Overflight Fee Development Report 

in support of “Update of August 2001 Overflight Fees” 

Notice of Proposed Rulemaking

 

Office of Financial Controls 

Federal Aviation Administration 

800 Independence Ave. S.W. 

Washington, DC 20591 

July 26, 2010 
STAFF WORKING DRAFT, 7/26/2010 

2

PURPOSE OF THE REPORT 

The purpose of this document is to provide supporting information concerning the 

updated schedule of fees that the Federal Aviation Administration (FAA) is proposing to 

charge for aircraft flights that transit U.S.-controlled airspace, but neither land in nor 

depart from the United States. The FAA currently charges fees for such flights, pursuant 

to its Final Rule, "Fees for FAA Services for Certain Flights (Docket No. FAA-2000-

7018)." 

The FAA issued a similar report in support of the June 2000 Interim Final Rule 

for these fees, and subsequently amended that report in August 2001 to reflect some 

adjustments to the cost data used to derive the fees in the Final Rule. The basic fee 

development methodology used for the 2001 fees has remained virtually the same, with 

only minor modifications, described herein.

INTRODUCTION 

 Fees for FAA services for aircraft flights that transit U.S.-controlled airspace, but 

neither land in nor depart from the United States, are authorized by 49 USC 45301. These 

flights are commonly referred to as “Overflights.” Unlike flights that land and/or takeoff in the United States1

, Overflights did not have a mechanism to assess and recover the 

costs they impose on the FAA’s air traffic control (ATC) system until the August 1, 2000 

implementation of the Overflight Fee Interim Final Rule (IFR). 

The practice of charging Overflight Fees for ATC and related services provided to 

Overflights is common within the international community. For example, a flight from 

Frankfurt, Germany, to Bogota, Colombia, could pass through airspace controlled by 

France, Portugal, the United States, the Netherlands Antilles, and Venezuela, in addition 

to airspace controlled by the countries of origin and destination, Germany and Colombia. 

The operator would have been charged ATC fees by all of these countries except the 

United States until the U.S. Overflight Fees were established on August 1, 2000. 

The level and type of air traffic services provided to Overflights depend, in part, on the 

portions of U.S.-controlled airspace transited by such flights. This report is concerned 

with only the flight activity that occurs in the two ATC operating environments (Enroute 

and Oceanic) where Overflights occur. Figure 1 identifies the U.S.-controlled airspace 

and illustrates where the FAA generally provides Enroute and Oceanic services. A 

complete description of U.S.-controlled airspace can be found in the docket for this 

Rulemaking.

 

1

 which pay one or more of the following excise taxes: passenger ticket tax, fuel tax, international 

arrival/departure tax, or cargo waybill tax 
STAFF WORKING DRAFT, 7/26/2010 

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Figure 1 

U.S.-Controlled Airspace2

Cost of Services: 

The FAA’s Overflight Fees are derived from the agency’s costs of providing 

Enroute and Oceanic services, which are two of the four services or cost pools into which 

all of the FAA’s costs for ATC and related services are distributed. The FAA’s Cost 

Accounting System (CAS) determines the costs of providing ATC and related services 

within the Oceanic and Enroute environments. The agency's costs of providing the other 

two ATC services (Terminal and Flight Services), are not included in the cost base for the 

FAA’s Overflight Fees. 

The FAA has determined, based on the structure and operation of its ATC system, that 

there is little or no difference between the costs of making ATC and related services 

available to an Overflight within a particular service environment (Enroute or Oceanic) 

versus making the same services available to any other operation within the same 

environment. Flights in the Enroute ATC environment (Overflights and 

domestic/international U.S. operations) use similar types of services. This is also the case 

for those flights receiving procedural control in U.S.-controlled Oceanic airspace. 

The process of deriving Overflight Fees from the costs of providing Enroute and Oceanic 

services initially involved the following four steps: 

1. Using CAS data, determine the FAA’s total costs of providing Enroute and Oceanic 

ATC and related services to all flights; 

2. Determine which of these costs can be used as a basis for fees per the then existing 

statutory requirement that the Overflight Fees be “directly related” to the FAA’s costs 

of providing the ATC and related services; 

3. Determine the unit costs of Enroute and Oceanic services; 

4. Derive the Overflight Fees that will recover the costs of providing ATC and related 

services, plus the costs of billing and collections. 

 

2

 For illustrative purposes only. See “Description of U.S.-Controlled Airspace” in the docket for actual 

airspace coordinates. 

Oceanic Enroute 
STAFF WORKING DRAFT, 7/26/2010 

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Subsequent to the derivation and implementation of the August 2001 Overflight Fees, the 

U.S. Congress enacted a provision of law in the Air Transportation and Security Act 

(ATSA) of 2001 that changed the statutory standard for the FAA’s Overflight Fees. 

