G 

U.S. Departnnent office of the Associate 800 Independence Ave., S.W. 

of Transportation Administrator for Airports Wasfiington, D.C. 20591 

Federal Aviation 

Administration 

OCT 2 7 2009 

ic/:>-

Complainants, Respondents and Counsel -^ ^^ ^ 

on Attached Service List y> 5>j ^ 

LU CO 

RE: Northwest Airlines, Inc., Delta Airlines, Inc., AirTran Airways Inc., -C" 

Continental Airlines, Inc., Southwest Airlines, Inc. 

V. 

Indianapolis Airport Authority Indianapolis International Airport, 

BAA-Indianapolis 

Docket No. 16-07-04 

Dear Parties: 

Enclosed is a copy of the Final Decision and Order of the Federal Aviation Administration 

(FAA) with respect to the above-referenced matter. 

Based on the record in this proceeding, FAA finds that the Determination made by the 

Director of Airport Compliance and Field Operations ^ supported by a preponderance 

of reliable, probative, and substantial evidence. I affirm the Director's Determination, 

which found the Airport sponsor is currently in compliance with its federal obligations. 

I further affirm the Director's advisory information and guidance provided in the 

Determination were both correct and appropriate. 

The reasons for upholding the Director's Determination are set forth in the enclosed 

Final Decision and Order. 

Sincerely, 

O/i^-

Catherine M. CShg 

Acting Associate Administrator 

for Airports 

Enclosure 
CERTIFICATE OF SERVICE 

I HEREBY CERTIFY that on (TC^TQIC^? ^ .•^'^ .-^^^ I placed in the United States 

mail (first class, postage paid) a true copy of the f((regoing document addressed to: 

For Respondents 

Pablo O. Nuesch 

Jeffrey A. Schwarz 

SPIEGEL & MCDIARMID LLP 

1333 New Hampshire Ave., NW 

Washington, DC 20036 

Robert A. Duncan 

Airport Director 

Indianapolis Airport Authority 

Indianapolis International Airport 

2500 South High School Road, Suite 100 

Indianapolis, IN 46241-4943 

For Complainants 

Robert E. Cohn 

Jonathan L. Abram 

Patrick R. Rizzi 

HOGAN & HARTSON, L.L.P. 

555 Thirteenth Street, NW 

Washington, DC 20004 

Brian Mattingly, 

Regional Director Airport Affairs 

Gary Bunce, 

Assistant General Counsel 

NORTHWEST AIRLINES, INC. 

2700 Lone Oak Parkway 

Eagan,MN 55121 

Joseph Zang 

Assistant General Counsel 

Rebecca Bays, 

General Attorney 

DELTA AIR LINES INC 

1030 Delta Boulevard 

Atlanta, GA 30320 

Lorraine B. Halloway 

CROWELL & MORING LLP 

1001 Pennsylvania Avenue NW 

Washington, DC 20004 

Counsel for Continental Airlines, Inc. 

Robert W. Kneisley 

Associate General Counsel 

Leslie Abbott 

Attorney 

SOUTHWEST AIRLINES CO. 

1901 L Street, NW, Suite 640 

Washington, DC 20036 

Thomas Newton Boiling 

Managing Attorney, Regulatory Affairs 

CONTINENTAL AIRLINES, INC. 

P.O. Box 4607 - HQSLG 

Houston, TX 77210 

Richard P. Magumo 

Senior Vice President & General Counsel 

AIR TRAN AIRWAYS, INC 

9955 AirTran Boulevard 

Orlando, FL 32827 
FAA Part 16 Airport Proceedings Docket 

FAA Airport Compliance and Field Operations, ACO-lOO 

FAA Great Lakes Region, AGL-600 

J^^.^4 

le Torgerson, 

Office of Airport Compliance 

and Field Operations 
UNITED STATES DEPARTMENT OF TRANSPORTATION 

FEDERAL AVIATION ADMINISTRATION 

WASHINGTON, DC 

Northwest Airlines, Inc., Delta Airlines, Inc. 

AirTran Airways Inc., Continental Airlines, Inc., 

Southwest Airlines, Inc. 

Complainants / Appellees 

V 

Indianapolis Airport Authority, Indianapolis 

International Airport, BAA-Indianapolis 

Respondents / Appellants 

FAA Docket 16-07-04 

FINAL DECISION AND ORDER 

I. INTRODUCTION 

o5 

This matter is before the Federal Aviation Administration (FAA) Associate Administrator 

for Airports on appeal filed by Indianapolis Airport Authority, Indianapolis International 

Airport (lAA or the Authority), and BAA-Indianapolis, LLC (Respondents or Appellants) 

fi-om the Director's Determination of August 19, 2008, issued by the Director of FAA 

Airport Compliance and Field Operations pursuant to the FAA Rules of Practice for 

Federally Assisted Airport Enforcement Proceedings found in Title 14 Code of Federal 

Regulations (CFR) Part 16 (Rules of Practice). 

Appellants agree that the Director properly granted their motion to dismiss the complaint 

on the grounds that lAA is currently in compliance with its federal grant obligations 

relating to unjust discrimination, exclusive rights, fee and rental structure, and airport 

revenues because there is no controversy ripe for review by the FAA under Part 16. 

Appellant lAA has agreed to fi-eeze at 2008 levels the landing fee rates chargeable to the 

signatory airlines, until the Airport Use Agreement at Indianapolis International Airport 

(IND) expires.^ As a result, the costs of the landing fee rent credit that lAA afforded 

Federal Express will not be imposed upon the signatory airlines until at least the end of 

December 2010. However, appellants object the reasoning in the rest of the Director's 

Determination. They contend that it "is not only dicta - i.e., discussion not necessary to 

support the outcome of the case - but confusing dicta that ignores controlling judicial, 

DOT, and FAA precedent, as well as the record evidence." [FAA Exhibit 1, Item 26, 

page 4.] Appellants argue "[t]hat is particularly troubling where, as here, parties then 

seek to use that dicta as leverage in subsequent negotiations..." [FAA Exhibit 1, 

Item 26, page 9.] 

FAA Exhibit 1, Item 20, page 21. 
Appellants ask the Associate Administrator to "affirm the Determination on the narrow 

ripeness grounds on which it is based, and either correct or disavow as uimecessary the 

alleged errors in the Director's Determination. [FAA Exhibit 1, Item 26, pages 5 and 10.] 

Complainants reply that lAA appeals fi-om a favorable determination and urge that "the 

appeal is without merit and should be denied." 

II. SUMMARY OF THE DIRECTOR'S DETERMINATION 

The Complaint is about the interplay between two separate agreements: (a) the 

Agreement and Lease of Premises at Indianapolis International Airport (Airport Use 

Agreement) dated March 15, 2001,^ and (h) Amendment No. 3 to the Airport-Federal 

Express Land Lease Agreement (Amendment No. 3) dated April 14, 2006. 

A. The Airport Use Agreement^ is an agreement between the Airport and tenant air 

carriers, called Signatory Airlines. Each of the complaining Airlines is a 

signatory to the Airport Use Agreement. This agreement, which is due to expire 

on its own terms at the end of December 2010'*, sets landing fee rates at the 

Airport on a residual basis.^ Federal Express (hereinafter "FedEx"), whose lease 

is at the center of this case, is not a Complainant. It is a tenant air carrier and 

signatory to the Airport Use Agreement.* 

B. Amendment No. 3 is an agreement between the Airport and FedEx. Under this 

agreement the Airport Authority consented to build a cargo apron to expand 

FedEx's cargo facilities as a Special Use Facility in exchange for increases in 

operations by FedEx at the Airport. FedEx agreed to pay a special facilities rent 

over a 20 year period to cover the cost of expanding the apron' adjacent to the 

FedEx facilities. At the same time, the Airport Authority agreed to provide a 

credit to FedEx based on a formula to recognize FedEx's increased operations at 

the airport (referred to herein as a Landing Fee Rent Credit or Credit). 

^ FAA Exhibit 1, Item 10, exhibit B. 

^ This agreement is referred by the Appellants as the "Airport Use Agreement." In the Director's 

Determination, it is also referred to as the "Lease Agreement." In this document, we have chosen to refer 

to it as the "Airport Use Agreement" for consistency. 

'' FAA Exhibit 1, Item 10, page 2. The Airport admits that each of the Conplaining Airlines is a signatory 

to the Airport Use Agreement. [See FAA Exhibit 1, Item 10, page 9.] 

' Under a residual financial plan. Signatory Airlines typically agree to assume part or all of the liability for 

the Airport's nonaeronautical costs in exchange for the Airport's agreement to cross-credit 

nonaeronautical revenues to aeronautical users. [See FAA's Policy Regarding Airport Rates and 

Charges, 61 FR 31994 (June 21,1996), section D, 2.1.1.] (A Signatory Airline is any air carrier that 

signs such an agreement.) 

* FAA Exhibit 1, Item 10, page 2. 

' The term "apron" is used to describe a detlned area on the Airport intended to accommodate aircraft for 

purposes of loading or unloading passengers, mail, or cargo; refueling; parking; or maintenance. 

[Aeronautical Information Manual / Federal Aviation Regulations (AIM/FAR) 2006, page 359.] 
As the Director summarized, the primary dispute underlying this Complaint is whether 

lAA was required under the Airport Use Agreement to obtain the approval of the other 

signatory airlines before amending its land lease agreement with FedEx to provide FedEx 

a landing fee rent credit. [See FAA Exhibit 1, Item 24, page 44.] Under the Airport Use 

Agreement, the Authority is not required to obtain approval from the Signatory Airlines 

for a Special Use Facility where the sole cost will be borne by the aeronautical tenant that 

will use the facility. The Authority claims that the cargo apron fimded by Federal 

Express under Amendment No. 3 qualifies as a Special Use Facility. The Complainants, 

however, maintain that the Landing Fee Rent Credit in Amendment No. 3 shifts the 

capital costs of the cargo apron so as to affect the Complainants' future landing fee rates; 

therefore the project does not qualify as a Special Use Facility. If the cargo apron does 

not meet the requirements for a Special Use Facility, then imder the Airport Use 

Agreement the Signatory Airlines must agree to any additional capital costs before those 

costs can be implemented and recovered by the landing fee. 

Complainants argued that the Airport Authority had unilaterally increased their fixture 

landing fees to finance expansion of FedEx's cargo apron in violation of grant 

assurances 22, Economic Nondiscrimination; 23, Exclusive Rights; 24, Fee and Rental 

Structure; and 25, Airport Revenues. The Director granted the Airport Authority's 

motion to dismiss for lack of ripeness because the Authority offered and agreed to fi-eeze 

landing fee rates at 2008 levels until the Airport Use Agreement expires at the end of 

December 2010. On this basis, the Director concluded that the Authority had not yet 

imposed the Landing Fee Rent Credit under Amendment No. 3 of the land lease 

agreement with FedEx, the Complainants had not been harmed, and there was not yet any 

compliance issue ripe for review tmder Part 16. The Director determined that the 

Authority is not currently in violation of: 

• 

• 

grant assurance 22, Economic Nondiscrimination, as a result of entering into an 

agreement with FedEx that includes a Landing Fee Rent Credit since that Credit 

was never implemented. [See FAA Exhibit 1, Item 24, Director's Determination, 

page 35.] 

grant assurance 23, Exclusive Rights, as a result of entering into an agreement 

with FedEx to provide an exclusive-use apron inasmuch as there is no evidence to 

suggest any other airline requested and was denied similar treatment imder a 

similar situation. [See FAA Exhibit 1, Item 24, Director's Determination, 

page 37.] 

grant assurance 24, Fee and Rental Structure, as a result of entering into an 

agreement with FedEx that includes a Landing Fee Rent Credit even if that Credit 

is implemented. [See FAA Exhibit 1, Item 24, Director's Determination, 

page 38.] 

grant assurance 25, Airport Revenues, as a result of entering into an agreement 

with FedEx that includes a Landing Fee Rent Credit where that Credit is part of a 
committed financial agreement and not a subsidy. [See FAA Exhibit 1, Item 24, 

Director's Determination, page 40.] 

While the Director agreed with the Authority that Amendment No. 3 had yet to adversely 

affect the Complainants, the Director concluded that the Complainants did have standing 

to contest the potential fixture impact of the rent credit afforded to FedEx on their landing 

fees under 14 CFR § 16.23(a). The Director accordingly denied the motion to dismiss for 

lack of standing. [FAA Exhibit 1, Item 24, Director's Determination, page 29.] 

The Director fiirther found that sections 8.01(D) and 8.03 of the Airport Use Agreement 

provide the Complainants with substantial protection in a civil proceeding. Complainants 

also enjoy protection under section 17.04, which stipulates that the laws of the State of 

Indiana and federal law govern the Airport Use Agreement. The Director stated, "If the 

parties have a dispute regarding their signatory [Airport Use] Agreement, Part 16 is not 

the proper venue for resolving these types of contract disputes; other civil remedies are 

available to the Complainants to address disputes related to the [Airport Use] Agreement 

and the FedEx Credit." [FAA Exhibit 1, Item 24, page 44.] 

III. PARTIES 

The Airport and its Federal Oblisations 

Indianapolis International Airport (IND or Airport) is a commercial service airport that 

holds a 14 CFR Part 139 operating certificate. The Indianapolis Airport Authority 

(Authority) owns and operates the Airport. BAA-Indianapolis managed the Airport 

through a management contract with the Authority at the time of this Complaint.^ BAAIndianapolis is a private management company and is one of the Respondents in this Part 

16 Complaint.' 

The Airport has approximately 7,700 acres, occupying about 12 square miles of land in 

Wayne and Decatur Townships of Marion County, all within the city of Indianapolis, 

Indiana."* As of September 25, 2008, the Airport had more than 74 based aircraft and 

213,740 total operations, 96,968 of which were for air carrier service. [FAA Exhibit 1, 

Item 16(b).] 

The planning and development of the Airport has been financed, in part, with funds 

provided by the FAA under the Airport Improvement Program (AIP). Between 1982 and 

2007, the Airport received more than $355 million in federal airport development 

assistance in AIP grants." In addition, part of the Airport was conveyed by the War 

Assets Administration (WAA) to the City of Indianapolis as surplus property. As a 

result, the Airport incurred obligations in the form of restrictive deed covenants arising 

The BAA-Indianapolis contract expired on its own terms on December 31, 2007. [See FAA Exhibit 1, 

Item 26, page 35.] 

'http://www.indyindiana.com/indianapolis_airport.htm 

"'http://www.indyindiana.com/indianapolis_airport.htm 

"FAA Exhibit 1, Item 18 
fi"om conveyances of land under the powers and authority contained in the provisions of 

the Surplus Property Act (SPA) of 1944 as amended, 49 United States Code 

(U.S.C.)§ 47151-153.'^ 

The Airf)Ort is the largest in Indiana. It is a major hub for FedEx. The 1.9 million square 

foot FedEx hub at IND is FedEx's second largest facility.'^ 

Complainants 

The Complainants - Northwest Airlines, Inc., Delta Air Lines, Inc., AirTran Airways 

Inc., Continental Airlines, Inc., and Southwest Airlines, Inc. - in this case are referred to 

as "Airlines" or "Complainants." All operate at IND. 

• Northwest is a U.S. certificated air carrier providing scheduled passenger air 

service to airports throughout the United States and the world. 

• Delta is a U.S. certificated air carrier providing scheduled passenger air service to 

airports throughout the United States and the world. 

• AirTran is a U.S. certificated air carrier providing scheduled passenger air service 

to airports throughout the United States and the Bahamas. 

• Continental is a US certificated air carrier providing scheduled passenger air 

service to airports throughout the United States and the world.'* 

• Southwest is a US certificated air carrier providing scheduled passenger air 

service to airports throughout the United States.'^ 

Each of the Complaining Airlines is a signatory to the Agreement and Lease of Premises 

at Indianapolis International Airport (Airport Use Agreement), which sets landing fee 

rates at the Airport on a residual basis until the Airport Use Agreement expires by its own 

terms at the end of December 2010.'* FedEx, who is pivotal in this case and not a 

Complainant, is also a signatory to the Airport Use Agreement.'^ 

IV. BACKGROUND AND PROCEDURAL HISTORY 

Since 1993, FedEx and the Authority have had an operating lease agreement. The 1993 

Amended and Restated Land Lease Agreement is one of two leases currently in effect 

between FedEx and the Authority and has been amended three times. It was first amended 

'^ FAA Exhibit 1, Item 16. 

'^ http://imaps.indygov.org/ed_portal/template.asp?page=transair 

'" FAA Exhibit 1, Item 2, page 2. 

'^ FAA Exhibit 1, Item 6, page 2. 

'* FAA Exhibit 1, Item 10, page 2. The Airport admits that each of the Complaining Airlines is a signatory 

to the Airport Use Agreement. [See FAA Exhibit 1, Item 10, page 9.] 

'"' FAA Exhibit 1, Item 10, page 2. 
as Amendment No.l in October 21, 1994, a second time as Amendment No. 2 on June 16, 

2000, and finally, by Amendment No. 3 on April 14, 2006. Amendment No. 3 is at issue 

here.'' 

In the spring 2006, the Authority informed Northwest Airlines, who is the designated 

carrier-representative for the Signatory Airlines," that the Authority had been discussing 

with FedEx the expansion of its domestic cargo facilities and operations at the Airport.^" 

On April 5, 2006, the Authority provided Northwest Airlines a summary of the terms of an 

agreement and provided the other airlines with written information about the FedEx 

agreement. The Authority indicated that Amendment No. 3 would be signed by FedEx 

within two weeks, on April 14, 2006. As planned, on April 14, 2006, the Authority and 

FedEx executed Amendment No. 3 for the financing and development of new cargo 

facilities and an adjacent apron at IND for FedEx's exclusive use. 

Specifically, Amendment No. 3 facilitates a major expansion of FedEx's operations at the 

Airport, including the financing and construction of a 400,000 square foot expansion of its 

existing sort building, a new 175,000 square foot secondary sort building, a 40,000 square 

foot aircraft maintenance building, and an 8,000 square foot facility for ground support 

equipment, all of which will belong to the Authority upon completion of construction. The 

Authority expects FedEx to invest approximately $162 million in expanding those 

facilities.^' The Complainants allege that under Amendment No. 3, the Authority will 

build the FedEx Cargo Apron at a cost to the Authority of approximately $49 million.^^ 

On May 3, 2006, the Authority sent an email to the members of the END AirlineAuthority Affairs Committee Members (Airlines/Complainants) announcing that the 

negotiations for the FedEx expansion at IND had been successfully completed. The 

Authority notified the Airlines that the agreement would be presented to the Airport's 

Board for approval on May 5, 2006. On May 5, the Airlines sent the Authority a letter 

objecting to the Special Facility Landing Fee Rent Credit that is part of Amendment 

No. 3. That same day, the Airport Board approved Amendment No. 3." 

'* FAA Exhibit 1, Item 10, page 2. 

" An airline that enters into an agreement that is substantially similar to the Airport Use Agreement is 

considered to be a "Signatory Airline." [See FAA Exhibit 1, Item 10, page 2.] 

^^ It is noted that the Authority denies that representatives of the Signatory Airlines were not informed until 

the spring of 2006 that there were ongoing discussions with FedEx regarding the expansion of the cargo 

facilities. The Authority States it introduced the cargo expansion project to the Signatory Airlines as 

early as the summer of 2005 during the Airport's capital budget review process. [See FAA Exhibit 1, 

Item 10, page 11.] The Director noted that the Authority failed to include in the record the reference to 

validate this claim despite a note in its Answer. Whether the Complainants were notified in the spring 

of 2006 or in the Summer 2005 is not critical to the issue represented here. [See FAA Exhibit 1, 

Item 24, page 4, footnote #20.] 

^' FAA Exhibit 1, Item 10, pages 2-3. 

^^ FAA Exhibit 1, Item 1, page 2 states the expansion will cost $49 million, while the Answer states the 

expansion will cost $46.5 million. This difference is irrelevant for purposes of the Final Agency 

Decision. 

" FAA Exhibit 1, Item 1, pages 18-19. 
Throughout 2006 and 2007, Complainants and the Authority attempted unsuccessfully to 

resolve the dispute. In February 2007, the Authority provided Complainants with an 

actual copy of Amendment No. 3.^* On April 13,2007, Complainants filed a 14 CFR 

Part 16 Complaint with the FAA. The Complaint was docketed as FAA Docket No. 16-

07-04." 

On April 20, 2007, Continental Airlines, Inc. submitted a motion to join the Complaint as 

a Joint Complainant.^* An Answer to this motion was filed on May 1,2007." On May 1, 

2007, the Authority submitted a Motion Requesting Extension of Time.^ An Answer by 

Complainants to this motion was filed on May 2, 2007.^ On May 4, 2007, FAA issued an 

Order extending the due date for the Answer until June 4, 2007.^ Also on that day. 

Southwest Airlines Co., filed a motion to join the Complaint as a Joint Complainant.^' 

On May 9, 2007, the Authority filed an Answer To Motion Of Southwest Airlines, Co. 

To Join Complaint As A Joint Complainant.^^ On June 4, 2007, an Answer and Motion 

to Dismiss was filed by the Authority.'^ This was followed on June 8, 2007, by an 

Unopposed Motion for Extension of Time.^ On June 22, 2007, Complainants filed a 

Reply and Answer to the Authority's Motion to Dismiss.^* This was followed by the 

Authority's Rebuttal on July 16, 2007.^* On July 30, 2007, Complainants filed a Motion 

for Leave to File and Response,^^ which was followed on August 9, 2007, by the 

Respondent's Answer to Complaining Airlines' Motion for Leave to File and Response.^* 

On December 5, 2007, the FAA issued a Notice of Extension of Time.^' 

On March 28, 2008, the FAA issued a request for additional information with six (6) 

questions (FAA Questions). The FAA requested the following information: 

(1) Provide a layout of the FedEx facilities located on the Airport; (2) Is the FedEx Apron 

subject to the Credit located within the Airport Cost Center known as the "Airfield Area" 

under the Agreement and Premises Lease; (3) Were the provisions of sections 8.01 and 

8.03 applied to the FedEx Apron subject to the Credit; (4) How are the funds representing 

the Credit applied to the Special Facilities Debt of the FedEx Apron; (5) Does the 

Agreement and Lease of Premises explicitly provide for increasing the Airfield Area 

^* FAA Exhibit 1, Item 1, page 19. 

^^ FAA Exhibit l,Iteml. 

^* FAA Exhibit 1, Item 2. 

"FAA Exhibit 1, Item 3. 

^* FAA Exhibit 1, Item 4. 

^'FAA Exhibit 1, Item 5. 

^° FAA Exhibit 1, Item 7. 

^'FAA Exhibit 1, Item 6. 

^^ FAA Exhibit 1, Item 8. 

"FAA Exhibit 1, Item 10. 

^''FAA Exhibit 1, Item 11. 

"FAA Exhibit 1, Item 12. 

^* FAA Exhibit 1, Item 13. 

^^ FAA Exhibit 1, Item 14. 

^* FAA Exhibit 1, Item 15. 

^'FAA Exhibit 1, Item 17. 
requirement to account for the Credit under the FedEx Amendment No 3; (6) What other 

types of credits have been claimed by Signatory Airlines imder the provisions of the 

Agreement and Premises Lease. The Director asked the parties to "describe the flow of 

fimds fi-om the Airfield Cost Center once the Credit is claimed by FedEx.'"*" 

On May 12, 2008, the FAA received the response to the FAA Questions fi:om the 

Authority.*' The Authority advised that it "has offered and the Signatory Airlines have 

indicated unanimously that they wish to accept, a negotiated landing fee rate for the 

balance of the term of the Signatory Agreement based on 2008 levels."^^ 

On June 11*, 2008, the FAA received the response to the Authority's response to the 

FAA Questions from the Complainants.''^ 

On August 19,2008, the FAA issued the Director's Determination. [FAA Exhibit 1, 

Item 24, Director's Determination.\ 

By letter dated September 18, 2008, [FAA Exhibit 1, Item 26, attachment A] the 

Complainants sought clarification of the following statement in the Director's 

Determination: 

If the Complainants agree to extend the Lease Agreement and not to amend it to 

recognize the Credit, [t]his matter would continue to be a contract dispute and 

Part 16 would not be the appropriate venue. Director's Determination at 33. 

Complainants sought this clarification because lAA and the Airlines were in the process 

of discussing a two year extension of the current Lease Agreement through December 

2012. [FAA Exhibit 1, Item 26, attachment A.] 

On September 22, 2008, the Indianapolis Airport Authority (lAA) appealed the 

Director's Determination. [FAA Exhibit 1, Item 26.] 

By letter dated September 25, 2008, lAA referenced its notice of appeal and requested 

that the FAA refrain from "attempting to expound the Determination as suggested by the 

Complainants." [FAA Exhibit 1, Item 36] 

On October 7, 2008, the FAA issued an Errata to the Director's Determination. [FAA 

Exhibit 1, Item 25.] The FAA clarified the statement at issue as follows: 

If the Complainants agree to extend the Lease Agreement and not to amend it to 

recognize the Credit, and the Credit is not applied, this matter would continue to 

be a contract dispute and Part 16 would not be the appropriate venue. 

"" FAA Exhibit 1, Item 22. 

*'FAA Exhibit 1, Item 20. 

"^ FAA Exhibit 1, Item 24, page 20, citing Exhibit 1, Item 20. 

"•^ FAA Exhibit 1, Item 21. 
On November 21, 2008, the FAA issued an extension of time for the Complainants to 

submit their reply. [FAA Exhibit 1, Item 27.] 

On December 4, 2008, Complainants submitted their Reply. [FAA Exhibit 1, Item 28.] 

V. APPLICABLE LAW AND POLICY 

The following is a discussion pertaining to the (a) FAA's enforcement responsibilities; 

(b) the FAA compliance program; (c) statutes, sponsor assurances, and relevant policies; 

and (d) the complaint and appeal process. 

A. FAA Enforcement Responsibilities 

The Federal Aviation Act of 1958, as amended, 49 U.S.C. § 40101, et seq., assigns the 

FAA Administrator broad responsibilities for the regulation of air commerce in the 

interests of safety, security, and development of civil aeronautics. The federal role in 

encouraging and developing civil aviation has been augmented by various legislative 

actions, which authorize programs for providing funds and other assistance to local 

communities for the development of airport facilities. In each such program, the airport 

sponsor assumes certain obligations, either by contract or by restrictive covenants in 

property deeds and conveyance instruments, to maintain and operate its airport facilities 

safely, efficiently, and in accordance with specified conditions. Commitments assumed 

by airport sponsors in property conveyance or grant agreements are important factors in 

maintaining a high degree of safety and efficiency in airport design, construction, 

operation, and maintenance, as well as ensuring the public reasonable access to the 

airport. Pursuant to 49 U.S.C. § 47122, the FAA has a statutory mandate to ensure that 

airport owners comply with their federal grant a;ssurances. 

B. FAA Airport Compliance Program 

The FAA discharges its responsibility for ensuring that airport sponsors comply with 

their federal obligations through its Airport Compliance Program. Sponsor obligations 

are the basis for the FAA's airport compliance effort. The airport owner accepts these 

obligations when receiving federal grant funds or when accepting the transfer of federal 

property for airport purposes. The FAA incorporates these obligations in grant 

agreements and instruments of conveyance to protect the public's interest in civil aviation 

and to ensure compliance with federal laws. 

The FAA designed the Airport Compliance Program to ensure the availability of a 

national system of safe and properly maintained public-use airports which airport 

sponsors operate in a maimer consistent with their federal obligations and the public's 

interest in civil aviation. The Airport Compliance Program does not confrol or direct the 

operation of airports. Rather, it monitors the administration of valuable rights, which 

airport sponsors pledge to the people of the United States in exchange for monetary 

grants and donations of federal property, to ensure that airport sponsors serve the public 

interest. 
FAA Order 5190.6A, Airport Compliance Requirements, October 2, 1989, (hereinafter 

Order)'*^ sets forth policies and procedures for the FAA Airport Compliance Program. 

The Order is not regulatory and is not confrolling with regard to airport sponsor conduct; 

rather, it establishes the policies and procedures for FAA personnel to follow in carrying 

out the FAA's responsibilities for ensuring airport compliance. It provides basic 

guidance for FAA personnel in interpreting and administering the various continuing 

commitments airport owners make to the United States as a condition for the grant of 

federal fiinds or the conveyance of federal property for airport purposes. The Order, inter 

alia, analyzes the various obligations set forth in the standard airport sponsor assurances, 

addresses the application of the assurances in the operation of pubHc-use airports, and 

facilitates interpretation of the assurances by FAA personnel. 

The FAA Compliance program is designed to achieve voluntary compUance with federal 

obligations accepted by owners and/or operators of public-use airports developed with 

FAA administered assistance. Therefore, in addressing allegations of noncompliance, the 

FAA will make a determination as to whether an airport sponsor is currently in 

compliance with the applicable federal obligations. Consequently, the FAA will consider 

the successful action by the airport to cure any alleged or potential past violation of 

applicable federal obligation to be grounds for dismissal of such allegations. [See e.g. 

Wilson Air Center v. Memphis and Shelbv County Airport Authority, FAA Docket No. 

16-99-10, (August 30, 2001) (Final Decision and Order).] 

For similar reasons, the FAA may also consider offers made by the airport to suspend 

implementation until some future event to be grounds to dismiss a Part 16 complaint. 

Where FAA perceives the potential for a fiiture violation, it typically provides 

appropriate guidance. This is consistent with the role and responsibility of the FAA to 

provide prudent advice and counsel to assist airport owners in achieving volimtary 

compliance under the Compliance program. Such advice is primarily geared towards 

assisting airports in understanding the nature of their obligations under their grant 

assurances and other applicable federal laws. [See Order 5190.6A, page 35. {See 

footnote # 44 below.) Note: The Airport Compliance Division's role in providing 

education and advisory services is addressed in FAA Order 5190.6B in chapter 2, 

pages 2-1 through 2-3.] 

C. Statutes, Sponsor Assurances, and Relevant Policies 

As a condition precedent to providing airport development assistance under the 

Airport and Airway Improvement Act of 1982 (AAIA), codified at Title 49 U.S.C. 

§ 47101, et seq., the Secretary of Transportation receives certain assurances from the 

airport sponsor. 

On September 30, 2009, the FAA published FAA Order 5190.6B, Airport Conpliance Manual, and 

cancelled FAA Order 5190.6A. During the proceedings of the Director's Determination and appeal, 

FAA Order 5190.6A outlined the policies and procedures to be followed in carrying out the FAA's 

functions related to airport compliance. The citations attached to FAA Order 5190.6A have been 

retained in this Final Agency Decision. This has no bearing on the analysis contained herein. 

10 
The AAIA, 49 U.S.C. § 47101, et seq., sets forth assurances to which an airport sponsor 

receiving federal financial assistance must agree as a condition precedent to receipt of 

such assistance. These sponsorship requirements are included in every airport 

improvement program (AIP) grant agreement. Upon acceptance of an AIP grant by an 

airport sponsor, the assurances become a binding obligation between the airport sponsor 

and the federal government. 

One federal grant assurances apply to the specific circumstances of this appeal. 

Assurance 22, Economic Nondiscriminatio/i 

Federal grant assurance 22, Economic Nondiscrimination, (Assurance 22) implements the 

provisions of 49 U.S.C. § 47107(a)(1) through (6), and requires, in pertinent part, that the 

owner or sponsor of a federally obligated airport: 

...will make its airport available as an airport for public use on reasonable 

terms, and without unjust discrimination, to all types, kinds, and classes of 

aeronautical activities, including commercial aeronautical activities 

offering services to the public at the airport. [Assurance 22(a).] 

.. .each air carrier using such airport shall have the right to service itself or 

to use any fixed-base operator that is authorized or permitted by the airport 

to serve any air carrier at such airport. [Assurance 22(d).] 

.. .will not exercise or grant any right or privilege which operates to 

prevent any person, firm, or corporation operating aircraft on the airport 

from performing any services on its own aircraft with its own employees 

(including, but not limited to maintenance, repair and fueling) that it may 

choose to perform. [Assurance 22(f).] 

...may establish such reasonable, and not unjustly discriminatory, conditions 

to be met by all users of the airport as may be necessary for the safe and 

efficient operation of the airport. [Assurance 22(h).] 

...may prohibit or limit any given type, kind or class of aeronautical use of 

the airport if such action is necessary for the safe operation of the airport 

or necessary to serve the civil aviation needs of the public." 

[Assurance 22(i).] 

Subsection (h) qualifies subsection (a), and subsection (i) represents an exception to 

subsection (a) to permit the owner or sponsor to exercise control of the airport sufficient 

to preclude imsafe and inefficient conditions, which would be detrimental to the civil 

aviation needs of the public. 

11 
FAA Order 5190.6A, Airport Compliance Requirements, describes the responsibilities 

under Assurance 22 assiamed by the owners or sponsor of public use airports developed 

with federal assistance. Among these is the obligation to freat in a uniform manner those 

users making the same or similar use of the airport and to make all airport facilities and 

services available on reasonable terms without unjust discrimination. [See Order, 

Sees. 4-14(a)(2) and 3-1.] 

The owner or sponsor of any airport developed with federal grant assistance is required to 

operate the airport for the use and benefit of the public and to make it available to all 

types, kinds and classes of aeronautical activity on reasonable terms, and without unjust 

discrimination. [See Order, Sec. 4-13(a).] 

The Order also provides ".. .an aircraft operator, otherwise entitled to use the landing 

area, may tie-down, adjust, repair, refuel, clean and otherwise services its own aircraft, 

provided it does so with its own employees in accordance with reasonable rules or 

standards of the sponsor relating to such work." [See Order, Sec 4-15(a).] 

FAA policy regarding the airport owner or sponsor's responsibility for ensuring the 

availability of services on reasonable terms and without unjust discrimination provides that 

third-party leases contain language incorporating these principles. Assurance 22(b) states, 

In any agreement, contract, lease, or other arrangement imder which a 

right or privilege at the airport is granted to any person, firm, or 

corporation to conduct or to engage in any aeronautical activity for 

fiimishing services to the public at the airport, the owner or sponsor will 

insert and enforce provisions requiring the confractor to -

(a) furnish said services on a reasonable, and not unjustly discriminatory, 

basis to all users thereof, and 

(b) charge reasonable, and not imjustly discriminatory, prices for each unit 

or service, provided that the contractor may be allowed to make 

reasonable and nondiscriminatory discoimts, rebates, or other similar 

types of price reductions to volume purchasers. 

The FAA considers it inappropriate to provide federal assistance for improvements to 

airports where the benefits of such improvements will not be fully realized due to 

inherent restrictions of aeronautical activities. [See Order, Sec. 3-8(a).] 

D. The Complaint and Appeal Process 

1. Right to File the Formal Complaint 

Pursuant to 14 CFR, Part 16, § 16.23, a person directly and substantially affected by any 

alleged noncompliance may file a complaint with the FAA. The complainant shall 

provide a concise but complete statement of the facts relied upon to substantiate each 

12 
allegation. The complaint shall also describe how the complainant was directly and 

substantially affected by the things done or omitted by the respondents. [14 CFR, 

Part 16, § 16.23(b)(3,4).] 

If, based on the pleadings, there appears to be a reasonable basis for fiirther investigation, 

the FAA will investigate the subject matter of the complaint. In rendering its initial 

determination, the FAA may rely entirely on the complaint and the responsive pleadings 

provided. Each party shall file documents that it considers sufficient to present all 

relevant facts and arguments necessary for the FAA to determine whether the sponsor is 

in compliance. [14 CFR, Part 16, § 16.29.] 

The proponent of a motion, request, or order has the bidden of proof A party who has 

asserted an affirmative defense has the burden of proving the affirmative defense. This 

standard burden of proof is consistent with the Administrative Procedure Act (APA) and 

federal case law. The APA provision states, "[ejxcept as otherwise provided by statute, 

the proponent of a rule or order has the burden of proof." 5 U.S.C. § 556(d). [See also. 

Director, Office of Worker's Compensation Programs. Department of Labor v. 

Greenwich Collieries. 512 US 267, 272 (1994); Air Canada et al. v. Department of 

Transportation. 148 F3d 1142, 1155 (DC Cir, 1998).] Title 14 CFR § 16.229(b) is 

consistent with 14 CFR § 16.23, which requires the complainant to submit all documents 

then available to support his or her complaint. Similarly, 14 CFR § 16.29 states that 

"[e]ach party shall file documents that it considers sufficient to present all relevant facts 

and argument necessary for the FAA to determine whether the sponsor is in compliance." 

2. Right to Appeal the Director's Determination 

A party to this decision adversely affected by the Director's Determination may file an 

appeal with the Associate Administrator within 30 days after the date of service of the 

initial determination. [14 C.F.R., Part 16, § 16.31(c).] If no appeal is filed within the 

time period specified, the Director's Determination becomes the final decision and order 

of the FAA without further action. A Director's Determination that becomes final 

because there is no adminisfrative appeal is not judicially reviewable. [14 CFR, Part 16, 

§ 16.33.] 

Part 16 requires all relevant facts to be presented in the complaint documents. [14 CFR, 

Part 16, § 16.23(b)(3).] New allegations or issues should not be presented on appeal. 

Review by the Associate Administrator is limited to an examination of the Director's 

Determination and the administrative record upon which such determination was based. 

Under Part 16, complainants are required to provide with the complaint and reply all 

supporting documentation upon which it relied to substantiate its claims. Failure to raise 

all issues and allegations in the original complaint documents may be cause for such 

issues and allegations to be deemed waived and not reviewable upon appeal. This is 

consistent with the Supreme Court's recognition that courts may require administrative 

issue exhaustion as a general rule because it is usually appropriate under an 

[adminisfrative] agency's practice for contestants in an adversarial proceeding before it to 

develop fiilly all issues there. The Court concluded that where parties are expected to 

13 
develop the issues in an adversarial adminisfrative proceeding, the rationale for requiring 

issue exhaustion is at its greatest. [See Sims v. Apfel. 530 US 103, 108-110 (2000) citing 

Hormel v. Helvering. 312 US 552 (1941) and US v. LA Tucker Truck Lines. 344 US 33, 

(1952).] 

3. FAA's Responsibility with Regard to an Appeal 

Pursuant to 14 CFR, Part 16, § 16.33, the Associate Adminisfrator will issue a final 

decision on appeal from the Director's Determination, without a hearing, where the 

complaint is dismissed after investigation. 

In such cases, it is the Associate Adminisfrator's responsibility to determine whether (a) 

the findings of fact made by the Director are supported by a preponderance of reliable, 

probative, and substantial evidence, and (b) each conclusion of law is made in accordance 

with applicable law, precedent, and public policy. [See e.g. Ricks v Millington Mvmicipal 

Airport. FAA Docket No. 16-98-19, (December 30,1999) (Final Decision and Order) 

page 21, and 14 CFR, Part 16, § 16.227.] 

VI. ANALYSIS and DISCUSSION 

This is an unusual appeal in that the Director's Determination granted the Authority's 

motion to dismiss and found the Authority was currently in compliance with its federal 

obligations on all matters argued by the Complainants, yet the Authority is appealing the 

decision. 

On appeal from a Director's Determination, the appellant must demonsfrate that the 

Director erred by (1) making findings of fact that were not supported by a preponderance 

of reliable, probative, and substantial evidence, or (2) by making conclusions of law that 

were not in accordance with applicable law, precedent, and public policy. Appellants 

argue seven points on appeal: 

A. The Associate Administrator should affirm the Director's Determination 

on the nartow ripeness grounds on which it is based and either correct or reject 

as unnecessary the Director's analysis of the substantive grant compliance issues. 

Appellants are concerned that the dicta may be used by the Complainants as 

leverage in subsequent negotiations. [FAA Exhibit 1, Item 26, page 7.] 

B. The Director erred in treating the Landing Fee Rent Credit as a discrete item and 

in failing to assess the impact of Amendment No. 3 as a whole. [FAA Exhibit 1, 

Item 26, page 10.] 

C. Even with the Landing Fee Rent Credit, FedEx's rent exceeds the Authority's 

costs, and no residual apron costs are included in the landing fee rate calculation. 

[FAA Exhibit 1, Item 26, page 14.] 

D. The Director erred in concluding that Amendment No. 3's rental provision could 

increase the Complainants' landing fees. [FAA Exhibit 1, Item 26, page 17.] 

14 
E. The Determination's dicta regarding grant assurance 22, Economic 

Nondiscrimination, cannot be reconciled with FAA, DOT, or appellate precedent. 

[FAA Exhibit 1, Item 26, page 24.] 

F. The Determination erred in failing to recognize that residual rates frequently 

include costs of facilities not benefiting all airlines. [FAA Exhibit 1, Item 26, 

page 31.] 

G. The Determination erred in failing to dismiss BAA-Indianapolis, LLC as a 

named party in the investigation. [FAA Exhibit 1, Item 26, page 34.] 

Issue A: Correct the Dicta or Limit the Scope of the Determination 

Appellants ask the Associate Adminisfrator to affirm the Director's Determination on the 

narrow ripeness grounds on which it is based and to correct or reject as unnecessary its 

dicta^^ [FAA Exhibit 1, Item 26, page 7.] 

Appellants correctly state, the principal issue reviewed in the Determination is whether 

FedEx's variable apron rent will affect the landing fees paid by the Complainants. [FAA 

Exhibit 1, Item 26, page 2.] Appellants argue it will not; Complainants argue it could. 

However, the Authority agreed to freeze landing fee rates chargeable to all air carriers for 

the remainder of the term of the Airport Use Agreement.'*^ As a result, the Landing Fee 

Rent Credit has not yet been imposed and is not yet ripe for review under Part 16. The 

Director accordingly found LAA was not currently in violation of its federal grant 

assurance and other obligations. 

Complainants note in their reply the curious fact that lAA is appealing from a favorable 

result, the grant of its own motion to dismiss. They argue the "the appeal is without merit 

and should be denied." 

According to Complainants, the Director's findings and conclusions are supported by the 

record, fully consistent with policy and precedent, and should be affirmed. They further 

argue: "It is routine and lawful for administrative agencies to issue policy determinations 

and to provide guidance in adjudicative decisions." [See FAA Exhibit 1, Item 28, 

page 22.] 

The Associate Administrator disagrees with Appellants that the Director should not have 

provided a flill discussion on the matter. The impact of the Landing Fee Rent Credit on 

landing fees was, after all, the basis of the Complaint. It is described by the Appellants as 

the principal issue. Appellants' arguments disregard the crucial fact that the Director 

qualified his advice to avoid speculation. As discussed in detail below in relation to the 

"** Appellants define dicta as "discussion not necessary to support the outcome of the case." [FAA 

Exhibit 1, Item 26, page 4.] 

•** The current Agreement and Lease of Premises at Indianapolis International Airport (Airport Use 

Agreement) expires on December 31, 2010. 

15 
application of the Rent Credit, the Director made it clear that he was not issuing an 

adjudicative decision. He indicated that he was not making findings of fact or 

conclusions of law about prospective fees. [See FAA Exhibit 1, Item 24, page 33.] 

Although the Director did not repeat the point in addressing each and every argimient, 

when the Determination is read as a whole it is clear that the Dfrector would only issue 

findings and conclusions after a presentation of the facts and circumstances in effect at 

the time the new charge is actually proposed by Appellants. 

Appellants' arguments also overlook the temporary nature of the rate freeze that resulted 

in the Complaint not being ripe for review. Policy guidance from the Director was 

appropriate because, notwithstanding Appellants' agreement to freeze rents temporarily, 

the Landing Fee Rent Credit could in the fiiture have affected landing fees in a way that 

would violate federal law. The challenged fee methodology could go into effect as soon 

as the current Airport Use Agreement expires in December 2010. Indeed, Appellant lAA 

has already signed a lease Amendment No. 3 with one carrier that would impose the 

challenged fees on other carriers. Particularly in light of their own defense of the fees on 

the merits. Appellants make no showing that the Director violated federal law in 

providing guidance to assist them in tmderstanding their federal grant assurance 

obligations and achieving voluntary compliance here. As noted above, it is FAA's role to 

provide precisely this type of guidance to Appellant imder the Compliance program. [See 

Order 5190.6A, page 35. (See footnote # 44 above.) Note: The Airport Comphance 

Division's role in providing education and advisory services is addressed in FAA Order 

5190.6B in chapter 2, pages 2-1 through 2-3.] Moreover, withholding policy guidance 

about an airport fee merely because an airport temporarily suspends its application would 

be contrary to the public interest. It would reduce the incentive for Complainants to 

pursue relief and the FAA's ability to encourage voluntary compliance. [See Miami 

International Airport Rates Proceeding, Order 97-3-26 (March 19, 1997).] 

For similar reasons. Appellants' objection to the discussion about how the FedEx 

Landing Fee Rent Credit could affect the Complainants and how it could affect the 

Authority's compliance with its federal obligations depending upon how the Credit is 

applied in the future, lacks merit. [FAA Exhibit 1, Item 26, page 8.] 

At any rate, the Associate Administrator finds the Director properly explained that he was 

providing guidance about requirements under applicable law, not making findings or 

drawing conclusions about how the Landing Fee Rent Credit might be applied in the 

future. Rather, the Director stated, 

"Since the FAA does not know the form of the future agreement, or 

whether there will even be an agreement, it is not appropriate at this time 

to rule on the Authority's possible future application of the [Landing Fee 

Rent] Credit for the FedEx apron. The Director finds that if the 

Complainants and the Authority do not come to terms in a replacement 

agreement and the Authority unilaterally imposes the Credit on the 

Complainants (and all airlines) such an action would be subject to the 

[FAA] Rates and Charges Policy. The Policy would not permit the 

16 
Authority to unilaterally impose the costs of one carrier on all other 

carriers by adding such costs to its common rate base xmless approved by 

those carriers."^^ [FAA Exhibit 1, Item 24, page 33.] 

Here the FAA was clearly fulfilling its responsibilities to provide guidance to facilitate 

grant compliance, not making factual findings or drawing conclusions that would be 

considered binding in any future Part 16 proceeding. As such, there is no need to correct 

or reject the advice as dicta. 

Appellants expressed concern that the Complainants may use the Director's discussion as 

leverage in subsequent negotiations. [FAA Exhibit 1, Item 26, page 9.] That concern 

does not make the discussion or analysis wrong or inappropriate. The Associate 

Adminisfrator finds the Director did not err in discussing the potential future impact of 

the Landing Fee Rent Credit when the issue was not ripe. The discussion was neither 

unnecessary nor incorrect. The Associate Administrator affirms the Director's 

Determination. 

Issue B: Amendment No. 3 as a Whole 

Appellants argue the Director erred in treating the Landing Fee Rent Credit as a discrete 

item and in failing to assess the impact of Amendment No. 3 as a whole. [FAA 

Exhibit 1, Item 26, page 10.] 

Appellants argue the Landing Fee Rent Credit is a single, non-severable component of 

the overall business deal with FedEx set forth in Amendment No. 3. [FAA Exhibit 1, 

Item 26, page 10.] Appellants state, "Amendment No. 3 expanded FedEx's leasehold and 

extended the term of its lease, all of which benefited the Authority and the Signatory 

Airlines by securing an increased, long-term revenue stream that exceed the Authority's 

out-of-pocket costs." [FAA Exhibit 1, Item 26, page 6.] Appellants also state, "The 

Determination also appears to accept that Amendment No. 3 was the best deal 'feasible' 

under the circumstances, and that the variable rent produced by the [Landing Fee] Rent 

Credit was 'integral' to the overall deal." [FAA Exhibit 1, Item 26, page 11.] 

These statements fail to acknowledge that Complainants were not a party to Amendment 

No. 3 establishing the Landing Fee Rent Credit for FedEx; Complainants had no voice in 

the proposed unilateral application of the Landing Fee Rent Credit to determine the 

landing fee under the Airport Use Agreement for all Signatory Airlines. Appellants argue 

the "deal" with FedEx financially benefits the Complainants and state the Director's 

Determination appears to accept Amendment No. 3 as the best deal feasible under the 

circumstances. The Determination makes no such finding concerning the Landing Fee 

Rent Credit and Amendment No. 3.^** Appellants argue they have established the best 

"^ FAA Policy Regarding Airport Rates and Charges, 61 FR 31994 (June 21,1996), (Rates and Charges 

Policy) section C. 

** The Director's comments regarding the benefit of the agreement with FedEx were limited to the 

Authority's ability to be self sustaining. The Director stated, "It appears that the Authority negotiated an 

17 
deal possible under the circumstances but fail to acknowledge that - other than FedEx -

none of the other Signatory Airlines, including the Complainants, had any say in 

determining the terms of the deal. 

These statements are also inconsistent with the allegation that the Director did not 

consider Amendment No. 3 as a whole. The fact that the Director reviewed a particular 

aspect of Amendment No. 3 - the Landing Fee Rent Credit - separately, does not detract 

from the Director's review of the entire Amendment. As noted by the Complainants, the 

"gravamen of the Joint Complaint was that appHcation of the FedEx [Landing Fee] Rent 

Credit would cause the Joint Complainants to pay more in landing fees than they 

otherwise would have to pay in the absence of the [Landing Fee] Rent Credit." [FAA 

Exhibit 1, Item 28, page 15.] For the reasons stated above, it was reasonable for the 

Director to review in detail and provide guidance concerning the aspect that is the subject 

of the Complaint. 

The Associate Adminisfrator finds the Director did not fail to assess the impact of 

Amendment No. 3 as a whole and did not err by discussing the Landing Fee Rent Credit 

separately. 

Issue C: No Residual Apron Costs in Landing Fee 

Appellants state, "Even with the [Landing Fee Rent] Credit, FedEx's rent exceeds the 

Authority's costs, and no residual apron costs are included in the landing fee rate 

calculation." [FAA Exhibit 1, Item 26, page 14.] 

Appellants state, ".. .the Determination's dicta, addressing how Grant Assurance No. 22 

might apply if the Authority had not offered to freeze its landing fee rate through 2010, 

are based on flawed factual premises and either should be corrected or disavowed." [FAA 

Exhibit 1, Item 26, page 17.] 

Appellants do not specifically state how they believe the Director erred in discussing 

grant assurance 22, Economic Nondiscrimination, as it pertains to the residual apron cost 

being included or excluded from the landing fee. The discussion in the Determination on 

assurance 22 covers 19 pages. Appellants do not direct their appeal allegation to any 

particular point in this discussion. 

On appeal from a Director's Determination, the Appellants must demonstrate that the 

Director erred by (1) making findings of fact that were not supported by a preponderance 

of reliable, probative, and substantial evidence, or (2) by making conclusions of law that 

were not in accordance with applicable law, precedent, and public policy. Appellants 

have not met this burden on this point. The Associate Administrator will not attempt to 

make a case for the Appellants that the Appellants have not made in their appeal. 

agreement with FedEx that contributes to its ability to be self-sustaining." [FAA Exhibit 1, Item 24, 

page 37.] 

18 
(Arguments regarding landing fees relative to the Landing Fee Rent Credit are discussed 

in Issue D below.) 

Issue D: Landing Fees 

Appellants argue the Director erred in concluding that the rental provision in Amendment 

No. 3 could increase the Complainants' landing fees. [FAA Exhibit 1, Item 26, page 17.] 

To demonsfrate that Complainants will not experience an increase in their landing fees as 

a result of the Landing Fee Rent Credit to FedEx, Appellants provide a simplified 

illustration for how the Landing Fee Rent Credit is expected to work. [See FAA 

Exhibit 1, Item 26, pages 2-4.] 

In this illusfration, assume the airfield costs total $20 and all air carriers pay the same fee 

for landing one imit of weight, for example $5. If FedEx and a Complainant air carrier 

each land one unit of weight, each would pay $5. Under Amendment No. 3, FedEx 

would pay a separate apron rent to cover the amortization of the apron, for example $10, 

but that rent would be reduced if FedEx lands an additional two units of weight. So if 

FedEx continues to land just one unit of weight, it would pay $10 in rent and $5 in 

landing fees for a total of $15 while the Complainant air carrier would pay $5 in landing 

fees for its one imit. This would cover the airfield cost of $20. If, on the other hand, 

FedEx increases its landings to three units of weight, the extra landing fees would be used 

to reduce the rent. FedEx would then pay $0 in rent and $15 in landing fees for a total 

still of $15. The Complainant air carrier would continue to pay $5 with no increase at all 

in its landing fee. The airfield cost of $20 would be recovered. Appellants argue the 

Complainant air carrier would, therefore, not be impacted. [FAA Exhibit 1, Item 26, 

page 3.] 

Complainants do not argue that their landing fees will increase, per se. Rather, they 

argue the "application of the FedEx [Landing Fee] Rent Credit would cause the Joint 

Complainants to pay more in landing fees than they otherwise would have to pay in the 

absence of the Rent Credit." [FAA Exhibit 1, Item 28, page 15.] 

A better illusfration of the effect of the Landing Fee Rent Credit on landing fee rates 

would be as follows: 

Assume FedEx initially represents 50 percent (50%) of the landed weight at the Airport 

and the airfield requirement (costs to be recovered) is $1 million per year. Total landed 

weight is 400 million pounds resulting in a landing fee of $2.50 per thousand pounds of 

landed weight. FedEx increases its landed weight from 200 million to 600 million 

poimds. Total landed weight is now 800 million pounds (600 million for FedEx plus 200 

millions for the Complainants). This results in a landing fee of $1.25 per thousand 

pounds of landed weight. FedEx receives a 20 percent (20%) credit off its landed weight 

because of Amendment No. 3. FedEx's landed weight is reduced from 600 million to 

480 million pounds. Total landed weight for the landing fee calculation is now 480 

million poimds plus 200 million pounds, or 680 million pounds, resulting in a landing fee 

19 
of $1.471 per thousand pounds of landed weight. This is less than the $2.50 per thousand 

pounds before the FedEx expansion but more than the $1.25 per thousand poimds before 

the application of the FedEx Rent Credit. Complainants pay $1.471 per thousand pounds 

instead of $1.25 per thousand pounds because of the appHcation of the FedEx Rent 

Credit. 

Appellants agree Complainants will benefit from the additional fees paid by FedEx. 

Appellants state, "so long as landing fees are set on a residual basis, the Complainants 

benefit from the additional rental revenues produced by Amendment No. 3." [FAA 

Exhibit 1, Item 26, page 19.] Appellants object that the Complainants are "seeking to 

benefit from FedEx's increased activity at the Airport." [FAA Exhibit 1, Item 26, 

page 4.] Appellants argue that the Landing Fee Rent Credit is designed in such a way 

that FedEx will pay a higher percentage of the increased Airport System Requirement 

than the other air carriers. The record shows Appellants stated, ".. .any increase of the 

Airport System Requirement caused by the [Landing Fee] Rent Credit is more than offset 

by an increase in FedEx's landing fees." [See FAA Exhibit 1, Item 24, page 20.] 

The Director developed an illusfrative calculation of the Landing Fee Rent Credit for the 

year 2012. [See Table 1 below and FAA Exhibit 1, Item 24, page 20.] He showed the 

development of a $1,416,247 Credit caused by the downward adjustment of FedEx's 

landed weight from 6,182,793 pounds to an adjusted base of 5,304,500 pounds. The 

allocation of 75 percent of this incremental landed weight to the Credit and not to the 

landing fee calculation raises the resulting landing fee rate higher than would otherwise 

be the case if all landed weight was included in the landing fee calculation. 

Table 1 

Calculation of Rent Credit 

For 2012 

Acnial Landed Weight 6,182,793 

Year Rate Adjustment Adjusted Base 

2010 5,000,000 

2011 3 5,150,000 

2012 3 5,304,500 

Less Adjusted Landed Weight Base 5,304,500 

Equal: Additional Landed Weight Attributable to Expansion 878,293 

Landing Fee Rate $ 2.15 

Incremental Landing Fee Revenue $1,888,330 

Less 25% Retained for Airport System $ 472,082 

Equals 75% of Incremental Landing Fee Available for Credit $1,416,247 

The Director noted the Airport Use Agreement is a separate stand-alone agreement 

between the Authority and the Signatory Airlines, including the Complainants and 

FedEx. Amendment No. 3 is a stand-alone agreement between the Authority and FedEx. 

[FAA Exhibit 1, Item 24, page 21.] 

20 
Federal law does not require a single approach to rate-setting. Fees may be set according 

to a "residual" or "compensatory" rate-setting methodology, by a combination of the two, 

or by ordinance, statute, resolution, regulation, or agreement. The FAA Rates and 

Charges Policy states that rates, fees, rentals, landing fees, and other service charges 

imposed on aeronautical users must be fair and reasonable. In a residual methodology, 

the Signatory Airlines agree to bear the burden of any financial shortfall by the airport in 

exchange for the benefit of applying concession revenues to lower airfield costs for the 

Signatory Airlines. The residual methodology requires agreement between the airport 

and the Signatory Airlines. The Complainants are all Signatory Airlines under the 

Airport Use Agreement, which is a residual agreement. If the Authority unilaterally 

imposed the Landing Fee Rent Credit, it may be found to be subject to the reasonableness 

principle of the FAA Rates and Charges Policy. [See Rates and Charges Policy, 

section D.2 "Fair and Reasonable Fees."] 

Appellants object to any illusfration or examples of how the Landing Fee Rent Credit 

may or may not affect the Signatory Airlines in the future. Appellants argue that 

"addressing speculative future events burdens the record and requires the parties, the 

agency, and potentially the courts, to expend significant resources correcting errors in the 

Director's analysis of events that may not come to pass." [FAA Exhibit 1, Item 26, 

page 10.] As part of his determination, the Director had broad discretion to provide 

guidance to lAA as he deemed appropriate for purposes of the Compliance program. [See 

Order 5190.6A, page 35. (5*6^ footnote # 44 above.) Note: The Airport Comphance 

Division's role in providing education and advisory services is addressed in FAA 

Order 5190.6B in chapter 2, pages 2-1 through 2-3.] Appellants fail to demonsfrate how 

this discretion was abused or exercised improperly as a matter of law. 

It should be noted that when the Complaint was filed this was not a "speculative fiiture 

event." Amendment No. 3 to the FedEx agreement allows for 20 years of Landing Fee 

Rent Credits. Complainants argued this Landing Fee Rent Credit over the course of 20 

years would cause Complainants to pay higher landing fees than they otherwise would 

pay in the absence of the Rent Credit. [FAA Exhibit 1, Item 28, page 2.] Complainants 

are not arguing their landing fees would be higher than they are right now; only that they 

would be higher with the Landing Fee Rent Credit than if the Landing Fee Rent Credit 

were not applied. 

After the Complaint was filed. Appellants agreed to freeze landing fee rates through the 

end of the current Airport Use Agreement, which expires December 31, 2010. Since the 

Landing Fee Rent Credit was not applied currently, the Director determined there was no 

current violation of the Authority's federal obligations with regard to a Credit that may or 

may not occur in the future. [See FAA Exhibit 1, Item 28, page 2.] 

Appellants object to the Director's statement, ".. .the Authority cannot impose the cost of 

FedEx's [Landing Fee] Rent Credit on other carriers even if the other carriers benefit 

from the additional operations by FedEx as a result of having the airfield costs spread 

over more operations, and even if the other carriers actually pay less as a result of the 

21 
overall deal." [FAA Exhibit 1, Item 24, Director's Determination, page 40 and Item 26, 

pages 17-18.] 

Appellants argue the Director erred in this statement because: 

1. The Determination does not and cannot show that Complainants would bear increased 

costs. [FAA Exhibit 1, Item 26, page 18.] 

2. The Determination's assumption that FedEx's incremental fees reflect increased wear 

and operational costs is not supported. [FAA Exhibit 1, Item 26, page 20.] 

3. The Determination erred in rejecting controlling precedent from the Miami Rates 

proceeding. [FAA Exhibit 1, Item 26, page 21.] 

1. Increased Costs 

Appellants argue that the "Determination does not and cannot show that 

Complainants would bear increased costs." [FAA Exhibit 1, Item 26, page 18.] 

As stated throughout the adminisfrative record, the focus of the Complaint is not 

that the landing fee rates will be higher than they are right now (increased costs), 

but that Complainants may pay higher landing fees over many years than they 

otherwise would pay in the absence of the FedEx Landing Fee Rent Credit. [See 

FAA Exhibit 1, Item 28, page 3.] 

The Director found that since the Complainants and Authority operate on a 

residual fee structure methodology by mutual agreement under the Airport Use 

Agreement, the Landing Fee Rent Credit could not be unilaterally imposed even 

if the Complainants actually pay less than they otherwise would have paid. [FAA 

Exhibit 1, Item 24, page 21.] It is immaterial whether the costs increase or 

decrease. Under the Airport Use Agreement, Complainants and the Authority 

have a process to follow for the development of capital improvements. [FAA 

Exhibit 1, Item 24, page 26.] The Airport Use Agreement would be the 

confrolling document to determine how that process will be applied. The 

imposition of landing fees on air carriers in the absence of following an agreedupon process would be subject to the reasonableness principle of the FAA Rates 

and Charges Policy. [See Issue F below.] 

The Associate Adminisfrator finds the Director did not make any findings on the 

premise that Complainants would have increased costs over their current fee 

structure. Rather, the Director's analysis follows the primary focus of the 

Complaint that the Complainants' landing fees could he higher if the Landing Fee 

Rent Credit to FedEx is applied than those fees would otherwise be under the 

residual methodology defined and agreed to in the Airport Use Agreement. 

22 
2. Wear and Tear 

Appellants argue the Determination's assumption that FedEx's incremental fees 

reflect increased wear and operational costs is not supported. [FAA Exhibit 1, 

Item 26, page 20.] 

Appellants object to the Director's statement that "FedEx's additional operations 

will impose costs on the airfield proportionate to the additional fees it is paying in 

the form of pavement wear and airport operations costs." [See FAA Exhibit 1, 

Item 26, page 20; and Item 24, page 43.] Appellants argue "there is no record 

evidence demonstrating that increased operations by FedEx will result in a 

proportional increase in pavement wear or airport operations costs." [FAA 

Exhibit 1, Item 26, page 20.] Appellants fiirther state the Determination conducts 

no analysis of the types of aircraft operated by FedEx, the Complainants, or any 

other airline at the Airport, or their individual certificated maximum take-off 

weight or landing weight, or their landing gear configuration, or the airlines' total 

number of takeoffs, operational frequencies, fraffic mixtures, or even specific 

runway and taxiway use. [See FAA Exhibit 1, Item 26, page 20.] 

The Associate Adminisfrator concurs with the Appellants on this point. There 

was no analysis to confirm or deny that FedEx's additional operations will impose 

costs on the airfield proportionate to the additional fees it will be paying. 

The Associate Administrator finds it reasonable, however, to conclude that 

increased operations will result in increased wear of the airfield. Whether the fees 

assessed to FedEx ZHQ proportionate to that increased wear - or are higher than or 

lower than that increased wear - cannot be assessed from the information 

provided. 

The crux of the Complaint is that Complainants might pay higher landing fees as 

a result of the Landing Fee Rent Credit to FedEx than they would otherwise pay 

in landing fees under the same circumstances if the Credit were not applied. Even 

though it may have been the Airport's intent to apply the Landing Fee Rent Credit 

currently, the Director found that the Airport had not implemented its plan. As 

such, the Director found Complainants were arguing against an uncertain 

potential future event and determined the Airport was not currently in violation of 

its federal obligations. [See FAA Exhibit 1, Item 24, Director's Determination, 

pages 28-29 and 35.] 

3. Miami Rates Proceeding 

Appellants argue the Determination erred in rejecting confrolling precedent from 

the Miami Rates proceeding. [FAA Exhibit 1, Item 26, page 21.] 

Complainants point out that the Director did not reject the Miami Case, but 

distinguished the facts in that case from those presented in this case. [See FAA 

23 
Exhibit 1, Item 28, page 19.] The Director wrote, "Credits given back to FedEx in 

return for landed weight will serve to dilute the costs of the improvements to 

FedEx and will spread them out, through the residual agreement, to all Signatory 

Airlines at the Airport. It is not reasonable to impose one carrier's special facility 

costs on other carriers where there will not be a reciprocal benefit, as in the blended 

rates in the Miami terminal, where all the carriers would eventually have their 

facilities upgraded. Furthermore, it is confrary to the express terms of the [Airport 

Use] Agreement." [FAA Exhibit 1, Item 24, page 32.] 

The Associate Administrator finds the Director did not reject the Miami Rates 

proceeding, but considered the facts of the Miami Case in light of the evidence 

presented in this current case. 

The Associate Adminisfrator finds the Director did not err in reasoning the rental 

provision in Amendment No. 3 could increase the Complainants' landing fees over what 

those fees might be if the Landing Fee Rent Credit were not applied. 

Issue E: Reconciliation with FAA, DOT, and Appellate Precedent 

Appellants argue the Determination's dicta regarding grant assurance 22, Economic 

Nondiscrimination, cannot be reconciled with FAA, DOT, or appellate precedent. [FAA 

Exhibit 1, Item 26, page 24.] As with Issue C above, the Appellants are not specific with 

regard to their allegations. 

Appellants argue Complainants bear the burden of proving the existence of unjust 

discrimination under grant assurance 22, Economic Nondiscrimination. Appellants 

further argue "Complainants could not establish unjust economic discrimination as to 

landing fee rates..." [FAA Exhibit 1, Item 26, page 26.] The Associate Adminisfrator 

notes the Director did not find the Authority in violation of grant assurance 22. 

Appellants further argue Complainants could not establish they had been subjected to 

unjust economic discrimination as to rental rates. [FAA Exhibit 1, Item 26, page 27.] 

Again, the Associate Administrator notes the Director did not find the Authority in 

violation of grant assurance 22. 

Appellants argue "the Authority submitted evidence that Amendment No. 3 was 

consistent with the Authority's non-discriminatory policy of providing Rent Credits in 

recognition of airline tenant investments." Appellants acknowledge, "While no other air 

carrier has received a credit as large as that which \s potentially available to FedEx, no 

other air carrier has invested nearly as much capital as FedEx in facilities that will revert 

to Authority ownership." [FAA Exhibit 1, Item 26, page 28.] Once again, the Associate 

Administrator notes the Director did not find the Authority in violation of grant 

assurance 22. 

Appellants argue FedEx and the Complainants are not similarly situated as to rental rates. 

[FAA Exhibit 1, Item 26, page 29.] The Director documented the Authority's arguments 

24 
that the parties are not similarly situated in the Determination. [See FAA Exhibit 1, 

Item 24, pages 33-34.] Nonetheless, the Director found FedEx and all of the Signatory 

Airlines "are similarly situated under the terms of the [Airport Use] Agreement." [FAA 

Exhibit 1, Item 24, page 34.] 

Appellants admit the parties are similarly situated for landing fee rates, but argue they are 

not similarly situated for rental rates. [FAA Exhibit 1, Item 26, page 29.] Appellants 

state, "The rent that FedEx and the Complainants pay can and should be different because 

they are not similarly situated with respect to those rates." [FAA Exhibit 1, Item 26, 

page 29.] This is irrelevant. FedEx rental rates were not the subject of the Complaint 

and Determination. The issue was whether the Complainants would pay higher landing 

fees than they would pay absent the Landing Fee Rent Credit. FedEx rent is not the issue; 

landing fee rates are. [See FAA Exhibit 1, Item 24, page 15.] The Director found that 

since the landing fee rates were frozen at 2008 levels through December 31, 2010, there 

is no current noncompliance. [FAA Exhibit 1, Item 24, page 35.] 

Even though the Director found the Authority in current compliance with their federal 

obligations. Appellants argue that the Director's "hypothetical findings about how Grant 

Assurance 22 might apply if the Authority had not offered to freeze the landing fee rates 

at 2008 level" are inconsistent with the Director's acknowledgement that it is not 

appropriate at this time to rule on the Authority's possible fiiture application of the 

Landing Fee Rent Credit for the FedEx apron. [FAA Exhibit 1, Item 26, page 25.] 

The Director did not find the Authority in violation of grant assurance 22, but did state 

the Complainants' argument that they will incur additional costs as a result of 

Amendment No. 3 could be valid z/the Authority imposes this arrangement on the 

airlines without their concurrence. [FAA Exhibit 1, Item 24, page 32.] The Director 

fiirther stated, "The responsibility for resolving the dispute over a Credit that has yet to be 

applied rests first with the Authority and then Complainants, not the FAA." [FAA 

Exhibit 1, Item 24, page 33.] The Director offered three scenarios: 

"If the Complainants agree to include the [Landing Fee Rent] Credit in a 

future methodology, it would not violate the FAA grant assurances or 

Rates and Charges Policy." 

"If the Authority imposes landing fees on the carriers, those fees will be 

subject to the reasonableness principle of the Rates and Charges Policy.'''' 

"If the Complainants agree to extend the [Airport Use] Agreement and not 

amend it to recognize the [Landing Fee Rent] Credit, and the Credit is not 

applied, this matter would continue to be a contract dispute and Part 16 

would not be the appropriate venue." 

[FAA Exhibit 1, Item 24, page 33. See also Errata to the Director's Determination at 

FAA Exhibit 1, Item 25.] 

25 
Appellants do not explain how any of these statements are incorrect. If the Complainants 

and Appellants agree to a methodology, there will be no issue. If they do not agree, the 

FAA Rates and Charges Policy will apply. If the issue remains a confract dispute not 

subject to the Part 16 proceeding, the FAA will not be involved and will not render a 

finding. A specific finding on a possible fiiture event is not predetermined. Depending 

on the resolution between the Complainants and Appellants, the issue may be subject to 

the Rates and Charges Policy and would have to be reviewed in light of the facts and that 

policy at that time. 

The Associate Adminisfrator finds no error with these statements. The Associate 

Administrator finds the Director did not err in his guidance or discussion regarding 

possible fiiture application of grant assurance 22, Economic Nondiscrimination. 

Issue F: Residual Rates 

Appellants argue on appeal the Determination erred in failing to recognize that residual 

rates frequently include costs of facilities not benefiting all airlines. [FAA Exhibit 1, 

Item 26, page 31.] 

Appellants point to the Director's statement, "The [Rates and Charges] Policy would not 

permit the authority to unilaterally impose the costs of one carrier on all other carriers by 

adding such costs to its coimnon rate base unless approved by those carriers." [FAA 

Exhibit 1, Item 24, page 33; and Item 26, page 31.] 

Appellants point out that "Federal law clearly establishes that airports may use a residual 

methodology for computing airport fees." [FAA Exhibit 1, Item 26, page 32.] 

Appellants explain the basis of a residual methodology versus a compensatory 

methodology in setting rates. Under a compensatory fee methodology, the fees charged 

will be based on the costs attributable to the users of that facility or service. Under a 

residual methodology, the landing fees provide the revenue needed by the airport to offset 

the difference between the airport's total expenses and the revenue collected by the 

airport from other sources, such as concessions. [See FAA Exhibit 1, Item 26, page 32.] 

Appellants fail to point out that an airport may elect to use a compensatory fee 

methodology without any agreement from the air carriers, but a residual methodology 

requires agreement by the air carriers. In a residual methodology, the Signatory Airlines 

agree to bear the burden of any financial shortfall in exchange for reaping the benefit of 

applying concession revenues to offset airfield costs. The residual methodology requires 

agreement. The Complainants are all Signatory Airlines under the Airport Use 

Agreement. That agreement provides the processes the Authority and Signatory Airlines 

have agreed to for the development and recovery of costs for capital improvements on the 

Airport. [See FAA Exhibit 1, Item 24, page 26.] 

The Director noted, "Under the existing [Airport Use] Agreement, the FedEx [Landing 

Fee Rent] Credit cannot be imposed unilaterally on the Complainants." [See FAA 

26 
Exhibit 1, Item 24, page 21.] Such an imposition may be subject to the reasonableness 

principle of the FAA Rates and Charges Policy. 

Appellants argue "The Determination's rule would foreclose the Authority from using the 

fee methodology on which it has relied for years to finance Airport expansion." [FAA 

Exhibit 1, Item 26, page 34.] 

This is incorrect. The Determination contemplates that the Authority would implement 

the residual rate methodology as agreed to with the Signatory Airlines in the Airport Use 

Agreement. The Airport Use Agreement is a separate stand-alone agreement between the 

Authority and the Signatory Airlines, including the Complainants. As noted under 

Issue E above, 

"If the Complainants agree to include the [Landing Fee Rent] Credit in a 

future methodology, it would not violate the FAA grant assurances or 

Rates and Charges Policy." 

"If the Authority imposes landing fees on the carriers, those fees will be 

subject to the reasonableness principle of the Rates and Charges Policy." 

"If the Complainants agree to extend the [Airport Use] Agreement and not 

amend it to recognize the [Landing Fee Rent] Credit, this matter would 

continue to be a confract dispute and Part 16 would not be the appropriate 

venue." 

[See VAA Exhibit 1, Item 24, page 33.] 

The Associate Administrator finds the Director properly explained and analyzed how 

compensatory and residual fee setting methodologies could apply in the present case. 

Residual fee setting methodologies - which the Authority uses - require agreement from 

the Signatory Airlines in the form of the Airport Use Agreement. Unilateral charges 

applied that are not consistent with the terms of the Airport Use Agreement as agreed to 

by the Signatory Airlines will be subject to the reasonableness principle of the FAA Rates 

and Charges Policy. 

The Associate Administrator finds the Director did not err in explaining or interpreting 

how the rate setting methodology is applied at Indianapolis International Airport. 

Issue G: BAA-Indianapolis 

Appellants argue on appeal that BAA-Indianapolis should not have been named as a corespondent in the Complaint because BAA-Indianapolis was the Authority's managing 

agent for operations only and was not an Airport sponsor. [FAA Exhibit I, Item 26, 

pages 34-35.] In addition. Appellants argue the contract between the Authority and 

BAA-Indianapolis expired by its terms on December 31, 2007. [FAA Exhibit 1, Item 26, 

page 35.] 

27 
In its initial Answer, Respondents argued that the entire Complaint should be dismissed 

because neither BAA-Indianapolis nor the Airport should have been named as parties to 

the action. [FAA Exhibit 1, Item 10, page 12, Motion to Dismiss.] 

The Director rejected the Respondents' motion to dismiss the entfre Complaint with the 

following statement: 

"The Authority requested the FAA dismiss the complaint because the Joint 

Complainants misnamed the responsible party. FAA Exhibit 1, Item 10, 

pages 12-13. The Complainants listed the Authority, the Airport and BAAIndianapolis, the airport operator as parties to the complaint. The FAA 

agrees its enforcement authorities under Part 16.1 are generally limited to 

actions taken by the sponsor, especially with regard to the Grant assurances, 

but the FAA will not dismiss the Complaint based on this assertion by the 

Authority. Under Part 16, the Authority is generally responsible for the 

actions taken by the Airport and BAA-Indianapolis, and FAA will hold the 

Authority responsible for actions taken by the Airport and/or BAAIndianapolis." [FAA Exhibit 1, Item 24, Director's Determination, 

page 15, footnote #59.] 

In its appeal, the Appellants argue that BAA-Indianapolis should have been dismissed as 

a named party. 

It is unclear what the Appellants hope to achieve by arguing BAA-Indianapolis should 

not have been a named party. The adminisfrative record shows that negotiations with 

FedEx for the expansion of its domestic cargo facilities and operations at the Airport 

were ongoing during 2006 and 2007 when BAA-Indianapolis was the operating manager 

at the Airport. [See FAA Exhibit 1, Item 24, Director's Determination, "background" 

pages 4-6.] As operating manager, they may have been directly or indirectly involved in 

some of the negotiations with FedEx. Whether they were or not did not affect the 

Director's findings that the Airport was in current compliance with its federal obligations. 

Appellant does not demonstrate that the Director erred by (1) making findings of fact that 

were not supported by a preponderance of reliable, probative, and substantial evidence, or 

(2) by making conclusions of law that were not in accordance with applicable law, 

precedent, and public policy by including BAA-Indianapolis as a Respondent to this 

Complaint. Neither does the Appellant show that this inclusion of BAA-Indianapolis as a 

Respondent in any way affected the outcome of the Determination. The Associate 

Adminisfrator finds the Director did not err in including BAA-Indianapolis as a 

Respondent in this matter. 

VII. FINDINGS and CONCLUSIONS 

FAA's role in this appeal is to determine whether the Director erred in findings of fact or 

conclusions of law in issuing the Director's Determination of August 19, 2008. 

28 
Upon an appeal of a Part 16 Director's Determination, the Associate Administrator must 

determine whether (a) the findings of fact made by the Director are supported by a 

preponderance of reliable, probative, and substantial evidence, and (b) each conclusion of 

law is made in accordance with applicable law, precedent, and public policy. [See e.g. 

Ricks V MiUington Municipal Airport, FAA Docket No. 16-98-19 (December 30,1999) 

(Final Decision and Order), page 21, and 14 CFR § 16.227.] 

In arriving at a final decision on this appeal, the FAA has reexamined the record, 

including the Director's Determination, the adminisfrative record supporting the 

Director's Determination, and the appeal and reply (if any) submitted by the parties, in 

light of applicable law and policy. Based on this reexamination, the Associate 

Administrator concludes that the Director's Determination is supported by a 

preponderance of reliable, probative, and substantial evidence, and is consistent with 

applicable law, precedent, and FAA policy. 

With the exception of stating "FedEx's additional operations will impose costs on the 

airfield proportionate to the additional fees it is paying in the form of pavement wear and 

airport operations costs" without conducting analysis to confirm or deny that FedEx's 

additional operations will impose costs on the airfield proportionate to the additional fees 

it will be paying,'*' the appeal does not contain persuasive arguments sufficient to reverse 

any portion of the Director's Determination. This statement by the Director is not a fatal 

error and does not affect the conclusions or findings of the Determination. 

While the Director's conclusions turned on the lack of ripeness of the Complaint, it was 

appropriate and permissible for the Director to include guidance on the FAA Rates and 

Charges Policy in the Determination. In this case, the challenged fee methodology was 

raised by Complainants; the challenged fee methodology could go into effect as soon as 

the current Airport Use Agreement expires in 2010; the Appellant lAA has already 

signed a lease (Amendment No. 3) with one carrier that would impose the challenged 

charge on other carriers; and the challenged charge has been defended by the Appellants 

in this proceeding. Accordingly, the Director properly reasoned that guidance on the 

FAA Rates and Charges Policy was appropriate both to address the incoming Complaint 

and to ensure that future fees comply with applicable federal policies. Moreover, the 

Director made it clear that the guidance provided on this issue was not itself a finding or 

conclusion of compliance or noncompliance with the grant assurances. The Director 

would issue such findings and conclusions only after a presentation of the facts and 

circumstances in effect at such time as the charge was actually implemented by the 

Appellants. 

The Associate Administrator affirms the Director's Determination. This decision 

constitutes the final decision of the Associate Administrator for Airports pursuant to 14 

CFR§ 16.33(a). 

49 See discussion in this document under Issue D (2). 

29 
ORDER 

ACCORDINGLY, it is ordered that (1) the Director's Determination is affirmed, and (2) 

the appeal is dismissed, pursuant to 14 CFR § 16.33. 

RIGHT TO APPEAL 

A party to this decision disclosing a substantial interest in the final decision and order of 

the Federal Aviation Administration may file a petition for review pursuant to 49 U.S.C. 

§ 46110, in the United States Court of Appeals for the District of Columbia Circuit or in 

the court of appeals of the United States for the Circuit in which the person resides or has 

its principal place of business. The petition must be filed not later than 60 days after a 

Final Decision and Order has been served on the party. [14 CFR, Part 16, § 16.247(a).] 

Catherine M. Lang \ 'DA e 

Acting Associate/(<^inisfrator 

for Airports ^-^ 

30 
FAA Exhibit 1 

Docket No. 16-07-03 

Final Decision and Order 

INDEX OF THE ADMINISTRATIVE RECORD 

Docket No. 16-07-04 

Northwest Airlines, Inc., Delta Airlines, Inc. 

AirTran Airways Inc., Continental Airiines, Inc., 

Southwest Airlines, Inc. 

Complainants / Appellees 

V 

Indianapolis Airport Authority, Indianapolis 

International Airport, BAA-Indianapolis 

Respondents / Appellants 

The following documents (items) constitute the administrative record in this proceeding: 

Items 1-23 make up the administrative record for the Director's Determination. 

Items 24-36 and Item 16(b) represent the additional items received as part of the appeal and 

documents prepared after the Director's Determination was issued. 

Item 1 Complaint dated April 13,2007, including appendices containing the following 

documents: 

• Exhibit 1 Amendment No. 3 to Amended and restated Land Lease Agreement 

between Indianapolis Airport Authority and Federal Express 

Corporation, dated April 14, 2006. 

a Exhibit 2 IND FedEx Sort Facility Apron-Airport Lease Deal - Projections. 

Q Exhibit 3 Declaration of Erin L. Heitkamp, April 12,2007. 

a Exhibit 4 Letter from Erin L. Heitkamp, Chairperson IND AAAC to Mr. Lacy 

Johnson, Board President, Indianapolis Airport Authority, 

May 5,2006. 

Item 2 

Items 

Item 4 

Motion of Continental Airlines, Inc to Join Complaint as a Joint Complainant, 

April 20, 2007. 

Answer to Motion of Continental Airlines, Inc. to Join Complaint as a Joint 

Complainant, May 1, 2007. 

Motion Requesting Extension of Time, May 1, 2007. 

31 
Item 5 Answer of Northwest Airlines, Inc., Delta Airlines, Inc., and Airtran Airways, 

Inc. to Motion Requesting an Extension of Time, May 2, 2007. 

Item 6 Motion of Southwest Airlines Co. to Join Complaint as a Joint Complainant, 

May 4, 2007. 

Item 7 FAA Order to grant Continental's Motion to join Complaint as a Joint 

Complainant, May 4,2007. 

Item 8 Answer to Motion to Southwest Airlines Co. to Join Complaint as a Joint 

Complainant, May 9,2007. 

Item 9 Notice to All Parties to delete Ron Ricks and Deborah Ackerman as 

representatives of Southwest Airlines, Co., June 4, 2007. 

Item 10 Answer and Motion to Dismiss, June 4, 2007, including the following exhibits: 

• