airline industry is dominated by a small number of very large entities. 

Table 2-8 depicts the BTS air carrier traffic statistics for 2006.6

 Twenty major airlines account for 84.5 

percent of passenger enplanements; major and national carriers combined account for over 96 percent of 

enplanements. 

Table 2-8. Air Carrier Statistics (2006) 

Carrier 

Type 

Number 

(% of 

Total) 

Passenger 

Enplanements

(thousands) 

Revenue 

PassengerMiles 

(millions) 

Available 

Seat-Miles 

(millions) 

Revenue 

Ton-Miles 

(millions) 

Available 

Ton-Miles 

(millions) 

Major 20 

(13.4%) 

634,202 

(84.5%) 

733,936 

(90.6%) 

922,667 

(89.8%) 

100,193 

(83.0%) 

163,090 

(81.9%) 

National 32 

(21.5%) 

88,112 

(11.7%) 

64,748 

(8.0%) 

87,643 

(8.5%) 

16,821 

(13.9%) 

29,669 

(14.9%) 

Regional 35 

(23.5%) 

8,893 

(1.2%) 

5,763 

(0.7%) 

8,347 

 (0.8%) 

3,166 

(2.6%) 

5,434 

(2.7%) 

Small 

Certificated 

35 

(23.5%) 

4,146 

(0.6%) 

1,320 

(0.2%) 

2,060 

(0.2%) 

151 

(0.1%) 

261 

(0.1%) 

Commuter 27 

(18.1%) 

15,443 

(2.1%) 

4,321 

(0.5%) 

6,808 

(0.7%) 

423 

(0.4%) 

780 

(0.4%) 

Total 149 750,796 810,098 1,027,525 120,764 199,234 

Source: BTS Air Carrier Summary: T1: U.S. Air Carrier Traffic and Capacity Summary by Service Class 

The air transportation industry uses standard measures of unit capacity and utilization to account for 

differences in aircraft size and routes. For passenger service, these measures are (BTS 2008b): 

• Revenue passenger-miles (RPM): number of revenue-earning passengers multiplied by the 

number of miles flown. 

• Available seat-miles (ASM): number of aircraft seats multiplied by the number of miles 

flown. 

Thus, ASM measures an air carrier’s capacity, while RPM measures how many of those seats were filled 

by paying customers. Dividing RPM by ASM results in the “load factor;” the percent of available seat 

miles that were filled. Table 2-8 shows that flying larger aircraft over longer distances, major airlines 

account for about 90 percent of industry RPM and ASM. 

For cargo, industry unit measures are (BTS 2008b): 

• Revenue ton-miles (RTM): tons of revenue-earning cargo carried multiplied by the number of 

miles flown. 

• Available ton-miles (ATM): cargo-carrying capacity measured in tons multiplied by the 

number of miles flown.7

 

6

 Due to the use of different data sources there is a minor discrepancy in the number of total airlines included in 

Table 2-8 when compared with other tables in this report. 

7

 Most cargo is carried on aircraft that also carry passengers, and therefore the tonnage available for cargo must be 

adjusted to account for the weight of the passengers carried. 
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Major airlines account for 83 percent of RTM and 82 percent of ATM. 

2.4 Air Transportation Industry Trends 

Historically, air transportation industry profitability has been highly cyclical. Recently, however, a series 

of largely unforeseen events this decade seriously disrupted the demand for air travel, which in turn 

generated a more pronounced dip in the air transportation industries’ financial health. Even prior to the 

September 11, 2001 terrorist attacks, demand for air transportation, especially associated with business 

travel, had slowed due to the weakening economy (ATA 2001; ATA 2002). As air travel finally started to 

return to pre-September 11th levels in 2003, the war in Iraq and the Severe Acute Respiratory Syndrome 

(SARS) outbreak significantly reduced international travel, which accounts for about 25 percent of U.S. 

airline RPMs (ATA 2003; ATA 2004). Currently, as the industry began recovering from these events in 

2005 and 2006, increasing fuel prices are weakening the upside of the financial cycle (ATA 2005; ATA 

2006; ATA 2007; Heimlich 2008). This section examines how the air transportation industry has evolved 

since its deregulation, and how it has adjusted to innovations such as the entry of low-cost carriers and the 

use of secondary airports. 

2.4.1 Deregulation of Airlines 

Deregulation in 1978 brought many changes to the structure of the airline industry; among those were 

open price competition, increasingly aggressive cost and capacity control measures, and the development 

of the airlines’ hub and spoke network system. While airlines existing during the regulated time (hereafter 

referred to as “legacy” airlines)8

 struggled to compete in the new free market, new entrants were able to 

enter the market. These new carriers often held several advantages over existing carriers: 

• Low overhead and infrastructure costs 

• Ability to purchase only capital equipment that was needed 

• Lack of pre-existing labor contracts allowed for outsourcing 

However, by the late 1980s many carriers, both new and old, exited the market through merger or 

bankruptcy as the industry struggled to adapt to the reality of an openly competitive market. This was a 

period of unusually high rates of mergers and acquisitions for the U.S. economy as a whole as well as the 

air transportation industry. 

2.4.1.1 Development of Hub and Spoke Networks 

Legacy carriers in general developed a competitive strategy organized around the concept of a “hub and 

spoke network,” while reducing point-to-point service because they found it less profitable (Kaps 2000).9

The concept is that airlines route passengers from many different points of origin and different 

destinations through a single major airport (“airline hub”) and use connecting flights to send them to their 

various destinations. Legacy airlines also began to integrate regional carriers into carrier networks where 

the regional airlines act as “feeders” for the hub. The regional airlines might be independently-owned 

partners with, or wholly-owned subsidiaries of the major carrier. 

 

8

 Although Southwest Airlines started operations prior to deregulation, it is not considered a “legacy” airline because 

it operates on a different business model. 

9

 The “hub” of a hub and spoke network developed by an airline for its operational purposes should not be confused 

with the FAA definition of a hub used to allocate AIP funds. 
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A hub and spoke network provides several advantages to airlines, including increased service frequency 

and connectivity, and overall increased density of operations. Frequent service and connectivity are 

attractive to passengers, and increased density of operations might allow the carrier to increase its load 

factor and perhaps use larger aircraft with lower unit costs (Borenstein and Rose 2007; Holloway 2003). 

Advantage might also be gained from decreased competition at hub airports (Borenstein and Rose 2007). 

Conversely, hubs can result in high capital costs and poor resource utilization as the airline must equip the 

hub to service large numbers of aircraft in a short period of time, then sit idle while waiting for the next 

“bank” of flights to arrive (i.e., operational peaks associated with large numbers of aircraft arriving and 

departing within a short period of time; Holloway 2003). 

In the context of the deicing effluent guideline, a hub has potentially significant implications for airline 

operations. Operational delays at a hub can ripple throughout an airline’s entire network causing further 

delays and missed connections. Furthermore, a “bank” of aircraft might need deicing in a short period of 

time (Holloway 2003). Thus, collecting ADF-contaminated stormwater at an operational hub might be 

more difficult, and airlines might be more sensitive to the implications of deicing operations to their 

schedule. 

2.4.1.2 Emergence of Low-Cost Carriers 

In recent years, a second generation of low-cost carriers has emerged as a strong rival to the legacy 

airlines. Originally considered a passing trend, low-cost carriers began to enter the market better 

capitalized and with lower costs in direct competition with legacy airlines during the 1990s (GAO 2004). 

The low-cost giant Southwest Airlines, which does not utilize a hub and spoke system, is the best known 

example of a successful low-cost carrier, although it started operating in 1971, prior to deregulation 

(Belobaba 2005). Some of the major attributes of the “low cost” business model are generally considered 

to include: no-frills, single class service at discount fares, use of a point-to-point route structure between 

secondary airports, and rigorously cutting costs by using a single aircraft type and quick turn-around 

times, thereby reducing maintenance costs and maximizing aircraft utilization. 

From 1998 to 2003, the overall market share of passenger enplanements for low-cost carriers rose from 

23 percent to 33 percent, and their presence in the 5,000 largest city-pair markets (e.g., New York – 

Boston) increased from 32 percent to 46 percent over the same time period. Between 1999 and 2004, all 

existing low-cost carriers gained market share while four of the six legacy carriers lost market share 

(GAO 2004). 

The emergence and success of low-cost carriers has caused legacy airlines to revise their business models 

to help them compete in a market with lower priced fares. A 2006 U.S. Government Accountability Office 

(GAO) analysis found that the median price for air travel has declined by almost 40 percent since 1980 after 

adjustment for inflation. Some legacy carriers, such as Delta and United developed their own low cost 

divisions (e.g., Song and Ted, respectively, both of which have been phased out), and there has been some 

trend away from reliance of hub and spoke route structures. 

Primarily, however, legacy carriers have relentlessly cut costs, especially in the years since September 11, 

2001. Although cutting costs by about 14 percent between October 2001 and December 2003, the gap 

between unit costs for legacy airlines and the low-cost carriers increased. GAO found that this disparity 

increased from 2.1 cents per available seat mile in 2000 to 3.8 cents per available seat mile in 2003 (GAO 

2004). The cost difference is attributable to two main factors: 

• Higher labor costs for legacy airlines due to long-standing union contracts. 

• Higher asset-related costs of legacy airlines due to an older, more diverse aircraft fleet. 

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Since 2000, overall domestic airline capacity has grown by a modest 1.9 percent. All of the growth in 

capacity has occurred among low-cost carriers and regional carriers, with low-cost carriers experiencing 

capacity growth rates of 57 percent. This compares with a capacity loss of 20.6 percent since 2000 for 

large legacy carriers (FAA 2007b). Due to these cuts in capacity, legacy airlines saw revenue passenger 

miles (RPM) fall 10.4 percent and enplanements fall 22.3 percent over the same time period. At the same 

time, low-cost carriers’ RPM and enplanements increased by 71.1 percent and 47.9 percent, respectively 

(FAA 2007b). Low-cost carriers posted operating profits of $911.6 million and net profits of $1.5 billion 

in 2006 (FAA 2007b). 

As the industry has evolved, two distinct types of large carriers have evolved: the legacy carriers, and the 

low-cost carriers. The advent of low-cost carriers is seen as driving much of the recent expansion in the 

industry, and growth is projected to continue at a healthy rate for the next decade (assuming recent 

increases in fuel prices are transitory). In addition, the development of low-cost carriers has affected the 

pattern of airport utilization, as will be discussed in the following section. 

2.4.1.3 Effect on Airports Served 

Deregulation of the airline industry meant that the legacy carriers could select their own routes and drop 

flights to unprofitable locations (Wells 1996). Foreseeing potential financial challenges to rural and less 

traveled airports after deregulation, the government developed a program called the Essential Air Service 

to ensure communities’ access to air travel. Smaller commuter airlines have replaced larger carriers in 

providing service to these airports. Even with subsidies, which are reflected in reduced passenger fares, 

these smaller commuter planes are less profitable and the GAO (2007b) found that these flights are the 

first flights to be eliminated during times of financial downturns. 

Conversely, smaller airports have implemented new strategies to diversify and differentiate themselves. 

For example, low-cost airlines seek airports where delays tend to be minimal and quick turnaround is 

possible (Carney and Mew, 2003). Secondary airports that are located in relatively close proximity to 

large hub airports, or at least the large metropolitan areas served by large hub airports, are able to offer 

lower rates and charges, higher reliability of operations, and lower average delays than large hub airports, 

which makes them attractive to low-cost airlines. This is effectively creating new regional multi-airport 

systems (Bonnefoy and Hansman 2007).10 

The combination of low-cost carrier and secondary airport market has made flying more cost-efficient in 

many markets. For example, as Southwest Airlines, considered the benchmark for the low fare carrier 

industry, has expanded its route structure, traffic at secondary airports it serves has often doubled or 

tripled, leading air industry experts to coin the phrase “the Southwest effect” to describe the phenomena 

(Bennett and Craun 1993). The airline’s service at Manchester, NH and Providence, RI has created two 

attractive alternatives to Boston’s Logan airport, a major hub, for air travel to and from the greater Boston 

metropolitan area. 

2.4.2 Cyclical Nature of Air Travel Demand 

The airline industry has undergone significant change since its deregulation. Passenger traffic and, with it, 

industry revenues, have expanded. However, expenses have grown just as fast and profits have become 

increasingly cyclical (GAO 2006) as seen in Figure 2-3. Immediately following deregulation, which 

 

10 Although these airports are not necessarily under the same operational control and do not coordinate plans. 
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and Standards for the Airport Deicing Category Air Transportation Industry 

occurred in 1978, the industry experienced a drop in profit, but by the late 1980s the industry had been in 

an upswing. However, by the early 1990s, the industry was once again on a downward financial trend due 

to a global economic recession. 

Although exacerbated by specific events, this profile cycle seems to be inherent in the industry (Morrison 

and Winston 1995; Borenstein and Rose 2007). The GAO (2006) explained one reason for the profit 

cyclicality of airlines is that the industry has high fixed costs for its aircraft and a costly labor structure, 

which makes it difficult for airlines to reduce costs when revenues drop from outside shocks, such has 

high fuel costs or declines in business travel. By the mid 1990s the industry was showing positive 

operating profits, and these are considered some of the best years for the industry (GAO 2006). However, 

by 2000, expenses were again higher than revenue. 

In fact, prior to September 11th the industry was already forecasting losses for 2001 (Belobaba 2005). 

Among concerns facing the industry in early 2001 were system capacity constraints, passenger-perceived 

poor quality of service, and concerns about anti-competitive actions by dominant airlines against new 

entrants (Belobaba 2005). As will be discussed further in Section 2.7.2, there are a number of 

characteristics for the airline industry that create this cyclical nature. 

Deregulation 

Figure 2-3. Cyclical Nature of Airline Operating Profits Since Deregulation 

Source: GAP 2006 

Though airports generate a large portion of revenue from the airlines through landing fees and passenger 

facility charges, there is a growing trend to generate more revenue through non-airline sources such as 

parking and concessions. The more revenue an airport generates through non-airline sources, the more 

attractive the airport is to airlines (as fees to airlines tend to be lower), and the more stable the airport’s 

revenue stream will be (Kwan 2008). More discussion about airport revenues is provided in Section 

2.6.2. 

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2.4.3 Growth in Air Travel 

Between 2000 and 2006, total domestic airline capacity (i.e., available seats) increased by only 1.9 

percent, but enplanements (i.e., filled seats) increased by 6.2 percent (FAA 2007b). The FAA forecasts 

growth in enplanements through 2020 at an average annual rate of 3.5 percent. 

2.4.3.1 Airport Capacity Constraint 

A growing issue for airports is airport congestion. While congestion is caused primarily by an increase in 

flight operations, it is exacerbated by a concurrent change in demand composition (Carney and Mew, 

2003). As airlines continue to differentiate themselves by increasing flight frequency on existing routes as 

well as by creating new routes (primarily of the point-to-point service variety serviced by regional jets), 

airports are struggling to keep pace. Airlines have more flexibility in adjusting their operational frequency 

and equipment mix than airports, which must work with an infrastructure that is largely fixed in the short 

term. This results in a disconnect between airline and airport operations and operational inefficiencies in 

the air transportation system. For example, the number of flights at John F. Kennedy Airport in New York 

City increased 41 percent from March 2006 to August 2007 without a corresponding increase in runways 

or resources available to handle increased operations (McCartney 2007). 

Adding capacity requires physical space, which many of the nation’s airports simply do not have. Another 

barrier is that many airports are built near environmentally sensitive areas, such as waterways, that would 

make expansion costly and, in many cases, prohibited. New, large capacity airports could also be 

constructed to address the demand issue, but environmental and space constraints make this option 

unlikely to be the primary solution (Bonnefoy and Hansman 2007). As discussed in Section 2.4.1, 

secondary airports have developed as viable alternatives for passengers willing to drive in order to avoid 

flying out of more congested hubs. 

2.4.3.2 Change in Airline Service 

Given the current constraints of the airport system, a plausible solution might be the use of larger aircraft 

by airlines. The larger aircraft could carry more passengers while using approximately the same airport 

resources as a smaller aircraft. The historical trend, however, is for airlines to use smaller aircraft. The 

contradiction stems from increased competition among airlines post-deregulation, which has generated a 

greater demand for increased flight frequency under the hub and spoke network. Thus airlines are 

utilizing smaller aircraft to meet demand when more frequent flights are offered. 

Additionally, for the airlines an empty seat is a lost revenue opportunity. Even if the airline offers a 

discounted fare on a flight that is not completely full, it still increases its revenue more than the additional 

cost of flying that passenger. Average load factor, which is the percentage of available seats filled by 

revenue passengers, have been rising as shown in Table 2-9. The data shows that airlines are experiencing 

more activity by increasing the number of passengers per departures. By the third quarter of 2007, the 

average passenger load factor was 82.3 percent (DOT 2007). 

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Table 2-9. Operational Highlights of the U.S. Scheduled Service Airline Industry 

(in millions except as noted) 

Financial Statistics 2001 2002 2003 2004 2005 2006 

% Change 

2001 to 2006 

Aircraft Departures 

(thousands) 8,888 9,275 10,848 11,401 11,558 11,264 26.7% 

Passengers Enplaned 622.1 614.1 646.5 703.0 738.3 744.2 19.6% 

Revenue Passenger Miles 

(RPMs) 651,700 642,242 656,938 733,680 778,563 796,795 22.3% 

Available Seat Miles 

(ASMs) 930,511 894,217 893,941 971,466 1,002,735 1,005,534 8.1% 

Passenger Load Factor 

(percent) 70 71.8 73.5 75.5 77.6 79.2 9.2 pts. 

Source: ATA 2007a 

2.4.3.3 Introduction of Regional Jets 

An increase in the number of flights available has led to a concurrent increase in the number of nonstop 

flights. According to Borenstein and Rose (2007), the number of markets that had nonstop service rose 

nearly 70 percent between 1984 and 2005. This increase in nonstop service coincided with the 

introduction of regional jets emerging in 1992 to replace older narrow-body jets and turboprops. Regional 

jets are defined as aircraft that have capacities of less than 100 passengers; these smaller planes are often 

more efficient than either small turboprops or larger jets on short-haul nonstop flights. Many features of 

these new aircraft made them popular with airlines. They have shorter flight times with faster turnaround 

and increased flight frequency of service than turboprop aircraft (Mozdzanowska et al 2003). 

EPA’s analysis of BTS data, as provided in Table 2-10, shows an overall growth trend in regional jet 

departures from 2000 to 2006 for passenger flights, and during this period, the reliance on regional jets 

relative to turboprops has increased significantly. In 2000, departures from turboprops were about 1.5 

times as common as regional jet departures; however, in 2006, regional jet departures were approximately 

2.5 times more common than turboprop departures. 

Overall the FAA (2007 forecast) has seen a trend for legacy airlines to decrease aircraft size while 

regional carriers have been increasing aircraft size. Regional carriers have been adjusting aircraft size to 

provide capacity that complements market demand.11

Increased prevalence of regional jets may affect ADF usage since the aircraft has improved the financial 

viability of operating from smaller airports. Therefore air traffic at these airports is increasing. The 

highest growth in regional jet departures occurred before 2004, the year of EPA’s deicing survey, so EPA 

believes that the information reviewed for this analysis has been captured to reflect the changing aircraft 

fleet composition. 

 

11 Another type of jet that has recently been introduced to the market is the Very Light Jet (VLJ). According to FAA 

(2006), the VLJ is a light weight, twin jet aircraft with a maximum take-off weight below 10,000 pounds. While 

currently they do not make up a significant portion of the fleet, the GAO (2007c) estimates a fleet of 3,016 to 7,649 

VLJ will be in the airways between 2016 and 2025. VLJs may become significant in the air taxi market segment, 

and the FAA is currently deliberating the possibility of allowing VLJs to operate on scheduled services. 
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2.5 Survey Methodology and Counts by Industry 

For the proposed rule analysis, EPA used the Airport Deicing Questionnaire and the Airline Deicing 

Questionnaire (hereafter referred to as surveys) to collect operational and economic data from a sample of 

airports and airlines potentially affected by the rule. EPA used its authority under Section 308 of the 

Clean Water Act to collect information that was not otherwise available, such as airport/airline-specific 

deicing budget data. 

EPA used these detailed data in the models used to project the impacts of the proposed effluent guideline 

and to improve its understanding of the air transportation industry. The methodologies used to define the 

sample frames for the airport and airline sectors of the industry differed, and will be discussed in turn 

below. The rulemaking docket provides copies of the survey instruments (DCNs AD00354 and 

AD00355) and detailed information regarding implementation of the surveys. 

Table 2-10. Regional Jet Versus Turboprop Departures (Passenger Data) 

Regional Jets Turboprops 

Year 

Number of 

Departures 

% Change from 

Previous Year 

Number of 

Departures 

% Change from 

Previous Year 

2000 752,359 NA 1,183,591 NA 

2001 899,258 19.5% 1,058,617 -10.6% 

2002 1,392,161 54.8% 1,133,799 7.1% 

2003 2,435,860 75.0% 1,752,518 54.6% 

2004 3,001,216 23.2% 1,602,674 -8.6% 

2005 3,347,156 11.5% 1,414,656 -11.7% 

2006 3,260,910 -2.6% 1,332,470 -5.8% 

Source: BTS T-100 database 

2.5.1 Airports 

This section focuses on the airport survey, which collected information on ownership structure, financial 

relationships with airlines, and funding sources for capital expenditures. Information to classify airports is 

based on BTS T100 data (available at www.transtats.bts.gov) and the National Flight Data Center 

Database (available at www.faa.gov/airports_airtraffic/airports/airport_safety/airportdata_5010). 

2.5.1.1 Sample Frame 

EPA developed a sample frame design for the airport survey based on airport size and climate. Although 

deicing operations are prevalent at colder climate airports, EPA needed to determine the extent that 

airports in warmer climates also have anti-icing operations. For example, flights that originate at these 

airports may land in airports with wintry weather conditions. Additionally, dry-weather deicing may also 

be performed on some types of aircraft whose fuel tanks become super-cooled during high-altitude flight, 

resulting in ice formation at lower altitudes and after landing. Thus all airports classified by FAA as large 

and medium hubs, regardless of climate, were sampled with certainty. These large and medium hubs 

account for 80 percent of commercial departures and enplanements. Five general aviation airports with at 

least five cargo departures on average per day were also surveyed as a judgment sample to better 

understand deicing/anti-icing operations at small airports with significant cargo-only service. 

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EPA also selected all small and nonhub airports (excluding Alaskan airports) with at least 30,000 annual 

jet departures. The remaining airports were stratified by the number of significant snow or freezing 

precipitation days (SOFP) as determined by the NOAA data (see Figure 2-1). EPA selected 14.5 SOFP 

days for stratification, and oversampled those airports with more than 14.5 SOFP days per year. 

One medium hub airport in Alaska was sampled with certainty. EPA then selected a judgment sample of 

small and nonhub Alaskan airports to better understand their deicing/anti-icing operations and economic 

profile as a judgment sample. EPA chose airports based on activity that would capture the major climate 

zones in Alaska (e.g., coastal). Due to its operational and financial structures, EPA analyzed the data 

separately, which is discussed in Section 2.9. 

2.5.1.2 Airport Count by Category 

EPA distributed the Airport Deicing Questionnaire to the industry in April 2006. The questionnaire was 

sent to a total of 152 airports,12 which included all large and medium hub airports, all five airports 

designated by EPA as general aviation/cargo airports, as well as a sample survey of all small and nonhub 

airports. EPA also included judgment sample airports with specific treatment technologies and Alaskan 

airports. The response rate for the Airport Questionnaire was 98 percent. Table 2-11 shows the 

distribution of surveyed airports by size class. 

Table 2-11. Airport Survey Sample Stratification 

Airport Categoryb SOFP Days Total Population Total # Sampled 

Large Hub NA 33 33 

Medium Hub NA 35 35 

Small Hub with > 30,000 Jet Departures NA 6 6 

< 14.5 38 6 Small Hub < 30,000 Jet Departures 

> 14.5 24 9 

< 14.5 99 13 Nonhub 

> 14.5 134 31 

Judgment Sample 

General Aviation/Cargo NA 5 4 

Alaskaa NA 85 11 

Specific Treatment Technologies NA NA 4 

Total 459 152 

a

 Airports included one medium, two small hubs, seven nonhubs, and one non-primary commercial service, from 

a total population of 85 commercial service airports. 

b

 Airport classifications may change from year-to-year because they are based on the number or percent of 

passenger boardings at each airport. The number of airports by category differs in this table from Figure 2-1 and 

Table 2-2 because they are based on classification at the time of stratification; the numbers in the previous table 

represent the most current airport counts.

 

12 One hundred and fifty three airports were surveyed. However, one general aviation/cargo airport was located on a 

military airport and therefore determined to be out of scope for this analysis. 
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2.5.2 Airline/Airport Combinations 

Once the airport selection was completed, EPA then identified the airlines that serve the sampled airports 

based on information available in the BTS T100 data and the National Flight Data Center Database. The 

resulting airline/airport combinations were then stratified into two groups: those with at least 20,000 

annual departures and those airline/airport combinations with less than 20,000 annual departures. All 

airlines with more than 20,000 annual departures at a surveyed airport received a questionnaire, as well as 

a sample of airlines with more than 1,000 annual departures at each surveyed airport. Any airline that 

reported a yearly departure rate of less than 1,000 jet flights (i.e., three flights per day) is unlikely to 

generate a substantial impact on stormwater discharges related to deicing and thus EPA excluded these 

airlines from the survey. EPA also limited the number of requests to any one airline to 20 airports or less 

to reduce burden on the airline. EPA sent the airline survey to 58 airlines covering deicing operations at 

54 airports. The response rate was 84 percent. 

2.6 Airport Management 

This section discusses in more detail the structure of airport ownership and financial management. It also 

presents data showing the financial characteristics of different airport types. 

2.6.1 Airport Ownership and Management 

Commercial airports in the United States generally fall under one of two main forms of ownership: quasigovernmental authorities (single purpose airport authorities or multipurpose port authorities) or 

multipurpose governments (e.g., cities, counties, states). This section examines the distribution of 

ownership types at airports throughout the United States. 

The Transportation Research Board’s analysis (2007) of the ownership structures of the nation’s top 100 

airports in 2005 (as determined by annual enplanements) is shown in Figure 2-4 below. Figure 2-4 also 

compares ownership answers provided by the Section 308 survey data based on 2004 data. Both data sets 

indicate that local governments (made up of city, regional, county and state governments) account for 58 

percent of airport ownership. Authorities, which are quasi-local or regional governmental organizations, 

own approximately 40 percent of airports. Airport authorities tend to be independent entities in which a 

government official selects the group of commissioners that govern the airport. 

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Top 100 Airports (2005) Surveyed Airports (2004) 

Figure 2-4. Airport Ownership 

Source for Top 100 Airports: TRB 2007; Source for Surveyed: EPA Deicing Survey 

As airline business models change, airport ownership structures may change as well. There is currently a 

movement toward an increasingly commercial mindset in airport operations with growing interest in 

allowing private ownership of commercial service airports. Currently, FAA regulations stipulate that 

airport revenues cannot be used to fund off-airport projects. This law prohibits private owners from 

making a profit for its shareholders, which is a major disincentive for private investors. In 1997, Congress 

established a pilot program to allow FAA to explore privatization as a means to generate access to private 

capital for airport improvement and development. Under the program, private companies may own, 

manage, lease, and develop public airports. These entities would be allowed to divert revenue from the 

airport (e.g., profit) and still qualify for federal financial assistance. 

Aside from current restrictions, another issue working against private ownership is lack of access to lowcost capital. Publicly owned airports can impose PFCs, apply for AIP grants,13 and issue tax-free 

municipal bonds; privately owned airports do not have access to these funding sources. More discussion 

about these funding sources is provided in the next section. 

Stewart International Airport in New York privatized under the pilot program, but in 2005, the airport was 

withdrawn from the program. During the same time period, several other airports also applied, but 

ultimately withdrew their applications. FAA believed that airport owners proposed privatization as a 

means to generate development capital rather than use available tax-exempt financing. During its review 

of the program, FAA (2004a) found that all the airports that had applied for the pilot program were 

operating with losses, which may have impaired its access to low cost financing. Currently, the City of 

Chicago has applied for Midway International Airport’s participation in the pilot program. 

 

13 The FAA-managed AIP provides grants to public agencies and, in rare cases to private entities, for the planning 

and development of public-use airports. 
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While the anticipated trend toward full-scale privatization of airport operations has certainly stalled, it 

does not mean that airports are shunning privatization altogether. Carney and Mew (2003) suggest that 

airports are developing different arrangements, such as outsourcing certain operations to private firms, 

such as concessions or parking, but the overall management of the airport remains in the public sector. 

2.6.2 Airport Financial Management 

This section provides a look at airport financial management, including the various components of airport 

revenue streams, typical accounting practices and how they may factor into EPA’s impact analysis, and 

finally how estimates of net operating revenues (operating revenues less operating expenditures) may 

inform EPA’s impacts analysis. 

2.6.2.1 Funding Methods 

The financial and operational relationship between airlines and airport is defined in the airport use 

agreement. This document specifies how the risks and responsibilities of running the airport will be 

shared, how rates for using facilities and services are calculated, and how frequently these rates and 

charges may be adjusted. 

Airport financial management is fundamentally different from most other business enterprises, because 

many airports have traditionally used a residual-cost approach to finances. Under this approach, the 

airlines assume the financial risk of running the airport by agreeing to pay any costs of running the airport 

not paid by non-airside sources of revenue. This approach became the standard before deregulation and is 

still used by the majority of large commercial airports (Wells 1996). Since the airlines are assuming part 

of the risk, they often enact “majority-in-interest” clauses, which requires the airport to consult and 

receive approval by the airlines before undertaking capital expenditures. GAO (2001) found that majorityin-interest clauses provide dominant airlines at an airport “veto” power, in effect, over large capital 

projects that could increase capacity. A survey conducted in 1998, found that 84 percent of airport/airline 

residual use and lease agreements include a majority-in-interest clause (FAA and OST 1999). 

Under the alternative compensatory approach, the airport assumes the financial risk; airlines pay rates set 

equal to their estimated cost of using the facility. Using the compensatory approach, there is no guarantee 

the airport will cover costs; however, the airport can keep any surplus revenue over cost and accumulate 

capital for future development. Only 20 percent of the airports surveyed in 1998 with a compensatory use 

and lease agreement had a majority-in-interest clause in their agreements (FAA and OST 1999). 

Many airports use a mixed approach of residual and compensatory funding, with some rates and charges 

and some airline buy-in. Of the 213 weighted responses to this question from the EPA deicing survey, a 

smaller percentage are using a pure residual cost method than a compensatory or mixed approach as 

illustrated in Table 2-12. 

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Table 2-12. Airport Funding Methods (2004) 

Funding Method Number of Weighted Respondents Percent of Weighted Respondentsa

Residual 41 18.8% 

Compensatory 78 35.8% 

Mixed 73 33.5% 

Other 21 9.6% a

Percentages do not add to 100 because 5 weighted respondents did not answer this question. 

Source: EPA Airport Deicing Questionnaire 

Determining the financial risk of an airport depends on the number of carriers it hosts; those with one 

primary carrier are more vulnerable to an unstable economy than those with competing airlines and 

diversified market shares. Airports with smaller and fewer air carriers are even more vulnerable than 

primary airports because their operations are more likely to be reduced in the case of an economic 

downturn. As a result of the downturn in air transportation after September 11, 2001, airports that host 

large carriers were seeing with increasing frequency a reduction in carrier hub presence and the breaking 

of long-term lease agreements (DOT 2003). 

Recently airports have been working to become more financially stable through reducing costs to carriers 

and increasing their revenue. According to the U.S. DOT, they have taken part in various efforts to reach 

this goal by: refinancing debt at lower interest rates, redirecting passenger facility charge (PFC) revenues 

to reduce airline charges, reducing expenditures on non-essential operations, raising revenue by applying 

for reimbursement on security costs, and increasing non-airside rates. The airports have also engaged in 

adjusting income-sharing to increase the airlines’ share and offering benefits to airlines by allowing them 

additional time to repay underpayments (DOT 2003). 

Often airport operating statements breakdown operating revenues and expenditures for key cost centers. 

Typical cost centers might be: 

• Airfield operations (e.g., runways, taxiways, aprons). 

• Terminal area concessions (e.g., food and beverage services, car rentals, specialty shops, 

personal services, amusements, advertising, ground transportation, hotels). 

• Airline leased areas (e.g., ground equipment rentals, offices, ticket counters, cargo terminals, 

hangers, operations and maintenance areas). 

• Other leased areas (e.g., fixed-based operators (FBO), freight forwarders, government offices, 

business in airport industrial parks, equipment and cargo terminals rented by non-airline 

users). 

Table 2-13 shows that of the 73 weighted respondents using a mixed approach, the majority (84.9 

percent) use the residual-cost approach to determine airline fees for airfield operations based on the actual 

cost of running these areas, while a much larger percentage of airports use a compensatory approach for 

terminal concessions. 

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Table 2-13. Portions of Revenue Collection Using Residual-Cost Approach When Airport Uses 

Mixed Approach Overall 

Method Number of Respondents Percent of Respondents 

Airfield operations 62 84.9% 

Terminal area concessions 15 20.5% 

Airline leased areas 22 30.1% 

Other leased areas 16 21.9% 

Source: EPA Airport Deicing Questionnaire 

2.6.2.2 Revenue Categories and Operating Profit 

Commercial service airports are required to annually file standardized financial statements with FAA 

(Form F-127). This section takes a closer look at the airport operating revenues and expenditures as 

reported to the FAA. These statements request revenue data for the following categories: 

Aeronautical Operating Revenue

• Landing fees 

• Terminal/International arrival area rental or other charges 

• Apron charges/tiedowns 

• FBO revenue (contract or sponsor-operated) 

• Cargo and hangar rentals 

• Aviation fuel tax retained for airport use 

• Fuel sales net profit/loss or fuel flowage fees 

• Security reimbursement 

• Miscellaneous 

• Other 

Non-aeronautical Operating Revenue

• Land and non-terminal facilities 

• Terminal – food and beverage 

• Terminal – retail stores 

• Terminal – other 

• Rental cars 

• Parking 

• Miscellaneous 

• Other 

As discussed earlier, airline payments to the airport (e.g., landing fee, terminal rentals) are often 

established in airport use agreements. The most common financial mechanisms include a square footage 

charge for rented space and a landing fee based on aircraft weight. Signatory airlines are committed to 

leasing airport resources for a fixed period of time. 

Table 2-14 lists eight general categories of revenue generation. Large hubs generate the largest portion of 

their revenue from landing fees (22.7 percent) and terminal rentals (24.5 percent). As hub size decreases, 

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the proportion of revenue generation from these two sources steadily decreases down to 10.2 percent for 

landing fees and 11.9 percent for terminal revenues for nonhubs. The top revenue generator for medium 

and small hubs is parking (25.8 and 22.9 percent of total revenue generated, respectively). Nonhubs 

generate the largest proportion of their total revenue from ground/land rentals (15.2 percent) and “other 

aviation” fees (29.4 percent). Significant proportions of the “other aviation” revenue for nonhubs comes 

from FBOs (5.4 percent), cargo and hangar rentals (7.8 percent), and fuel sales and flowage fees (10.2 

percent). “Other aviation” fees and ground/land rentals are relatively small revenue generators for larger 

hubs. 

Table 2-14. Airside and Non-airside Operating Revenues and as a Percent of Total Revenues 

Total Revenue by Hub Size (millions) Percent Revenue by Hub Size Revenue Categories Large Medium Small Non Large Medium Small Non 

Landing Fees $1,865.5 $451.0 $149.0 $54.4 22.7% 19.2% 14.3% 10.2% 

Terminal Rentals $2,016.4 $511.5 $191.1 $63.5 24.5% 21.8% 18.3% 11.9% 

Other Aviation $753.7 $213.9 $130.1 $157.2 9.2% 9.1% 12.5% 29.4% 

Ground/Land Rentals $257.6 $81.3 $91.8 $81.5 3.1% 3.5% 8.8% 15.2% 

In Terminal Concessions $875.0 $159.2 $60.0 $18.8 10.6% 6.8% 5.7% 3.5% 

Rental Cars $623.8 $274.4 $151.2 $63.1 7.6% 11.7% 14.5% 11.8% 

Parking $1,318.0 $603.8 $238.9 $65.4 16.0% 25.8% 22.9% 12.2% 

Other $515.1 $49.4 $32.2 $31.3 6.3% 2.1% 3.1% 5.8% 

Total $8,225.0 $2,344.5 $1,044.3 $535.1 100.0% 100.0% 100.0% 100.0% 

Source: FAA AAS-400 CATS Report 127 by Hub Size for Year 2004 

EPA further explored the revenue differences among airport hub sizes in Table 2-15. Average operating 

revenues at medium hubs are 23.2 percent of those at large hubs; for small and nonhubs those figures are 

7.2 percent and 1.1 percent respectively. Similarly, the revenue generation by airports through landing 

fees is on par with operating revenues with average landing fees at medium hubs 20.0 percent of those at 

large hubs; for small and nonhubs those figures are 4.8 percent and 0.7 percent respectively. The 

difference among airport sizes is significant to this analysis in at least two ways. First, rates and charges 

(e.g., landing fees) tend to be a key means for airports to pass compliance costs through to airlines. 

Second, landing fees might also be indicative of an airport’s market power when negotiating with airlines. 

More discussion about the ability to pass the proposed rule’s compliance costs on is found in Section 

2.8.2. 

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Table 2-15. Average Revenues and Expenditures by Hub Size, 2002-2006 

Large Hubs Medium Hubs Small Hubs Nonhubs 

Airport Count 33 35 25 54 

Total Operating Revenues $259,059,243 $60,033,358 $18,778,255 $2,789,776 

As Percent of Large Hub Average -- 23.2% 7.2% 1.1% 

Landing Fees $57,985,445 $11,600,777 $2,809,179 $387,957 

As Percent of Large Hub Average -- 20.0% 4.8% 0.7% 

Concessions Revenues $40,486,606 $10,496,019 $3,115,883 $383,742 

As Percent of Large Hub Average -- 25.9% 7.7% 0.9% 

Parking Revenues $42,276,451 $15,605,612 $4,825,623 $495,553 

As Percent of Large Hub Average -- 36.9% 11.4% 1.2% 

Total Operating Expenses $165,811,794 $37,771,069 $12,321,288 $2,722,125 

As Percent of Large Hub Average -- 22.8% 7.4% 1.6% 

Net Operating Revenues $93,247,449 $22,262,289 $6,456,967 $85,835 

As Percent of Large Hub Average -- 23.9% 6.9% 0.1% 

Source: EPA analysis of FAA Form 127 airport financial data. Surveyed airports only. 

Finally, more than 75 percent of the airports sampled in the EPA Deicing Questionnaire indicated that 

they received no direct operating subsidies from state, city, or county governments in 2004. 

2.6.2.3 Cost Trends 

For airports, much of the direct impacts from the events of September 11, 2001 are reflected in changes in 

protocol and safety measures. FAA (2004b) found that airports experienced a decline in financial health 

due to increased security costs combined with reduced revenue from decreased air travel. These airports 

had substantial fixed costs that provided few options for quick reduction of operating costs. EPA 

conducted a literature review, but found limited information regarding the direct financial impacts on 

airports with the exception of changes to security procedures. Much of the literature discussed the 

significant impacts to the airlines, which results in an indirect effect on airports (e.g., reduced collection 

of landing fees and other passenger-based charges). 

2.6.2.4 Capital Financing 

If an airport implements enhanced deicing/anti-icing pads and other storm water environmental mitigation 

projects, it will likely pay for the new infrastructure as a capital expenditure. The primary capital funding 

sources available to airports (e.g., bonds, AIP grants, PFCs, state/local contributions) are discussed in the 

following subsections. 

2.6.2.4.1 Airport bonds 

As publicly owned entities, airports do not access private equity markets and instead issue debt through 

the municipal bond market. There are four principal types of bonds generally issued by airports to fund 

capital expenditures (TRB 2007): 

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• General obligation (GO) bonds 

• General airport revenue bonds (GARBs) 

• PFC-backed bonds 

• Special facility bonds 

GO bonds have been the primary capital financing tool in recent years for the nation’s smaller airports; 

GARBs, however, are most commonly used overall for financing airport infrastructure improvements 

(TRB 2007). As most of the bonds issued by airports are municipal bonds, they are usually tax-exempt for 

the purchasers. While many airlines have defaulted on their debt issuances, no airports have defaulted 

(DOT 2003, Kaps 2000). Because revenue to pay the bond debt is based on airlines serving that airport, 

bond investors recognize the connection between airline health and airport revenues (Schoenberger 2003). 

2.6.2.4.2 AIP grants 

Airport Improvement Program (AIP) grants are administered by the FAA and funded through aviation 

user taxes. AIP grants are not equally available to all airports; in fact, there are at least six mechanisms for 

granting AIP funds to airports: 

• Entitlement funds 

• Small airport funds 

• “Set aside” funds 

• State apportionments 

• Nonprimary apportionments 

• Discretionary funds 

Prior to applying for AIP grants, airports must meet the eligibility requirements. The airport must be 

included in the NPIAS and meet one of the following criteria: 

• Publicly owned 

• Privately owned but classified by FAA as a reliever airport 

• Privately owned with a minimum of 2,500 annual enplanements 

AIP funded projects must be directly related to the safety and construction or rehabilitation of airstriprelated areas and activities. Aesthetic improvements to the grounds, hangars, offices, parking lots, or the 

terminals are not eligible. For large and medium primary hub airports, AIP funds can cover up to 75 

percent of costs (80 percent for noise reduction projects), and for small primary, reliever, and general 

aviation airports, they can cover up to 95 percent of costs. 

In FAA Order 5100.38C, Airport Improvement Program Handbook (effective June 28, 2005) FAA 

includes aircraft ground deicing and anti-icing systems as eligible safety projects (FAA 2005b). Section 

547(d) states: 

At commercial service airports, construction or reconstruction of aircraft deicing, anti-icing, 

and ice inspection facilities on the ground, including pavement, drainage, fluid collection, and 

environmental mitigation to reduce storm water discharge contamination, is eligible when 

designed in accordance with Advisory Circular 150/5300-14 [i.e., FAA design standards]. 

During fiscal year (FY) 2007, the FAA issued 2,022 AIP grants totaling more than $3.3 billion. EPA 

reviewed grants made in 2005 and 2006 for aircraft deicing containment facility construction or 

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rehabilitation. Table 2-16 depicts those airports receiving grants specifically related to deicing 

containment. 

Because demand for AIP grants is greater than AIP funds (GAO 2007) and airport sponsors must apply 

for project-specific grants, a process that is time consuming and costly, EPA does not assume airports will 

be able to use AIP grants to pay for projects to meet effluent guidelines. 

Table 2-16. AIP Grants Awarded for Aircraft Deicing Related Projects 

Airport 2005 Grant 2006 Grant 

Akron-Canton Regional $5,000,000 $5,000,000 

Bandette International $553,932 

Bangor International $1,384,222 

Buffalo-Niagara International $816,891 

Denver International $13,211,130 $3,450,000 

Detroit Metropolitan $2,950,000 

Kansas City International $7,464,005 $4,463,462 

Morgantown Municipal $1,018,589 

Scott Air Force Base/Midamerica $709,672 

Toledo Express $746,767 $861,735 

Pittsburgh Internationala $2,663,274 

a

 For the design and permitting for environmental mitigation in conjunction with existing deicing treatment 

plant. 

Source: EPA analysis of FAA 2007d and 2008b 

2.6.2.4.3 PFCs 

Since the early 1990s, most of the nation’s passenger service airports have been able to fund capital 

development projects using a passenger facility charge (PFC). Approved airports are allowed to collect 

PFC fees of up to $4.5014 for every enplaned passenger. The FAA manages the program and is authorized 

to approve an airport’s application to participate and the specific projects for which the collected money 

will be used. Eligible PFC-funded projects include those that: 

• Enhance safety or security of the national air transportation system. 

• Reduce airport noise. 

• Facilitate competition between or among air carriers. 

Airlines collect the PFCs when tickets are purchased and forward the funds to the airports. PFC revenues, 

which totaled more than $2.4 billion in 2006, can be applied to projects two ways: (1) “pay-as-you-go”, in 

which the revenues and interest are directly spent on capital projects, or (2) leveraged to repay debt (TRB 

2007). Table 2-17 provides a break down of the PFC as a percent of the total operating revenue by hub 

size. 

 

14 There have been legislative efforts recently to increase the PFC (GAO 2007). 
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 2. Profile of the 

and Standards for the Airport Deicing Category Air Transportation Industry 

Table 2-17. PFCs as Percent of Total Operating Revenues (2003-2006) and Total Value (2006) 

FAA Hub PFCs as % of Total Operating Revenues Total Value of PFCs 

Size 2003 2004 2005 2006 2006 

% of Total PFC 

Revenue in 2006 

Large 17.7% 18.9% 19.4% 19.4% $1,814,337,475 74% 

Medium 15.7% 16.8% 16.5% 17.0% $388,841,623 16% 

Small 13.1% 14.6% 15.4% 15.7% $178,209,216 7% 

Nonhub 6.6% 7.1% 7.4% 7.0% $62,144,102 3% 

Source: EPA calculations on BTS Form 127 Airport Financial Data 

The GAO found that large and medium hub airports participate at a higher rate than small airports for 

various reasons. Of the total PFC funding, large airports receive the most benefit since the fee is based on 

enplanements. As seen in Table 2-17, large airports received 74 percent of total PFC revenues. For the 

small airports, revenues from the PFCs may be too low (i.e., too few enplanements) to offset the expected 

costs of applying and administering the program. In an effort to combat this inequity, $0.50 of every 

dollar up to 50 percent of the annual revenues collected by large airports is transferred to FAA to be 

added to the general PFC fund. These PFCs are awarded to other commercial service airports to fund 

capital investment projects (FAA 2007b). 

As of May 1, 2008, the FAA had approved 372 airports to collect PFCs. Of these, 280 (75 percent) were 

approved to collect at the maximum level of $4.50. Total approved PFC collections were approximately 

$62.1 billion as of May 1, 2008, although actual collected amounts are less (FAA 2008d). These data 

indicate that since most airports currently approved to collect PFCs are already doing so at the maximum 

rate, the ability of PFC revenues to cover additional increased capital expenditures (whether directly or as 

the revenue stream to cover bond issues) is questionable. 

2.6.2.4.4 State and Local Contributions 

The GAO (2007d) examined state and local government contributions to airports and found that they 

contribute $0.7 billion of total annual airport capital funding of $13 billion annually (or 4 percent of the 

total). The same GAO report also provides information on the distribution of the grant funds to various 

airport categories as presented in Table 2-18. A majority of the state and local funding (57 percent) is 

directed toward general aviation reliever airports. 

Table 2-18. Distribution of State Funding

Airport Category Percent of State Grants Receiveda 

Large Hub 7% 

Medium Hub 7% 

Small Hub 7% 

Nonhub 7% 

Non-primary CS 2% 

General Aviation/Reliever 57% 

a The report does not document the distribution of the remaining 13 percent of grants. 

Source: GAO (2007d) 

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2.6.2.4.5 Overview of Capital Funding 

Annual capital expenditures by the nation’s airports are substantial, and a variety of funding sources exist 

to cover these expenditures. The GAO estimated the source of airport capital funding as listed in Table 2-

19. The report further stated that large and medium hub airports accounted for 72 percent of all capital 

expenditure ($9.4 billion annually). Their finding that grants and state/local contributions make up a 

smaller proportion of funding is consistent with EPA’s survey responses. 

Table 2-19. Sources of Airport Funding (2001-2005) 

Funding Source 

Average Funding 

(billion, 2006 $) 

Percent of Total 

Funding 

Airport bonds $6.5 50% 

AIP grants $3.6 29% 

PFCs $2.2 17% 

State and local contributions $0.7 4% 

Total $13 100% 

Source: GAO 2007d 

For a more detailed look at this information by hub size, EPA examined the responses to its Airport 

Deicing Questionnaire.15 The answers provided by surveyed airports were slightly different than what is 

reported in aggregate in the GAO report. Table 2-20 below provides a breakdown of weighted responses 

to the question of airport capital financing. 

Table 2-20. Capital Expenditure Financing (2001-2005) 

Grants “Pay As You Go” Financed By: 

Hub Size AIP Other PFCs

Rates and 

Charges Other

Airport 

Bonds 

Large Hubs 13.7% 3.7% 16.2% 8.0% 18.0% 46.8% 

Medium Hubs 34.4% 5.7% 18.3% 11.1% 10.9% 44.8% 

Small Hubs 55.7% 2.9% 20.1% 9.5% 9.6% 20.8% 

Nonhubs 70.9% 8.4% 7.2% 5.5% 21.3% 12.4% 

Source: EPA’s Airport Deicing Questionnaire 

In EPA’s survey responses, between 12 percent and 47 percent of respondents of capital expenditures 

were financed with bonds in the previous five years, compared with GAO’s estimate of 50 percent. 

Airport bonds were the largest source of funds for large and medium hubs. The largest source of capital 

funding reported by small hubs and non hubs were grants, the majority of which were AIP grants. 

As shown in Figure 2-5, the GAO (2007d) found that airport projects planned for 2007-2011 exceed past 

funding levels by approximately $1 billion annually. Although some of these projects are ineligible for 

AIP grants ($5.8 billion), a total of $8.2 billion of AIP eligible projects is larger than the historical AIP 

funding of the five year period 2001-2005 at $3.6 billion. Some of difference is funded by other sources, 

such as PFC ($2.2 billion) and airport bonds ($6.5 billion). 

 

15 The specific question: “Using readily available information, characterize the percentage of capital expenditures at 

this airport of the last five years accounted for by [the categories shown in part in the first column of Table 2.19].” 
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and Standards for the Airport Deicing Category Air Transportation Industry 

As Figure 2-6 shows, the GAO (2007d) found that average annual planned development at larger airports 

for 2007-2011 exceeds the average annual funding from 2001-2005 by approximately $600 million. From 

2001-2005, larger airports collected an average of $9.4 billion each year while they plan to spend $10 

billion each year from 2007-2011. Of the $10 billion in planned development costs, $5.7 billion (57 

percent) is planned to go towards AIP ineligible projects. Funding through PFCs ($2.0 billion) and 

airport bonds ($5.9 billion) will help fund the majority of these development projects. 

AIP Ineligible, 

$5,738 

Standards, 

Capacity, 

Terminal, 

$5,295 

Reconstruction security, 

safety, 

environment, 

noise, $2,449 

Other, new 

airport, access, 

$488 

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

(2006 dollars in millions)

$13,968

Average Annual Funding, 2001-2005 Average Annual Planned Development, 2007-2011 

GARBs, 

$6,458 

AIP, $3,636 

PFCs, $2,189 

State and local 

contributions, 

$732 

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

(2006 dollars in millions)

$13,014

Figure 2-5. Comparison of Past Airport Funding to Future Development Costs 

Source: GAO 2007d 

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Average Annual Funding, 2001-2005 Average Annual Planned Development, 2007-2011 

AIP Ineligible, 

$5,663 

Capacity, 

$1,416 

Reconstruction, security, 

safety, 

environment, 

$1,199 

Terminal, 

$1,118 

Other access 

standards, 

$614 

$0

$2,000

$4,000

$6,000

$8,000

$10,000

(2006 dollars in millions)

$10,010

GARBs, 

$5,921 

AIP, $1,327 

PFCs, $1,976 

State and local 

contributions, 

$198 

$0

$2,000

$4,000

$6,000

$8,000

$10,000

(2006 dollars in millions)

$9,424

Figure 2-6. Comparison of Larger Airports’ Past Funding to Future Development Costs 

Source: GAO 2007d 

2.6.2.5 Net Operating Revenues 

The FAA reported that airports have recovered financially from the difficulties of the early 2000s (Shaffer 

2007). However, they also found a direct relationship between the size of the airport (measured by 

passenger enplanements) and the net operating revenues of the airport. Large and medium-sized airports 

consistently earn positive net revenues. FAA’s review found them financially stable in large part because 

of their ability to tap into funding sources beyond federal grants, such as GARBs and PFCs. However, it 

goes beyond this; the ability of large and medium-sized airports to tap into bond markets is at least 

partially a function of their ability to earn positive net revenues, that is, to earn revenues over and above 

costs that can be used to pay for the bonds. 

Although small hub and nonhub primary airports have returned to the financial health levels of the late 

1990s, these airports are not as financially stable as their larger counterparts. FAA found that even with 

the option to collect PFCs, many of these airports continue to rely on federal AIP grants for major capital 

improvements (Shaffer 2007).16 

 

16 This may be related to the variance in year-to-year passenger enplanements at these airports. Passenger 

enplanements at smaller airports appears to vary more (relative to their average) than at larger airports. Thus, the 

stream of revenues from PFCs may be too uncertain to be used to guarantee sufficient backing for a bond issue. 
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 2. Profile of the 

and Standards for the Airport Deicing Category Air Transportation Industry 

2.6.3 Airport Finance and the Economic Impact Analysis 

There are a number of distinguishing features of this industry that make the analysis different from the 

type of analysis EPA would perform for a more traditional for-profit manufacturing industry. Almost all 

potentially affected airports are publicly owned and operated by local, county, or state governments, or by 

quasi-governmental authorities created to operate the airport. As governmental or quasi-governmental 

entities, airports do not earn a profit or loss in the traditional financial sense; in fact, many airports have 

been operated with the expectation that they will break even financially, with airline customers legally 

required to cover expenditures in excess of costs. 

In addition, airport capacity is constrained, especially in the short run, and the demand for large capital 

expenditures necessary to maintain and expand U.S. airport network significantly exceeds supply. 

Although airports have access to federal, state, and local government grants, and PFCs, it is not clear 

these funds are available to meet capital expenditures associated with meeting effluent guidelines. 

Airports will likely have to rely on the bond market and airline rates and charges. As the preceding 

analysis shows, these are not equally available to all types of airports. 

2.7 Airline Financial Management 

2.7.1 Historical Overview of Airline Profitability 

The year 2006 represented the first profitable year for the airline industry since 2000. Increased revenues 

were attributed to “solid growth in passenger, cargo and ancillary revenues, and against a backdrop of 3.3 

percent growth in real U.S. gross domestic product (GDP)” (ATA 2007b). Passenger revenues in 2006 

were 0.75 percent of U.S. GDP, still well below the pre-September 11, 2001, share of 0.95 percent (ATA 

2007b). While revenues increased in 2006, so did operational expenses. The increase in operational 

expenses of 3.6 percent is largely attributed to higher fuel prices (which is discussed in Section 2.7.2.4). 

Following September 11, 2001, major airlines cut the number of flights by 20 percent or more, and one 

carrier ceased operations entirely (GAO 2001). As a result of decreased airline traffic, many airlines 

grounded part of their existing fleet and delayed delivery of new aircraft that had been on order (FAA 

2007). The largest effect on airlines following September 11, 2001, was an increase in operating costs. 

This increase occurred for several reasons: 

• Unit costs increased due to lower aircraft utilization, brought about by schedule reductions. 

• Increased security requirements and associated delays decreased airline productivity. 

• Both aircraft insurance and liability insurance costs increased substantially. 

In addition to the costs above, airlines were also faced with the implementation of the Aviation Security 

Infrastructure Fee (ASIF) to cover Transportation Security Administration screening costs (Belobaba 

2005). The fee is directly passed to passengers at an amount of $2.50 added to the fare for the first two 

legs of a flight in each direction (TSA 2004) (i.e., a maximum charge of $10 roundtrip). 

In 2003, the airline industry suffered another sharp decrease in demand for flights, particularly to the 

Asian market, due to the SARS crisis. Since SARS is spread through inhalation of airborne droplets, 

primarily in areas of close contact with many people, it was of particular concern to airlines and airline 

passengers. United Airlines saw scheduled revenue passenger miles decrease by about 6 percent in 

March, 2003 compared with one year earlier; the airline’s passenger load factor declined from 78 percent 

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in March 2002 to 74 percent in March 2003. US Airways also saw declines in revenue passenger miles 

(down 16 percent in March 2003 over March 2002) (Gola 2003). 

Between 2001 and 2005, the airline industry incurred operating losses of nearly $28 billion (GAO 2006). 

Table 2-21 lists various financial statistics for domestic operations only, by airline type over the five-year 

period from 2002 through 2006. The majority of airlines posted negative operating profit and net 

income.17 On average, only national, commuter and domestic cargo carriers earned positive operating 

profits and only regional and domestic cargo carriers posted average positive net income from 2002 to 

2006. 

Table 2-21. Five-Year Average Financials for Domestic Operations by Airline Type 

(2002-2006) 

Five-Year (2002-2006) Average Financials (in thousands) 

Airline Type 

Operating 

Revenue 

Operating 

Expenses 

Operating 

Profit Net Income 

Major Carrier $6,188,971 $6,404,253 -$215,282 -$622,568 

National Carrier $416,058 $398,878 $17,180 -$13,490 

Regional Carrier $46,735 $47,228 -$493 $82 

Medium Regional Carrier $12,968 $15,042 -$2,074 -$2,603 

Commuter Carrier $31,488 $26,916 $4,571 -$2,969 

Small Certified Carrier $4,981 $5,066 -$85 -$163 

Domestic Only All Cargo $544,950 $528,641 $16,310 $24,073 

Source: BTS Air Carrier Financial Reports (Form 41), Schedules P-11 and P-12. 

By 2006, however, there were gains in all operating revenue categories, with the exception of the charter 

market. Table 2-22 presents summary financial statistics for U.S. airlines, 2005-2006. Both operating 

and net profit margins improved, with net profit becoming positive. Particularly important to the industry 

are that the unit measurements of revenue per passenger mile (RPM), revenue per available seat mile 

(ASM), and revenue per cargo ton mile all increased significantly, with gains of 5.7, 7.9, and 4.6 percent 

respectively. 

 

17 Operating profit represents the profit (loss) from air transportation-related activities only and does not include 

non-operating income (expenses), nonrecurring items or income taxes. Net income represents the total profit (loss) 

and includes operating profit (loss), non-operating income (expenses), nonrecurring items and income taxes. 
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Table 2-22. Financial Highlights of the Airline Industry 

(U.S. Airlines, scheduled service, in millions except as noted) 

2005 2006 Change (%) 

Operating Revenues $151,255 $163,824 8.3 

Passengera 93,500 101,208 8.2 

Cargoa 20,704 22,544 8.9 

Charter 6,074 5,562 -8.4 

Other 30,976 34,510 11.4 

Operating Expenses 150,828 156,279 3.6 

Operating Profit (Loss) 427 7,545 1,668.1 

Net Profit (Loss) b -$5,782 $3,045 - 

Revenue per Passenger-Mile (¢/RPM)a 12.00 12.69 5.7 

Revenue per Seat-Miles (¢/ASM)a 9.32 10.06 7.9 

Revenue per Cargo Ton-Mile (¢/RTM)a 73.58 76.99 4.6 

Operating Profit Margin (%) 0.3 4.6 4.3 pts. 

Net Profit Margin (%) -3.8 1.9 5.7 pts. 

a

 Scheduled service only. 

b

 Excludes bankruptcy-related charges (reorganization expenses and fresh-start accounting 

gains). 

Source: ATA 2007b 

Table 2-23 highlights overall changes in domestic operating profit and net income for large certificated 

air carriers by type between 2002 and 2006. Although five-year average operating profits were negative 

(see Table 2-21), most air carriers experienced growth in operating profit; only medium regional and 

small certified carriers showed declining operating profit. Changes in net income from 2002 to 2006 were 

more mixed; major, national, commuter and domestic cargo carriers posted improved net income 

(although net income was still negative for major and national airlines), while regional, medium regional 

and small certified carriers showed declining net income. 

Despite the improved 2006 financial picture, in 2007, the Air Transport Association (ATA) reported that 

because of the industry’s high level of debt, airlines will continue to be extremely vulnerable to market 

fluctuations, such as fuel prices and economic recession. During 2006, the higher jet fuel prices are 

estimated to have added $8.9 billion to the industry’s operating costs, virtually negating any cost saving 

efforts that carriers made in reducing non-fuel related expenses during the year (Heimlich 2007). 

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Table 2-23. Changes in Domestic Operating Profit and Net Income, 2002 to 2006 

Operating Profit 

(in thousands) 

Net Income 

(in thousands) 

Airline Type 2002 2006 Change 2002 2006 Change 

Major Carrier -$574,711 $239,115 $813,827 -$696,493 -$320,645 $375,847 

National Carrier $1,747 $23,074 $21,328 -$7,572 -$4,041 $3,532 

Regional Carrier -$1,959 $1,340 $3,299 $1,645 $205 -$1,440 

Medium Regional Carrier -$1,199 -$8,426 -$7,227 -$2,361 -$9,083 -$6,722 

Commuter Carrier -$9,173 $0 $9,173 -$35,761 $0 $35,761 

Small Certified Carrier $0 -$423 -$423 $0 -$815 -$815 

Domestic Only All Cargo $0 $42,785 $42,785 $0 $90,054 $90,054 

Source: BTS Air Carrier Financial Reports (Form 41), Schedules P-11 and P-12. 

2.7.2 Factors in Airline Profitability 

2.7.2.1 Industry Characteristics Affecting Profitability 

Air transport is an intermediate product; that is, it is a product consumed so that another good (e.g., 

business meeting, leisure travel) can be obtained. Thus, the demand for air transport services is dependent 

on demand for the underlying product (Holloway 2003). As an intermediate good, the airline industry 

exhibits fixed capacity, sells a perishable product, and faces demand levels that vary both predictably and 

stochastically (Borenstein and Rose, 2007). 

While the industry itself has been deregulated, the majority of the infrastructure for air transportation 

remains controlled by the government (Borenstein and Rose, 2007). Holloway (2003) believes this creates 

an unusual dynamic between the publicly controlled airspace and airports and privately controlled 

airlines. Holloway (2003) found air transport demand is: 

• Heavily influenced by output supply. 

• Prone to market fluctuation impacts in the long run. 

• Subject to imbalances in volume or timing of traffic flows. 

Holloway (2003) suggested that approximately 80 percent of a scheduled carrier’s costs can be considered 

fixed in the short run. This translates into airlines not being able to quickly adjust to market changes. 

Indeed, airline profits have exhibited greater fluctuations since deregulation, but Borenstein and Rose 

(2007) believe this is due to both price inflation and the size of the industry. The observed fluctuations in 

net income, however, are no more severe than during regulation. The volatility inherent in the airline 

industry may be largely explained by two factors (Borenstein and Rose 2007; Morrison and Winston 

1995): 

• Fundamentals of the industry: quick and dramatic fluctuations in profit are driven by highly 

volatile demand, high levels of fixed costs, and slow adjustment of supply; 

• Strategic errors: changes in airline capacity can take years to implement (e.g., new aircraft 

orders, expansion of airport facilities), thus the industry relies heavily on economic forecasts, 

which means that their most important business decisions are based on the imperfect science 

of economic forecasting done by each airline individually. 

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2.7.2.2 Factors Controlled by the Airlines 

Many factors within the airline’s control can affect profits. The major determinants of profitability are: 

• Operating costs (e.g., employee compensation, fuel prices, maintenance expenses) 

• Fares 

• Network and operating characteristics 

• Managerial characteristics 

Operating costs have an inverse relationship to profits. An airline trade group, ATA publishes a quarterly 

airline cost index based on the data provided to U.S. DOT on Form 41. As illustrated in Figure 2-7, the 

highest percent of operating costs are labor and fuel, based on the most recent data available (ATA 

2007b). 

Landing fees

2%

Fuel

28%

Labor

23% Other operating 

expenses

13%

Professional 

services

8%

Rents and 

ownership

11%

Transport-related

15%

Figure 2-7. Airline Operating Costs as Percentage of Total (2007) 

Source: EPA analysis of ATA 2007b. 

2.7.2.3 Labor Costs 

Unions represent at least part of the labor force at all major U.S. airlines (GAO 2003). Contracts between 

airlines and their unionized employees are conducted in accordance with the requirements of the Railway 

Labor Act of 1936. Airline labor contracts do not expire, but instead have a date upon which parties can 

request revised terms for a new contract. Labor costs accounted for over 40 percent of the unit cost 

difference between legacy airlines and low cost airlines in 2003 (GAO 2004). Legacy airlines’ high labor 

costs are the result of a more senior workforce, higher pension costs, and work rules that differ from their 

low-cost carriers. Union contracts can also make it more difficult for airlines to adjust labor costs to 

changing market conditions. Legacy airlines that file for bankruptcy have been renegotiating union 

contracts to reduce labor cost. Even with its younger staff and lower pay, labor costs are still a significant 

portion of the low-cost carriers’ operating expenses. 

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2.7.2.4 Fuel Costs 

The U.S. airline industry consumes approximately 19.5 billion gallons of jet fuel per year (ATA 2008a). 

Fuel now exists as the largest contributor to airline costs, surpassing labor for the first time in 2006 

(Heimlich 2007). As of May 2008, the ATA reported that almost 40 percent of the price of an airline 

ticket goes to pay for fuel costs, as opposed to roughly 15 percent in 2000 (Maxon 2008). In terms of the 

reduction in fuel related costs, efforts have been made to reduce consumption across the commercial side 

of the industry with a 1.9 percent decrease in consumption from 2005 to 2006. Airlines have been cutting 

costs through reduction of plane weight and drag. For example, airlines have reduced reserve fuel carried 

by aircraft to reduce weight. Cutting heavy items from plane interiors, such as beverage carts, seats, 

ovens, and extra potable water, has proven to save thousands of gallons of fuel annually (Heimlich 2007). 

In FAA’s forecast of air transportation (2007), they found that if the price of oil increased to more than 

$100 per barrel, then the industry will experience major disruptions likely resulting in less capacity and 

passenger demand, along with reduced market competition. In February 2008, Merrill Lynch, a global 

financial management and advisory company, projected that if oil was available at $75 per barrel, then all 

12 airlines analyzed would have a profitable year (Reed 2008). The company further suggested that oil 

priced at $95 per barrel, would result in only five profitable airlines and a total industry loss of $322 

million. At $110 per barrel, only two airlines would be profitable and industry losses would be $3.3 

billion. The Energy Information Administration stated that in 2007, the average price for oil was $72 per 

barrel in 2007 and their June 10, 2008 short-term forecast projected an average of $122 per barrel in 2008 

and $126 per barrel in 2009 (EIA 2008).18

2.7.2.5 Landing Fees 

In the third quarter of 2007 landing fees composed 1.9 percent ($653 million of $33.9 billion) of 

operating costs, and since 1990, landing fees have composed of between 1.8 and 2.4 percent of operating 

costs (ATA 2008a). Absolute costs have increased at a slow but steady rate increase from $1.25 billion in 

1990 to $2.51 billion in 2006. 

An FAA rule issued in 1996 set some guidelines for the structuring of landing fees (FAA 1996). Airports 

had traditionally structured many of their landing fees based on weight of the aircraft, and the 1996 rule 

did nothing to alter that. However, it did require that all landing fees must be offset by costs of completed 

construction projects (not future or current projects) to avoid large revenue accumulation based on the 

landing fees. The rule also allowed for a “peak pricing” system (as long as it is not discriminatory) in 

which congested airports could charge carriers higher landing fees at the busiest times. 

There is a growing move to use “peak pricing” to encourage airport customers to use alternative airports, 

alter their flight schedules, or fly larger aircraft (GAO 2001). A proposed FAA rule issued in January 

2008 (FAA 2008c) clarifies that airports did have the authority “to establish a two-part landing fee 

structure consisting of both an operation charge and a weight-based charge, in lieu of the standard weightbased charge.” Additionally, the proposed rule allows airport managers the ability to offset a proportion 

of the landing fees with current (in addition to already constructed) construction projects, and the ability 

to offset their revenue from landing fees with construction costs of any other underutilized airports they 

may own. 

 

18 Prediction based on West Texas Intermediate crude oil market, which is slightly higher quality crude oil than the 

OPEC basket (but typically no more than $2 per barrel higher). The price of jet fuel is primarily based on the 

underlying price of crude oil (with additional costs imputed from the jet fuel crack spread), so as crude prices rise, 

so do jet fuel prices (Heimlich 2006). 
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In EPA’s airport questionnaire, EPA asked airports to identify the landing fees for commercial air carriers 

for 2004. Table 2-24 lists the weighted average of the responses according to hub size across five 

categories. A signatory airline is an air carrier that has signed a long term commitment with the airport. 

As shown in Table 2-24, signatory airlines often are provided with a reduced landing fee as a benefit of 

the agreement.19 EPA found that landing fees for the nonhubs airports are much higher than the other hub 

sizes. 

Table 2-24. Landing Fees by Hub ($/1000 lb landed weight) 

Hub Size 

Passenger Air 

Carrier 

Signatory 

Passenger Air 

Carrier NonSignatory 

Cargo Air 

Carrier 

Signatory 

Cargo Air 

Carrier NonSignatory 

Commuter/ Small 

Commercial 

Airlines 

Large 2.30 2.61 2.31 2.65 2.66 

Medium 1.80 2.27 1.89 2.25 2.00 

Small 2.34 3.09 2.43 2.80 2.24 

Nonhub 4.25 5.19 3.86 4.94 4.16 

Source: EPA Deicing Questionnaire 

EPA anticipates that airport costs associated with the deicing effluent guideline may be passed through to 

the airlines in the form of higher landing fees. 

2.7.3 Industry Concentration 

Despite many of the legacy air carriers ceasing operations in the years following deregulation, the largest 

carriers have retained market dominance. In 2005, with a combined market share of 66 percent, 9 of the 

original 23 legacy carriers continue to serve the U.S. market (Borenstein and Rose 2007). Since 2005, and 

the success of the US Airways and America West merger, there are continued rumors about proposed 

legacy airline mergers due to overcapacity (Bailey 2006; Blanton 2008). In theory, these mergers would 

consolidate overlapping operations on routes and airports, along with corporate overhead, in order to 

reduce operating costs. The decline in the number of traditional carriers through bankruptcy or merger has 

raised concerns among some observers that increasing market concentration might provide surviving 

airlines with market power. 

2.7.3.1 Market Power 

Economists typically measure industry competitiveness by market share accounted by the largest four or 

eight largest companies or an index such as Herfindahl that measures the number of “effective 

competitors.” Using such measures, the competitiveness of the airline industry has declined since 

deregulation due to mergers. However, airlines do not really compete at the national level, but at the route 

level. As Morrison and Winston (1995) pointed out: 

 

19 The 1996 FAA rule mentioned above (FAA 1996) states that it is not considered a discriminatory process to 

charge different rates for signatory and non-signatory airlines, “The prohibition on unjust discrimination does not 

prevent an airport proprietor from making reasonable distinctions among aeronautical users (such as signatory and 

non-signatory carriers) and assessing higher fees on certain categories of aeronautical users based on those 

distinctions (such as higher fees for non-signatory carriers, as compared to signatory carriers).” 
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Four effective competitors at the national level can operate in two very different ways: with 

each having a monopoly share on one-quarter of the routes or each having a one-quarter share 

on all routes. Although the number of airlines is the same either way, the second situation is 

obviously more competitive because more airlines serve each route. Thus fewer effective 

competitors at the national level does not necessarily mean that the industry is less 

competitive. 

Entry into a given route market is determined by existing competition on the route and how the route has 

been integrated into both the entering carrier’s and existing carriers’ networks (Morrison and Winston 

1995). Carriers are discouraged from entering a new route market if one of their competitors has a hub at 

either the origin or destination of that route (Morrison and Winston 1995), therefore, reducing 

competition on certain routes. 

Many airline markets tend to exhibit oligopolistic behavior in that price changes initiated by any one of 

the small number of competitors on a route are likely to bring a reaction in pricing by the other carriers 

(Holloway 2003). This aspect of air carrier behavior has been readily observable in the last two or three 

years as airlines struggle to cover increasing fuel costs. A carrier might announce a fare increase, then 

watch to see if competitors follow the increase; if not, the initiating airline often quietly reduces its fares 

to their previous level a few days later (see, for example: Grant, 2008; IHT, 2007; Reuters, 2007). 

Holloway (2003) also noted that additional airline costs can feed into passenger fares through changes in 

total fares (after all taxes and fees) even though base fares (advertised fares) might remain constant. An 

example of this strategy is fuel surcharges after oil price spikes; the addition of a fuel surcharge increases 

the total passenger fare. Thus airlines are able to increase revenues by increasing the total amount paid for 

a ticket without actually increasing base fares. 

In light of the unprecedented increases in jet fuel costs in 2008, airlines have increasingly made use of 

surcharges to generate additional revenues without raising base fares. These include: fuel surcharges, fees 

for checking a pet on board, making a phone reservation, checking a second piece of luggage, snacks and 

meals, and the opportunity to select a window or aisle seat (Chen and Prada 2008; Hamman, 2008). 

American Airlines has even added a new charge for checking the first piece of luggage; other airlines 

have not made this move yet, but are considering it for the near future (Chen and Prada 2008). 

In a 2005 report, GAO found that since 2000, the airline industry’s excess capacity has greatly diminished 

their pricing power. Profitability, therefore, depends on which airlines can most effectively compete on 

cost, which relates back to the increased market share of low-cost carriers. With the changing landscape 

of the airline industry, it suggests any legacy carrier exiting the industry would be replaced by a new lowcost entrant, thus resulting in an overall lowering of fares. On the other hand, the exit of the major lowcost carrier in the nation, Southwest Airlines, while it would affect a small percentage of overall 

passenger traffic, would send overall fares upward (Morrison and Winston 1995). 

2.7.3.2 Barriers to Exit 

Bankruptcy has been a common occurrence in the U.S. airline industry. Borenstein and Rose (2007) 

report that five of the top seven U.S. airlines (each having at least five percent of domestic market share) 

have filed for Chapter 11 bankruptcy at least once. These airlines are Continental, US Airways, Delta, 

United, and Northwest; all except Continental have filed for Chapter 11 since September 11, 2001 (ATA 

2008b). The only two top-tier airlines that have yet to declare bankruptcy are American and Southwest 

(Borenstein and Rose 2007). 

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Chapter 11 bankruptcy allows a company to continue to operate while the company is protected from its 

creditors and allowed to reorganize in an attempt to once again become a financially viable company after 

its fresh start. Reorganization typically involves renegotiation of contractual (including union) and debt 

obligations; creditors and others, such as a unionized labor force, have incentive to agree to 

reorganization in the hopes that the reorganized company will be worth more than they would receive if 

the company was shut down and its assets sold to repay creditors. 

Many in the airline industry have argued that continued operation of insolvent airlines is at least partially 

responsible for the financial instability of the industry as a whole (e.g., Crandall 1995, Kaps 2000, 

Holloway 2003). The primary issue here is that Chapter 11 bankruptcy provisions act as a “barrier to 

exit,” allowing otherwise financially nonviable airlines to remain in operation to the detriment of the 

industry as a whole. 

The issue can largely be traced to the economics of operating an industry with high fixed costs (e.g., 

aircraft ownership and/or leases, infrastructure) and low marginal cost. Given that an airline is already 

committed to undertaking a flight from one city to another, the marginal—or incremental cost of filling an 

empty seat on that aircraft is relatively low (primarily the incremental fuel burn). This creates incentive 

for airlines to reduce prices; as long as the ticket price exceeds marginal cost, the airline will make more 

money—or lose less money—by filling that seat even if the ticket does not cover the allocated full costs 

of providing that flight. This is exacerbated by the perishable nature of the product—the potential revenue 

represented by an empty seat on flight can never be recovered by selling it at a later date. 

Crandall (1995) aggressively states the case for the problems caused by a bankrupt airline remaining in 

operation. Airlines operating under bankruptcy protection are able to operate at artificially low cost due to 

restructured debt, renegotiated labor contracts, and other reduced obligations. Thus such airlines receive a 

cost advantage over other airlines, and are able to offer even lower fares. Nonbankrupt airlines are faced 

with an unpalatable choice between matching the lower fares, which are probably below that airline’s full 

costs, or maintaining fares that will cover costs but lose passengers. As discussed in the previous 

paragraph, their incentive would be to follow the competition and reduce fares as well. Crandall 

concludes that bankruptcy protection has resulted in ruinous fare wars, huge losses, high debt-to-equity 

ratios, and low-grade investment securities for U.S. airlines. 

Not all agree with this doomsday assessment of airline bankruptcy. According to Borenstein and Rose 

(2007), very little happens to the market when a large player files for bankruptcy. Typically, an airline 

will reduce fares immediately prior to filing bankruptcy. Competitors with healthier financial outlooks, 

however, do not tend to follow suit with the price decrease and therefore the fare decrease is usually 

temporary. Despite there being a lot of media attention paid to airline bankruptcy filings, it appears that 

there is little impact on competitors or consumers (Borenstein and Rose 2007). 

Crandall’s discussion of the implications of barriers to exit and bankruptcy on the industry intuitively 

makes sense. However, one can take the same logic that appears to be inherent in the nature of the airline 

industry and argue that the problem of bankruptcy protection might be overstated. The incentive to fill 

aircraft seats even at fares below fully allocated cost exists whether the carrier is bankrupt or not. Because 

aircraft seats are a perishable product and the marginal cost of filling those seats is low, there will always 

tend to be downward pressure on air fares as long as the market is competitive. 

Furthermore, the value of an airline, even if bankrupt, is far greater than the value of its components: “the 

value of an airline’s assets—individual aircraft, buildings, ground leases, etc.--is substantially less than 

the stream of cash flow which can be produced by using those assets in concert” (Crandall 1995). Thus, 

whether an airline is protected by the courts or not, there are strong incentives for creditors (and 

employees) to reach agreement to keep a vulnerable airline in operation. 

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Finally, Crandall points out that renegotiated labor contracts give bankrupt airlines lower labor costs than 

the nonbankrupt competition. However, since deregulation, the industry has seen a stream of low cost 

start-ups, of which a majority do not have union labor, and all of which have lower labor costs (e.g., they 

do not have pilots, mechanics, and other employees with 20 or more years of seniority because the airline 

hasn’t been in existence that long). Thus, low labor cost competition is not resulting solely from bankrupt 

airlines. 

In conclusion, the economics of the industry appear to be such that there is inherently downward pressure 

on prices. With high fixed costs and low marginal costs, this provides incentive for airlines to offer fares 

below fully allocated costs. Because many of an airline’s costs may be associated with aircraft leases and 

other long term financial commitments, there are incentives for those airlines to remain in operation for 

long periods of time even if they cannot meet their full costs. Thus, although the importance of Chapter 

11 bankruptcy provisions might be overstated in the financial performance of the industry, the underlying 

economic fundamentals suggest there are inherent factors in operation that will always make the airline 

industry a difficult financial environment. 

2.8 Airport-Airline Interactions 

2.8.1 Effect of Airline Bankruptcies on Airports 

With financial instability being an inherent trait of the airline industry, it bears mentioning the impact 

such instability has on airports. Borenstein and Rose (2007) found that while carriers do tend to reduce 

service levels during bankruptcy, there are always other airlines willing to meet market demand. They 

also found that in both small and large airports there is no statistically significant service effect when a 

carrier at those airports declares bankruptcy. There is a small statistically significant effect at medium 

airports, but “total service to the airport declines by less than half the number of flights that the filing 

carrier offered before bankruptcy” (Borenstein and Rose, 2007:19). 

2.8.2 Airport-Airline Cost Pass-Through Analysis 

The ability of a supplier to pass through costs to the purchaser depends on the fundamentals of supply and 

demand. The demand for aircraft deicing services–as well as the demand for airport services in general–is 

derived from consumers’ demand to travel from one place to another or to ship their cargo from one place 

to another. In short, it is due to consumers’ demand for air transportation that airlines demand services 

from airports, such as landing slots and access to the terminal, apron, and hanger space necessary to 

support their flight operations. Determining cost pass-through for deicing services thus involves not one, 

but two pass-throughs: from airport to airline and from airline to passenger. 

In perfectly competitive markets–with many small sellers and many small purchasers–the relative price 

elasticities of supply and demand essentially determine cost pass-through. However, neither the market 

for airport services nor the market for airline services can be described as perfectly competitive. Both 

airports and airlines appear to have some ability to set prices, although this pricing power probably varies 

with the type and location of the airport, and the size, type, and route structure of the airline. In the air 

transportation industry, although cost pass-through might depend on market fundamentals in the long run, 

in the short run it is subject to negotiation. Section 2.8.2.1 and Section 2.8.2.2 describe some of the 

attributes that affect the determination of cost pass-through between airports and airlines and between 

airlines and customers, respectively. 

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2.8.2.1 Airports to Airlines 

Historically, it has been something of a truism that all airport costs are eventually paid for by airlines and 

airline customers. Airlines pay for airport operating costs through rates and charges. They also pay for 

airport capital expansion either through aviation user taxes that formed the basis for AIP grants or by 

providing the revenue stream to finance bond issues. These costs are then generally passed on to their 

customers. In addition, airline passengers directly pay for airport costs through the airport revenue 

streams from concessions, parking, and car rentals. In addition, much capital expenditure is now funded 

through PFCs (which are added to ticket prices).20 Although these recent trends have modified airport 

finance, the overall impression is still that in the long-run, a large percentage of airport costs are passed 

through to airlines and airline passengers in the form of increased fees. However, in the short-run, cost 

pass-through (CPT) from airports to airlines might be significantly smaller than 100 percent. 

Although sparse, and more suggestive than definitive, available literature indicates that airports are able to 

pass on costs to airlines. But there is a delicate balance to maintain, especially in the short run: 

“A major consideration to be made by airport personnel at airline-served airports in 

forecasting their projected revenues is that of how to charge the airport’s major tenants, the 

airlines. Because such charges impact heavily on the airport’s revenue stream, it is important 

to be fair to the tenants as well as to gain sufficient revenue to operate the airport and make 

related major purchases” (Kaps 2000). 

An analysis by the DOT supports this claim. DOT examined how the severe airline financial distress 

following September 11, 2001, affected airports and looked at actions taken by airports to ensure their 

own financial viability. Among the actions taken were the following: 

“Reducing or refunding the effective rates that air carriers pay for airport facilities by 

suspending or reducing airline rates and charges, under-recovering certain costs allowable 

under airline agreements, contributing discretionary cash flow to reduce airline charges, 

adjusting the income-sharing formula to enlarge the airline share, offering airlines additional 

time to repay any underpayments of prior rates and charges, and consolidating unspent 

construction fund amounts to refund airlines” (DOT 2003). 

This indicates that the reality of the airlines’ financial situation impeded pass-through of airport capital 

expenditures to airlines. 

In addition, the ability of airports to increase fees is dependent on the nature of the particular airport and 

its relationship with the tenant airline(s). For example, airports with only one major airline are more 

financially vulnerable and may be less willing to pass on capital costs to the airline if the airline is in 

financial distress. Also, secondary airports are more vulnerable than primary airports because the services 

at secondary airports are more readily suspended during times of financial difficulty for the airlines. 

Increased competition at airports will lessen the likelihood that an airport will be dominated by a single 

airline in the future (DOT 2003). In addition, airports compete among themselves to attract and retain 

airline tenants by creating favorable working environments for the airlines. Anecdotally, some airports in 

relatively close proximity to other significant airports have indicated to EPA that they are reluctant to 

increase airline rates and charges for fear of losing traffic to competitors. 

 

20 To the extent that PFCs increase the cost of air transportation, and therefore decrease the quantity of air 

transportation purchased by consumer, airlines indirectly pay some cost of PFCs in the form of forgone revenues 

(see Section 2.8.2.2). 
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The DOT report also finds that airports turn to alternative revenue sources when trying to reduce costs on 

airlines. Such alternatives may include altering staffing levels and benefits, reducing non-essential 

business operations expenditures, and increasing parking rates. In strong financial markets when interest 

rates are low, airports may also seek to refinance their outstanding debt, redirect PFC revenues to pay for 

outstanding debt and/or reduce some airline rates and charges (DOT 2003). 

In summary, the impression from analyzing the industry and its financial and market structure and 

reviewing the literature, is that most airport costs, both capital and operating, will eventually be passed 

through to airlines and/or their customers. However, this represents a long-run trend. In the short-run, 

airports might face significant resistance to increased costs, especially when the airlines are in financial 

distress. The years since the events of September 11, 2001, have largely been a period of financial distress 

for airlines. As the price of oil continues to rise, it is not clear how much this financial stress on airlines 

has eased. Thus, while costs might conceptually be passed through, it is not clear how much scope is 

available for cost pass-through at this point in time. 

Finally, cost pass-through from airports to airlines cannot be discussed without consideration of the 

complexity of the airport sector. Airports vary considerably not only in their ability to pass through costs, 

but their need to pass through costs as well. These differences appear to be systematically related to 

airport size. Large airports have significant financial resources on which to draw, both from ability to 

accumulate operating surpluses as well as their access to various capital funding programs. Smaller 

airports have much more limited financial resources. It is difficult for them to generate operating 

surpluses, and they appear to be much more dependent on various grant programs to fund capital projects. 

These two issues: financial resources generated through operations, and through participation in 

government programs, are discussed in detail in the following two sections. 

2.8.2.1.1 Review of Operational and Financial Characteristics of Airports 

If an airport is constrained in its ability to pass through costs to airlines, then its ability to implement a 

regulatory option will largely be a function of its financial resources in the absence of significant 

additional revenues. These resources include the ability of an airport to access capital markets to fund the 

initial capital expenditure; if costs can be passed through, capital markets should be easier to access since 

a revenue stream is available to fund the incurred debt. 

The potential for airports to pass through costs to airlines is at least partially a function of the financial 

resources the airport can call upon. The difference in the scale of operations, and hence their access to 

financial resources is significant. Table 2-25 compares average operational data by airport hub size. The 

implications of this table are clear; even medium hub airports, the second largest category of airports after 

large hubs, operate at a fraction of the scale at which large hubs operate: 

• Average departures at a medium hub are less than 30 percent and enplanements are less than 

24 percent of the average large hub figure. 

• For small hubs, departures are less than 12 percent and enplanements less than 7 percent of 

the average large hub figure. 

• For nonhubs, departures are less than 4 percent and enplanements less than 1 percent of the 

average large hub figure. 

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Table 2-25. Average Departures and Enplanements by Hub Size, 2002-2006 

Large Hubs Medium Hubs Small Hubs Nonhubs 

Airport Count 33 35 25 54 

Departures 190,093 56,313 21,849 6,244 

As Percent of Large Hub Average -- 29.6% 11.5% 3.3% 

Enplanements 15,285,072 3,589,355 1,023,525 118,173 

As Percent of Large Hub Average -- 23.5% 6.7% 0.8% 

Source: EPA analysis of BTS T-100 airport operations data. Surveyed airports only. 

The consequences of the difference in operational scale are reflected in average airport revenues and 

expenditures. Average operating revenues at medium hubs are 23.2 percent of those at large hubs; for 

small and nonhubs those figures are 7.2 percent and 1.1 percent respectively (see Table 2-15, Section 

2.6.2.). 

The differences between airport size classes in landing fees are significant in at least two ways. First, rates 

and charges (e.g., landing fees) tend to be a key means for airports to pass-through compliance costs to 

airlines. Second, landing fees might also be indicative of an airport’s market power when negotiating with 

airlines. 

• Average landing fees at medium hubs are 20.0 percent of those at large hubs; for small and 

nonhubs those figures are 4.8 percent and 0.7 percent respectively. 

• Landing fees at these airports are smaller relative to large hub landing fees than are 

departures; for example, medium hub departures are 29.6 percent of those at large hubs but 

landing fees are only 20.0 percent of those at large hubs. This most likely reflects the weaker 

passenger demand at these airports in two ways: 

o Airlines tend to fly smaller aircraft into smaller airports (e.g., regional jets rather than 

Boeing 737s), and 

o Airlines may be more willing to reduce or withdraw services at these airports if fees 

become too large, thus constraining an airport’s ability to raise fees. 

In addition, airports are often able to accumulate reserves for capital expenditure programs through 

concession and parking revenues, which are also related to the scale of passenger service at the airport. 

Table 2-15 also shows that revenues from these sources are relatively small at smaller airports, 

particularly nonhubs. These revenue sources can be particularly valuable to an airport because airlines 

have less influence on rate setting for concessionaires and how those revenues will be used than they do 

over landing fees and terminal and gate rents. 

Finally, capital expenditures can be funded out of net operating revenues. To the extent that operating 

revenues exceed operating expenditures, airports can accumulate the difference in its capital accounts. 

EPA compared operating revenues with operating expenses by airport type over five years to determine 

airports’ ability to accumulate reserves for capital projects out of operating surpluses. These results are 

presented in Table 2-26. Large, medium and small hub airports appear to have the ability to accumulate 

reserves. Nonhub airports, however, spend more than they take in from operating revenues, meaning they 

may have to find alternative funding sources just to finance their day-to-day operations. It appears clear 

that nonhubs do not have significant internal financial resources to draw on to support capital projects. 

Furthermore, this limits their access to bond markets, as GARBs typically require that net revenues 

exceed annual debt service by at least 25 percent. 

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Table 2-26. Ratio of Airport Operating Expense to Revenues, 5-Year 

Average (2002-2006) 

 FAA Classification Ratio of Operating Expenses to Operating Revenues 

Large Hubs 0.65 

Medium Hubs 0.64 

Small Hubs 0.76 

Nonhubs 1.42 

Source: FAA Form 127 data as compiled by EPA. 

2.8.2.1.2 Airport Capital Improvement Programs and Financing Sources 

Average capital expenditures and significant sources of funding for capital expenditures are summarized 

in Table 2-27. On average, capital improvement programs at smaller airports tend to be relatively small 

scale, on the order of $5 million for nonhubs to $15 million for small hubs. It should be noted that these 

capital programs must cover replacement of current capital stocks such as fire-fighting equipment, radar, 

lighting, communications and other equipment, resurfacing of runways, and similar projects; they do not 

necessarily represent expansion programs. 

Table 2-27. Average Capital Expenditure and Financing by Hub Size, 2002-2006 

Large Hubs Medium Hubs Small Hubs Nonhubs 

Airport Count 33 35 25 54 

Total Project Expenditures $177,874,771 $39,616,089 $14,705,868 $4,956,860 

As Percent of Large Hub Average -- 22.3% 8.3% 2.8% 

PFC Revenues $48,059,002 $9,561,662 $3,012,540 $334,152 

As Percent of Large Hub Average -- 19.9% 6.3% 0.7% 

Grant Receipts $22,809,305 $10,716,828 $7,010,565 $3,679,966 

As Percent of Large Hub Average -- 47.0% 30.7% 16.1% 

Bond Indebtedness $1,335,074,774 $253,756,033 $57,327,526 $2,631,704 

As Percent of Large Hub Average -- 19.0% 4.3% 0.2% 

Total Indebtedness $1,418,440,732 $268,293,030 $59,921,343 $4,223,407 

As Percent of Large Hub Average -- 18.9% 4.2% 0.3% 

Source: EPA analysis of FAA Form 127 airport financial data. Surveyed airports only. 

Table 2-27 demonstrates that nonhub airports in particular do not rely on debt financing of capital 

programs. This is largely an implication of the operating income figures discussed above; these airports 

do not have the revenue streams necessary to support large amounts of debt. Furthermore, PFCs are not a 

large source of funds for these airports; they do not have the passenger flow that will generate significant 

PFC revenues. 

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Smaller airports are much more heavily dependent on grants to fund capital expenditures than are large 

hubs. For example, departures, enplanements, operating revenues and expenditures, capital expenditures, 

indebtedness, and PFC revenues for nonhubs are all less than about 3 percent of the same figures at large 

hubs. The single exception to that rule is grant receipts; grant receipts at nonhubs are 16 percent of grant 

receipts at large hubs. In fact, grant receipts comprise 74 percent of capital project expenditures at 

nonhubs, 48 percent at small hubs, 27 percent at medium hubs, and about 13 percent at large hubs. 

Clearly, smaller airports are highly dependent on grants to pay for capital expenditures. These grants must 

fund replacement of necessary existing capital plant, not just new capital expenditures. Since funding of 

grants, especially AIP grants, is low relative to the demand for those grants, only the highest priority 

projects tend to get funded at smaller airports. 

In summary, it appears that in the short run, at least, the largest airports have the most ability–or 

leverage–to pass through costs to airlines. They also have the best access to other means of funding 

capital construction programs. Small airports are the most vulnerable to changes in airline service, and 

thus have little market power to enable them to pass through costs to airlines. In addition, the smallest 

group of potentially affected airports, small hubs and nonhubs, has the fewest alternatives for funding 

capital programs; nonhubs in particular appear to be almost entirely dependent on AIP grants for capital 

expenditures. 

2.8.2.2 Airlines to Passengers 

The ability of airlines to pass through costs to passengers in the form of higher ticket prices depends 

largely on market specific factors such as the desirability of an airport as a final destination, whether a trip 

to that final destination is for business or pleasure, and whether other airports with acceptable standards of 

airline service are close to that destination. If an airport serves a highly desirable final destination, with a 

high percentage of business travel, and there are no alternative airports nearby, airlines might be able to 

pass through significant costs to their passengers. Conversely, if customers are flying to airports primarily 

as a means to get elsewhere (e.g., connecting flights), if multiple airlines serve that airport, or if there are 

other airports just as suitable for that purpose, customers will be less willing to pay higher ticket prices, 

and airlines will thus be less able to pass through costs on flights using that airport.21 

Very few studies examine or try to estimate the intensity of demand for services at specific airports. A 

number of studies have measured the intensity of demand for airline services in general. EPA used two 

papers (FAA 1995, Button 2005) that contained extensive literature reviews of studies of the price 

elasticity of demand for air transportation. The price elasticity of demand evaluates the responsiveness of 

consumers to changes in product price and is defined as the percentage change in quantity demanded (in 

this case, air travel) caused by a given percentage change in price (in this case, airfare). 

Although details may vary, the price elasticity of demand for business travel is generally less elastic than 

for non-business travel (e.g., vacation travel). That is, there will be a relatively small reduction in business 

travel compared to non-business travel in response to any given change in fares. If a business person has 

to be at a certain location on a certain date, those travel plans are unlikely to change if fares increase. 

Conversely, a person traveling for vacation has no need to be at a specific location on a specific date; a 

vacation traveler might respond to fare increases by changing destination, mode of travel, or perhaps even 

choosing not to travel. Second, the price elasticity of demand is less elastic for long trips than short trips. 

 

21 In another context, the importance of these factors is recognized when airports issue bonds. Airports perform 

analyses of these underlying demand fundaments, which become important components in determining bond ratings 

and prices. 
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 2. Profile of the 

and Standards for the Airport Deicing Category Air Transportation Industry 

The reasoning is similar to that for business travel: if fares increase, short trips might be feasible by car or 

train, while those alternatives will be less attractive for long trips. 

Econometric studies have estimated price elasticities of demand for air travel ranging from -0.26 for longhaul business travel (a 10 percent increase in fare reduces travel by 2.6 percent), to about -4.5 for shorthaul non-business travel (a 10 percent increase in fare reduces travel by 45 percent) (FAA 1995, Button 

2005). Analysts frequently use values of about -0.9 for business travel, and from -1.5 to -2.0 for 

nonbusiness travel (FAA 1995, Button 2005). 

Price elasticities of demand are of more than academic interest; they have significant implications for 

supplier income when prices change. If demand is inelastic (that is, if the price elasticity of demand lies 

between 0.0 and -1.0), then a fare increase will increase supplier revenues; the percentage reduction in 

demand is smaller than the percentage increase in fare, thus overall supplier revenues increase. If demand 

is elastic (that is, if the price elasticity of demand is from -1.0 to -∞), then a fare increase will trigger such 

a large reduction in demand that supplier revenues decrease. Vacation travel appears to account for a 

larger share of passengers than business travel (with the exception of certain destinations and times of the 

year), suggesting that if airlines try to pass through costs to their customers, revenues will decline. 

The exact impact of a fare increase on airlines will depend on airline specific factors such as flight 

destinations, overall route structure, frequency of departures, and a number of other factors that lead 

customers to choose one airline over another. The impact will also depend on other supply characteristics. 

If supply is very inelastic (e.g., in a supply-demand diagram, the supply curve is very steep or vertical), 

airlines will not change the number of seats offered for sale in the short run if the costs of offering those 

seats for travel increases. In this case, cost pass-through will be zero; there will be no increase in fare and 

no decrease in passengers carried, but cost per seat will increase and operating profit will fall by the same 

amount. Conversely, if supply is elastic (e.g., in a supply-demand diagram, the supply curve is very flat or 

horizontal), airlines will pass through 100 percent of costs. This will cause passengers to reduce the 

number of seats purchased, and revenues will fall. 

Data on the price elasticity of supply of airline seats are not readily available. However, at least in the 

short run, supply appears to be very inelastic. Airline tickets have become something of a commodity, 

where passengers largely base their choice on ticket price. This acts to drive prices down to a low level. 

The incentives for airline behavior driving this result were discussed in detail under “Barriers to Exit” 

(see Section 2.7.3.2). The results of this price competition might be observed in the recent behavior of 

airlines in reaction to rising fuel costs. With airline fuel costs projected to increase by 50 to 70 percent in 

2008, airlines have found it difficult to raise fares, at least in the short run. Announced fare increases by 

one airline have not been followed by others, forcing the airline raising its fares to return them to their 

initial level. While airlines have recently started charging or increasing fees for checked bags, phone 

reservations, and in-flight meals and snacks, these fees are expected to cover only a fraction of increased 

fuel costs. Thus, it appears that at least in the short run, it is difficult in today’s business climate for 

airlines to pass through a significant percentage of costs to their passengers. 

In the long run, however, airlines must cover all costs to remain in operation, and will adjust capacity to 

meet demand. That is, the long run supply curve for air transportation is much flatter. Due to the lack of 

specific information, EPA will examine the impacts of cost increases on air carriers under two alternative 

assumptions. First, EPA will assume supply is perfectly inelastic in the short run. This results in zero 

percent cost pass-through regardless of the price elasticity of demand, and airline operating income will 

fall by the total amount of costs incurred. Alternatively, EPA will assume supply is perfectly elastic. In 

this case, 100 percent of costs are passed through, and the primary impact on airlines will result from the 

reduction in demand and hence revenues caused by the fare increase. 

July 2009 2-48
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and Standards for the Airport Deicing Category Air Transportation Industry 

July 2009 2-49

2.9 Alaska 

Aviation in Alaska is significantly different from aviation in the other 48 states in the continental United 

States. Approximately 90 percent of the State of Alaska is not serviced by roads, so aviation is important 

to the State’s infrastructure and basic way of life. Alaska has six times as many pilots per capita and 16 

times as many aircraft per capita compared with the rest of the United States (State of Alaska 2008a). 

With the exception of Juneau International Airport, the State of Alaska owns all the airports, which are 

divided into two distinct systems: 

• The Alaska International Airport System—Ted Stevens Anchorage International Airport 

(only medium hub in Alaska) and Fairbanks International Airport (small hub). 

• The Alaska Rural Airport System (RAS)—256 rural airports scattered throughout the State. 

Juneau International Airport (small hub) is owned by the City and Borough of Juneau, and operated as a 

major enterprise fund of the local government. As such, it is considered to be a self-sufficient component 

of the City/Borough of Juneau (City and Borough of Juneau, 2004). 

Table 2-28 shows the number of departures of commercial services leaving Alaska from 2002-2006. After 

a large 15 percent increase in departures in 2003, there was a small but steady decline in total departures 

for the following three years with the exception of Ted Stevens Anchorage. Despite decreasing number of 

departures from 2004 to 2006, passenger enplanements increased during that time as shown in Table 2-

29. This data correlates with the increased number of passengers per departure—9.3 in 2003 to 11.1 in 

2006 (Table 2-30). 

Another indication of how different Alaska aviation is from the rest of the United States is that Alaska has 

many small airlines that operate only in Alaska. Based on analysis of BTS T100 data, there are 37 airline 

carriers which have at least 97 percent of their total flights depart from Alaskan airports; furthermore, 32 

of these 37 carriers operate exclusively within the state (i.e., 100 percent of their departures are within 

Alaska). While some of these 37 airlines have very few departures per year (i.e., eight airlines have fewer 

than 525 departures per year), 14 of these 37 airlines had more than 10,000 departures from Alaska in 

2006. The top three airlines in terms of Alaskan departures include: 

• Hageland Aviation Service (76,522 Alaskan departures [99.99 percent of the airline’s total 

departures]) . 

• Grant Aviation (46,217 Alaskan departures [100 percent of airline’s total departures]). 

• Peninsula Airways (42,690 Alaskan departures [99.96 percent of the airline’s total 

departures]). 

In addition, these 37 airlines tend to be more reliant on propeller-driven aircraft; at least 83 percent of 

these airlines’ departing aircraft are propeller driven and most rely on a much higher percentage. Even 

national carriers tend to use propeller planes for their Alaskan departures. Delta, Continental, and United 

Airlines all had between 700 and 1,000 departures from Alaska, all of which were propeller-powered 

aircraft. This reliance on propeller-driven aircraft illustrates just some of the differences of air 

transportation in Alaska: smaller aircraft, frequent short hops, frequent bad weather, and dirt runways 

with little ground support at many airports (see, for example Carey, 2007). However, the key feature of 

air transportation in Alaska is that it provides the primary outside access to many towns and villages that 

cannot be reached by road. 
Economic Analysis for Proposed Effluent Limitation Guidelines 

and Standards for the Airport Deicing Category ATable 2-28. Commercial Service Aircraft Departures (Alaska) 

Number of Departures Annual Grow

Airport Type 

Number 

of Hubs 2002 2003 2004 2005 2006 2003 2004 

Large Hub 0 0 0 0 0 0 NA NA Medium Hub 1 74,838 83,211 90,641 95,607 99,607 11.19% 8.93% Small Hub 2 43,080 50,870 51,169 44,232 41,204 18.08% 0.59% Nonhub 23 146,443 170,748 163,656 169,212 167,229 16.60% -4.15% Non-primary 61 158,134 180,129 169,440 157,323 153,038 13.91% -5.93% Total 87 422,495 484,958 474,906 466,374 461,078 14.78% -2.07% 

Source: EPA analysis of BTS T-100 data Table 2-29. Commercial Service Passenger Enplanements (Alaska) 

Passenger Enplanements Annual G

Airport Type 

Number 

of Hubs 2002 2003 2004 2005 2006 2003 2004 

Large Hub 0 0 0 0 0 0 NA NA Medium Hub 1 2,431,444 2,305,462 2,489,946 2,640,210 2,598,569 -5.18% 8.00% Small Hub 2 762,589 777,376 821,885 828,461 834,338 1.94% 5.73% Nonhub 23 1,087,004 1,104,889 1,172,959 1,203,034 1,227,718 1.65% 6.16% Non-primary 61 389,962 409,063 424,615 426,115 435,003 4.90% 3.80% Total 87 4,670,999 4,596,790 4,909,405 5,097,820 5,095,628 -1.59% 6.80% 

Source: EPA analysis of BTS T-100 data Table 2-30. Commercial Service Aircraft Passengers per Departure (Alaska) 

Passengers per Departure Annual Gro

Airport Type 

Number 

of Hubs 2002 2003 2004 2005 2006 2003 2004 

Large Hub 0 0 0 0 0 0 NA NA Medium Hub 1 32.5 27.7 27.5 27.6 26.1 -14.72% -0.85% Small Hub 2 17.7 15.3 16.1 18.7 20.2 -13.67% 5.11% Nonhub 23 7.4 6.5 7.2 7.1 7.3 -12.82% 10.76% Non-primary 61 2.5 2.3 2.5 2.7 2.8 -7.91% 10.35% Total 87 11.1 9.5 10.3 10.9 11.1 -14.26% 9.06% 

Source: EPA analysis of BTS T-100 data July 2009 2-50
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2.9.1 Alaska International Airport System 

The State operates the Alaska International Airport System as a separate major enterprise. It is considered 

a self-sufficient component of the State government, which can issue its own debt in the form of revenue 

bonds. Thus the two airports: Ted Stevens Anchorage International Airport and Fairbanks International 

Airport operate similar to the other state government-run airports in the United States. 

2.9.2 Alaska Rural Airport System 

The RAS is the other major component of the Alaskan aviation system, but it operates much differently 

from the International Airport System. The 256 airports of the RAS range from small municipal airports 

to simple dirt landing strips. The RAS is not a self-sufficient government unit, and the rural airports 

actually lose money every year. However, due to the nature of transportation in the State of Alaska, it is 

vital that these airports remain in operation despite being unprofitable. 

The Alaska Department of Transportation and Public Facilities (DOT&PF), as well as local or tribal 

governments are responsible for operating RAS airports. According to the DOT&PF, airports in the state 

are funded through a combination of user fees, state, local, or tribal funds, and federal funds. RAS airports 

have limited opportunities for generating revenue. In fact, these airports have found it difficult to finance 

the increased federal security mandates since September 11, 2001. The DOT&PF has limited funds to 

perform additional O&M at many of the state’s RAS airports. 

2.9.2.1 RAS Airport Funding 

According to Roger Maggard, Statewide Airport Development Manager for the RAS, almost every RAS 

capital project is funded through AIP grants. As the RAS loses money each year, they do not (and would 

not be able to) issue any bonds and therefore do not carry debt. Instead, to ensure continued operation, the 

RAS is heavily subsidized by the State government and local sponsors. Maggard estimated that the State 

of Alaska provides $23 to $24 million annually to cover RAS operating costs. These airports only 

generate between $3 and $4 million in revenues. These revenues are not received from typical sources, as 

there are no passenger facility charges and rarely any concessions or even building space to rent. The 

revenues are primarily comprised from land leases for aviation or non-aviation purposes (Maggard 2008). 

The RAS does receive approximately $1 to $2 million per year from the State Legislature for various 

projects. However, because this funding is spread over the 256 rural airports, it does not cover the total 

capital costs of necessary projects. Although there is the possibility of the Legislature approving 

appropriations from the General Fund to finance projects in the RAS, this appears highly unlikely and the 

RAS can not assume that any money will be available through this avenue (Maggard 2008). 

2.9.2.2 AIP Spending 

Since most capital projects within the RAS are funded through the AIP, EPA examined the number and 

type of projects being funded over the past couple of fiscal years. Table 2-31 shows overall project counts 

and dollar amounts for AIP-funded projects at primary and non-primary airports within the RAS. 

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Table 2-31. Alaska Rural Airports AIP Spending Plan 

FY 2006 FY 2007 FY 2008 

Funding 

Amount 

Number of 

Projects 

Funding 

 Amount 

Number of 

Projects 

Number of 

Projects 

Funding 

Amount 

Primary Airports 19 $80,899,778 20 $40,714,125 30 $75,394,000 

Non-Primary Airports 27 $66,100,891 27 $81,020,189 37 $143,814,950 

Total 46 $147,000,669 47 $121,734,314 67 $219,208,950 

As of December 12, 2007. Spending plan figures contain entitlement and discretionary funded AIP projects. 

Source: EPA calculations based on State of Alaska 2007

The majority of projects and money spent (or planned for) in 2007 and 2008 are at non-primary airports 

within the RAS. Four primary categories of projects are included in the AIP spending plan: 

• Airfield projects 

• Buildings 

• Equipment 

• Airport Planning 

A breakdown of AIP spending by project type, combined for primary and non-primary airports is 

provided in Table 2-32. The majority of AIP funded projects in the RAS, in terms of dollars spent, are 

airfield projects. These included runway and apron improvements and construction, runway surfacing, 

and general airfield upgrades. Most projects fall into the equipment category, though the amount spent is 

relatively small compared with airfield projects. Equipment projects include the purchase of new and 

replacement equipment such as snow blowers, deicing vehicles, plows, and other heavy machinery. 

Airport planning and buildings costs round out the projects funded through the AIP. 

Table 2-32. Total AIP Spending by Project Type - Alaska Rural Airport System 

FY 2006 

 Number of Projects Funding Amount Percent of Total Project Funding

Airfield Projects 16 $129,502,657 88.1% 

Buildings 3 $6,076,086 4.1% 

Equipment 19 $6,394,670 4.4% 

Airport Planning 8 $5,027,256 3.4% 

FY 2007 

 Number of Projects Funding Amount Percent of Total Project Funding

Airfield Projects 15 $98,548,553 81.0% 

Buildings 2 $7,990,066 6.6% 

Equipment 16 $4,985,520 4.1% 

Airport Planning 14 $10,210,175 8.4% 

FY 2008 

 Number of Projects Funding Amount Percent of Total Project Funding

Airfield Projects 25 $195,584,250 89.2% 

Buildings 6 $10,480,000 4.8% 

Equipment 28 $8,618,000 3.9% 

Airport Planning 8 $4,526,700 2.1% 

Source: EPA calculations based on State of Alaska 2007. 

July 2009 2-52
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All AIP-funded projects require state and local sponsors provide 6.25 percent of funding, of which the 

state covers half and local or tribal governments contribute the remaining. The figures in Tables 2-31 and 

2-32 above represent total project costs. 

2.9.2.3 Other Funding Issues 

As mentioned above, the RAS is heavily subsidized by the State of Alaska. However, detailed 

information on the State’s funding of the RAS has been difficult to obtain since it is not a specific line 

item in DOT&PF’s budget, as seen in Table 2-33, which represents the publicly available budget. 

Table 2-33. FY 2001 Capital & Operating Budget for the AK DOT&PF 

Budget Category Amount (in thousands) Percent of Total Budget 

Measurement Standards $3,350.90 0.30% 

Planning/D&C $4,982.80 0.50% 

Administration $11,697.00 1.10% 

State Equipment Fleet $21,742.30 2.10% 

International Airports $41,465.20 4% 

Marine Highways $103,086.70 10% 

Maintenance & Ops $87,081.40 8.40% 

Capital Budget $756,130.40 73.60% 

- Federal $643.2 

- General Fund $60.2 

- Hwy Working Capital Fund $11.8 

- Int’l Airport Revenue Fund $22.5 

- AHFC Fund $5.9 

- Capital Improvement Program $1.5 

Designated Receipts $9.1 

 

Investment Loss Trust Fund $1.9 

Source: DOT&PF 2000 

2.9.2.4 Operation and Maintenance 

The daily O&M at rural airports is handled in different ways, depending on the size of the airports. For 

the larger airports, O&M tasks are handled by staff from the DOT&PF; for other airports along the major 

highway system, these tasks are handled by the same crews that tend to the highways. For smaller rural 

airports, maintenance jobs (such as snowplowing) are generally contracted out to local residents (DOTPF 

2000). Routine maintenance needs for the entire Alaskan airport system (both International and Rural) is 

estimated at $39 million per year, and the budget available to cover these costs for the airport system has 

not kept pace with inflation. 

2.9.3 Alaska and the Economic Impact Analysis 

Since the majority of Alaskan airports are operated as part of a RAS, EPA has reviewed them separately 

in Chapter 5. 

July 2009 2-53
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Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 2. Profile of the 

and Standards for the Airport Deicing Category Air Transportation Industry 

Heimlich, John. 2008. U.S. Airlines: Operating in an era of high jet fuel prices. Air Transport Association 

of America, Inc. May 20. Available online at http://www.airlines.org/economics/energy/fuel+QA.htm

(accessed May 21, 2008). 

Heimlich, John. 2007. U.S. Airlines: Operating in an era of high jet fuel prices. Air Transport Association 

of America, Inc. September 19. Available online at 

http://www.airlines.org/economics/energy/fuel+QA.htm (accessed September 20, 2007). 

Heimlich, John. 2006. Commercial Jet Fuel Supply: Impact on U.S. Airlines. Statement of John P. 

Heimlich before the Aviation Subcommittee of the Committee on Transportation and Infrastructure of the 

House of Representatives. February 15. Available online at: http://www.airlines.org. 

Holloway, Stephen. 2003. Straight and level: Practical airline economics. 2nd ed. Burlington: Ashgate 

Publishing Company. 

IHT. 2007. Briefing: U.S. airlines withdraw latest fare increases. International Herald Tribune. February 

5. Available online at: http://www.iht.com/articles/2007/02/05/business/ibrief.php. 

Kaps, Robert. 2000. Fiscal aspects of aviation management. Carbondale: Southern Illinois University 

Press. 

Kwan, Jean. 2008. Airport’s revenue increasing despite airline industry woes. Austin Business Journal. 

July 18. 

Maggard, Roger. 2008. Personal communication from Statewide Airport Development Manager, Alaska 

Rural Airport System, to Dina Metivier, ERG. May 14. 

Maxon, Terry. 2008. An airline industry never designed for $130 oil “at a crossroads.” Dallas Morning 

News, May 23. Available online at http://www.dallasnews.com/sharedcontent/dws/bus/stories/DNAirlines_23bus.ART.State.Edition2.45e5955.html. 

McCartney, Scott. 2007. How fewer flights at JFK could affect you. The Wall Street Journal, 

November 6. 

Morrison, Steven, and Clifford Winston. 1995. The evolution of the airline industry. Washington: The 

Brookings Institution. 

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ATM R&D Seminar, June 23-27, in Budapest, Hungary. Available online at 

http:hdl.handle.net/1721.1/35881. 

OAG. 2003. Airline industry recovering says OAG (Asia Pacific Media). Press release, September 21. 

Available online at: http://www.oag.com. 

Reed, Dan. 2008. High-priced fuel scares airlines. USA Today. March 24. 

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http://www.msnbc.msn.com/id/21577295. 

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Shaffer, D. Kirk. 2007. Statement of D. Kirk Shaffer, FAA Associate Administrator for Airports, before 

the House Transportation and Infrastructure Committee, Subcommittee on Aviation, on FAA’s 

Reauthorization Proposal, the Next Generation Air Transportation System Financing Reform Act of 2007. 

March 27. 

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69(190):58943. 

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Transportation Research Board 1951:44-51. 
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 3. Economic Impact Methodology 

and Standards for the Airport Deicing Category 

CHAPTER 3 

ECONOMIC IMPACT METHODOLOGY 

This chapter presents the methodology EPA used to analyze and estimate the economic impacts of an 

effluent guideline on airport deicing operations. The unusual aspect of this effluent guideline is that the 

airport is likely to purchase and install treatment systems or implement best management practices to 

control discharges, but the airlines may pay for a significant proportion of those changes. 

Section 3.1 reviews funding sources available to airports to finance capital improvements, and describes 

how EPA chose to model airport capital finance and annualization of compliance costs. Section 3.2 

presents the methodology EPA used to project economic and financial impacts to airports as a result of 

those compliance costs. Section 3.3 provides the method by which compliance costs incurred by airlines 

are estimated, assesses the baseline financial condition of the airline industry, and presents benchmarks 

for determining if compliance costs passed through from airports to airlines can be considered “small.” 

Finally, Section 3.4 lists cited references. 

3.1 Financing Capital Expenditures and Compliance Cost Annualization 

In this section, EPA discusses how airports might finance capital programs and its implications for the 

annualization of capital costs. Section 3.1.1 reviews alternative means of airport financing of capital 

expenditures, and concludes that, for the purpose of this analysis, the most useful approach is to assume 

airports will use bond financing. Section 3.1.2 provides basic information regarding airport bonds, while 

Section 3.1.3 outlines EPA’s method for estimating the annualized cost of capital expenditures using 

bonds. Section 3.1.4 compares how financial impacts to industry might differ depending on the means 

used to fund capital expenditures. 

3.1.1 Financing Methods for Capital Expenditures 

Projected airport compliance costs are of two distinct types: operating and maintenance (O&M), and 

capital; the proposed effluent limitations guideline (ELG) will result in most affected airports incurring a 

combination of the two. EPA expects that significant capital expenditures are likely to be financed using 

tax-exempt General Airport Revenue Bonds (GARB). According to the Air Transport Association (ATA), 

95 percent of all airport debt issued since 1982 has been in the form of GARB (ATA, 2005a). To issue 

GARB, an airport needs to demonstrate that it has a revenue stream to support payment of interest and 

principal. EPA assumes that the revenue stream would be in the form of increased rates and charges; this 

assumption will be further discussed below. According to the Federal Tax Code, O&M expenses cannot 

be funded through debt financing and would therefore be paid out of current operating income. 

Other funding sources exist for airports, such as Airport Improvement Program (AIP) grants from Federal 

Aviation Administration (FAA), state grants, Passenger Facility Charges (PFC), commercial paper, “payas-you-go” supported by airport rates and charges, or (assuming the capital expenditures are not too large) 

the airport’s capital improvement fund (CIF). However, in addition to the predominance of GARB as a 

means of paying for airport capital expenditures, there are practical reasons for assuming these alternate 

forms of funding are less likely to be utilized. 

The lowest cost alternative for funding capital expenditures is clearly AIP or other grants. However: 

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Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 3. Economic Impact Methodology 

and Standards for the Airport Deicing Category 

• Demand for AIP grants exceeds availability, and airports may already have committed 

anticipated AIP grants well into the future. 

• State and other grants appear to be a relatively small source of capital funding. 

• Switching AIP grants from an existing program to pay for deicing-related capital 

expenditures would require FAA approval, and entail additional work and expense. Also, 

FAA may be reluctant to permit such changes, since many AIP grants are for high priority 

safety and capacity-related projects. 

Although it is more likely that PFCs may be used to fund capital expenditures than AIP grants, it cannot 

be generally assumed that airports will use those either because: 

• PFCs require FAA approval on a project-specific basis, and, like AIP grants, tend to be 

committed well into the future. 

• There is a maximum PFC that an airport may charge ($4.50); as of May 1, 2008, 280 of the 

372 airports (75 percent) approved by FAA to collect PFCs were charging the maximum rate 

(FAA 2008). 

Furthermore, PFCs can be used as the revenue source to support a GARB issue. In such a case, if a capital 

program is economically achievable using rates and charges to support GARB, it should also be 

affordable if the GARB can be supported using PFC revenues. 

One of the primary drawbacks to funding capital expenditures through short-term commercial paper or 

pay-as-you-go is practical. It is more difficult to manage a project with uncertain revenue streams; a bond 

issue smoothes expenditure and revenue streams. In fact, commercial paper may commonly be used in the 

short run to fund a project until it can be rolled into a larger bond issue (Taylor, 2005). Pay-as-you-go has 

the advantage that it does not increase airport debt, and may therefore be used when an airport may be 

close to a debt ceiling or similar constraint that would make it reluctant to issue new debt. 

The primary advantage of using GARB over alternative sources of finance is that because they are a form 

of municipal bond, income to bond holders is tax exempt. This has been estimated to result in effective 

interest rates two percentage points lower than alternative non-tax exempt capital sources to bond issuers 

(CBO 1999). Although airports ostensibly do not pay interest if capital projects can be funded through 

grants instead of issuing bonds, airports do incur an opportunity cost: using an AIP grant to finance 

deicing-related capital expenditures means the AIP grant cannot be used for funding other capital 

programs. Thus, an airport would probably have to fund the other project using GARB or some other 

interest bearing source, or would have to postpone the project. In either case, the airport incurs an 

opportunity cost, which is best represented by the interest rate associated with issuing bonds. 

For these reasons, EPA believes the financing of capital costs associated with the deicing effluent 

guideline is best represented by using a model based on GARB to assess the financial impacts of 

increased capital expenditures on airports. For those airports that choose to use alternative sources, then 

the GARB model still provides a reasonable estimate of the opportunity cost of using these alternative 

sources to finance capital expenditures. 

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and Standards for the Airport Deicing Category 

3.1.2 General Airport Revenue Bonds 

EPA assumes airports will issue tax-exempt, fixed coupon rate serial GARB to fund capital expenditures. 

To issue GARB, airports will incur additional costs associated with: 

• Feasibility consultant 

• Bond counsel 

• Underwriting 

• Bond insurance 

• Rating agency 

These costs can run from 0.5 percent to 3 percent of the total bond issue (Mullins and Kumar, 2006). 

Many bond issuance costs are relatively fixed (e.g., the cost of bond counsel will tend to be relatively 

invariant with respect to the size of the bond issue). If the bond issue is relatively small, these costs may 

compose such a large percentage of the bonds issued that they exceed the interest savings associated with 

the tax-exempt status of GARB. In practice, there tends to be a lower limit to the size of a bond issue, 

although it is not necessarily clear what that limit may be. Some airports do not seriously consider bond 

financing unless they reach a threshold such as $50 million (Taylor, 2005). Other airports, however, have 

issued bonds for relatively small amounts: for example, Greater Rockford issued $1.7 million in General 

Obligation Bonds, and Albany issued $14.5 million in GARB. In addition, airports may combine multiple 

capital projects to make it worthwhile funding them with bonds. Combining multiple projects into a 

single bond issue reduces the relatively fixed issuance costs as a percent of the bond issue. 

Market conditions may result in bonds selling at a discount or premium from their face value. This 

changes the effective interest rate the issuer pays relative to the nominal coupon rate. At the time of the 

initial sale, the issuer may receive more or less than the face value of the bond; because the nominal 

coupon rate is fixed, the issuer pays the same interest on a larger or smaller amount of debt, thus changing 

the effective interest rate. EPA did not attempt to project potential GARB discounts or premiums, and set 

the effective nominal interest rate equal to the nominal coupon rate. The issuer always pays the nominal 

coupon rate regardless of any premium or discount earned on the initial sale, or any changes in value in 

the secondary market. 

Bond issues can be insured against default, and investors are therefore willing to accept a lower interest 

rate on such a bond issue. Thus, the airport can borrow at lower cost if its bonds can be insured 

(essentially, the bond issuer takes on the AAA bond rating of its insurer). However, the issuer would 

weigh the lowered cost of capital achieved through bond insurance against the additional cost of 

purchasing the insurance (Spumberg, 2006). The airport will only insure its bonds if the insurance 

premiums are smaller than the interest savings from the lower coupon rate. EPA will assume bond issues 

are uninsured; the cost of the rule will be lower to the extent that airports will be able to obtain insurance. 

3.1.3 Annualization of Capital Costs using GARB 

EPA calculated the annual principal and interest payments of a bond issue equal to the estimated capital 

costs of collecting and treating ADF-contaminated stormwater. Capital costs were increased by 3 percent 

to account for bond issuance costs. EPA used the nominal coupon rate from the airport’s most recent bond 

issue for this analysis. This was obtained from the airport’s Comprehensive Annual Financial Report 

(CAFR) that EPA collected as part of its survey. If no rate was available for an airport, EPA used the 

median nominal coupon rate from airports for which it was available. Among airports receiving EPA’s 

survey: 

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Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 3. Economic Impact Methodology 

and Standards for the Airport Deicing Category 

• Nominal coupon rates range from 2.04 to 9.37 percent, with a median of 5.25 percent and an 

average of 5.26 percent. 

• Deflating the nominal rates using the average Consumer Price Index (CPI) from 2002 through 

2006 (2.31 percent) results in real rates that range from 0.0 to 6.9 percent, with a median of 

2.87 percent and an average of 2.89 percent. 

The low effective real rates reflect the significance of the tax-exempt nature of GARB. 

The second key decision in modeling the financing of capital expenditures using GARB is the number of 

years until bond maturation. The maximum period for which GARB might be issued is determined by the 

service life of the asset plus 3 years, up to a total of 30 years. EPA analyzed three different technological 

bases for aircraft deicing fluid (ADF) capture: (1) glycol recovery vehicles (GRVs), (2) plug and pump 

(combined with GRVs), and (3) deicing pads (see Section 4, and the Technical Development Document 

for further details). EPA reviewed expected service lives of these technologies, plus additional required 

components, and found: 

• Glycol recovery vehicles (GRVs) have expected service lives of approximately 10 years. 

• Plug and pump technologies have expected service lives of approximately 10 years. 

• Deicing pads have expected service lives of approximately 20 to 30 years. 

Additional major components include: 

• Holding tanks and associated piping have expected service lives of approximately 20 years. 

• Anaerobic fluid bed (AFB) treatment has an expected service life of approximately 20 years. 

• Engineering and monitoring costs associated with updating the Stormwater Pollution 

Prevention Plan (SWPPP) must be performed every 5 years. 

Based on this information, EPA modeled the bond issue by calculating the net present value (NPV) of 

capital expenditures over 20 years, incorporating equipment replacement as necessary. For example, if an 

airport is modeled as purchasing GRV and plug and pump technologies, capital costs are incurred in year 

1 and year 11; if the airport is modeled as installing deicing pads, capital costs are only incurred in year 1. 

In all cases, the NPV of capital costs are annualized over 20 years to allow direct comparison between 

options despite differing service lives. To the extent that the actual service life of deicing pads exceeds 20 

years, annualizing technologies over 20 years will bias the results against deicing pads. That is, after 20 

years the airport will need to replace GRV and plug and pump technologies, but may be able to postpone 

replacement of a the deicing pad for as many as 10 more years. Because of uncertainty concerning the 

service life of deicing pads beyond 20 years, EPA selected a 20 year annualization period. 

In addition to annual debt payments (the annualized NPV of the bond issue), each airport also incurs 

annual O&M costs. Each component specified under an option has O&M costs associated with it in 

addition to its capital cost. Also, certain airports are expected to incur costs annually because of the 

requirement to switch from using urea to the more costly potassium acetate for airfield deicing. An 

airport’s annual O&M costs under each option is therefore the sum of O&M costs for each component 

specified under that option. 

The cost basis for the economic and financial impact analyses described below consists of: 

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Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 3. Economic Impact Methodology 

and Standards for the Airport Deicing Category 

• Annual debt payments estimated as the annualized NPV of capital costs (including 

replacement of capital equipment if necessary), which will be used to determine if the airport 

can continue to service its debt after the proposed rule is promulgated (see Section 3.2.2). 

• Annual operating costs estimated as the sum of the annual O&M costs associated with each 

component specified under an option, which will also be used to determine if the airport can 

continue to service its debt after the proposed rule is promulgated (see Section 3.2.2). 

• Total annualized costs estimated as the sum of annual debt payments plus annual operating 

costs, which will be used to project airport revenues based on the revenue test (see Section 

3.2.1) and potential impacts to airlines if compliance costs are passed through from airports 

(see Section 3.3). 

3.1.4 Comparison of Impacts under GARB, AIP Grants and PFCs 

Should an airport choose to use AIP or PFC funds to finance capital expenditures, impacts will differ 

from expenditures financed through increased rates and charges. The effect of using an AIP grant to pay 

for deicing-related infrastructure improvements would likely be the delay in an alternative project for 

which the AIP grant was originally slated. Thus, there is an opportunity cost, which is measured by the 

cost of capital, but no direct effect on rates and charges, and no compliance costs to be passed on to 

airlines or their passengers. However, as mentioned above, AIP grants tend to be accounted for well into 

the future and it would be highly speculative to assume the FAA would authorize whole-scale changes in 

the use of these grants to meet the requirements of this effluent guideline. EPA will assume AIP grants 

are not available for effluent guideline-related capital projects; if they become available, the cost of the 

proposed regulation should be lower than projected by EPA. 

In the case of PFCs, the availability of funding is not clear cut. Not all airports eligible for PFCs use them, 

and not all airports that use PFCs are at the maximum allowable rate. In some ways funding the project 

through PFCs should not differ substantially from rates and charges. Many airports designate PFCs as the 

dedicated revenue stream to secure GARB. 

Funding capital expenditures with PFCs should result in lower impacts to airports than using rates and 

charges to support GARB. Servicing the debt associated with capital expenditures does not directly enter 

the airport’s rates and charges using PFCs. While costs of the rule might be passed on to airlines and their 

customers whether financed through rates and charges or PFCs, the impacts of the two funding 

mechanisms will differ. If capital improvements are funded through rates and charges, then airlines will 

directly incur increased operating costs, some (or all) of which may be passed through to passengers in 

the form of increased ticket prices. To the extent that passengers react to increased ticket prices by flying 

less, airlines may also incur decreased revenues depending on the price elasticity of demand for travel to 

that airport. 

Should an airport use PFCs to finance capital expenditures, passenger cost of air transportation services 

will increase. PFCs are added directly to ticket prices, collected by the airline, and transferred to the 

airport. Although the PFC charge is listed on the ticket separately from the fare, there is no evidence that 

passengers differentiate the PFC component from the total cost of purchasing the ticket when making 

their travel decisions. Presumably an increase in the total cost of purchasing a ticket attributable to an 

increased PFC will affect their travel decision in the same way as an identical increase in the total cost of 

purchasing a ticket attributable to increased landing fees. In such a case, passenger response, and the 

impact on airline revenues should be identical under both funding mechanisms. However, PFCs do not 

directly increase airline operating costs. 

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Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 3. Economic Impact Methodology 

and Standards for the Airport Deicing Category 

July 2009 3-6

3.2 Economic Impact Analysis of Airports 

As discussed in the Industry Profile, airports are generally non-profit government or quasi-government 

(e.g., port authorities) enterprise funds. Thus, the impact of compliance costs resulting from an effluent 

guideline on airport income is not equivalent to that of a for-profit private sector business, nor can it be 

analyzed in the same manner using the same benchmarks. 

EPA has identified two measures to judge the economic achievability of the proposed rule on affected 

airports: 

• Ratio of annualized compliance costs to operating revenues 

• Debt service coverage ratio 

The number (and/or percent) of entities incurring annualized compliance costs exceeding 1 percent of 

operating revenues is a frequently used standard of judging economic achievability. EPA uses it for small 

business impact analyses, impact analyses where cash flow or net income measures are not available, and 

screening analyses. It is also a measure often used by other agencies for impact analyses. 

3.2.1 Ratio of Annualized Compliance Costs to Operating Revenues 

EPA’s Guidelines for Preparing Economic Analyses (2000b) specifically presents the “revenue test,” that 

is, the ratio of annualized compliance costs to operating revenues, as the relevant method to measure 

impacts of programs that directly affect government and not-for-profit entities. The airports potentially 

affected by this rule are owned directly by the government (e.g., city, county, or state), or by a quasigovernmental not-for-profit port authority.22 Thus, this is an appropriate measure of impacts for airports 

affected by the deicing effluent guideline. 

EPA therefore compared the ratio of total annualized compliance costs (costs) to total operating revenues 

(revenues) for each airport to determine the impact of the selected options on airport revenues. By EPA 

guidance (EPA 2000b),23 when: 

• 0 percent < (estimated annualized compliance costs/revenues) < 1 percent: the option is 

generally considered affordable for the entity. 

• 1 percent < (estimated annualized compliance costs/revenues) < 3 percent: the option may be 

considered affordable if only a few entities are affected and the majority incur costs less than 

one percent of revenues. 

• 3 percent < (estimated annualized compliance costs/revenues): the option is considered to be 

placing a heavy burden on the entity. 

Two issues need to be resolved to apply these guidelines to this proposed rulemaking effort. First, the 

guidance suggests an option is affordable if only a few entities incur costs exceeding 1 percent or 3 

percent of operating revenues. The only relevant guidance EPA found for determining what might be 

 

22 One surveyed airport, Airborne Airpark, is privately owned and is a private use facility; the revenue test would not 

be appropriate for this airport. However, Airborne Airpark is not expected to be affected by the proposed regulation. 23 The EPA guidance cited here was developed from EPA’s small business regulatory flexibility guidance. However, 

in this guidance (i.e., EPA 2000b), the guidelines apply to all affected entities, not just small entities. 
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 3. Economic Impact Methodology 

and Standards for the Airport Deicing Category 

considered an appropriate measure of “a few entities” in this context was its Final Guidance for EPA 

Rulewriters: Regulatory Flexibility Act as amended by the Small Business Regulatory Enforcement 

Fairness Act (2006). This guidance states that it can be presumed there is not a significant impact to a 

substantial number of small entities if fewer than 100 small entities or less than 20 percent of affected 

small entities incur costs exceeding 3 percent of revenues. 

The purpose of the Regulatory Flexibility Act as amended by the Small Business Regulatory Enforcement 

Act (hereafter jointly referred to as RFA) is to prevent the imposition of unnecessary and 

disproportionately burdensome demands upon small entities (EPA 2006). This is because small entities 

are presumed to be more vulnerable to regulatory impacts than larger entities. Therefore, EPA believes 

that (on the basis of its RFA guidance) if a substantial number of small entities would not be significantly 

affected by a proposed rulemaking option, then applying the same standard to large entities, which are 

less vulnerable to economic impacts, demonstrates that a substantial number of large entities are also not 

significantly affected. Thus, for the purpose of this rulemaking effort, EPA has determined: 

• If fewer than 100 entities, or less than 20 percent of affected entities incur compliance costs 

that are less than 3 percent of operating revenues, then the option is considered affordable. 

Second, under the Clean Water Act (CWA), EPA is setting effluent guidelines for airport deicing 

operations based on the best technology available to industry that is economically achievable (CWA 

Section 304(b)(2)). For the purpose of this rulemaking effort, EPA assumes that if an option is 

determined to be affordable on the basis of the revenue test as described above, then the option will also 

be considered “economically achievable.” 

To apply the revenue test to airports, EPA used the sum of 2004 aeronautical and non-aeronautical 

operating revenues reported by airports on FAA Form F-127 (Operating and Financial Summary) as the 

measure of airport operating revenue for this analysis. The estimation of annualized compliance costs was 

described in Section 3.1.3, above, and the Technical Development Document (EPA 2009). 

3.2.2 Debt Service Coverage Ratio 

In order to be able to issue debt in the form of GARB to finance capital expenditures, an airport must 

maintain good financial standing. Indeed, airports operated by quasi- governmental port authorities have 

financial requirements written into the controlling documents that establishing and governing the 

authority. These generally include limitations on the airport’s debt service coverage ratio (DSCR); if the 

DSCR does not remain above a certain threshold, the authority will be default on its debt. Although this 

threshold might vary in general, the applicable standard among airports affected by the rule is that the 

DSCR must remain above 1.25. 

EPA therefore examined the impact of the rule on each affected airport’s DSCR. The DSCR is defined as: 

pre

pre

pre Debt Service

Net Revenues

DSCR =

Analysis of airport financial data presented on FAA Form 127 demonstrated that an airport’s DSCR could 

not, in general, be estimated from this information. Therefore, EPA requested the airport’s current debt 

service coverage ratio, and the net revenues and debt service used to calculate that ratio on the survey. 

EPA also verified that all airports projected as incurring capital costs under the proposed option do use 

bonds to finance capital expenditures. 

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and Standards for the Airport Deicing Category 

EPA estimated post-regulatory DSCR in two ways: assuming 100 percent of costs are passed through to 

airlines in the form of higher rates and charges, and assuming zero percent of costs are passed through to 

airlines. 

Assuming 100 percent cost pass-through, post-regulatory DSCR is calculated as: 

DebtService AnnualizedBond Payment

Net Revenues FeeLandinglIncrementa Revenues OperatinglIncrementa Costs

DSCR

pre

pre

post +

+ − =

Assuming zero cost pass-through, post-regulatory DSCR is calculated as: 

Debt Service AnnualizedBond Payment

Net Revenues OperatinglIncrementa Cost

DSCR

pre

pre

post +

− =

The DSCR threshold that an airport must meet is specified in the statute creating the airport authority, or 

the standard that otherwise applies to the relevant airport owner, such as the county or municipal 

government. For all affected airports for which EPA was able to document the DSCR, the standard is 

1.25. Thus, an airport will be evaluated as impacted if its pre-regulatory DSCR is greater than 1.25 and its 

post-regulatory DSCR is less than 1.25. 

An airport will not necessarily see its financial health significantly weakened if the airport’s postregulatory DSCR falls below the 1.25 threshold. Rates and charges could be raised by a larger amount, 

debt might be restructured, and airports may have opportunities to pay for capital expenditures without 

incurring debt (e.g., “pay-as-you-go” funded through rates and charges or passenger facility charges 

(PFC)). This may help a marginal airport stay within its financial limitations. However, exceeding this 

threshold would constitute a potentially significant financial impact, and the economic achievability of the 

proposed rule might be questionable for that airport. 

3.3 Economic Impact Analysis of Airlines 

EPA measured impacts to airlines by directly comparing estimated airline compliance costs with three 

different airline income measures: operating revenues, operating profit, and net income. In general, 

impacts to income are best measured at the level of operating profits or net income; if expenditures 

consistently exceed revenues, a business will eventually have to close down even when not facing 

compliance costs, and as such would be considered a baseline closure facing no impacts. Thus, there is a 

relatively clear dividing line for determining if compliance costs can or cannot be borne by the airline. 

However, because so many airlines had negative operating profit and/or net income over the years 

analyzed (see Section 2.7.3.2 on barriers to exit), EPA would not be able to project impacts for a large 

percentage of potentially affected airlines. EPA therefore chose to include operating revenues as a third 

measure of income to use in the analysis to get a more complete picture of the impacts of the rule. 

3.3.1 Airline Cost Extrapolation 

All airline costs associated with compliance are operating costs. Costs are expected to be incurred in the 

form of increased rates and charges, and will vary with the airline’s level of operations at that airport. 

These costs reflect the annualized portion of airport capital costs, but airlines do not directly incur capital 

costs in this analysis. 

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Each airline’s compliance costs are directly estimated for each surveyed airport that the airline serves, and 

extrapolated to estimate costs incurred at airports that were not surveyed. EPA assumes airports will 

primarily finance costs incurred in complying with the effluent guidelines through increased landing fees. 

Because landing fees are typically assessed on the rated landed weight of each aircraft, the landing fees 

paid by any single airline at an airport are a function of the type and number of landings by that airline’s 

aircraft at the airport. 

The BTS T-100 database records airport departures by airline and aircraft type. Augmenting these data 

with rated landed weight by aircraft type (in general, obtained from the FAA Aircraft Characteristics 

Database), EPA estimated the total landed weight for each airline providing service at each surveyed 

airport. EPA then allocated compliance costs at each airport based on airline share of total landed weight; 

if an airline accounted for 10 percent of landed weight at an airport, it is assumed to incur 10 percent of 

that airport’s compliance costs. The distribution of projected airline impacts will thus differ from actual 

airline impacts to the extent that airports pass through costs using a different mechanism. Should airports 

increase terminal rents instead of landing fees, for example, the airline impacts will depend on its share of 

total airport terminal rents rather than its share of landed weight. Perhaps more significantly, if an airport 

chooses to fund its capital expenditures solely through PFCs, then capital costs will be borne by passenger 

airlines (indirectly through their impact on the demand for air transportation services) but not cargo-only 

airlines. 

Total airline costs are calculated by summing estimated costs at each airport for all airports served. If an 

airport was selected from a sample stratum rather than selected with certainty (i.e., all large and medium 

hubs, and small hubs with more than 30,000 annual departures), then that airport’s projected compliance 

costs are multiplied by its survey weight before allocating its costs to airlines. EPA allocated costs to 

large and small U.S. certificated carriers, U.S. commuter air carriers, and foreign-flag carriers, but not air 

taxis, general aviation or military aircraft. 

3.3.2 Baseline Air Carrier Financial Condition and the Impact Analysis 

EPA obtained airline operating revenue, operating profit, and net income data from BTS.24 In performing 

economic impact analyses for an ELG, EPA has typically used estimated compliance costs and baseline 

cashflow or net income to perform a “closure” analysis. In such an analysis EPA projects the affected 

entities’ discounted compliance costs and cashflow over the period of analysis; if an entity’s preregulatory discounted cashflow is positive, and its post-regulatory discounted cashflow is negative (i.e., 

projected pre-regulatory discounted cashflow less discounted compliance costs), the entity would be 

projected to close as a result of the effluent guideline. In this context, EPA ideally would analyze each 

airline’s routes, and a “closure” means an airline would stop serving a specific route or airport pair. 

However, this type of analysis is problematic for the airline industry: 

• Airline decision-makers do not generally base service decisions on the finances of a specific 

route or airport, but how that route/airport fits into the airline’s entire route structure; changes 

at one airport may affect the financial viability of other routes and other airports (Holloway, 

2003). 

 

24 Large and small certificated carriers report financial data to BTS using Form 41, Schedules P-11 and P-12. These 

data are publicly available and were downloaded from the BTS website. Commuter airlines report financial data to 

BTS using Form 298C. These data are confidential for three years after the reporting period; EPA obtained these 

data from BTS and is required to maintain confidentiality. Thus, data for commuter air carriers are only reported in 

the aggregate, and not on an airline-specific basis. 
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 3. Economic Impact Methodology 

and Standards for the Airport Deicing Category 

July 2009 3-10

• If the impact of the ELG at a specific airport is large, airlines have alternatives to halting 

service at that airport; they could use smaller aircraft or otherwise reduce service to that 

airport without eliminating it. 

• Airline cost and revenue data are only available at the airline level, not at the level of specific 

routes or airports. 

• As discussed in the Industry Profile (Sections 2.4.2 and 2.7), airline profitability has been 

highly cyclical. When the Preliminary Data Summary was published in 2000 (EPA 2000a), 

the industry was just completing perhaps its most profitable period in its history; when this 

rulemaking commenced, the industry was experiencing some of its worst financial years in its 

history. Projecting air transportation business cycles in any robust manner, especially starting 

from the most recent data points, is highly problematic. 

• Over the period of analysis, from 2004 through 2006, 40 to 50 percent of airlines for which 

EPA obtained financial data reported negative net income (see Table 5-11) and 34 to 47 

percent reported negative operating profit. In addition: 

o 12 of 19 major airlines (those earning more than $1 billion in annual revenues) reported 

negative net income in 2004 and 7 of those major airlines still reported negative net 

income in 2006; 

o the “Big Six” “legacy” carriers, which account for over 60 percent of domestic capacity 

and 50 percent of domestic passengers, earned negative net and operating income in both 

2004 and 2005 (FAA, 2006); four of the “Big Six” operated under Chapter 11 bankruptcy 

protection at some point during some of this period.25

EPA defines a “baseline closure” as an affected business entity for which baseline net income (or 

cashflow) is negative; baseline closures are excluded from an analysis of post-compliance net income (or 

cashflow). Under this definition, if EPA was to employ a closure analysis for the purposes of this ELG 

(which it is not), 12 of 19 major airlines would be considered baseline closures for the purpose of 

comparing compliance costs with income, including some of the most important passenger airlines in the 

U.S.26 

3.3.3 Airline Impacts I: Compliance Costs and Airline Revenues 

For the reasons enumerated in Section 3.3.2, EPA chose not to utilize a traditional “closure” methodology 

to project regulatory impacts to airlines. 

Instead, EPA performed a series of analyses to characterize airline impacts and ability to bear the costs 

associated with the proposed rule. For each year of the 2004 through 2006 time period, EPA compared 

the ratio of airline compliance costs to: 

 

25 The “Big Six” legacy carriers are: American, Continental, Delta, Northwest, United, and US Airways. US 

Airways merged with America West in 2005 (America West acquired US Airways although the airline operates 

under the US Airways name). In 2008, Delta and Northwest announced plans to merge and continue to operate 

under the Delta name. United has explored mergers with Continental and US Airways, although both initiatives 

appear to have fallen through. 

26 In addition,, EPA guidance states that if a discharger is not profitable prior to a regulation, it may not claim 

substantial impacts would occur as a result of the regulation (e.g., EPA’s Interim Economic Guidance for Water 

Quality Standards (1995), cited in EPA 2000b). 
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 3. Economic Impact Methodology 

and Standards for the Airport Deicing Category 

• Operating revenues for all U.S. large certificated, small certificated, and commuter air 

carriers that reported data to BTS. This includes: 

o 129 of 146 (88 percent) U.S. carriers with operations at surveyed airports in 2004, no 

financial data were available for 17 air carriers; 

o 122 of 143 (85 percent) U.S. carriers with operations at surveyed airports in 2005, no 

financial data were available for 21 air carriers; 

o 119 of 139 (86 percent) U.S. carriers with operations at surveyed airports in 2006, no 

financial data were available for 20 air carriers. 

• Operating profit for all U.S. large certificated, small certificated, and commuter air carriers 

that reported data to BTS and for whom operating profit was positive. This includes: 

o 68 of 146 (47 percent) U.S. carriers with operations at surveyed airports in 2004, 61 

carriers reported negative operating profit; 

o 66 of 143 (46 percent) U.S. carriers with operations at surveyed airports in 2005; 56 

carriers reported negative operating profit; 

o 78 of 139 (56 percent) U.S. carriers with operations at surveyed airports in 2006; 41 

carriers reported negative operating profit. 

• Net income for all U.S. large certificated, small certificated, and commuter air carriers that 

reported data to BTS and for whom net income was positive. This includes: 

o 65 of 146 (45 percent) U.S. carriers with operations at surveyed airports in 2004, 64 

carriers reported negative operating profit; 

o 62 of 143 (43 percent) U.S. carriers with operations at surveyed airports in 2005; 60 

carriers reported negative operating profit; 

o 71 of 139 (51 percent) U.S. carriers with operations at surveyed airports in 2006; 48 

carriers reported negative operating profit. 

Because 49 to 55 percent of airlines could not be evaluated under the more stringent operating profit and 

net income metrics, EPA based its evaluation of impacts on operating revenues: 

• 0 percent < (estimated annual compliance costs/operating revenues) < 1 percent: the option is 

generally considered affordable. 

• 1 percent < (estimated annual compliance costs/operating revenues) < 3 percent: the option 

may be considered affordable if only a few entities are affected and the majority incurs costs 

less than one percent of revenues. 

• 3 percent < (estimated annual compliance costs/operating revenues): the option is considered 

to be placing a heavy burden on the entity. 

This essentially applies the same standards to for-profit entities as it does to non-profits organizations and 

government entities (EPA 2000b; EPA 2006): 

• If fewer than 100, or less than 20 percent of affected airlines incur compliance costs that 

exceed 3 percent of operating revenues, then the option is considered affordable. 

For those airlines with positive operating profit and/or positive net income, the analysis can be treated like 

a closure analysis: 

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and Standards for the Airport Deicing Category 

July 2009 3-12

• If estimated annual compliance costs exceed operating profit, or if estimated annual 

compliance costs exceed net income): the option is not affordable; essentially the airline 

would be projected to shutdown as a result of the regulation.27

EPA analyzed projected airline compliance costs relative to operating profit and net income and presents 

the results of the analysis in this EA. However, because of the limitations described above in applying a 

closure analysis to the airline industry, especially in its current baseline financial condition, EPA is not 

basing its determination of economic achievability on this analysis. 

Finally, when interpreting the results of the airline impact analysis, the context of the baseline financial 

condition of the airline industry should be remembered. These results do not measure affordability based 

on a relatively well defined outcome using a clearcut decision criterion, but rather attempt to determine if 

compliance costs are affordable in the sense that they are “small” relative to airline income. 

3.3.4 Airline Impacts II: Compliance Costs and Demand for Air Transportation Services 

The analysis of airline impacts described in the previous section does not account for airlines passing 

through compliance costs to their passengers in the form of higher airfares. As discussed in the Industry 

Profile (Section 2.8.2.2), the ability of airlines to pass through costs incurred attributable to this effluent 

guideline (assuming 100 percent of these costs are passed through from airports to airlines) is unclear. For 

example, fuel comprises about 40 percent of airline operating costs and fuel prices have been rising at an 

average annual rate of 24 percent from 2002 through 2007, yet airlines have been notably unable to 

increase fares in response. 

Because of the large number of routes flown by many airlines, as well as the multiple fares frequently 

offered on those routes, EPA did not attempt to estimate an “average price” for air travel, instead, EPA 

used the same metrics the industry uses to measure capacity, utilization, and revenues: 

• Available seat-miles (ASM) is the industry’s basic measure of capacity (or supply of airline 

transportation services) for passenger service; a single ASM is equal to one passenger seat 

(empty or filled) flown one mile, thus a carrier’s ASM are calculated by multiplying the 

number of seats flown on a route by route distance, then aggregating ASM over all routes 

flown. 

• Revenue passenger miles (RPM) is the industry’s basic measure of production (or the 

quantity of air transportation services sold) for passenger service; a single RPM is equal to 

one revenue-paying passenger carried one mile, thus a carrier’s RPM are calculated by 

multiplying paying passengers by the number of miles each was flown, then summing over 

all passengers flown.28 RPM is not the same as: 

 

27 The analysis of compliance costs relative to operating profit and net income does not account for tax shields on 

compliance costs; these tax shields would lower the burden of the regulation on these airlines but would not 

substantially affect the results of the analysis. 

28 Dividing RPM by ASM results in another commonly reported measure, the airline’s “load factor;” essentially load 

factor measures the percentage of available seats filled by paying customers (weighted by miles flown). 
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 3. Economic Impact Methodology 

and Standards for the Airport Deicing Category 

July 2009 3-13

• Revenue per passenger mile, or yield. An airline’s yield is calculated by dividing total 

passenger revenue by total RPM. This measures revenue earned per RPM flown.29

Similar metrics exist for cargo-only air carriers where the relevant analog to passenger/seat-mile is cargo 

ton-miles. 

EPA accessed BTS Air Carrier Summary Data, Schedule T-1 to obtain ASM, available ton-miles (ATM), 

RPM, and revenue ton-miles (RTM) data for potentially affected airlines. These measure the quantity 

supplied and quantity demanded of air transportation services. Dividing operating revenues by RPM or 

RTM, as appropriate, measures the average unit price customers paid for those services. Thus, these 

measures provide the essential components of a partial equilibrium supply-demand model for each 

affected airline. 

In addition to price and quantity data, EPA requires estimates of the price elasticity of supply and demand 

to project airline impacts using this model framework. Economists use demand elasticities to measure the 

“responsiveness” of consumers’ willingness to purchase a product resulting from a change in that 

product’s price; supply elasticities measure the responsiveness of producers’ willingness to sell the 

product in response to a change in product price. To eliminate ambiguities in interpretation due to units of 

measure, elasticities are measured as the percentage change in quantity demanded (or supplied) resulting 

from a given percentage change in price. Thus elasticities are scalable, and can be transferred from one 

study to another (assuming that underlying supply and demand conditions have not changed so 

dramatically that the market is no longer in the “neighborhood” of the measured elasticity). 

3.3.4.1 Price Elasticity of Demand 

To determine the price elasticity of demand, EPA reviewed two papers (FAA 1995, Button 2005) that 

contained extensive literature reviews of studies of the price elasticity of demand for air transportation. 

Two factors appear to be most significant in determining the price elasticity of demand: the reason for 

travel, and the length of the trip. Although details between studies vary, the price elasticity of demand for 

business travel is generally less elastic than for non-business travel (e.g., vacation travel). That is, there 

will be a relatively small reduction in business travel compared to nonbusiness travel in response to any 

given change in fares. If a business person has to be at a certain location on a certain date, those travel 

plans are less likely to change if fares increase than for an analogous leisure traveler. A person traveling 

for vacation has less need to be at a specific location on a specific date; a vacation traveler might respond 

to fare increases by changing destination, mode of travel, or perhaps even choosing not to travel. Second, 

the price elasticity of demand is less elastic for long trips than short trips. The reason is the availability of 

substitutes; if fares increase, short trips might be feasible by car or train, while those alternatives will be 

considerably less attractive for long trips. 

Econometric studies have estimated price elasticities of demand for air travel ranging from -0.26 (a 10 

percent increase in fare reduces travel by 2.6 percent) for long-haul business travel, to about -4.5 (a 10 

percent increase in fare reduces travel by 45 percent) for short-haul nonbusiness travel (FAA 1995, 

Button 2005). Analysts frequently use values of about -0.9 for business travel, and from -1.5 to -2.0 for 

nonbusiness travel (FAA 1995, Button 2005). With approximately 30 to 40 percent of passenger 

 

29 The next step in analyzing airline operations would be to multiply yield by load factor to measure revenue per 

ASM; this can be directly compared with cost per ASM, and the impact of the proposed rule on the margin between 

cost per ASM and revenue per ASM could be examined. However, as is the case for operating profit, cost per ASM 

exceeds revenue per ASM for many potentially affected airlines, and therefore this additional step does not provide 

analytically useful information. 
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 3. Economic Impact Methodology 

and Standards for the Airport Deicing Category 

enplanements accounted for by business travel, EPA selected an overall price elasticity of demand for air 

transportation services of -1.5; that is, if ticket price increases by 10 percent, the quantity of air travel 

services purchased will decline by 15 percent. This value is especially significant because if the price 

elasticity of demand is smaller than -1.0 (i.e., -1.0 < elasticity < -∞, as is -1.5), then an increase in ticket 

price will not only decrease the number of passengers, but will decrease revenues earned from those 

passengers as well. 

A projected reduction in air travel resulting from the proposed effluent guideline does not incorporate all 

implications of increased air fares. Different transportation modes are composed of different bundles of 

attributes, such as price, convenience, comfort, speed, and safety. Thus, if a traveler changes 

transportation mode in response to an increase in airfares, the bundle of attributes purchased will change. 

Travel by commercial air carrier is perhaps the safest widely-available transportation mode. Therefore, 

switching from air transportation to automobile transportation, for example, will result in increased risk of 

injury or fatality per passenger-mile traveled. Thus, the projected reduction in RPM resulting from 

potential increased air fares may result in increased injuries and fatalities to the extent travelers choose to 

undertake their trip using a different mode. This will be affected by the traveler’s willingness to travel by 

different modes in response to the increased air fare, and the distance traveled. EPA did not evaluate this 

implication of the potential increase in air fares resulting from the ELG. 

3.3.4.2 Price Elasticity of Supply 

The effect of the proposed effluent guideline on the price and quantity of air transportation services sold 

depends not only on the price elasticity of demand, but the price elasticity of supply as well. For the 

purpose of this analysis, EPA chose to assume the price elasticity of supply is infinite, that is, the supply 

curve for air transportation services is a horizontal line when looking at a traditional supply-demand 

graph. This represents a worst case scenario: 100 percent of compliance costs are passed through to 

customers in the form of increased air fares. This assumption results in the largest decrease in RPMs 

purchased by customers, and thus the largest decrease in air carrier revenues resulting from the effluent 

guideline (given that the price elasticity of demand is smaller than -1.0). In this case, average ticket prices 

increase by an amount equal to compliance costs divided by RPM. This covers the costs of compliance, 

but airline income decreases indirectly due to the reduction in airline revenues caused by the decreased 

quantity of air transportation services purchased. 

It can be shown that the analysis described in Section 3.3.3 above is equivalent to the analysis described 

in this section under an alternate assumption that the price elasticity of supply is equal to zero (perfectly 

inelastic), that is, the supply curve for air transportation services is a vertical line when looking at a 

traditional supply-demand graph. This represents a scenario where zero percent of compliance costs are 

passed through to customers in the form of increased air fares. In this case, airline income decreases 

directly by an amount equal to the compliance costs passed through from airports to airlines. There is no 

reduction in airline revenues or quantity of air transportation services purchased. 

Thus, although EPA did not explicitly model the specific price elasticity of supply of air transportation 

services, implicitly EPA modeled bookend scenarios: 100 percent cost pass-through and zero percent cost 

pass-through. The true impacts on the market for air transportation services will fall somewhere between 

these two extreme cases. If the modeling results demonstrate that the impacts of the ELG are “small” 

under both scenarios, then the impacts will also be small using the actual value for the price elasticity of 

supply (if it were known). 

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and Standards for the Airport Deicing Category 

July 2009 3-15

3.3.4.3 Calculation of Impacts 

The price elasticity of demand (εd) is expressed in terms of percentage changes: the percent change in 

quantity demanded divided by the percentage change in price. 

⎟

⎠

⎞ ⎜

⎝

⎛

⎟

⎠

⎞ ⎜

⎝

⎛

−= −=

baseline price

Δ price

baselinequantity demanded

Δquantity demanded

%Δ price

%Δquantity demanded

ε d

Using data on compliance costs, baseline revenue, and baseline RPM, EPA estimated the percentage 

increase in price necessary to cover the compliance costs of the proposed regulation for each airline. The 

measure of each airline’s fares (perhaps more accurately described as “unit price”) used in this analysis is 

“yield,” that is, revenue per RPM. Yield is determined by dividing passenger revenues by total RPM. As 

discussed in Section 3.3.4.2, assuming that supply is perfectly elastic with respect to a change in price is 

equivalent to assuming 100 percent of compliance costs are passed through to customers. Therefore, the 

required change in air fares is calculated by dividing each airline’s total compliance costs by its RPM. 

⎟

⎠

⎞ ⎜

⎝

⎛

⎟

⎠

⎞ ⎜

⎝

⎛

=

RPM

totalrevenues

RPM

total compliancecosts

% Δ price

Because many airlines did not report passenger revenue data separate from total revenue to BTS, EPA 

used total airline revenues for this process instead of passenger revenues to allow for consistent 

estimation. This modification does not affect the estimated reduction in revenues caused by the effluent 

guideline, but does underestimate the reduction in RPM by a small amount.30 

Using the estimated percentage change in price, the price elasticity of demand, and baseline RPM, EPA 

calculated the decrease in quantity of air transportation services demanded resulting from the price 

increase as: 

( ) ( )

- Δ RPM ε ( )( ) %Δ price RPM

or

- Δquantity demanded %Δ price baselinequantity demanded

d ×= ×

ε d ×= ×

since demand for air transportation is measured in terms of RPM. 

EPA then estimated the reduction in each airline’s revenues associated with the decrease in RPM: 

⎟

⎠

⎞ ⎜

⎝

⎛ ×= RPM

totalrevenues Δ -revenues Δ RPM

 

30 For those airlines that provided both total revenue and passenger revenue data, basing the calculation on total 

revenues resulted in an estimated reduction in RPM that was less than 2/100ths of a percent smaller (relative to 

baseline) than the estimate based on passenger revenues alone. 
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 3. Economic Impact Methodology 

and Standards for the Airport Deicing Category 

The final step of this analysis is to project the relative size of the impacts if incurred in the form of lost 

revenue rather than increased costs. The same issues associated with measuring impacts that were listed in 

Section 3.3.2 are equally valid under this scenario. Hence, EPA evaluated impacts using essentially the 

same method: 

• 0 percent < (Δ revenues/operating revenues) < 1 percent: the option is generally considered 

affordable. 

• 1 percent < (Δ revenues/operating revenues) < 3 percent: the option may be considered 

affordable if only a few entities are affected and the majority incurs costs less than one 

percent of revenues. 

• 3 percent < (Δ revenues/operating revenues): the option is not generally considered 

affordable. 

The same analysis was performed for cargo-only airlines based on revenue per RTM instead of yield. 

3.3.4.4 Impact on Reduction in Demand for Air Transportation Services on Airport Revenues 

The airport finance model is based on raising capital through selling bonds. The revenue stream to pay off 

the bonds is through increased landing fees, which are a function of aircraft landed weight. Landed weight 

is determined for each aircraft type, and is not the result of physically weighing each aircraft. Therefore, 

an airport will earn the same revenue from an aircraft carrying 100 passengers as it will if the same 

aircraft type carries 101 passengers. Thus, in this model framework, an increase in ticket prices that 

results in decreased passenger enplanements will affect airline revenue but not airport revenue (although 

there could be a decline in airport concession and other revenues not modeled). 

If the impact of the ELG on passenger demand is large, it is possible that airlines could use smaller 

aircraft to service the airport, and/or reduce service frequency. This would result in a decrease in airport 

revenues, and could also impact PFC revenues used to fund other airport capital projects, if any. 

3.4 References 

ATA. 2005a. Airline Handbook. Chapter 7: Airports. Air Transportation Association. Downloaded from 

www.airlines.org/about/, April 27, 2005. 

ATA. 2005b. Economics: Annual Revenues and Earnings: U.S. Airlines – All Services. Downloaded 

from www.airlines.org/econ/, September 20, 2006. 

ATA. 2005c. 2005 ATA Economic Report. Downloaded from www.airlines.org/econ/, September 20, 

2006. 

Boyd, 2006. Airline Industry Bankruptcies: Facts v. Myths. The Boyd Group. Downloaded from 

www.aviationplanning.com/asrc20, March 29. 

Button, Kenneth. 2005. The taxation of air transportation. Center for Transportation Policy, Operations 

and Logistics, School of Public Policy, George Mason University. April. 

July 2009 3-16
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and Standards for the Airport Deicing Category 

July 2009 3-17

CBO. 1999. Financing Small Commercial-Service Airports: Federal Policies and Options. CBO Paper. 

Congressional Budget Office. April. 

FAA. 2008. Passenger Facility Charge Monthly Reports. May 1. Available online at

http://www.faa.gov/airports_airtraffic/airports/pfc/monthly_reports/ (accessed May 21, 2008). 

FAA. 2006. FAA Aerospace Forecast Fiscal Years 2006-2017. Federal Aviation Administration, Office 

of Policy and Plans. downloaded from www.faa.gov/data_statistics/aviation/aerospace_forecasts/2006-

2017/, September 21. 

FAA. 1995. Report to Congress: Child restraint systems. Volume 1. Federal Aviation Administration, 

May. 

Hill, Phil. 2006. Role of the Feasibility Consultant: Airport Financings. Presentation by Phil G. Hill of 

Ricondo & Associates at the AAAE Airport Finance and Bond Symposium. New York, New York. June 

26-27. 

Holloway, Stephen. 2003. Straight and Level: Practical Airline Economics (2nd ed.). Aldershot: Ashgate 

Publishing. 

Mullins, Crystal, and Deevana Kumar. 2006. Airport Revenue Bond Financing Options. Presentation by 

Crystal Mullins and Deevana Kumar of JPMorgan at the AAAE Airport Finance and Bond Symposium. 

New York, New York. June 26-27. 

Page, Sasha. 2005. Tweaking or Transforming Airport Performance. Presentation by Sasha Page of 

Infrastructure Management Group at the AAAE Rates and Charges Workshop. Washington, DC. 

April 5-6. 

Spumberg, Howard. 2006. Financial Guaranty Insurance. Presentation at the AAAE/JPMorgan Airport 

Finance and Bond Symposium. New York, New York. June 26-27. 

Taylor, Elizabeth. 2005. Meeting with Elizabeth Taylor and Catherine Weatherall of MassPort, and Cal 

Franz, ERG. September 13. 

U.S. EPA. 2009. Technical Development Document for Proposed Effluent Limitation Guidelines and 

Standards for the Airport Deicing Category. EPA-821-R-09-004. 

U.S. EPA. 2006. Final Guidance for EPA Rulewriters: Regulatory Flexibility Act as amended by the 

Small Business Regulatory Enforcement Fairness Act. U.S. Environmental Protection Agency. 

November.

U.S. EPA. 2000a. Preliminary Data Summary: Airport Deicing Operations (Revised). U.S. Environmental 

Protection Agency. EPA-821-R-00-016. 

U.S. EPA. 2000b. Guidelines for Preparing Economic Analyses. U.S. Environmental Protection Agency. 

EPA 240-R-00-003. September. 

Walsh, Tom. 2005. Financial Accounting Framework. Presentation by Tom Walsh of Leigh Fisher 

Associates at the AAAE Rates and Charges Workshop. Washington, DC. April 5-6. 
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 4. Pollution Control Options 

and Standards for the Airport Deicing Category 

CHAPTER 4 

POLLUTION CONTROL OPTIONS 

4.1 Effluent Limitation Guidelines and Standards 

The Federal Water Pollution Control Act (commonly known as the Clean Water Act [CWA, 33 U.S.C. 

§1251 et seq.]) establishes a comprehensive program to “restore and maintain the chemical, physical, and 

biological integrity of the Nation’s waters” (§101(a)). EPA is authorized under sections 301, 304, 306, 

and 307 of the CWA to establish effluent limitation guidelines and pretreatment standards of performance 

for industrial dischargers. The standards EPA establishes include: 

• Best Practicable Control Technology Currently Available (BPT). Required under section 

304(b)(1), these rules apply to existing industrial direct dischargers. EPA establishes BPT 

effluent limitations based on the average of the best performances of facilities within the 

industry, grouped to reflect various ages, sizes, processes, or other common characteristics. 

EPA may promulgate BPT effluent limits for conventional, toxic, and non-conventional 

pollutants. 

• Best Available Technology Economically Achievable (BAT). Required under section 

304(b)(2), these rules apply to existing industrial direct dischargers. BAT represents the 

second level of stringency for controlling direct discharge of toxic and nonconventional 

pollutants. In general, BAT effluent limitation guidelines represent the best economically 

achievable performance of facilities in the industrial subcategory or category. The factors 

considered in assessing BAT include the cost of achieving BAT effluent reductions, the age 

of equipment and facilities involved, the process employed, potential process changes, and 

non-water quality environmental impacts including energy requirements, and such other 

factors as the EPA Administrator deems appropriate. 

• Best Conventional Pollutant Control Technology (BCT). Required under section 304(b)(4), 

these rules apply to existing industrial direct dischargers, and represent an an additional level 

of control, after BPT, for conventional pollutants. BCT limitations must be established in 

light of a two-part “cost-reasonableness” test. 

• Pretreatment Standards for Existing Sources (PSES). Required under section 307. Analogous 

to BAT controls, these rules apply to existing indirect dischargers, whose discharges flow to 

publicly owned treatment works (POTWs). PSES are designed to prevent the discharge of 

pollutants that pass through, interfere with, or are otherwise incompatible with the operation 

of POTWs. 

• New Source Performance Standards (NSPS). Required under section 306(b), these rules 

apply to new source industrial direct dischargers for all pollutants. NSPS reflect effluent 

reductions that are achievable based on the “best available demonstrated control technology.” 

New facilities have the opportunity to install the best and most efficient production processes 

and wastewater treatment technologies. As a result, NSPS should represent the most 

stringent controls attainable through the application of the best available demonstrated control 

technology. 

• Pretreatment Standards for New Sources (PSNS). Required under section 307. Analogous to 

NSPS controls, these rules apply to new source indirect dischargers (whose discharges flow 

July 2009 4-1
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 4. Pollution Control Options 

and Standards for the Airport Deicing Category 

to POTWs). Such pretreatment standards must prevent the discharge of any pollutant into a 

POTW that may interfere with, pass through, or may otherwise be incompatible with the 

POTW. EPA promulgates PSNS based on best available demonstrated technology for new 

sources. 

In this proposed effluent limitation guidelines for the aircraft anti-icing/deicing industry, EPA intends to 

promulgate BAT and NSPS standards. 

4.2 Technology Basis for Deicing Options 

EPA does not mandate technologies when establishing effluent limitation guidelines and pretreatment 

standards. However, EPA evaluates various technology options in order to base the limitations on 

demonstrated technologies and to evaluate the economic impact of the cost of those technologies on the 

regulated industry. If airports and/or airlines can find less costly ways to meet the limits, as they are free 

to do, then the analysis based on these technologies will be an overestimate. This section briefly describes 

the pollution control technologies evaluated for the aircraft anti-icing/deicing effluent guideline. 

Most aircraft deicing fluid (ADF) is applied to aircraft through pressurized spraying systems, either 

mounted on trucks that move around an aircraft, or on large fixed boom devices. Airlines typically 

purchase ADF in concentrated form and dilute it with water prior to spraying. Most applied ADF is Type 

I fluid, which does not adhere to aircraft surfaces. Consequently Type I ADF is available for discharge 

due to dripping, overspraying, tracking and shearing during takeoff. Once the ADF has reached the 

ground, it will then mix with precipitation, as well as other chemicals found in airport stormwater. (These 

chemicals typically include aircraft fuel, lubricants and solvents, and metals from aircraft and utilty 

vehicles.) This wastestream enters an airport’s storm drain system. At many airports, the storm drains 

discharge directly to waters of the United States with no treatment. 

The ADF application process has presented a challenge for airports attempting to manage their deicing 

stormwater streams. The airlines’ process of applying ADF to aircraft through high pressure spraying, 

combined with their typical practices of spraying the aircraft outdoors in multiple large unconfined 

spaces, results in pollutants being dispersed over a wide area and entering storm drains at multiple 

locations. EPA has identified several technologies that are available to collect and manage the ADF 

wastestream, which are described in Sections 4.2.1 through 4.2.3. After collection, the ADF must be 

treated to numeric limits; EPA evaluated anaerobic fluidized bed (AFB) biological treatment as the basis 

for the treatment component of the effluent guideline (Section 4.2.4). More detailed information about the 

collection and treatment technologies described here is contained in the Technical Development 

Document (EPA 2009). 

4.2.1 Glycol Recovery Vehicle 

A glycol recovery vehicle (GRV) is a truck or trailer-based device that utilizes a vacuum mechanism to 

gather stormwater contaminated with ADF resulting from deicing operations. A GRV is a modular 

technology, in that collection capacity can be increased by using additional units, without the 

complicating factors of in-ground construction associated with some other technologies. An airport can 

easily increase its overall ADF collection capacity by purchasing larger and/or additional units. EPA 

estimates that GRVs typically capture approximately 20 percent of the applied ADF. 

July 2009 4-2
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 4. Pollution Control Options 

and Standards for the Airport Deicing Category 

4.2.2 Plug and Pump 

The plug-and-pump collection system involves alterations to an airport's existing storm drain system 

infrastructure in combination with GRVs to contain and collect ADF-contaminated stormwater. Drainage 

system modifications involve the placement of temporary blocking devices at storm drain inlets, and/or 

installation of shutoff valves at one or more points in the storm sewer system. Before a deicing event 

begins, airport personnel activate the blocking devices, which trap the ADF-contaminated stormwater in 

the collection system. After the deicing activity ceases, vacuum trucks pump deicing stormwater from the 

storm sewer system. EPA estimates that plug and pump systems which incorporate GRVs may capture 

approximately 40 percent of the applied ADF. 

4.2.3 Centralized Deicing Pads 

A centralized deicing pad is a facility on an airfield built specifically for aircraft deicing operations. It is 

typically a paved area adjacent to a gate area, taxiway, or runway, and constructed with a drainage system 

separate from the airport's main storm drain system. It is usually constructed of concrete with sealed joints 

to prevent the loss of sprayed ADF through the joints. A pad is specially graded and captures and routes 

highly contaminated runoff to storage ponds or tanks, from which the deicing stormwater can be sent to 

on-site or off-site treatment. Central deicing pads minimize the volume of deicing wastewater by 

restricting deicing to very small areas, and managing the captured wastewater through a dedicated drain 

system. EPA estimates that central deicing pads allow airports to capture about 60 percent of the sprayed 

ADF. 

In developing cost estimates for installing centralized deicing pads, EPA did not impute an opportunity 

cost for the use of airport land taken by the pads. EPA believes that the airports projected to install 

deicing pads to meet a 60 percent capture requirement for ADF will be able to install the pad(s) on their 

current property without purchasing additional land. Furthermore, deicing pads will need to be installed 

within the existing structure of runways, aprons, and taxiways. Because of FAA-mandated restrictions on 

structure heights and clearances, EPA believes airports cannot use those sites for building terminals, cargo 

facilities, maintenance buildings or other structures. Thus these sites have few, if any, alternative uses that 

would create an opportunity cost for using the site to construct a deicing pad. 

EPA acknowledges that airport use of deicing pads increases the complexity of operations during winter 

weather. However, these complexities are not inherently insoluble. Of the 14 airports EPA expects will 

have to meet the 60 percent capture requirement under the selected option (see table below), seven 

already use deicing pads, two have completed installation of pads since the deicing survey was 

administered (Cleveland-Hopkins and Washington Dulles), and one is installing pads for use on at least 

some operations (Chicago-O’Hare). Thus, workable solutions to these operational complexities must be 

available, although EPA has no means of estimating costs associated with this additional complexity. 

Furthermore, EPA believes that as long as deicing pads do not reduce the number of departures per hour 

below the limit caused by the weather itself, then the cost of delays is attributable to the bad weather, not 

the deicing pads. Although some aircraft might be delayed if they lose their spot in the queue, then these 

costs are offset by the benefit to aircraft that move up in the queue (although those aircraft may not be 

owned by the same carrier). Therefore, EPA did not estimate costs for potential delays that might be 

caused by deicing pads. 

July 2009 4-3
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 4. Pollution Control Options 

and Standards for the Airport Deicing Category 

4.2.4 Anaerobic Fluid Bed Biological Treatment 

The AFB treatment system uses a vertical, cylindrical tank in which the ADF-contaminated stormwater is 

pumped upwards through a bed of granular activated carbon at a velocity sufficient to fluidize, or 

suspend, the media. A thin film of microorganisms grows and coats each granular activated carbon 

particle, providing a vast surface area for biological growth. The anaerobic microorganisms that develop 

occur naturally in sediment, peat bogs, cattle intestines, and even brewer's yeast. These microorganisms 

provide treatment of the ADF-contaminated stormwater. AFB treatment system by-products include 

methane, carbon dioxide, and new biomass. Effluent from the AFB can be discharged to a local publicly 

owned treatment works (POTW) or, in most cases, directly to surface water. EPA selected AFB biological 

treatment for further evaluation since it represents the best technology currently in use by airports to treat 

deicing stormwater prior to direct discharge. 

4.3 Analyzed Options 

For the purpose of analyzing effluent guideline options, EPA chose different technology bases to apply to 

different sizes of in-scope airports. Thus, to analyze option 3, for example, a very large airport might be 

costed for installing a centralized deicing pad, but a smaller airport expected to achieve a lower capture 

rate might be costed for GRVs. Table 4-1 summarizes the technology options considered for each 

industry subcategory. The first column indicates the option number that appears in the cost and impact 

tables in the following chapters. The second column contains the airport subcategory definition; the third 

column describes the goal of the option; and the last column provides a description of the technology 

considered. 

July 2009 4-4
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 4. Pollution Control Options 

and Standards for the Airport Deicing Category 

July 2009 4-5

Table 4-1. BAT Options for Primary Commercial Service Airports with more than 1,000 Annual 

Jet Departures 

BAT Option Airport Criteria Option Description Technology 

1 < 10,000 departures Discontinue urea usage Product substitution 

> 10,000 departures Capture 20% ADF, 

treat to numeric limit; 

discontinue urea usage 

Glycol Recovery Vehicles; 

AFB Biological Treatment; 

Product substitution 

2 < 10,000 departures Discontinue urea usage Product substitution 

> 10,000 departures Capture 40% ADF, 

treat to numeric limit; 

discontinue urea usage 

Glycol Recovery Vehicles; 

Block & Pump; 

AFB Biological Treatment; 

Product substitution 

< 10,000 departures Discontinue urea usage Product substitution 

> 10,000 departures, 

< 460k gallons of ADF 

Capture 20% ADF, 

treat to numeric limit; 

discontinue urea usage 

Glycol Recovery Vehicles; 

AFB Biological Treatment; 

Product substitution 

3 

> 10,000 departures, 

> 460k gallons of ADF 

Capture 60% ADF, 

treat to numeric limit; 

discontinue urea usage 

Deicing Pads; 

AFB Biological Treatment; 

Product substitution 

< 460k gallons of ADF Capture 20% ADF, 

treat to numeric limit; 

discontinue urea usage 

Glycol Recovery Vehicles; 

AFB Biological Treatment; 

Product substitution 

4 

> 460k gallons of ADF Capture 60% ADF, 

treat to numeric limit; 

discontinue urea usage 

Deicing Pads; 

AFB Biological Treatment; 

Product substitution 

4.4 References 

U.S. EPA. 2009. Technical Development Document for Proposed Effluent Limitation Guidelines and 

Standards for the Airport Deicing Category. EPA-821-R-09-004. 
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

July 2009 5-1

CHAPTER 5 

ECONOMIC IMPACT ANALYSIS RESULTS 

This section presents the projected economic impacts resulting from the costs of complying with the 

proposed effluent limitation guidelines (ELG) for aircraft anti-icing/deicing operations. The impacts are 

estimated using the methodology outlined in Sections 3. 

Section 5.1 presents the national costs for the options described in Section 4. Section 5.2 presents 

estimated impacts on airports, while Section 5.3 outlines the estimated impacts on airlines. Although 

airports will directly incur the costs of the rule, it is likely that many of the compliance costs will be 

passed through to airlines in the form of higher rates and charges, hence the need to evaluate potential 

impacts to both sectors. Section 5.4 presents impacts on the air transportation market. Just as airports 

might pass through costs to airlines, airlines might pass those costs through to their customers in the form 

of increased fares. Higher fares will affect the demand for air transportation services, hence the need to 

evaluate impacts to air transportation markets. Finally, Section 5.5 summarizes the impacts under the 

proposed rule. A more detailed analysis of impacts on small business entities within the industry is 

presented in Section 6. 

5.1 National Compliance Costs 

Capital costs were annualized using each airport’s nominal bond rate for its most recent General Airport 

Bond (GARB) issue. This was converted to a real rate using an average annual inflation rate of 2.3 

percent over the last 5 years. The median nominal discount rate for costed airports was 5.25 percent 

(range: 2.04 to 9.37 percent), which is equivalent to 2.87 percent (range: 0.0 to 6.9 percent) after 

accounting for inflation. Costs were annualized over 20 years. 

Included in this analysis are 114 airports, weighted to represent 218 commercial service airports in the 

U.S. that both exceed 1,000 jet departures annually and perform deicing. This includes 8 Alaskan airports 

within the scope of this rule.1

 

Table 5-1 presents projected costs for all options examined under this rulemaking effort; EPA selected 

Option 3 as its proposed option. EPA projects that under Option 3, affected airports will incur $701.7 

million in (unannualized) present value of capital costs over the 20 year analytic period using the 

technologies described in Section 4. The net present value of capital costs is presented to allow a fair 

comparison between technologies such as glycol recovery vehicles (GRV) and plug and pump that will 

require replacement within the 20 year analytic period and deicing pads, which are expected to last at 

least 20 years before replacement or resurfacing. 

Assuming that airports will use the Option 3 technologies to meet the effluent limitations (see Chapter 4 

and TDD), which EPA is proposing to industry as the best available technologies (BAT), the annual 

operating and maintenance (O&M) costs are estimated at $45.9 million for a total annualized cost of 

$91.3 million (2006 dollars). This figure for the cost of Option 3 technologies includes the cost of using 

potassium acetate instead of urea to deice airfields. Seventy of 218 in-scope airports are expected to incur 

costs under this proposal. 

 

1

 The eight in-scope Alaskan airports were individually selected for analysis rather than selected through random 

sampling, and therefore were assigned survey weights of 1.0. 
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

Option 2, primarily composed of airports required to meet the 40 percent aircraft deicing fluid (ADF) 

capture and treatment rate, is the most expensive option despite capital costs that are 40 percent smaller 

than Option 3. This is due to the high annual O&M costs of running plug and pump technologies. 

Table 5-1. Estimated Option Costs for In-scope Airports (millions, 2006 dollars)a

Option 

Airports 

Incurring Costs 

Present Value of 

Capital Costsb

Annualized 

Capital Costsb

Annual O&M 

Costs 

Total Annualized 

Costs 

1 67 $299.5 $19.2 $17.1 $36.4 

2 75 $435.2 $28.0 $82.1 $110.1 

3 70 $701.7 $45.4 $45.9 $91.3 

4 121 $848.7 $54.9 $50.0 $105.0 

a

 An estimated 218 airports are in-scope. 

b

 Cost estimates and annualization calculations performed assuming a 20-year time horizon. 

5.2 Airport Impacts 

This section presents projected impacts of the proposed ADF effluent guidelines on potentially affected 

airports in three ways. First, EPA reviews the distribution of costs incurred by airports; these results are 

summarized in Section 5.2.1. Second, EPA examined the ratio of compliance costs to operating revenues 

(the “revenue” test) to determine the relative impact of the proposed rule on airport operating income. The 

results of this test are presented in Section 5.2.2. Third, because EPA expects that many, if not most, 

airports will finance capital expenditures resulting from the proposed rule through the issuance of General 

Airport Revenue Bonds (GARBs), EPA analyzed the potential impact of the rule on each airport’s debt 

service coverage ratio to determine if the rule would affect the ability of airports to use debt financing. 

This analysis is described in Section 5.2.3. 

5.2.1 Distribution of Projected Compliance Costs 

Table 5-2 presents a summary of estimated annualized cost for airports in-scope for the airport deicing 

effluent guideline. Of the 218 airports expected to be in-scope, 68 to 122 are projected to incur costs 

under the examined options, with 71 (33 percent) projected to incur costs under the proposed Option 3. 

Although average annualized compliance costs per airport under Option 3 are $1.3 million (for those 

airports that incur costs), three-fourths of these airports are projected to incur average annualized costs 

less than $772,000 (3rd Quartile), and half of them are projected to incur annualized costs less than 

$215,000. 

July 2009 5-2
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

July 2009 5-3

Table 5-2. Summary Cost Statistics for In-scope Airports 

Number of In-scope 

Airports (218) Compliance Cost Statistics (thousands, 2006 dollars) 

Option 

Costs 

 = $0 

Costs 

> $0 Average Max 

75th

Percentile Median 

25th

Percentile Mina

1 150 68 $538 $5,296 $631 $103 $39.6 $1.1 

2 142 76 $1,445 $10,611 $1,836 $338 $40.5 $1.1 

3 147 71 $1,290 $18,649 $772 $214 $40.5 $1.1 

4 96 122 $860 $18,649 $462 $207 $92.7 $1.1 

a

 All airports in the lowest cost quartile are projected to only incur costs associated with replacing urea with 

potassium acetate, hence the projected compliance costs for these airports are identical under all four options. 

Table 5-3 presents a list of all airports projected to incur annualized compliance costs in the highest cost 

quartile under each option. The table includes the airport weight, which is a necessary component of the 

analysis resulting from the statistical survey methodology. EPA took a sample of small hub and nonhub 

airports for the survey. Because their selection was through a sample of all relevant airports, the selected 

airports represent not only themselves, but also other airports with similar characteristics (i.e., hub status 

and SOFP days) that did not receive a survey. The number of airports represented by each of the 

surveyed airports is characterized by a survey weight greater than 1.0. EPA took a census of all large and 

medium hub airports, therefore these airports all have a weight of 1.0; that is, they represent themselves 

but no other airport. For the purpose of this analysis, the weight is applied to the impacts resulting from 

the compliance costs. Thus, the entry in Table 5-3, Option 1, for Fort Wayne International (FWA; last 

row of Option 1), shows that EPA projects 1.968 airports represented by Fort Wayne International will 

incur annualized compliance costs of $771,950 under that option. 

5.2.2 Revenue Test Analysis 

EPA compared the ratio of total annualized compliance costs (costs) to total operating revenues 

(revenues) for each airport to determine the impact of the selected options on airport revenues. Table 5-4 

presents the results of this analysis for all in-scope airports. As discussed in more detail in Section 3.2.1, 

EPA selected the following benchmark to determine the economic achievability of the proposed option: 

• If fewer than 100, or less than 20 percent of affected airports incur compliance costs that 

exceed 3 percent of operating revenues, then the option is considered affordable. 

As shown in Table 5-4, under most options the majority of airports incur compliance costs that are less 

than one percent of total operating revenues. Under the proposed option, 80 percent of in-scope airports 

are projected to incur costs less than 1 percent of revenues, while 11 airports (5 percent) are projected to 

incur costs exceeding 3 percent of revenues. Under Option 4, however, approximately 26 percent of all 

affected airports incur compliance costs greater than 3 percent of total operating revenues. 
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 5. Econom

and Standards for the Airport Deicing Category 

Table 5-3. Airports in Top Quartile of Projected Compliance Costs

Airport ID Airport City State 

Hub 

Status 

Survey 

Weigh

Option 1EWR Newark Liberty Intl Newark NJ L 1.000 BOS General Edward Lawrence Logan Intl Boston MA L 1.000 JFK John F Kennedy Intl New York NY L 1.000 LGA La Guardia New York NY L 1.000 MEM Memphis Intl Memphis TN M 1.000 CLT Charlotte/Douglas Intl Charlotte NC L 1.000 CMH Port Columbus Intl Columbus OH M 1.000 GSO Piedmont Triad International Greensboro NC S 1.000 RDU Raleigh-Durham Intl Raleigh/Durham NC M 1.000 ANC Ted Stevens Anchorage Intl Anchorage AK M 1.000 MHT Manchester Manchester NH M 1.000 SLC Salt Lake City Intl Salt Lake City UT L 1.000 SAT San Antonio Intl San Antonio TX M 1.000 JNU Juneau Intl Juneau AK S 1.000 FWA Fort Wayne International Fort Wayne IN N 1.968 Option 2EWR Newark Liberty Intl Newark NJ L 1.000 JFK John F Kennedy Intl New York NY L 1.000 GSO Piedmont Triad International Greensboro NC S 1.000 BOS General Edward Lawrence Logan Intl Boston MA L 1.000 LGA La Guardia New York NY L 1.000 ABQ Albuquerque Intl Sunport Albuquerque NM M 1.000 SAT San Antonio Intl San Antonio TX M 1.000 RDU Raleigh-Durham Intl Raleigh/Durham NC M 1.000 CMH Port Columbus Intl Columbus OH M 1.000 MEM Memphis Intl Memphis TN M 1.000 ROA Roanoke Regional/Woodrum Field Roanoke VA N 2.192 FWA Fort Wayne International Fort Wayne IN N 1.968 PDX Portland Intl Portland OR M 1.000 CLT Charlotte/Douglas Intl Charlotte NC L 1.000 JNU Juneau Intl Juneau AK S 1.000 OKC Will Rogers World Oklahoma City OK S 1.000 

July 2009 5-4
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 5. Econom

and Standards for the Airport Deicing Category July 2009 5-5

Table 5-3. Airports in Top Quartile of Projected Compliance Costs

Airport ID Airport City State 

Hub 

Status 

Survey 

Weigh

ORF Norfolk Intl Norfolk VA M 1.000 MHT Manchester Manchester NH M 1.000 OMA Eppley Airfield Omaha NE M 1.000 TOL Toledo Express Toledo OH N 2.092 XNA Northwest Arkansas Rgnl Fayetteville/Springdale AR S 1.880 RNO Reno/Tahoe International Reno NV M 1.000 Option 3 IAD Washington Dulles International Washington DC L 1.000 ORD Chicago O'Hare Intl Chicago IL L 1.000 EWR Newark Liberty Intl Newark NJ L 1.000 BOS General Edward Lawrence Logan Intl Boston MA L 1.000 LGA La Guardia New York NY L 1.000 JFK John F Kennedy Intl New York NY L 1.000 CLE Cleveland-Hopkins Intl Cleveland OH M 1.000 MEM Memphis Intl Memphis TN M 1.000 CLT Charlotte/Douglas Intl Charlotte NC L 1.000 CMH Port Columbus Intl Columbus OH M 1.000 GSO Piedmont Triad International Greensboro NC S 1.000 RDU Raleigh-Durham Intl Raleigh/Durham NC M 1.000 ANC Ted Stevens Anchorage Intl Anchorage AK M 1.000 MHT Manchester Manchester NH M 1.000 SLC Salt Lake City Intl Salt Lake City UT L 1.000 SAT San Antonio Intl San Antonio TX M 1.000 JNU Juneau Intl Juneau AK S 1.000 Option 4 IAD Washington Dulles International Washington DC L 1.000 ORD Chicago O'Hare Intl Chicago IL L 1.000 EWR Newark Liberty Intl Newark NJ L 1.000 BOS General Edward Lawrence Logan Intl Boston MA L 1.000 LGA La Guardia New York NY L 1.000 JFK John F Kennedy Intl New York NY L 1.000 CLE Cleveland-Hopkins Intl Cleveland OH M 1.000 MEM Memphis Intl Memphis TN M 1.000 
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 5. Econom

and Standards for the Airport Deicing Category July 2009 5-6

Table 5-3. Airports in Top Quartile of Projected Compliance Costs

Airport ID Airport City State 

Hub 

Status 

Survey 

Weigh

CLT Charlotte/Douglas Intl Charlotte NC L 1.000 CMH Port Columbus Intl Columbus OH M 1.000 GSO Piedmont Triad International Greensboro NC S 1.000 RDU Raleigh-Durham Intl Raleigh/Durham NC M 1.000 ANC Ted Stevens Anchorage Intl Anchorage AK M 1.000 MHT Manchester Manchester NH M 1.000 SLC Salt Lake City Intl Salt Lake City UT L 1.000 SAT San Antonio Intl San Antonio TX M 1.000 JNU Juneau Intl Juneau AK S 1.000 FWA Fort Wayne International Fort Wayne IN N 1.968 ROA Roanoke Regional/Woodrum Field Roanoke VA N 2.192 OMA Eppley Airfield Omaha NE M 1.000 OKC Will Rogers World Oklahoma City OK S 1.000 FCA Glacier Park Intl Kalispell MT N 3.141 RAP Rapid City Regional Rapid City SD N 3.108 
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

Table 5-4. Compliance Costs as Percent of Operating Revenues, In-scope Airports 

Number of Airports with Ratio of Compliance Costs 

to Operating Revenues:a

Option 

Total 

Annualized 

Costs (millions 

of 2006 

dollars) 

Total 

Airports in 

Scope 

Less than or 

equal to 1% 

Greater than 1%, 

but less than or 

equal to 3% 

Greater 

than 3% 

Number 178 27 9 

1 

% 

$36.4 

81.9% 12.5% 4.2% 

Number 165 30 20 

2 

% 

$110.1 

75.6% 13.8% 9.2% 

Number 174 29 11 

3 

% 

$91.3 

80.1% 13.4% 5.1% 

Number 130 25 58 

4 

% 

$105.0 

218 

59.7% 11.4% 26.6% 

a

 Financial impacts to 3 airports under Options 1 – 3, and 5 airports under Option 4 could not be analyzed because 

compliance costs are greater than $0 but data on operating revenues are not available. All 5 airports are owned by 

the Alaska Department of Transportation and Public Facilities Rural Aviation System, which does not charge user 

fees nor does it maintain airport-specific revenue data. 

Table 5-5 presents, for each option, all airports projected to incur annualized compliance costs greater 

than 3 percent of airport operating revenues. In this table, the survey weight indicates that, for example, 

1.968 airports represented by Fort Wayne International are projected to incur annualized compliance costs 

that compose 6.82 percent of operating revenues. 

5.2.3 Debt Service Coverage Ratio Analysis 

EPA analyzed the impact of the proposed options on the ability of the airport owner to service the 

incurred debt under EPA’s assumption that airports will finance capital projects by issuing GARBs. 

Among the estimated 218 in-scope airports, there are several multi-airport authorities that own more than 

one potentially affected airport. For these multi-airport authorities, debt is issued at the ownership level, 

not at the airport level. In these cases, EPA estimated the potential debt incurred by all airports owned by 

that authority. Table 5-6 presents the multi-airport authorities that own airports surveyed by EPA, and 

their airports. 

July 2009 5-7
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 5. Econom

and Standards for the Airport Deicing Category Table 5-5. Airports with Projected Annualized Costs Exceeding 3 Percent of Operating Revenues

Airport ID Airport City State 

Hub 

Status 

Survey 

Weight 

Unweig

Annua

Option 

(2006 do

Option 1JNU Juneau Intl Juneau AK S 1.000 $802,2ROA Roanoke Regional/Woodrum Field Roanoke VA N 2.192 $621,4FWA Fort Wayne International Fort Wayne IN N 1.968 $771,9GSO Piedmont Triad International Greensboro NC S 1.000 $1,329XNA Northwest Arkansas Rgnl Fayetteville/Springdale AR S 1.880 $350,5FAI Fairbanks Intl Fairbanks AK S 1.000 $254,4Option 2JNU Juneau Intl Juneau AK S 1.000 $2,202ROA Roanoke Regional/Woodrum Field Roanoke VA N 2.192 $3,680GSO Piedmont Triad International Greensboro NC S 1.000 $7,869FWA Fort Wayne International Fort Wayne IN N 1.968 $2,624TOL Toledo Express Toledo OH N 2.092 $1,314XNA Northwest Arkansas Rgnl Fayetteville/Springdale AR S 1.880 $1,203ABQ Albuquerque Intl Sunport Albuquerque NM M 1.000 $5,763SAT San Antonio Intl San Antonio TX M 1.000 $4,803CMH Port Columbus Intl Columbus OH M 1.000 $3,772ORF Norfolk Intl Norfolk VA M 1.000 $1,799RDU Raleigh-Durham Intl Raleigh/Durham NC M 1.000 $4,084OMA Eppley Airfield Omaha NE M 1.000 $1,466OKC Will Rogers World Oklahoma City OK S 1.000 $2,201MEM Memphis Intl Memphis TN M 1.000 $3,771MHT Manchester Manchester NH M 1.000 $1,494FAI Fairbanks Intl Fairbanks AK S 1.000 $254,4Option 3JNU Juneau Intl Juneau AK S 1.000 $802,2ROA Roanoke Regional/Woodrum Field Roanoke VA N 2.192 $621,4FWA Fort Wayne International Fort Wayne IN N 1.968 $771,9IAD Washington Dulles International Washington DC L 1.000 $18,648GSO Piedmont Triad International Greensboro NC S 1.000 $1,329XNA Northwest Arkansas Rgnl Fayetteville/Springdale AR S 1.880 $350,5ORD Chicago O'Hare Intl Chicago IL L 1.000 $16,875FAI Fairbanks Intl Fairbanks AK S 1.000 $254,4July 2009 5-8
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 5. Econom

and Standards for the Airport Deicing Category July 2009 5-9Table 5-5. Airports with Projected Annualized Costs Exceeding 3 Percent of Operating Revenues

Airport ID Airport City State 

Hub 

Status 

Survey 

Weight 

Unweig

Annua

Option 

(2006 do

Option 4JNU Juneau Intl Juneau AK S 1.000 $802,2FCA Glacier Park Intl Kalispell MT N 3.141 $491,0CWA Central Wisconsin Mosinee WI N 3.016 $390,7HVN Tweed-New Haven New Haven CT N 5.029 $115,2RAP Rapid City Regional Rapid City SD N 3.108 $462,3AVP Wilkes-Barre/Scranton Intl Wilkes-Barre/Scranton PA N 2.682 $376,HTS Tri-State/Milton J. Ferguson Field Huntington WV N 8.089 $184,4ROA Roanoke Regional/Woodrum Field Roanoke VA N 2.192 $621,4ATW Outagamie County Regional Appleton WI N 2.484 $461,4FWA Fort Wayne International Fort Wayne IN N 1.968 $771,9EVV Evansville Regional Evansville IN N 5.104 $297,5BIS Bismarck Muni Bismarck ND N 3.868 $199,5IAD Washington Dulles International Washington DC L 1.000 $18,648ILM Wilmington Intl Wilmington NC N 6.039 $311,2GSO Piedmont Triad International Greensboro NC S 1.000 $1,329LCK Rickenbacker International Columbus OH N 4.366 $197,XNA Northwest Arkansas Rgnl Fayetteville/Springdale AR S 1.880 $350,5ORD Chicago O'Hare Intl Chicago IL L 1.000 $16,875FAI Fairbanks Intl Fairbanks AK S 1.000 $254,4
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

Table 5-6. Multi-Airport Authorities 

Owner Name Airports Owned 

City of Chicago Chicago O’Harea

Chicago Midwaya

City of Houston William P Hobbya

George Bush Intercontinentala

Columbus Regional Airport Authority Port Columbus Internationala

Rickenbacker Internationala

County of Sacramentob Sacramento Internationala

Sacramento Mather 

Hawaii State Airports Divisionb Lanai 

Kahului 

Honolulu International 

Kona International at Keahole 

Metro Washington Airport Authority Washington Dulles Internationala

Ronald Reagan Washington Nationala

Port Authority of NY and NJ Newark Liberty Internationala

John F Kennedy Internationala

La Guardiaa

Stewart Internationala

State of Alaska Airport System Ted Stevens Anchorage Internationala

Fairbanks Internationala

State of Alaska Rural Aviationb Bethela

Ketchikan Internationala

Sitka, Rocky Gutierreza, c

Nomea

Ralph Wien Memoriala

Aniak 

Deadhorse 

Cold Bay 

Wiley Post-Will Rogers Memorial 

Wayne County Airport Authority Detroit Metropolitan Wayne Countya

Willow Run a

 Airport EPA has estimated will be in-scope of the proposed regulation.

b

 Additional airports are owned by this authority but are not included in the list because they were not 

surveyed and EPA determined they are unlikely to be in-scope of the proposed regulation. c

 Sitka, Rocky Gutierrez Airport did not receive an EPA survey, but based on publicly available data 

EPA believes it will be in-scope and analyzed it based on data for other Alaskan airports. 

EPA presents the results of the DSCR analysis separately for multi airport authorities (Table 5-7) and 

single airport owners (Table 5-8). EPA found that of the 10 multi-airport authorities responsible for 31 

airports shown in Table 5-6, 9 authorities accounted for 21 airports that are in-scope of the proposed rule. 

All results for multiple airport authorities are unweighted because each airport was individually identified 

and therefore does not represent any other airports but itself with respect to ownership. EPA aggregated 

projected costs for all in-scope airports under that ownership and analyzed them using the owning 

organization’s debt service coverage ratio obtained from its Comprehensive Annual Financial Report. The 

remaining 93 (unweighted) in-scope airports (representing 193 airports) were evaluated individually as 

single-owner airports. For single airport owners, the survey weights cannot be considered statistically 

reliable because the survey was not stratified on the basis of ownership. 

July 2009 5-10
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

July 2009 5-11

Because the airport survey was not stratified by airport ownership, EPA cannot present summary results 

encompassing the 218 airports determined to be in-scope of this rule. That is, EPA cannot use the survey 

weights to present on a basis completely consistent with the estimated 218 in-scope airports: (1) the 

number of airports operated by single-airport owners, (2) the number of multi-airport systems, (3) the 

number of airports operated by those multi-airport systems, and (4) the number of airports that are 

impacted by the rule. For example, EPA identified both the surveyed airports that belong to multi-airport 

systems and the total number of airports (and the identity of those airports) belonging to those same 

systems. Comparing the surveyed airports with the airports known to be owned by the system 

demonstrates that the survey weights are not entirely representative of multi-airport ownership patterns.1

However, because of the large number of single airport operators, and the relatively small number of 

multi-airport authorities, EPA believes the weighted airport results presented in the lower half of Table 5-

8 are generally reflective of the relative frequency of single airport ownership. In addition, the combined 

results of the unweighted multi-airport authority analysis and the weighted results for the single airport 

owners are broadly representative of impacts under this analysis. 

Table 5-7 presents the results of the debt service coverage ratio (DSCR) analysis for multi-airport 

authorities potentially affected by the airport deicing effluent guideline. A standard DSCR threshold is 

1.25; that is, revenues available for debt service must be at least 125 percent of debt service, or the airport 

owner will be in default on its debt.2

 Therefore, if an airport or multi-airport authority had a preregulatory DSCR greater than or equal to 1.25, but a post-regulatory DSCR less than 1.25, EPA projects 

that the airport or airport authority will be significantly impacted by the regulation. At a minimum, EPA 

expects the airport’s bond rating would be downgraded, making it more difficult for the airport to use debt 

financing in the future and requiring payment of higher interest rates. The DSCR analysis was performed 

alternately under the following assumptions: (1) 100 percent of compliance costs will be passed through 

to airlines in the form of higher rates and charges (which will still affect the owner’s DSCR by increasing 

debt service requirements but not net revenues, see Section 3.2.2); (2) 50 percent of compliance costs will 

be passed through to airlines; and (3) worst-case scenario, no compliance costs will be passed through to 

airlines. 

 

1

 For example, the Port Authority of NY and NJ owns four in-scope airports: LaGuardia, John F. Kennedy 

International, Newark Liberty International (each of which has a survey weight of 1.0), and Stewart International 

(with a survey weight of 2.9). Clearly the Port Authority does not own the 2.9 airports represented by Stewart, it 

only owns Stewart International. However, it cannot be determined if the additional 1.9 airports represented by 

Stewart are owned by multi-airport authorities or single airport operators. 2

 As recently as June 2003, Forbes (2003) documented that no airport has defaulted on a bond issue; EPA has found 

no reports of airport bond defaults since that date. Thus it is difficult to determine what will happen if an airport 

defaults on a bond issue. Default on municipal bonds is rare; unlike corporations, municipalities in default 

(including public authorities) are almost never liquidated, defaulted municipal bonds have high recovery rates, and 

most bond issuer resume debt payments (see, for example, Moody’s 2002; Public Bonds 2004). The most likely 

result of default appears to be that the airport would receive lower ratings on future bond issues, making it more 

difficult to sell debt and requiring higher interest rates. 
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

Table 5-7. Projected Impacts to Debt Service Coverage Ratio of Multi-Airport Authorities 

Incurring Costs for Various Cost Pass-Through Assumptions (unweighted)

Number of Authorities with 

Pre-Regulatory DSCR > 1.25 and 

Post-Regulatory DSCR <1.25 

Option 

MultiAirport 

Authorities 

Incurring 

Costsa

Airports 

Incurring 

Costsa

Authorities 

Incurring 

Costs that 

Cannot be 

Analyzedb

Airports 

Incurring 

Costs that 

Cannot be 

Analyzeda 100% CPTc 50% CPTc 0%CPTc

1 5 11 1 3 0 0 0 

2 5 11 1 3 0 0 0 

3 6 13 1 3 0 0 0 

4 6 16 1 5 0 0 0 a

 A total of 9 multi-airport authorities own 21 airports that are in-scope of the rule. These columns present the 

number of authorities and airports that are projected to incur costs under the proposed rule.

b

 One multi-airport authority, the Alaska Department of Transportation and Public Facilities Rural Aviation System, 

which owns 5 airports projected to incur costs under the proposed option, could not be analyzed. 

c 100% CPT: 100 percent of airport compliance costs are passed through to airlines in the form of higher rates and 

charges; 50% CPT: 50 percent of airport compliance costs are passed through to airlines; 0% CPT: no costs are 

passed through to airlines. 

Table 5-8 presents the projected impact of the rule on the ability of the owners of single airports to 

finance their debt. Assuming zero cost pass-through to air carriers, two airports (unweighted, three 

airports using survey weights) are projected to incur costs that would result in their post-regulatory DSCR 

falling below the threshold that indicates default under the proposed Option 3. However, one of these 

airports (Memphis International; MSCAA 2007) completed installation of a deicing pad after the survey 

was submitted, and therefore would presumably incur lower than projected compliance costs. Under the 

proposed regulation, no single airport owners are projected to be in danger of default assuming 100 

percent of compliance costs are passed through to airline customers. 

Table 5-8. Projected Impacts to Debt Service Coverage Ratio of Single Airport Owners Incurring 

Costs for Various Cost Pass-Through Assumptions

Owners with Pre-Regulatory DSCR > 1.25 & 

Post Regulatory DSCR < 1.25 

Option 

Airports 

Incurring Costsa

Airports 

Incurring Costs 

Not Analyzed 100% CPT 50% CPT 0% CPT 

Unweighted 

1 29 3 0 1 2 

2 34 3 1 3 5 

3 30 3 0 1 2 

4 39 10 0 1 2 

Weighted 

1 54 6 0 1 3 

2 62 6 1 4 7 

3 55 6 0 1 3 

4 99 42 0 1 3 a

 93 surveyed single-owner airports are in-scope with weights representing 192 airports. Survey weights are not 

statistically reliable for determining number of single airport owners; however, EPA believes the weights 

generally reflect the relative frequency of potentially affected single airport owners. 

July 2009 5-12
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

5.2.4 Impacts on Alaskan Airports 

EPA determined that the impact of projected compliance costs on airports in the state of Alaska should be 

analyzed separately due to the unique nature of the airport system in the State. The State of Alaska owns 

and operates two separate airport systems: the International Airport System (IAS) and the Rural Airport 

System (RAS). 

5.2.4.1 Impacts on the Alaska International Airport System 

The IAS consists of Ted Stevens Anchorage International Airport and Fairbanks International Airport. 

The IAS is considered a separate major enterprise fund of the State of Alaska, and is considered to be a 

self-sufficient component of the State government. The IAS issues its own debt in the form of revenue 

bonds. In short, the IAS operates as many other government-run airports in the United States. 

Table 5-9 shows the impact of projected compliance costs on the two airports of the Alaska IAS. Under 

the proposed option, total projected compliance costs for the Alaska IAS are $1.2 million, or 1.29 percent 

of total annualized compliance costs for the option. Ted Stevens Anchorage International Airport incurs 

projected compliance costs that are 1.11 percent of its total operating revenues, while Fairbanks 

International Airport incurs projected compliance costs that are 3.14 percent of total operating revenues. 

Table 5-9. Impacts on the Alaska International Airport System (IAS)

IAS Airports with Ratio of Compliance 

Costs to Total Operating Revenues: 

Option 

Total Annualized 

Option Costs 

(millions of 2006 

dollars) 

IAS Total 

Annualized Option 

Costs (millions of 

2006 dollars) 

IAS Costs 

as % of 

Total 

Less than 

or equal 

to 1% 

Greater than 1%, 

but less than or 

equal to 3% 

Greater 

than 3% 

1 $36.4 $1.2 3.23% 0 1 1 

2 $110.1 $1.2 1.07% 0 1 1 

3 $91.3 $1.2 1.29% 0 1 1 

4 $105.0 $1.2 1.12% 0 1 1 

5.2.4.2 Impacts on the Alaska Rural Airport System 

The RAS consists of 256 rural airports scattered throughout the State (State of Alaska 2008). The RAS is 

not a self-sufficient government unit, and the rural airports lose money every year. However, due to the 

nature of transportation in the State of Alaska, it is vital that these airports remain in operation despite not 

being profitable. Operation of airports within the RAS falls on the Alaska Department of Transportation 

and Public Facilities (DOT&PF), as well as on local or tribal governments. According to the DOT&PF, 

airports in AK “are funded through a combination of user fees, state, local, or tribal funds, and federal 

funds” (DOTPF 2008). However, the rural airports have very limited opportunities for generating 

revenue, and the system is largely reliant on state subsidies to pay O&M costs at these airports. 

Table 5-10 presents the impact of projected compliance costs on five rural airports in the Alaska RAS that 

EPA determined would be affected by the proposed rule (Bethel, Ketchikan International, Sitka Rocky 

Gutierrez, Nome, and Ralph Wien Memorial). Because data on the revenues of individual airports within 

the RAS could not be obtained, EPA used the estimated yearly contribution of $23 to $24 million by the 

State of Alaska to cover the operating costs of the RAS (Maggard 2008). Under the proposed option, 

projected compliance costs for the five RAS airports together total $1.4 million (1.54 percent of total 

option costs). The RAS is expected to incur compliance costs representing 6.25 percent of the State’s 

July 2009 5-13
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

July 2009 5-14

contribution to airport operations.3

 EPA has concluded that it is likely that the state of Alaska would be 

required to increase its subsidy to the RAS to pay for the required capital improvements under its current 

system of funding. 

Table 5-10. Impacts on the Alaska Rural Airport System (RAS) 

Ratio of Compliance Costs to State 

Operating Costs of RAS Airports: 

Option 

Total Annualized 

Option Costs 

(millions of 2006 

dollars) 

RAS Total 

Annualized 

Option Costs 

(millions of 2006 

dollars) 

RAS Costs 

as % of 

Total 

Less than or 

equal to 1% 

Greater than 

1%, but less 

than or equal 

to 3% 

Greater than 

3%a

1 $36.4 $1.4 3.85% 0 0 3 

2 $110.1 $4.3 3.87% 0 0 3 

3 $91.3 $1.4 1.54% 0 0 3 

4 $105.0 $1.5 1.43% 0 0 5 a

 Represents the number of airports projected to incur costs under the specified option; however, the RAS as a whole 

will incur compliance costs exceeding 3 percent of system operating costs. 

5.3 Airline Impacts 

To project compliance costs potentially passed through to airlines, EPA estimated total landed weight of 

commercial service airlines at each surveyed airport, and the percentage of landed weight at that airport 

accounted for by each airline serving it. Assuming landing fees per thousand pounds landed weight 

increase by the same amount for all aircraft and airline types serving that airport, then compliance costs 

incurred by airlines at each airport will be in proportion to their percentage of landed weight at that 

airport. For the purposes of the analysis presented in this section, EPA assumes 100 percent of annualized 

compliance costs are passed through to airlines from airports in the form of higher landing fees, as 

opposed to other possibilities such as terminal fees. Increased costs passed through landing fees result in 

airlines incurring costs proportionate to their percent of total landed weight at an airport. 

EPA calculated total annual compliance costs incurred by each airline by summing its airport-specific 

capital and O&M costs over all affected airports served4

. EPA then evaluated impacts by calculating the 

ratio of each airline’s total annual compliance costs to three income measures: operating revenues; 

operating profit (equal to operating revenues less operating expenditures); and net income. Because the 

years since 2001 have been financially difficult for the airline industry, many airlines earned negative 

operating profits and negative net income for much of the period. The ratios of compliance costs to 

operating profit and net income are meaningless statistics when profit or net income is negative. Thus, 

EPA does not present those results and the number of airlines analyzed declines for each successive 

income measure examined. 

 

3

 The fiscal year 2006 budget for the entire Alaska Department of Transportation and Public Facilities was $407.2 

million (State of Alaska 2005). 

4

 For this analysis, EPA scaled O&M costs from 2004 based on changes in landed weight at each airport in 2005 and 

2006. This change resulted in minor changes in total compliance costs calculations, as well as minor changes to the 

numbers of affected airlines (based on ratio of compliance costs to revenues). The only change in overall impacts 

was under Option 2 in 2006, where the scaled costs resulted in one airline changing from being impacted at the one 

to three percent level to being impacted at the less than one percent level. 
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

The airline revenue data presented in this analysis are for the 2004 through 2006 period. When EPA 

initiated this rulemaking, the industry appeared to be returning to a sound financial footing from the 

negative effects of September 11, 2001, the SARS epidemic, and the war in Iraq (see Section 2.4). Thus, 

2004 and 2005 appeared to be abnormally poor financial years for the industry, while the financial data 

for 2006 seemed more representative of what might reasonably be expected in the future. However, the 

dramatic increase in fuel costs in 2008 has once again worsened the overall financial picture for the 

industry. Thus, the results based on 2006 financial data might be optimistic for some airlines, although the 

results of the analysis are broadly consistent with those for 2004 and 2005, which were financially 

substantially worse years for the industry. 

Table 5-11 and 5-12 present air carrier financial data for the three-year span from 2004 through 2006. 

Overall, the data show that 2006 was the most financially successful year in recent history, which is 

corroborated by the Air Transportation Association (ATA) in their annual industry reports. Table 5-11 

shows the number of potentially affected air carriers with negative operating profits and net income from 

2004 to 2006. Over those three years, the number of airlines with negative operating profits and negative 

net income declined among most air carrier types. Some of this reduction may be attributable to 

financially weak airlines ceasing operations or merging with other airlines (e.g., the US Airways merger 

with America West in 2005), as the total number of airlines also declined during this time period. 

Table 5-11. Number of Airlines with Negative Profits and Income 

Number of Airlines with 

Financial Data 

Number of Airlines with 

Negative Operating Profit 

Number of Airlines with 

Negative Net Income 

Air Carrier Type 2004 2005 2006 2004 2005 2006 2004 2005 2006 

Major 19 20 20 9 9 3 12 10 7 

National 33 33 33 11 11 11 13 11 12 

Regional 21 18 18 9 10 7 9 10 7 

Medium Regional 9 11 10 5 7 7 4 8 7 

Commuter 29 27 29 15 11 8 15 13 9 

Small Certified 18 13 9 12 8 5 11 8 6 

TOTAL 129 122 119 61 56 41 64 60 48 

Table 5-12 provides average airline financial data by carrier type for the same three-year span. In general, 

the data show an overall improvement in all three measures – operating revenues, operating profit and net 

income – from 2004 to 2006, although average net income across the industry remained negative. 

July 2009 5-15
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

Table 5-12. Average Financial Data for Potentially Affected Air Carriers, 2004-2006 (in millions)a

Average Operating Revenues Average Operating Profit Average Net Income 

Air Carrier Type 2004 2005 2006 2004 2005 2006 2004 2005 2006 

Major $6,365.4 $6,792.1 $7,458.2 -$98.9 -$2.9 $347.7 -$477.5 -$1,345.7 -$241.1

National $411.9 $457.1 $451.5 $15.1 $18.2 $19.5 $0.6 -$7.7 $9.2

Regional $52.1 $57.2 $59.7 $1.1 $1.2 $1.2 $0.9 $0.6 $0.4

Medium Regional $10.5 $12.3 $21.3 -$2.1 -$5.7 -$11.9 -$2.1 -$5.8 -$11.9

Commuter $16.8 $14.9 $20.4 -$0.2 -$0.4 $0.7 $0.0 $0.2 $0.5

Small Certified $42.5 $65.7 $104.0 -$5.36 -$2.9 $0.02 -$1.9 -$3.0 -$0.4

a

 Averages for airlines with financial data available. 

EPA evaluated economic impacts on airlines using essentially the same test and impact thresholds as it 

did for airports (see Section 5.2.2). However, the test for airlines differs in that it compares the operating 

revenue of for-profit businesses with compliance costs, instead of revenues of non-profit government 

enterprises, with compliance costs. 

In addition, although compliance costs might represent a small percentage of operating revenues, this 

does not determine financial affordability when either an airline’s operating profits or net income is 

negative. The question is: what level of compliance costs is affordable if an entity is losing money? That 

is not a question that can be answered using standard tests of economic achievability. 

Table 5-13 presents the ratio of compliance costs to revenues for the 129 air carriers with 2004 financial 

data available out of the 146 domestic air carriers that operated from potentially affected airports in 2004. 

Under Option 3, which EPA is proposing to adopt, 128 of 129 air carriers reporting financial data are 

projected to incur compliance costs less than 1 percent of revenues under the proposed option; one air 

carrier is projected to incur annual compliance costs exceeding 3 percent of revenues. 

Table 5-13. Ratio of Compliance Costs to Air Carrier Operating Revenue, 2004 Financial Data 

Number of Air Carriers with Ratio of Compliance Costs 

to Operating Revenue:a 

Option 

Total Compliance 

Costs ($2004, in 

millions) 

Domestic Air

Carriers 

Operating at 

Potentially 

Affected 

Airportsa

Less than or 

equal to 1% 

Greater than 1%, 

but less than or 

equal to 3% 

Greater 

than 3% 

Number 128 0 1 1 

%b $33.4 

87.7% 0.0% 0.7% 

Number 114 14 1 2 

%b $101.1 

78.1% 9.6% 0.7% 

Number 128 0 1 3 

%b $83.9 

87.7% 0.0% 0.7% 

Number 128 0 1 4 

%b $96.0 

146 

87.7% 0.0% 0.7% a

 Analysis excludes 17 air carriers (11.6 percent) due to lack of financial data. 

b

 Percentages based on 146 potentially affected air carriers.

July 2009 5-16
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

Table 5-14 presents the same analysis using 2005 financial data. Of the 122 existing air carriers reporting 

data (out of 143 with operations at in-scope airports), 120 are projected to incur compliance costs less 

than 1 percent of revenues under the proposed Option 3; one air carrier is projected to incur annual 

compliance costs exceeding 1 percent, but less than 3 percent of revenues; and one air carrier is projected 

to incur annual compliance costs exceeding 3 percent of revenues. 

Table 5-14. Ratio of Compliance Costs to Air Carrier Operating Revenue, 2005 Financial Data 

Number of Air Carriers with Ratio of Compliance Costs 

to Operating Revenue:a 

Option 

Total 

Compliance 

Costs ($2005, 

in millions)b 

Domestic Air

Carriers 

Operating at 

Potentially 

Affected 

Airportsa

Less than or 

equal to 1% 

Greater than 1%, 

 but less than or 

 equal to 3% 

Greater 

than 3% 

Number 120 1 1 1 

%c $36.6 83.9% 0.7% 0.7% 

Number 109 11 2 2 

%c $110.7 76.2% 7.7% 1.4% 

Number 120 1 1 3 %c $92.0 83.9% 0.7% 0.7% 

Number 120 1 1 4 

%c $105.7

143 

83.9% 0.7% 0.7% a

 Analysis excludes 21 air carriers (14.7 percent) due to lack of financial data. 

b Total compliance costs may differ from other analyses due to the fact that EPA scaled airline O&M costs to 

reflect changes in landed weight from 2004. 

c

 Percentages based on 143 potentially affected air carriers.

Table 5-15 presents the ratio of compliance costs to revenues for 119 air carriers with 2006 financial data 

available of the 139 air carriers that operated from in-scope airports in 2006. Under the proposed 

Option 3, 118 of 119 air carriers are projected to incur compliance costs less than 1 percent of revenues 

under the proposed option; one air carrier is projected to incur annual compliance costs exceeding 1 

percent, but less than 3 percent of revenues. 

July 2009 5-17
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

Table 5-15. Ratio of Compliance Costs to Air Carrier Operating Revenue, 2006 Financial Data 

Number of Air Carriers with Ratio of Compliance Costs 

to Operating Revenue:a

Option 

Total 

Compliance 

Costs 

($2006, in 

millions)b 

Domestic Air

Carriers 

Operating at 

Potentially 

Affected 

Airportsa

Less than or equal 

to 1% 

Greater than 1%, 

but less than or 

equal to 3% 

Greater 

than 3% 

Number 118 1 0 1 

%c $36.1 84.9% 0.7% 0.0% 

Number 107 11 1 2 

%c $108.5 76.9% 7.9% 0.7% 

Number 118 1 0 3 %c $90.1 84.9% 0.7% 0.0% 

Number 118 1 0 4 

%c $103.2 

139 

84.9% 0.7% 0.0% a

 Analysis excludes 20 air carriers (14.4 percent) due to lack of financial data. 

b Total compliance costs may differ from other analyses due to the fact that EPA scaled airline O&M costs to 

reflect changes in landed weight from 2004. 

c

 Percentages based on 139 potentially affected air carriers. 

Table 5-16 shows that of the 119 air carriers for which 2006 financial data are available, 41 reported 

negative operating profits and 48 reported negative net income. The average operating profit and income 

shown in the table are only for those carriers with positive income. Thus, of 139 potentially affected air 

carriers, 119 were assessed for impacts based on the ratio of compliance costs to revenues (the “sales 

test,” Table 5-11, above); 20 air carriers could not be analyzed using the sales test due to lack of financial 

data. Of the 119 air carriers that can be analyzed, EPA was able to assess impacts for 78 using the ratio of 

compliance costs to operating profit. Finally, for 71 air carriers EPA was able to assess impacts using the 

ratio of compliance costs to net income. 

July 2009 5-18
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

July 2009 5-19

Table 5-16. Air Carriers with Positive Operating Profits and Net Incomes; 2006 Financial Data 

and Airline Type

Air Carrier Operating Profit Air Carrier Net Income 

Air Carrier 

Type 

Domestic 

Air 

Carriers 

Operating 

at 

Potentially 

Affected 

Airportsa

Number with 

Negative 

Operating 

Profit

Number 

Analyzed

Average 

Operating 

Profit 

(millions)b

Number 

with 

Negative 

Net Income 

Number 

Analyzed 

Average Net 

Income 

(millions) b

Major 20 3 17 $419.0 7 13 $339.8 

National 33 11 22 $39.1 12 21 $27.1 

Regional 21 7 11 $5.4 7 11 $3.9 

Medium 

Regional 10 7 3 ND 7 3 ND 

Commuter 32 8 21 $1.6 9 20 $1.3 

Small 

Certified 23 5 4 ND 6 3 ND 

Total 139 41 78 NA 48 71 NA 

ND = Not Disclosed. Due to low number of observations, these figures are not disclosed to protect confidentiality. 

NA: Not Applicable. 

a

 Financial data are not available for 3 regional, 3 commuter, and 14 small certificated air carriers. 

b

 Average for carriers with positive, and thus analyzable, values.

Table 5-17 presents the ratio of compliance costs to operating profit for those air carriers with financial 

data available and positive operating profit in 2006. This analysis provides greater perspective on impacts 

for that subset of air carriers with positive operating profits. Of those 78 airlines with positive operating 

profit in 2006, 40 incur compliance costs less than 1 percent of operating profits and 21 incur compliance 

costs greater than 3 percent of operating profits under the proposed Option 3. One regional carrier is 

projected to incur compliance costs exceeding 100 percent of operating profit. This carrier’s projected 

costs composed 1.59 percent of operating revenues, but its operating profit in 2006 was about $200,000, 

hence the significant impact under the more stringent analysis.5

 If EPA were performing a closure 

analysis, this air carrier might have been projected to close as a result of the proposed rule.6

 For six other 

airlines, comprising: one major airline; one national airline; and four commuter airlines, projected 

compliance costs exceed 10 percent of operating profits under Option 3. For three commuter airlines, 

projected compliance costs ranged between 25 percent and 75 percent of operating profit, while the major 

airline, Delta, was projected to incur costs of about 19 percent of operating profit. None of these six 

airlines incurred compliance costs exceeding 1 percent of revenues. To maintain perspective, none of 

these airlines would have been projected to close as a result of the proposed rule. 

 

5

 This carrier filed for bankruptcy in October 2007 and, according to some reports, has since ceased operations 

(Logistics Management 2007). 

6

 A complete closure analysis would require reconciliation of operating profit with cashflow and/or net income, and 

would also account for tax shields that would reduce the compliance costs incurred by the airline. Thus, although 

the results in Table 5-15 can be considered a reasonable proxy for a closure analysis, there are significant differences 

that might affect the outcome. Furthermore, a closure analysis is rarely performed on a single year’s data, and, as 

was pointed out in Section 2.7.3.2, air carriers have sometimes been able to operate under bankruptcy protection for 

several years and return to financial health. 
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

Table 5-17. Ratio of Compliance Costs to Air Carrier Operating Profit, 2006 Financial Data

Number of Air Carriers with Ratio of Compliance Costs 

to Operating Profit:a

Option 

Total 

Compliance 

Costs 

($2006, in 

millions)b 

Domestic Air

Carriers 

Operating at 

Potentially 

Affected 

Airportsa Less than or 

equal to 1% 

Greater 

than 1%, 

but less than 

or equal to 

3% 

Greater 

than 3%, 

but less than 

or equal to 

100% 

Greater 

than 100% 

Number 52 10 15 1 1 % $36.1 37.4% 7.2% 10.8% 0.7% 

Number 31 21 24 2 2 % $108.5 22.3% 15.1% 17.3% 1.4% 

Number 40 17 20 1 3 % $90.1 28.8% 12.2% 14.4% 0.7% 

Number 34 21 22 1 4 % $103.2 

139 

24.5% 15.1% 15.8% 0.7% a

 Analysis excludes 20 air carriers due to lack of financial data and 41 carriers with negative operating profit in 

2006. 

b Total compliance costs may differ from other analyses due to the fact that EPA scaled airline O&M costs to 

reflect changes in landed weight from 2004.

Table 5-18 presents the ratio of compliance costs to net income for air carriers with 2006 financial data 

available. Of those 71 airlines with positive net income in 2006, 36 incur compliance costs less than less 

than 1 percent, and 24 incur compliance costs exceeding 3 percent of net income under the proposed 

Option 3. Nine airlines are projected to incur costs exceeding 10 percent of net income under Option 3. 

Of those, one regional carrier (see footnote 2) and one commuter carrier are projected to incur costs 

exceeding 100 percent of 2006 net income. One major air carrier, American Eagle, is projected to incur 

compliance costs composing about 50 percent of net income. Only one of these nine airlines incurred 

costs exceeding 1 percent of operating revenues. 

July 2009 5-20
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

Table 5-18. Ratio of Compliance Costs to Air Carrier Net Income, 2006 Financial Data

Number of Air Carriers with Ratio of Compliance Costs 

to Net Income:a

Option 

Total 

Compliance 

Costs 

($2006, in 

millions)b 

Domestic Air

Carriers 

Operating at 

Potentially 

Affected 

Airportsa Less than or 

equal to 1% 

Greater than 

1%, but less 

than or 

equal to 3% 

Greater than 

3%, but less 

than or 

equal to 

100% 

Greater than 

100% 

Number 43 10 16 2 1 

% $36.1 30.9% 7.2% 11.5% 1.4% 

Number 26 15 26 4 2 

% $108.5 18.7% 10.8% 18.7% 2.8% 

Number 36 11 22 2 3 

% $90.1 25.9% 7.9% 15.8% 1.4% 

Number 32 10 27 2 4 

% $103.2 

139 

23.0% 7.2% 19.4% 1.4% a

 Analysis excludes 20 air carriers due to lack of financial data, 41 carriers with negative operating profit and 7 

carriers with negative net income in 2006. 

b Total compliance costs may differ from other analyses due to the fact that EPA scaled airline O&M costs to 

reflect changes in landed weight from 2004. 

Table 5-19 demonstrates that the majority of compliance costs are borne by the 119 airlines for which 

financial data are available. The 20 domestic carriers that could not be analyzed due to lack of financial 

data are projected to incur less than 2 percent of compliance costs. Under the proposed option 3, 12 

percent of compliance costs are projected to be passed through to foreign flag air carriers. This is because 

major east coast international airports such as Boston-Logan, New York-John F. Kennedy, NewarkLiberty, and Washington DC-Dulles International airports are all projected to incur substantial costs under 

the proposed option, as is Chicago-O’Hare. 

Table 5-19. Compliance Costs Incurred by Air Carriers Without 2006 Financial Data and 

International Air Carriers 

Domestic Carriers 

with Financial Data 

Domestic Carriers without 

Financial Data International Carriers 

Option Number 

Compliance 

Costs 

($2006, in 

millions) Number 

Compliance 

Costs 

($2006, in 

millions) 

Cost as % of 

Total Option 

Cost Number

Compliance 

Costs 

($2006, in 

millions) 

Cost as % of 

Total Option 

Cost 

1 $32.8 $0.25 0.7% $3.0 8.4% 

2 $100.4 $0.76 0.7% $7.3 6.8% 

3 $77.9 $1.2 1.3% $10.9 12.1% 

4 

119 

$91.0 

20 

$1.3 1.3% 

143 

$10.9 10.6% 

Table 5-20 presents, by air carrier type, the number of airlines, average revenues, and average compliance 

costs per airline for the 119 air carriers with 2006 financial data and the 20 potentially affected air carriers 

without 2006 financial data. These data demonstrate that, as a group, the air carriers that cannot be 

analyzed due to missing financial data are not expected to incur disproportionate compliance costs. 

However, without company-specific financial data, it cannot be demonstrated that none of these air 

carriers are significantly affected by the proposed rule. 

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Table 5-20. Air Carrier 2006 Financial Data and Average Estimated Annual Compliance Costs 

Average Compliance Costs by Option 

(2006 dollars) 

Air Carrier Type 

Domestic Air 

Carriers 

Operating at 

Potentially 

Affected 

Airports 

Air 

Carriers 

Analyzed 

Average 

Revenues 

(millions) Option1 Option 2 Option 3 Option 4 

Air Carriers with 2006 Financial Data 

Major 20 20 $7,458.2 $1,293,275 $3,802,212 $3,248,378 $3,591,639

National 33 33 $451.5 $126,957 $461,968 $280,649 $421,230

Regional 21 18 $59.7 $69,525 $253,113 $92,379 $94,986

Medium Regional 10 10 $21.3 $2,781 $11,841 $4,622 $7,684

Commuter 32 29 $20.3 $24,832 $68,554 $25,722 $33,750

Small Certified 23 9 $104.0 $83,243 $276,889 $139,499 $276,718

Air Carriers without 2006 Financial Data

Regional 21 3 NA $63,112 $196,654 $361,296 $361,523

Commuter 32 3 NA $2,088 $4,698 $2,088 $6,181

Small Certified 23 14 NA $3,679 $10,994 $8,006 $13,427

NA: Not Applicable. 

In these estimates of potential airline compliance costs, EPA used a number of very conservative 

assumptions for each impact an airline might experience. It is unlikely that all of these assumptions and 

impacts would occur together to affect any one airline. Thus, the true level of impacts for a particular 

airline will be significantly less than described in the preceding tables. 

5.4 Market Impacts 

EPA also projected impacts to airlines should airlines pass through 100 percent of costs to passengers. As 

discussed in the methodology (Section 3), this analysis is equivalent to a market analysis assuming the 

supply of air transportation services is completely elastic (i.e., the supply curve is horizontal on a 

traditional supply-demand graph), and the price elasticity of demand is set equal to -1.5 (i.e., a 10 percent 

increase in price will cause a 15 percent reduction in quantity demanded).7

 The analysis presented in 

Section 5.3 is equivalent to zero percent cost pass-through. That is, the supply of air transportation 

services is completely inelastic (i.e., the supply curve is vertical on a traditional supply-demand graph), 

and the price elasticity of demand is set equal to -1.5 (i.e., a 10 percent increase in price will cause a 15 

percent reduction in quantity demanded). 

The impacts under zero percent cost pass-through cause no reduction in demand or increase in air fare 

(and thus revenues), but directly increase airline operating costs by an amount equal to compliance costs. 

Under the 100 percent cost pass-through assumption, the increase in unit compliance costs is exactly 

 

7

 EPA selected the best available point estimate of the price elasticity of demand for this analysis. If instead, the 

price elasticity of demand lies between -1.0 and -1.5, projected revenue impacts to air carriers will be smaller than 

those presented in Table 5-18 and 5-19; if the price elasticity of demand lies between -1.5 and -∞, projected revenue 

impacts will be larger. 
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

July 2009 5-23

offset by an increase in unit price. However, the increased fare causes passengers to reduce purchases of 

air transportation services; thus the impacts are incurred through the loss in revenue from reduced sales.8

 

The analysis was performed on an airline specific basis, using each carrier’s 2006 revenue passengermiles (RPM; or revenue ton-miles (RTM) for cargo-only airlines) as the quantity of air transportation 

demanded, and using yield (revenue per RPM or RTM) as the price. The analysis was performed on the 

subset of airlines for which EPA had 2006 data for: airline revenues, RPM or RTM, and were projected to 

incur compliance costs. Table 5-21 presents the reduction in revenues and RPM (or RTM) resulting from 

the passed-through costs, and the number of airlines for which these lost revenues exceed 1 percent and 

three percent of baseline revenues. The estimated compliance costs under the zero cost pass-through 

assumption are also included for comparative purposes. 

Assuming 100 percent cost pass-through will cause a larger impact in lost revenues than direct impacts 

through increased costs under the assumption that supply is perfectly elastic. Lost revenues are 50 percent 

larger than direct costs. However, the larger impacts projected using this method do not substantially 

increase the number of airlines incurring impacts larger than 1 percent of revenues. Under the proposed 

option 105 airlines (96 percent) are projected to incur impacts less than 1 percent of revenues, and 4 

airlines are projected to incur impacts exceeding 1 percent, but less than 3 percent of revenues. In 

addition, the projected decrease in the quantity of air transportation services purchased is less than 0.1 

percent of baseline quantity. 

 

8

 EPA did not estimate the reduction in operating costs associated with the reduction in RPMs flown. Because this 

reduction could be composed of fewer seats sold on each departure with no decrease in departures, the operating 

cost reduction would be smaller than the average cost per available seat mile. Thus, these results overestimate 

impacts, but by an unknown amount. 
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

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Table 5-21. Impacts to Air Carrier Revenues and Revenue Miles Assuming 100 Percent Cost PassThrough, 2006 

Estimated Option 

Impacts Incurred by 

Analyzed Air Carriers 

($1,000s) 

Unit Production Impacts 

(millions)a

Number of Air Carriers with 

Ratio of Option Impact Costs 

to Operating Revenue:b

Option 

Number of 

Analyzed 

Domestic Air 

Carriers 

Operating at 

Potentially 

Affected 

Airportsa 0% CPT 100% CPT Baseline Reduction 

Percent 

Reduction

Less than 

or equal 

to 1% 

Greater 

than 1%, 

but less 

than or 

equal to 

3% 

Greater 

than 3% 

Passenger-only and Passenger-cargo Airlines 

1 $27,348 $41,022 235 0.029% 82 3 0 

2 $83,003 $124,505 712 0.089% 75 7 3 

3 $69,990 $104,985 617 0.077% 82 3 0 

4 

85 

$81,733 $122,600 

802,114 

701 0.087% 82 3 0 

Cargo-only Airlines 

1 $5,395 $8,093 9 0.031% 23 1 0 

2 $17,271 $25,907 31 0.108% 19 4 1 

3 $7,889 $11,834 14 0.048% 23 1 0 

4 

24 

$9,196 $13,794 

28,659 

16 0.054% 23 1 0 a Unit production for passenger-only and passenger-cargo airlines is measured in millions of revenue passenger miles 

(RPM); unit production for cargo-only airlines is measured in cargo ton-miles (RTM).

b

 Analysis includes those airlines for which: operating revenues, revenue passenger miles (RPM) or revenue ton miles 

(RTM), and projected compliance costs. 

5.5 Summary of Projected Impacts and Selection of the Proposed Option 

Table 5-22 summarizes the projected annualized compliance costs and the number and percent of inscope airports projected to incur compliance costs greater than 3 percent of operating revenues under each 

option analyzed by EPA. 

Table 5-22. Summary of Impacts Under Analyzed Options

In-Scope Airports with Projected Compliance Costs 

Exceeding 3% of Operating Revenuesa, b

Option 

Total Annualized 

Compliance Costs 

(millions of 2006 dollars) Number Percent 

1 $36.4 9 4.2% 

2 $110.1 20 9.2% 

3 $91.3 11 5.1% 

4 $105.0 58 26.6% a

 Assuming zero percent cost pass-through. 

b

 Impacts were not projected for 3 airports under Options 1 through 3, and 5 airports under Option 4. All 5 airports 

are owned by the Alaska Department of Transportation and Public Facilities; impacts to these airports could not be 

projected because the airport owner does not maintain airport-specific revenue figures. 

Under Option 2, airports are projected to incur the largest total annualized costs of all four options 

examined, yet projected removals of COD are less than under either Option 3 or Option 4 (see TDD, 

section 13.2). Because Option 2 would cost more but would remove fewer pounds of pollutants than 

either Option 3 or Option 4, EPA eliminated Option 2 as a candidate for selection as best available 

technology for this ELG. 

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and Standards for the Airport Deicing Category 

EPA also rejected Option 4 as a candidate for selection as BAT, because more than one-quarter of inscope airports (i.e., 58 out of 218 in-scope airports, see Table 5-5) are projected to incur costs exceeding 3 

percent of operating revenue under this option. The difference between Option 3 and Option 4 is that 

Option 4 would extends the 20 percent ADF capture and treatment rate requirement from primary 

commercial service airports with more than 10,000 annual departures to primary commercial service 

airports with more than 1,000 annual departures (see Table 4-1). Extending the capture requirement 

would cause 51 small airports with relatively low operating revenues that were not projected to incur 

costs under Option 3 to incur compliance costs under Option 4. Forty-seven of these 51 airports are 

projected to incur costs exceeding 3 percent of revenues, which means that these entities would 

experience a heavy economic burden if required to meet this option, as described above. Based on the 

large number of airports that EPA projects would experience this heavy economic burden, EPA 

determined that Option 4 is not economically achievable. 

Under Option 3, the proposed regulations would require the 14 airports where average ADF usage has 

been estimated to exceed 460,000 gallons annually to capture and treat 60 percent of ADF. Airports with 

greater than 10,000 annual departures but less than 460,000 gallons of ADF usage would be required to 

meet a 20 percent ADF capture and treatment rate. Under Option 1, the regulations would require all 

airports with greater than 10,000 annual departures to meet the 20 percent ADF capture and treatment 

rate. Thus, the difference between Option 1 and Option 3 in projected compliance costs, economic 

impacts, and pollutant removals is entirely attributable to the stricter standard for the 14 airports with the 

largest ADF usage; this stricter standard would add a projected $54.9 million in annualized compliance 

costs to the rule. 

EPA determined that both options are economically achievable. The 9 airports projected to incur costs 

exceeding 3 percent of operating revenues under Option 1 would incur identical impacts under Option 3. 

Due to the 60 percent ADF capture and treatment standard, two additional airports are projected to incur 

costs exceeding 3 percent of operating revenues under Option 3: Chicago O’Hare and Washington Dulles 

(see Table 5-5). However, as discussed in Section 2.6, large airports such as these have significantly 

better access to financial resources than smaller airports, and are less vulnerable to a potential loss of 

service in response to increased rates and charges. Thus, EPA believes these airports will be less affected 

than smaller airports by compliance costs that comprise a similar percentage of revenues. In addition, 

both Dulles and O’Hare are currently undergoing significant capital expansion and improvement 

programs; as part of these programs both airports are installing deicing pads. Although EPA does not 

have sufficient information to determine if these pads will enable the airports to meet the 60 percent 

capture and treatment target without further capital expenditure, their installation should decrease the 

incremental costs necessary to reach that standard. 

The 60 percent ADF capture and treatment standard for the 14 airports at which the largest ADF usage 

occurs is expected to result in about a 70 percent increase in pollutant removals compared to Option 1 (an 

increase from 26.4 million pounds to 44.6 million pounds of COD and ammonia removals, see TDD 

Section 13.2). Thus, EPA projects that Option 3 will result in significantly greater pollutant removals but 

little increase in the economic impacts of the rule compared to Option 1. In particular, the additional 

costs of the rule would be borne by only two additional airports, and the two in question are among of the 

largest airports in the U.S. and therefore have the greatest ability to take on these additional costs without 

undue financial burden. For these reasons, among the four wide-ranging technology options considered, 

EPA proposes to identify Option 3 as the BAT basis for this effluent limitation guideline. 

Airports with less than 10,000 total annual departures have been excluded from ADF collection and 

treatment requirements based on possible economic achievability concerns. EPA’s analysis shows that 

approximately 46 percent of the next approximately 100 airports (in terms of ADF usage) would incur 

costs of greater than 3 percent of their revenue if required to comply with these additional requirements. 

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and Standards for the Airport Deicing Category 

Moreover, airports with less than 10,000 annual departures are smaller airports and may have greater 

difficulty raising funds to meet these ADF requirements. For these reasons, EPA decided to exclude 

airports with less than 10,000 total annual departures from the ADF collection and treatment requirements 

of this proposed rule. 

As a check on whether Option 3 is the best combination of technologies to be selected as BAT, EPA also 

examined whether there might be an additional option that would result in more removals than Option 3 

(but less than Option 4) while still being economically achievable. Option 3 would impose a 60 percent 

capture requirement on the 14 airports that are the largest by ADF usage. EPA therefore considered 

whether the 60 percent requirement could be extended to additional airports beyond the top 14 (i.e., 

extended to airports with somewhat less ADF usage) without going beyond the limits of economic 

achievability. However, upon review of the projected costs of installing deicing pads at airports with less 

than 460,000 gallons of annual ADF usage as well as those airports’ operating revenues, it became 

evident that the set of airports immediately following the “top 14” by ADF usage would incur 

significantly greater economic impacts relative to their resources than would the top 14 airports. 

Specifically, of those airports that would incur costs under the proposed rule, 5 of the 6 airports that 

immediately follow the top 14 by ADF usage would be projected to incur costs greater than 3 percent of 

revenues and therefore would incur a heavy economic burden. In addition, 29 of the 57 airports in all that 

follow the top 14 by ADF usage would be projected to incur costs over 3 percent of revenues. This 

confirms, in EPA’s view, that imposing the 60 percent requirement on only the top 14 airports under 

Option 3 is the appropriate cutoff point for determining economic achievability for this industry. 

Moreover, these additional airports, if subjected to a 60 percent capture requirement, would be expected 

to achieve few additional pounds of pollutant removals overall relative to these additional costs. This 

additional analysis confirms EPA’s proposal to identify the Option 3 technologies as the BAT basis for 

this effluent limitation guideline. See Technical Development Document for Proposed Effluent 

Limitation Guidelines and Standards for the Airport Deicing Category (DCN AD01195) in the docket for 

additional information. 

5.6 References 

DOTPF. 2008. Let’s Get Moving 2030: Alaska Statewide Long-Range Transportation Policy Plan. State 

of Alaska Department of Transportation & Public Facilities. Available online at: 

http://www.dot.state.ak.us. 

ERG. 2006. “Revised Draft Economic Impact Methodology”. Memo from Calvin Franz, ERG, to James 

Covington, EPA. November 20, 2006. 

Forbes. 2003. Airport Munis. Forbes.com. June 9. Available online at 

http://www.forbes.com/forbes/2003/0609.134.html

Logistics Management. 2007. Air shipping: financial woes force Kitty Hawk to cease network air freight 

and ground operations. October 31. Available online at 

http://www.logisticsmgmt.com/article/CA6496182.html 

Maggard, Roger. 2008. Statewide Airport Development Manager, AK Rural Airport System. Personal 

Communication with Dina Metivier, ERG. May 14, 2008. 

Moody’s. 2002. Moody’s US Municipal Bond Rating Scale. Moody’s Special Comment. Moody’s 

Investors Service. November. Available online at 

http://www.moodys.com/cust/content/content.ashx?source=StaticContent/Free%20pages/Credit%20Polic

y%20Research/documents/current/2001700000407258.pdf

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July 2009 5-27

MSCAA. 2007. Memphis-Shelby County Airport Authority Annual Report 2007. Available online at 

http://www.mscaa.com/MSCAA%20Annual%2007%20Complete.pdf 

Public Bonds. 2004. Municipal Bonds and Default. Available online at 

http://www.publicbonds.org/public_fin/default.htm 

State of Alaska. 2008. Official Website of the State of Alaska Rural Aviation Division. Accessed on 

May 15, 2008. Available online at http://www.dot.state.ak.us/stwdav/index.shtml. 

State of Alaska. 2005. State of Alaska FY 2006 Governor’s Operating Budget: Department of 

Transportation and Public Facilities. December 15. 

http://www.gov.state.ak.us/omb/06_OMB/budget/Trans/dept25.pdf. 
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 6. Initial Regulatory Flexibility Analysis 

and Standards for the Airport Deicing Category 

CHAPTER 6 

INITIAL REGULATORY FLEXIBILITY ANALYSIS 

This chapter analyzes the projected effects of incremental pollution control costs on small entities 

engaged in aircraft deicing operations. This analysis is required by the Regulatory Flexibility Act as 

amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), hereafter 

jointly referred to as the RFA. The RFA acknowledges that small entities have limited resources and 

makes regulating federal agencies responsible for avoiding unnecessary burden on such entities. In 

response to the RFA, EPA has prepared an initial regulatory flexibility analysis (IRFA). Section 6.1 

provides the initial assessment to determine if an IRFA is necessary. Section 6.2 describes the 

components of the IRFA. Section 6.3 presents the analysis of economic impacts to small entities within 

the air transportation industry. Section 6.4 summarizes the steps EPA has taken to minimize small 

business impacts under the proposed rule. 

6.1 Initial Assessment 

EPA guidance on implementing RFA requirements suggests the following issues should be addressed in 

an initial assessment. 

First, EPA should indicate whether the proposal is a rule subject to notice-and-comment rulemaking 

requirements. EPA has determined that the proposed aircraft deicing effluent limitation guidelines (ELG) 

is a rule subject to notice-and-comment rulemaking requirements. 

Second, EPA should develop a profile of the affected small entities. EPA has developed a profile of the 

aircraft deicing industry. This profile, provided in Chapter 2, includes all affected operations, as well as 

small businesses. Chapter 5 of this EA presents the analysis of projected economic impacts to the industry 

as a whole, including both small and large businesses. Much of the information covered in these chapters 

applies to small businesses. Section 6.3.1 and Section 6.3.2 provide additional information on small 

airports and small airlines, respectively. 

Third, EPA’s assessment should determine whether the rule would affect small entities, as well as 

whether the rule would have an adverse economic impact on small entities. EPA has determined that 

some small entities may incur costs for incremental pollution control as a result of the rule, if promulgated 

as proposed. EPA examines the impacts of these additional costs in Section 6.3. 

6.2 Regulatory Flexibility Analysis Components 

Section 603 of the RFA requires that an IRFA must contain the following: 

• An explanation of why the rule may be needed. 

• A short explanation of the objectives and legal basis for the proposed rule. 

• A description of and, where feasible, an estimate of the number of small business entities to 

which the proposed rule will apply. 

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• A description of the proposed reporting, recordkeeping, and other compliance requirements 

(including estimates of the types of small entities that will be subject to the requirement and 

the type of professional skills necessary for the preparation of the report or record). 

• Identification, to the extent practicable, of all relevant federal rules that may duplicate, 

overlap, or conflict with the proposed rule. 

• A description of “any significant regulatory alternatives” to the proposed rule that accomplish 

the stated objectives of the applicable statutes and minimize any significant economic impact 

of the rule on small entities. 

Sections 6.2.1 through 6.2.5 below address each of these issues in turn. 

6.2.1 Legal Basis of and Need for the Rule 

EPA is authorized under sections 301, 304, 306, and 307 of the Clean Water Act (CWA) to establish 

effluent limitation guidelines and standards of performance for industrial dischargers. The objective of the 

CWA is to “restore and maintain the chemical, physical, and biological integrity of the Nation’s waters.” 

To assist in achieving this objective, EPA issues effluent limitation guidelines, pretreatment standards, 

and new source performance standards for industrial discharges. Sections 301(b)(1) and 304(b)(1) 

authorize EPA to issue Best Practicable Control Technology (BPT) effluent limitation guidelines. Section 

304(b)(4) authorizes EPA to issue Best Conventional Pollutant Control Technology (BCT) guidelines for 

conventional pollutants; Sections 103(b)(2)(E) and 304(b)(2) authorize EPA to issue Best Available 

Technology Economically Achievable (BAT) guidelines to control nonconventional and toxic pollutants; 

Section 306 authorizes EPA to issue New Source Performance Standards (NSPS) for all pollutants; and 

Sections 304(g) and 307(b) authorize EPA to issue Pretreatment Standards for Existing Sources (PSES) 

and Pretreatment Standards for New Sources (PSNS) for all pollutants. 

6.2.2 Estimated Number of Small Business Entities to Which the Regulation Will Apply 

The RFA defines a “small entity” as a: (1) small not-for-profit organization, (2) small governmental 

jurisdiction, or (3) small business. EPA expects the principal impact of the proposed rule will fall on 

different types of small entities depending on whether the focus is on airports or airlines. For airports, the 

small entities impacted will be primarily small governmental jurisdictions; for airlines, the small entities 

impacted will be small businesses. Due to the different ownership structures of the two major components 

of the aircraft deicing industry (airports and airlines), EPA conducted separate small business analyses for 

each sector. 

A small governmental jurisdiction is defined as the government of a city, county, town, township, village, 

school district, or special district with a population of less than 50,000. A small business is generally 

defined according to NAICS code by standards set by the Small Business Administration (SBA). Under 

NAICS codes 481111 (Scheduled Passenger Air Transportation) and 481112 (Scheduled Freight Air 

Transportation), a small business is defined as one with fewer than 1,500 employees. Note that a 

particular facility (or in this case, a particular airline) may employ fewer than 1,500 employees but not be 

considered “small” by this standard if it is owned by a larger parent company and the total employment 

among all company-owned facilities exceeds 1,500 workers (SBA, 2008). 

Tables 6-3 and 6-13 present the estimated number of small airports and small airlines, respectively, which 

may be impacted by the ELG. EPA estimates that 34 out of 218 potentially affected airports (15.6 

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percent) are owned by small governmental jurisdictions, and that 103 out of 139 potentially affected 

airlines (74.1 percent) are small businesses under the 1,500 employee standard. 

6.2.3 Description of the Proposed Reporting, Recordkeeping, and Other Compliance 

Requirements 

EPA has incorporated incremental reporting recordkeeping and reporting requirements in the proposed 

rule. Details of these requirements are described in the Technical Development Document, Section 12: 

Technology Costs (EPA 2009). These costs are generally already incorporated in the option costs used as 

the basis for the economic impact analysis (Chapter 5 of this document) and the RFA. A brief summary of 

treatment technologies that will meet the effluent guidelines is presented in Chapter 4 of this document. 

6.2.4 Identification of Relevant Federal Rules That May Duplicate, Overlap, or Conflict with the 

Proposed Rule 

The Phase I Stormwater Discharge Permit regulations already in place for deicing operations specifically 

cover the direct discharge of deicing agent-contaminated stormwater from airports into the nation’s 

surface waters. Although these regulations were developed by EPA, they are implemented, in most cases, 

by individual states. When developing individual airport stormwater discharge permits, states may take 

into account local water quality issues. This leads to a large disparity in permit requirements from airport 

to airport. The ELG being promulgated by EPA would apply limits uniformly to entities within the 

industry scope without regard to the condition of the water body receiving the discharge. The 

requirements in the ELGs would be incorporated into the stormwater permits issued by EPA and states 

and would neither conflict with nor overlap existing requirements. 

6.2.5 Significant Regulatory Alternatives 

EPA undertook a number of steps to minimize the impact of this rule on small entities. According to the 

FAA National Plan of Integrated Airport Systems (2007 – 2011), there are approximately 2,800 public 

use general aviation and reliever airports in the U.S., some of which have substantial cargo service. Many, 

if not most, of these airports are likely to be owned by small government entities. Also likely to be owned 

by small governmental entities are approximately 135 non-primary commercial service airports. EPA has 

categorically chosen not to regulate any general aviation, reliever, or non-primary commercial service 

airports under the proposed regulation. In addition to the 34 small government-owned primary 

commercial service airports, EPA also estimates that another 42 primary commercial service airports are 

owned by small government entities, but will be out-of-scope of the proposed regulation because little or 

no aircraft deicing fluid (ADF) is used at those airports. 

EPA also analyzed several different regulatory options in the process of developing this rule. 

6.3 Small Business Analysis 

This section presents the projected economic impacts on small businesses resulting from compliance with 

the proposed ELG for the air deicing category. The impacts are estimated using the methodology outlined 

in Chapter 3. Section 6.3.1 presents the impacts on airports and Section 6.3.2 presents the impacts on 

airlines. 

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July 2009 6-4

6.3.1 Analysis of Small Airports 

6.3.1.1 Definition of Small Airports 

Small airports are defined according to the size of the population served by the governmental jurisdiction 

that owns the airport. To determine airport ownership, EPA downloaded the Federal Aviation 

Administration (FAA) Airport Data (5010) and Contact Information data file for National Flight Data 

Center (NFDC) facilities. This database lists the owner of each airport as of December 20, 2007. Using 

the airport code, city, and state, EPA matched the 218 airports of interest to their owners and determined 

whether the owner was public or private. Airport ownership is composed of: 

• One privately owned airport: Airborne Airpark 

• States 

• Counties 

• Cities 

• Airport Authorities 

• Multipurpose Port Authorities 

Thus, the size of most airports will be determined by the population of the state, county, or city that owns 

the airport.40 

In general, airport and multi-purpose port authorities are quasi-governmental agencies that maintain and 

usually operate airports, shipping ports, and other government owned facilities such as bridges. The 

authorities are legal entities created by legislation. Many of these authorities have the ability to issue debt, 

as well as charge fees for the use of the properties. 

As quasi-governmental organizations, EPA will consider airport and port authorities as owned by the 

relevant government, and the airport will be considered small for the purposes of RFA if the government 

that created the authority has a population of less than 50,000 people.41 For example: the owner of the 

Williamsport, PA airport is listed in the NFDC database as the Williamsport Municipal Airport Authority. 

Williamsport, PA has a population of 29,900, and is therefore a “small” government for the purposes of 

RFA. Conversely, Port Columbus International Airport is listed in the NFDC database as owned by 

Columbus Regional Airport Authority. Because Columbus, OH has a population of 728,000, the airport is 

not considered “small.” 

6.3.1.2 Number of Potentially Affected Small Airports 

Table 6-1 presents the unweighted counts of surveyed airports by size designation (small or non-small, as 

determined by the criteria described above), hub size, location (Alaska or all other states), and average 

annual snow or freezing precipitation (SOFP) days (greater than or equal to 14.5 or less than 14.5). The 

list below shows the number of small and non-small surveyed airports (including Alaska): 

 

40 All but one of the surveyed Alaskan airports are owned by the State of Alaska and are therefore designated “nonsmall” even if they serve sparsely populated areas. 

41 We also examined the possibility that airports should be classified by size using either the $6.5 million standard 

for NAICS 488119 (Airport Operations) or $23.5 million for NAICS 488310 (Port and Harbor Operations). 

Compared to the governmental jurisdiction population method, using the lower standard results in more airports 

designated as “small.” The main objection, however, to using one of the alternative thresholds is that it seems most 

logical to classify airport or port authorities as governmental agencies. 
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 6. Initial Regulatory Flexibility Analysis 

and Standards for the Airport Deicing Category 

• 136 of 152 surveyed airports (89 percent) are non-small. 

• 16 of 152 surveyed airports (11 percent) are small. 

• 10 of the 11 surveyed airports in Alaska are non-small because they are owned by the State of 

Alaska. 

Table 6-1. Small and Non-small Airports, Surveyed (Unweighted) 

Airport Type SOFP Days > 14.5 SOFP Days < 14.5 Total 

Non-Alaska Airports 

Large Hubs 

Non-small 12 21 33 

Small 0 0 0 

Medium Hubs 

Non-small 10 24 34 

Small 0 0 0 

Small Hubs 

Non-small 15 7 22 

Small 1 0 1 

Nonhubs 

Non-small 22 11 33 

Small 12 2 14 

General Aviation/Cargo 

Non-small 2 2 4 

Small 0 0 0 

Totals, Non-Alaska Airports 

All Airports 74 67 141 

Non-small 61 65 126 

Small 13 2 15 

Alaska Airportsa

Medium Hubs 

Non-small 1 0 1 

Small 0 0 0 

Small Hubs 

Non-small 1 0 1 

Small 1 0 1 

Nonhubs 

Non-small 7 0 7 

Small 0 0 0 

Commercial Service 

Non-small 1 0 1 

Small 0 0 0 

Totals, Alaska Airports 

All Airports 11 0 11 

Non-small 10 0 10 

Small 1 0 1 a

 Ten of 11 surveyed Alaskan airports are owned by the State of Alaska and are therefore considered non-small. 

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Table 6-2 presents the same results based on survey weights rather than survey counts. By summing the 

weights of surveyed airports EPA estimated the total national number of potentially affected small and 

non-small airports. Since it would not be appropriate to include judgment sample airports in a statistically 

weighted summary, all airports in Alaska as well as four non-Alaska airports were excluded from the 

results presented in Table 6-2.42 A weighted analysis gives the following results: 

• 276.4 of 347.0 potentially affected airports (80 percent), excluding Alaska, are non-small, 

• 70.6 of 347.0 potentially affected airports (20 percent), excluding Alaska, are small. 

The larger percentage of potentially affected small airports that occurs when weights are used reflects the 

fact that, with one exception, all large and medium hubs were certainty selects and therefore have weights 

equal to one. Conversely, almost all small and nonhub airports were sampled and therefore have weights 

greater than one. 

Table 6-2. Small and Non-small Airports, Excluding Alaska, Weighteda

Airport Type SOFP Days > 14.5 SOFP Days < 14.5 Total 

Large Hub 

Non-small 12.0 21.0 33.0 

Small 0.0 0.0 0.0 

Medium Hub 

Non-small 10.0 26.0 36.0 

Small 0.0 0.0 0.0 

Small Hub 

Non-small 20.4 25.7 46.1 

Small 1.9 0.0 1.9 

Nonhub 

Non-small 77.3 80.0 157.3 

Small 46.4 22.3 68.7 

General Aviation/Cargo 

Non-small 2.0 2.0 4.0 

Small 0.0 0.0 0.0 

Totals 

All Airports 170.0 177.0 347.0 

Non-small 121.7 154.7 276.4 

Small 48.3 22.3 70.6 a Alaska airports are not presented in this table, as they were included as judgment samples for the survey, and 

therefore cannot be considered statistically representative. 

Tables 6-1 and 6-2 present the universe of surveyed airports (both unweighted and weighted). EPA has 

determined, based on survey responses, that not all of these airports fall within scope of the proposed rule 

due to some airports not being involved in deicing operations. Table 6-3 presents the final estimate of 

small and nonsmall airports that fall within the scope of this rulemaking. Based on the final counts, only 

34 of 218 in-scope airports (15.6 percent) are considered small based on the size of the government that 

owns each airport. 

 

42 Airports in the judgment sample were chosen for the survey at EPA’s discretion. These included all Alaska 

airports in the survey as well as the following four non-Alaska airports: Kalamazoo/Battle Creek International 

Airport (AZO), Akron-Canton Regional Airport (CAK), Duluth International Airport (DLH), and Chicago/Rockford 

International Airport (RFD). 
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 6. Initial Regulatory Flexibility Analysis 

and Standards for the Airport Deicing Category 

Table 6-3. Numbers of Small and Nonsmall Airports In Scope 

Hub Size 

Number of Small 

Airports 

Number of Nonsmall 

Airports Total 

Large Hub 0 28 28 

Medium Hub 0 35 35 

Small Hub 3 38 41 

Nonhub 31 83 114 

Total 34 184 218 

6.3.1.3 Summary of Projected Compliance Costs for Small Airports 

Table 6-4 presents a summary of total compliance costs, by option, for all in-scope airports as well as 

small in-scope airports. Under the proposed option, small in-scope airports incur $1.8 million in projected 

compliance costs, which represents 1.96 percent of total compliance costs for this option.

Table 6-4. Total Compliance Costs for Small Airports In Scope 

Total Compliance Costs ($2006, in millions) 

Option All In Scope Small In Scope Small as Percent of Total 

1 $36.4 $1.8 4.92% 

2 $110.1 $4.8 4.35% 

3 $91.3 $1.8 1.96% 

4 $105.0 $3.0 2.81% 

Table 6-5 presents a list of the small airports with total projected compliance costs in the top quartile of 

compliance costs under each option. Under the proposed option, Juneau International Airport incurs 

$802,221 in projected compliance costs, representing 20.4 percent of the airport’s total operating 

revenues. Section 6.3.1.4 describes in more detail the impact of projected compliance costs on airport 

operating revenues. 

Table 6-5. Small Airports in Top Quartile of Projected Compliance Costs 

Airport 

Id Airport Name City State

Hub 

Status Weight 

Projected 

Annualized 

Compliance 

Costs (2006 

dollars)

Compliance 

Costs as 

Percent of 

Revenue 

Option 1

JNU Juneau Intl Juneau AK S 1.000 $802,221 20.43% 

Option 2

JNU Juneau Intl Juneau AK S 1.000 $2,202,074 56.07% 

XNA Northwest Arkansas 

Regional 

Fayetteville/ 

Springdale AR S 1.880 $1,203,584 13.28% 

Option 3

JNU Juneau Intl Juneau AK S 1.000 $802,221 20.43% 

Option 4

JNU Juneau Intl Juneau AK S 1.000 $802,221 20.43% 

July 2009 6-7
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 6. Initial Regulatory Flexibility Analysis 

and Standards for the Airport Deicing Category 

6.3.1.4 Impact of Compliance Costs on Small Airport Revenues 

As a measure of the impact that projected compliance costs might have on airport revenues, EPA 

analyzed the ratio of projected compliance costs to total operating revenues (the “revenue test”). 

By EPA guidance (EPA 2006): 

• If fewer than 100, or less than 20 percent of affected airports incur compliance costs that 

exceed 3 percent of operating revenues, then the option is considered affordable. 

Table 6-6 presents the ratio of compliance costs to total operating revenues for small, in-scope airports. 

Table 6-6. Impacts on Small Airports (Weighted Figures) 

Small Airports with Ratio of Compliance Costs 

to Operating Revenuesb: 

Option 

Total 

Annualized 

Option Costs 

(millions of 

2006 dollars) 

Total 

Airports in 

Scope 

Total Small 

Airports in 

Scopea Less than or 

equal to 1% 

Greater than 1%, 

but less than or 

equal to 3% 

Greater 

than 3% 

1 Number 23 8 3 

% 

$36.4 

67.9% 23.7% 8.4% 

2 Number 23 8 3 

%

$110.1 

67.9% 23.7% 8.4% 

3 Number 23 8 3 

%

$91.3 

67.9% 23.7% 8.4% 

4 Number 23 0 11 

%

$105.0 

218 34 

67.9% 0.0% 32.1% a

 An airport is considered small if the governmental entity that owns the airport is responsible for a region with less 

than 50,000 people. 

b Airport counts may not add to 218 due to rounding of weights. 

The majority of airports (67.9 percent) incur compliance costs less than one percent of total operating 

revenues. Under the proposed option, 23 small airports incur compliance costs less than one percent of 

operating revenues; eight small airports incur compliance costs greater than one percent of revenues, but 

less than three percent of revenues; and three small airports incur compliance costs greater than three 

percent of operating revenues. 

Table 6-7 presents a list of small airports with projected compliance costs greater than 3 percent of total 

operating revenues. Under the proposed option, Juneau International Airport incurs compliance costs that 

are 20.4 percent of operating revenues and Northwest Arkansas Regional Airport incurs compliance costs 

that are 3.87 percent of operating revenues. 

July 2009 6-8
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 6. Initial Regulatory Flexibility Analysis 

and Standards for the Airport Deicing Category 

Table 6-7. Small Airports with Projected Compliance Costs Exceeding 3 Percent of Operating 

Revenues 

Airport Id Airport Name City State

Hub 

Status Weight 

Projected 

Annualized Costs 

(2006 dollars) 

Compliance Cost 

as Percent of 

Revenue 

Option 1

JNU Juneau Intl Juneau AK S 1.000 $802,221 20.43% 

XNA Northwest 

Arkansas Regional 

Fayetteville/

Springdale AR S 1.880 $350,557 3.87% 

Option 2

JNU Juneau Intl Juneau AK S 1.000 $2,202,074 56.07% 

XNA Northwest 

Arkansas Regional 

Fayetteville/

Springdale AR S 1.880 $1,203,584 13.28% 

Option 3

JNU Juneau Intl Juneau AK S 1.000 $802,221 20.43% 

XNA Northwest 

Arkansas Regional 

Fayetteville/

Springdale AR S 1.880 $350,557 3.87% 

Option 4

JNU Juneau Intl Juneau AK S 1.000 $802,221 20.43% 

HTS Tri-State/Milton J. 

Ferguson Field Huntington WV N 8.089 $184,475 9.41% 

XNA Northwest 

Arkansas Regional 

Fayetteville/

Springdale AR S 1.880 $350,557 3.87% 

6.3.1.5 Impact of Compliance Costs on Debt Service Coverage Ratio of Small Airports 

In addition to the revenue test, EPA also conducted an analysis of the impact compliance costs would 

have on the debt service coverage ratio (DSCR) of in-scope airports. A full description of the methods 

used to analyze debt service coverage is presented in Chapter 3. 

A standard DSCR threshold is 1.25; that is, revenues available for debt service must be at least 125 

percent of debt service. Therefore, EPA used 1.25 as a cutoff point for impacts. If an airport with debt 

service data that also incurred compliance costs had a post-regulatory DSCR less than 1.25, it was 

considered to be impacted. 

EPA separately analyzed the impacts to DSCR for those entities owning only one airport and those 

entities owning more than one airport. Table 6-8 presents the impacts to DSCR under three cost passthrough (CPT) scenarios for those entities owning only one airport. 

July 2009 6-9
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 6. Initial Regulatory Flexibility Analysis 

and Standards for the Airport Deicing Category 

Table 6-8. Projected Impacts to Debt Service Coverage Ratio of Small Single Airport-Owners 

Incurring Costs

Owners with Pre-Regulatory DSCR 1.25 or Greater 

and Post Regulatory DSCR Less Than 1.25 

Option 

Airports 

Incurring Costsa

Airports Incurring 

Costs Not Analyzed 100% CPT 50% CPT 0% CPT 

Unweighted 

1 29 3 0 0 1 

2 34 3 0 1 1 

3 30 3 0 0 1 

4 39 10 0 0 1 

Weighted 

1 54 6 0 0 2 

2 62 6 0 2 2 

3 55 6 0 0 2 

4 99 42 0 0 2 a

 Ninety-three surveyed single-owner airports are in-scope with weights representing 192 airports. Survey weights 

are not statistically reliable for determining the number of single airport owners. However, EPA believes the 

weights generally reflect the relative frequency of potentially affected single airport owners. 

Under the proposed option (unweighted) and zero cost pass-through scenario, one small airport incurs a 

post-regulatory DSCR less than 1.25; when the weighted calculation is used, this number changes to two 

airports. 

No small airports were owned by governments or authorities owning more than one airport. Thus, EPA 

did not conduct a small business DSCR analysis for multi-airport owners. 

6.3.2 Analysis of Airlines 

6.3.2.1 Definition of Small Airlines 

As privately-owned, for-profit businesses, airlines are subject to the small business definitions set forth by 

the Small Business Administration’s size standards. Table 6-9 shows the Small Business Administration 

size standards for NAICS 481, the Air Transportation category. 

Table 6-9. Small Business Administration Size Standards for Airline Industry 

NAICS 

Code NAICS Industry Definition 

Size Standard in 

Millions of Dollarsa

Size Standard in 

Number of 

Employees 

481111 Scheduled Passenger Air Transportation 1,500 

481112 Scheduled Freight Air Transportation 1,500 

481211 Nonscheduled Chartered Passenger Air Transportation 1,500 

Except Offshore Marine Air Transportation Services $25.5 

481212 Nonscheduled Chartered Freight Air Transportation 1,500 

Except Offshore Marine Air Transportation Services $25.5 

481219 Other Nonscheduled Air Transportation $6.5 a Average annual receipts. Source: SBA 2008. 

July 2009 6-10
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 6. Initial Regulatory Flexibility Analysis 

and Standards for the Airport Deicing Category 

For EPA’s purposes, the size standards for the Scheduled Passenger and Freight Air Transportation 

categories (NAICS 481111 and 481112) will be appropriate for determining potentially affected small 

airlines. Thus, airlines with less than 1,500 employees will be considered small for the purposes of this 

analysis. 

6.3.2.2 Data Issues 

Available employment data for airlines is limited to that provided by the Bureau of Transportation 

Statistics (BTS) in their Employment Statistics – Certificated Carriers report. Unfortunately, this data set 

only contains records for 66 airlines – far fewer than the number of airlines in the scope of this proposed 

rule. In addition, not all of the 66 airlines with employment data were considered to be in the scope of the 

proposed rule, so the usable employment data was even less. 

EPA obtained employment figures from the airlines’ individual annual reports or the annual report of the 

Regional Airline Association for some of the airlines that were missing data. As a proxy for the remaining 

missing data, primarily in the smaller airline categories (regional, medium regional, commuter and small 

certified carriers), EPA examined departure and enplanement data for in-scope airlines for 2004 through 

2006. Since both passenger and cargo airlines are included in the list, EPA determined that departures 

would be the more appropriate measure to use as a proxy for employment data. 

EPA first analyzed the number of departures for the non-small and small airlines as defined by 

employment statistics. Table 6-10 summarizes the findings. 

Table 6-10. 2006 Departures Data for Non-Small and Small Airlines, as 

Defined by Employment 

Departures Data Non-Small Small 

Average 269,329 19,776 

Median 198,210 6,565 

Minimum 2,656 0 

Maximum 1,092,819 120,538 

Sources: BTS 2008, BTS 2007 

EPA determined that a reasonable proxy cutoff for small and non-small airlines could be made at 20,000 

annual departures. This is slightly more than the average departures by known small airlines (as defined 

by available employment data). 

Where employment data was available, it was used as the determinant of small airline status. Where 

employment data was not available, the departures for the respective year (2004, 2005 or 2006) were 

used. Any airline with no employment data and fewer than 20,000 annual departures was considered to be 

small for purposes of this analysis. 

6.3.2.3 Number of Potentially Affected Small Airlines 

Tables 6-11 to 6-13 show the numbers of potentially affected small and non-small airlines for each year 

of the impact analysis (2004 through 2006). For each of these three years, the majority of airlines are 

considered small. Approximately half of the small airlines are in the Commuter Carrier and Small 

Certified Carrier categories. 

July 2009 6-11
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 6. Initial Regulatory Flexibility Analysis 

and Standards for the Airport Deicing Category 

Table 6-11. Numbers of Non-Small and Small Airlines by Airline Type: 2004 

Carrier Type 

Total NonSmall % of All 

Airlines Total Small 

% of All 

Airlines 

Major Carriers 20 13.7% 0 0.0% 

National Carriers 14 10.7% 19 14.5% 

Regional Carriers 0 0.0% 21 16.0% 

Medium Regional Carriers 0 0.0% 11 8.4% 

Commuter Carriers 0 0.0% 35 26.7% 

Small Certified Carriers 4 3.1% 22 16.8% 

Total 38 29.0% 108 82.4% 

Table 6-12. Numbers of Non-Small and Small Airlines by Airline Type: 2005 

Carrier Type 

Total NonSmall % of All 

Airlines Total Small 

% of All 

Airlines 

Major Carriers 20 14.0% 0 0.0% 

National Carriers 14 10.7% 19 14.5% 

Regional Carriers 0 0.0% 20 15.3% 

Medium Regional Carriers 0 0.0% 10 7.6% 

Commuter Carriers 0 0.0% 34 26.0% 

Small Certified Carriers 1 0.8% 25 19.1% 

Total 35 26.7% 108 82.4% 

Table 6-13. Numbers of Non-Small and Small Airlines by Airline Type: 2006 

Carrier Type 

Total NonSmall % of All 

Airlines Total Small 

% of All 

Airlines 

Major Carriers 20 14.4% 0 0.0% 

National Carriers 13 9.9% 20 15.3% 

Regional Carriers 1 0.8% 20 15.3% 

Medium Regional Carriers 0 0.0% 10 7.6% 

Commuter Carriers 0 0.0% 32 24.4% 

Small Certified Carriers 2 1.5% 21 16.0% 

Total 36 27.5% 103 78.6% 

6.3.2.4 Impacts on Small Airlines 

As with airports, EPA analyzed the impact of projected compliance costs on the total operating revenues 

of in-scope airlines. Table 6-14 presents the results of this analysis. 

Under the proposed option (Option 3), 82 small airlines (79.6 percent of small airlines) incur compliance 

costs less than one percent of total operating revenues; one airline (1.0 percent of small airlines) incur 

compliance costs between one percent and three percent of total operating revenues; and no small airlines 

incur compliance costs greater than three percent of total operating revenues. Twenty airlines (19.4 

percent of small airlines) were not included in the analysis due to lack of financial data. 

July 2009 6-12
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 6. Initial Regulatory Flexibility Analysis 

and Standards for the Airport Deicing Category 

Table 6-15 shows the impact of projected compliance costs on the operating profit of in-scope airlines. 

Under the proposed option, 28 small airlines (27.2 percent of small airlines) incur compliance costs less 

than one percent of total operating profit; 5 airlines (4.9 percent of small airlines) incur compliance costs 

between one percent and three percent of total operating profit; and 19 small airlines (18.4 percent of 

small airlines) incur compliance costs greater than three percent of total operating profit (one of which 

incurred costs exceeding 100 percent of operating profit). Fifty-one airlines (49.5 percent of small 

airlines) were not included in the analysis due to lack of financial data or because they had negative 

operating profits. 

Table 6-16 shows the impact of projected compliance costs on the net income of in-scope airlines. Under 

the proposed option, 27 small airlines (26.2 percent of small airlines) incur compliance costs less than one 

percent of net income; 5 airlines (4.9 percent of small airlines) incur compliance costs between one 

percent and three percent of net income; and 18 small airlines (17.5 percent of small airlines) incur 

compliance costs greater than three percent of net income (two of which incurred costs exceeding 100 

percent of net income). Fifty-three airlines (51.5 percent of small airlines) were not included in the 

analysis due to lack of financial data or because they had negative net income. 

Table 6-14. Impacts on Operating Revenues of Small Airlines 

Airlines with Ratio of Compliance Costs to 

Operating Revenues: 

Option 

Total 

Option 

Costs 

($2006 

millions) 

Total Small 

Airline 

Compliance 

Costs 

($2006, in 

millions) 

Small Airline 

Compliance 

Costs as % of 

Total Option 

Costs 

Total 

Number

of Small 

Airlines

Less than or 

equal to 1%

Greater than 

1%, but less 

than or equal 

to 3% 

Greater 

than 3% 

Not 

Analyzeda

Number 82 1 0 20 1 

% 

$36.4 $3.3 9.2% 

79.6% 1.0% 0.0% 19.4% 

Number 70 12 1 20 2 

% 

$110.1 $12.2 11.1% 

68.0% 11.7% 1.0% 19.4% 

Number 82 1 0 20 3 

% 

$91.3 $6.5 7.2% 

79.6% 1.0% 0.0% 19.4% 

Number 82 1 0 20 4 

% 

$104.6 $7.4 7.1% 

103 

79.6% 1.0% 0.0% 19.4% a Airlines were not included in the analysis if financial data was not available. 

July 2009 6-13
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 6. Initial Regulatory Flexibility Analysis 

and Standards for the Airport Deicing Category 

Table 6-15. Impacts on Operating Profits of Small Airlines 

Airlines with Ratio of Compliance Costs 

 to Operating Profits: 

Option 

Total 

Option 

Costs 

($2006 

millions) 

Total Small 

Airline 

Compliance 

Costs 

($2006, in 

millions) 

Small Airline 

Compliance 

Costs as % of

Total Option 

Costs 

Total 

Number

of Small 

Airlines

Less than or 

equal to 1%

Greater than 

1%, but less 

than or equal 

to 3% 

Greater 

than 3%b

Not 

Analyzeda

Number 30 5 17 51 1 

% 

$36.4 $3.3 9.2% 

29.1% 4.9% 16.5% 49.5% 

Number 23 6 23 51 2 

% 

$110.1 $12.2 11.1% 

22.3% 5.8% 22.3% 49.5% 

Number 28 5 19 51 3 

% 

$91.3 $6.5 7.2% 

27.2% 4.9% 18.4% 49.5% 

Number 26 6 20 51 4 

% 

$104.6 $7.4 7.1% 

103 

25.2% 5.8% 19.4% 49.5% a Airlines were not included in the analysis if financial data was not available or if airlines had negative operating 

profits. 

b

 One small airline incurred compliance costs exceeding operating profits under Options 1, 3, and 4; two small 

airlines incurred compliance costs exceeding operating profits under Option 2. 

Table 6-16. Impacts on Net Income of Small Airlines 

Airlines with Ratio of Compliance Costs 

 to Net Income: 

Option 

Total 

Option 

Costs 

($2006 

millions) 

Total Small 

Airline 

Compliance 

Costs 

($2006, in 

millions) 

Small Airline 

Compliance 

Costs as % of

Total Option 

Costs 

Total 

Number

of Small 

Airlines

Less than or 

equal to 1%

Greater than 

1%, but less 

than or equal 

to 3% 

Greater 

than 3%b

Not 

Analyzeda

Number 28 7 15 53 1 

% 

$36.4 $3.3 9.2% 

27.2% 6.8% 14.6% 51.5% 

Number 21 8 21 53 2 

% 

$110.1 $12.2 11.1% 

20.4% 7.8% 20.4% 51.5% 

Number 27 5 18 53 3 

% 

$91.3 $6.5 7.2% 

26.2% 4.9% 17.5% 51.5% 

Number 25 5 20 53 4 

% 

$104.6 $7.4 7.1% 

103 

24.3% 4.9% 19.4% 51.5% a Airlines were not included in the analysis if financial data was not available or if airlines had negative net incomes.

b

 Two small airlines incurred compliance costs exceeding net income under Options 1, 3, and 4; four small airlines 

incurred compliance costs exceeding operating profits under Option 2. 

6.4 Regulatory Flexibility Analysis 

EPA has chosen to minimize the impact of this rule on small entities by tailoring its proposed guidelines 

based on airport size (i.e., annual jet departures) and use of aircraft deicing fluid. EPA chose not to 

include any general aviation, reliever, or non-primary commercial service airports under the scope of the 

proposed rule. In addition, another 42 primary commercial service airports owned by small government 

entities will be out-of-scope of the proposed regulation because little or no deicing fluid is used at those 

airports. 

July 2009 6-14
Economic Analysis for Proposed Effluent Limitation Guidelines Chapter 6. Initial Regulatory Flexibility Analysis 

and Standards for the Airport Deicing Category 

July 2009 6-15

Based on the results presented in Section 6.3, three small airports incur projected compliance costs greater 

than three percent of operating revenues under the proposed option. Under the same option, no small 

airlines are projected to incur compliance costs greater than three percent of operating revenues. 

6.5 References 

BTS 2008. Employment Statistics – Certificated Carriers. Bureau of Transportation Statistics. 

Downloaded from http://www.bts.gov, May 13, 2008. 

BTS 2007. Air Carrier Statistics (Form 41 Traffic), T-100 Segment Database. Bureau of Transportation 

Statistics. Downloaded at: http://www.bts.gov, October 2, 2007. 

RAA 2006. 2006 Annual Report. Regional Airlines Association. 

SBA 2008. U.S. Small Business Administration. Table of Small Business Size Standards Matched to 

North American Industry Classification System Codes. U.S. Small Business Administration. Effective 

March 11, 2008. Downloaded at: http://www.sba.gov, May 13, 2008. 

U.S. EPA. 2009. Development Document for Proposed Effluent Limitation Guidelines and Standards for 

the Airport Deicing Category. EPA-821-R-09-004. 

U.S. EPA. 2006. Final Guidance for EPA Rulewriters: Regulatory Flexibility Act as amended by the 

Small Business Regulatory Enforcement Fairness Act. U.S. Environmental Protection Agency. 

November.