Whereas the original statutory authorization for the fees had specified that the fees must 

be “directly related” to the FAA’s costs of providing the ATC and related services, the 

ATSA language changed that requirement from “directly related” to “reasonably related.” 

The “directly related” requirement had been the sole reason that the FAA had removed all 

overhead costs from the cost base used to derive the fees. Since overhead costs are 

frequently and typically included in the cost base when setting fees to achieve full cost 

recovery, the FAA believes it is reasonable to include overhead costs in the cost base for 

its Overflight Fees. Therefore, this step of removing all overhead from the cost base to 

ensure that the fees are “directly related” to costs has been eliminated for the currently 

proposed update of the August 2001 Overflight Fees.

The step-by-step process of deriving the fees proposed in this Notice of Proposed 

Rulemaking (NPRM) is as follows: 

STEP 1: 

Using CAS data, determine the FAA’s total costs of providing Enroute and Oceanic 

ATC and related services 

Introduction 

The FAA’s CAS was developed both for overall agency management purposes and to 

provide the basis for determining Overflight Fees, which were being developed initially 

by the FAA at about the same time. Each cost category in the CAS was individually 

analyzed to determine whether it was directly related to the provision of Enroute and/or 

Oceanic services. Other costs, such as those incurred for the provision of Terminal and 

Flight Services were not included, as they were determined not to be related to the 

provision of Enroute and Oceanic services. 

All costs in the CAS have been assigned or allocated to services based on generally 

accepted accounting principles. Federal Accounting Standards Advisory Board’s 

“Statement of Federal Financial Accounting Standards,” Number 4, the Federal 

Government’s guiding framework authority on cost accounting matters, was used 

throughout the development of the CAS. All assignments were performed using the best 

available data and, where economically feasible, new processes were created to enhance 

the fidelity of particular assignments. 
STAFF WORKING DRAFT, 7/26/2010 

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Expenditures vs. Obligations 

The FAA has used CAS data for fiscal year (FY) 2008 (October 1, 2007 through 

September 30, 2008) for this update of its Overflight Fees. Total expenses recorded for 

FY 2008 do not precisely match the FAA’s FY 2008 budget as enacted by the U.S. 

Congress. This is due to the Governmental budgeting rules that allow obligations (legal 

reservations of budgeted amounts) to be incurred over a period of one to several years 

after enactment of the budget by Congress. 

As Figure 2 below indicates, expenses for FY 2008 were actually obligated 

against budgets enacted from FY 1999 through FY 2008, depending on whether the 

expenditures were for Facilities & Equipment; Operations; or Research, Engineering & 

Development. 

Figure 2 

Conversion of Obligations to FY 2008 Expenditures 

.....

..................

....................................

Facilities and 

Equipment 

Operations 

Research, Engineering 

& Development 

FY99 

FY00 

FY01 

FY02 

FY03 

FY04 

FY05 

FY06 

FY07 

FY08 

FY 2008 Costs 
STAFF WORKING DRAFT, 7/26/2010 

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Description of the Cost Accounting System (CAS) 

The FAA has developed the CAS to better understand its costs. The purpose of 

the CAS is twofold: 1) to provide information to help improve the management of the 

FAA, and 2) to determine the costs of Enroute and Oceanic services in support of 

Overflight Fees. The first phase of the CAS developed the cost information for the 

agency’s Enroute and Oceanic air traffic services. This cost information was the basis 

from which the agency’s August 2001 Overflight Fees were derived, and is now the basis 

for the currently proposed update of those fees. 

Full details on how the FAA’s cost accounting system captures costs for all FAA lines of 

business and the methods of assignment of costs to the Enroute and Oceanic ATC 

services are available in a separate report. A copy of that report, titled “Costing 

Methodology Report,” has been placed in the Overflight Fee rulemaking docket. 

Enroute and Oceanic Costs 

Table 1 below indicates the cost categories and the total costs for the FAA’s 

Enroute and Oceanic ATC and related services, as determined by the FAA’s CAS. These 

costs were based on the FAA’s FY 2008 expenditures.

Table 1 

TOTAL COST OF ENROUTE AND OCEANIC SERVICES*

FAA COST ACCOUNTING SYSTEM 

COST OF SERVICE REPORT 

FOR THE YEAR ENDING SEPTEMBER 30, 2008 

 

 

 

ENROUTE 

COSTS 

OCEANIC 

COSTS 

Level 1: Facility ATC Direct Labor $1,138,099,860 $35,680,507 

 ATC Indirect Labor $295,361,250 $8,281,574 

 ATC Direct Non-Labor $7,611,551 $313,498 

 ATC Indirect Non-Labor $1,734,228 ($18,476) 

 ATC Contract Training $37,976,882 $1,366,605 

 ATC Academy Training $18,535,080 $534,765 

 Tech Ops Direct Labor $157,504,541 $2,296,720 

 Tech Ops Direct Non-Labor $51,978,066 $2,686,825 

 Tech Ops DO Indirect $116,662,775 $1,627,924 

 Tech Ops Academy Training $19,414,905 $141,259 

 Telecommunications $105,590,688 $29,821,321 

 Telecommunications Support $55,816,758 $427,928 

 Flight Inspection Services $23,938,424 

 

Logistics $50,374,654 $239,182 
STAFF WORKING DRAFT, 7/26/2010 

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 Utilities $31,603,426 $777,348 

 subtotal: $2,112,203,089 $84,176,979 

 

Level 2: Service Unit ATC Workers' Compensation $31,353,290 $984,296 

 Tech Ops Workers' Compensation $5,448,184 $81,739 

 Direct Field Support $183,434,987 $4,248,972 

 Contract Weather $9,598,341 $286,277 

 Contract Weather Observations - - 

 Contract Tower - - 

 Contract Flight Service - - 

 DUATS - - 

 Contract Maintenance $9,604,678 $134,564 

 

Implementation $148,075,922 $446,022 

 Acquisition (non ATO) $5,089,860 - 

 Acquisition (ATO) $606,408,421 $35,141,267 

 Depreciation & Capital Leases $509,081,843 $8,322,390 

 subtotal: $1,508,095,525 $49,645,527 

 

Level 3: ATO ATC System Command Center $157,059,988 ($14) 

 Atlantic Operations Control Center $2,038,340 $51,016 

 Mid-States Operations Control Center $2,256,995 $6,799 

 Pacific Operations Control Center $2,235,817 $57,661 

 National Network Control Center $21,089,422 $330,029 

 Charting $26,715,925 - 

 Service Area Indirect $67,033,453 $1,385,440 

 Service Unit Indirect $163,012,617 $3,077,507 

 ATO Indirect $163,789,674 $4,183,410 

 subtotal: $605,232,230 $9,091,847 

 

Level 4: FAA FAA Regional Indirect $25,035,113 $530,550 

 FAA Headquarters Indirect $174,903,978 $6,598,127 

 Medical $9,047,349 $284,112 

 Gain/(Loss) $32,375,669 - 

 Accrued Liabilities $267,393,595 $5,668,185 

 subtotal: $508,755,704 $13,080,973 

 

 Grand Total: $4,734,286,548 $155,995,327 

As shown by the table above, the total cost, as determined by the CAS, for the FAA’s 

provision of Enroute services in FY 2008was $4,734,286,548, and the total cost for the 

FAA’s provision of Oceanic services in FY 2008 was $155,995,327. 
STAFF WORKING DRAFT, 7/26/2010 

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Step 2: 

Determine the unit costs of Enroute and Oceanic services

In the previous section, the total costs for Enroute and Oceanic services were 

identified. The next step is to derive the unit cost of providing services within the 

Enroute and Oceanic environments. The unit costs calculated herein reflect the FAA's 

cost of making services available on a per 100-nautical-mile basis. The level and type of 

services provided are highly similar for all aircraft operations within a particular 

environment (i.e., Enroute or Oceanic), although the cost of making services available for 

safe flight to all users, including Overflights, constitutes much of the cost. The FAA has 

determined, based on the structure and operation of its ATC system, that there is little or 

no difference between the costs of providing services to an Overflight versus any other 

operation within each of these service environments. Consequently, the unit cost of 

providing services to Overflights within each environment is considered identical to the 

unit cost of providing services to any other flight within each respective environment.3

 

To construct these unit costs, flight miles within each environment are identified on an 

annual basis. The costs of providing ATC and related services within each environment 

are divided by the respective flight miles to determine the unit costs of services. Flight 

miles are tracked using FAA’s Enhanced Traffic Management System (ETMS). ETMS 

provides detailed information on a flight-by-flight basis for every aircraft operation. 

Using ETMS data, it is possible to track flights from origination to destination and 

thereby determine the amount of services provided based on distance flown within U.S.-

controlled airspace. 

Air Traffic Activity

Table 2 shows the total number of flights and miles traveled within the Enroute 

and Oceanic environments for FY 2008. 

 

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 Let αi = (Overflight Activityi)/(Total Activityi ), for i = Enroute, Oceanic. It has been determined, based 

on the structure and operation of the FAA ATC system, that within each airspace environment, the cost of 

making available and providing ATC services to Overflights is proportional to the total cost of making

available and providing ATC services within that environment, i.e., Overflight Costsi = αi *Total ATC 

Costsi

. The unit cost of services made available and provided to Overflights within environment i, for i = 

Enroute, Oceanic is as follows: 

(Overflight Costsi )/( Overflight Activityi ) = (αi *Total ATC Costsi)/ (αi *Total ATC Activityi) = 

 (Total ATC Costsi

)/(Total ATC Activity). 
STAFF WORKING DRAFT, 7/26/2010 

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Table 2 

ENROUTE AND OCEANIC ACTIVITY 

TOTAL TRAFFIC WORKED4

(10/1/2007-9/30/2008)

 

Enroute Airspace Oceanic Airspace U.S.-controlled Airspace **/ 

Flights GCD nm */ Flights GCD nm Flights GCD nm 

Total 

annual 

activity 

17,492,183 8,326,843,296 959,736 721,081,489 17,908,482 9,047,924,785 

*/ GCD nm is the great circle distance for these flights expressed in nautical miles. 

**/ These numbers represent total number of flights that transited through U.S.-controlled airspace and the 

total number of miles these flights traveled in the U.S.-controlled airspace. The flight count is not the sum 

of flights across the Enroute and Oceanic environments. Some flights transit both environments and 

summing flights across these environments would result in double counting. 

Over this 12-month period, there were 17,492,183 flights traveling 8,326,843,296 

nautical miles (nm) within the Enroute environment and 959,736 flights traveling 

721,081,489 nm within the Oceanic environment. 

Unit Cost of Service 

Using the total annual GCD flight miles shown in Table 2, the unit cost of each 

type of service (Enroute or Oceanic) is computed. Table 3 illustrates this calculation. 

The unit costs of ATC and related services are calculated by dividing the respective total 

costs by the respective number of miles flown. 

Table 3 

UNIT COST OF ENROUTE AND OCEANIC SERVICES 

Enroute Oceanic 

Reasonably Related ATC and related Costs $4,734,286,548 $155,995,327 

Total annual GCD (nautical miles -- nm) 8,326,843,296 721,081,489 

Unit Cost (per 100 nm) = (ATC Costs/ GCD nm)*100 $56.86 $21.63 

 

4

 Flight miles are expressed in terms of the great circle distance (GCD) traveled in each type of U.S.-

controlled airspace. For any individual flight, the point of entry and the point of exit are determined based 

on the best information available as determined by the FAA. The GCD is calculated for each set of entry 

and exit points per airspace. This mileage is then summed by airspace and appropriate fee is applied to the 

total miles in each type of airspace (Enroute or Oceanic) to determine the total charge for the flight. GCD 

was used rather than actual flight miles to, among other reasons, reduce the computational burden 

associated with the calculation of flight miles. 
STAFF WORKING DRAFT, 7/26/2010 

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Because the FAA's costs of making services available to Overflights have been 

determined to be the same as for any other aircraft operation (as discussed previously) 

within the same respective (Enroute or Oceanic) environment, these unit costs represent 

the “reasonably related” unit cost of services made available to Overflights on a per 100-

nautical-mile basis. Thus, the cost of providing ATC and related services to a flight within 

the Enroute environment is $56.86; similarly, the cost of providing ATC and related services to a flight 

within the Oceanic environment is $21.63. 

Step 3: 

Derive the amount of the Overflight Fees that, when fully implemented, 

will recover the reasonably related costs of providing ATC and related 

services in the Enroute and Oceanic environments 

As explained earlier in this report, the change in the statutory standard for the FAA’s 

Overflight Fees from “directly related” to “reasonably related” to costs has allowed the 

FAA to include overhead in the cost base for the fees now being proposed in the 

accompanying NPRM. This is a departure from what was done when the current fees 

were first established in August 2001. At that time, all overhead was carefully removed 

from the cost base before the respective unit costs were derived. Among other things, 

this exclusion had the effect of removing almost all of the FAA’s billing and collection 

costs from the cost base. 

Therefore, at this point in the fee development process, the estimated billing and 

collection costs associated with the fees were explicitly factored in, resulting in an 

increase in the calculated unit costs of 3.5%. This time, since overhead has already been 

included in the cost base, the FAA has not increased the calculated unit costs to account 

for billing and collection costs in order to avoid double counting of those costs. 

Thus, the proposed updated Overflight Fees will be, quite simply, the unit costs of 

providing services in the two operating environments, as detailed in Table 3, but with one 

significant caveat. As explained and detailed in the accompanying NPRM, the FAA is 

proposing that the updating of the fees be done incrementally over a several year period. 

While it is difficult to predict how long a full, notice and comment Rulemaking such as 

this might take, we are proposing an effective date for the first fee increase of October 1, 

2011, to be followed by annual increases on October 1 for the next three years.. Because 

costs have increased more relative to activity levels in the Enroute service area than in the 

Oceanic service area, the annual increases are larger for Enroute (14%) than for Oceanic 

(8%). The specific fees, by year, would be as follows: 

 Effective Date Enroute Oceanic

 October 1, 2011 $38.44 $17.22 

 October 1, 2012 $43.82 $18.60 

 October 1, 2013 $49.95 $20.09 

October 1, 2014 $56.86 $21.63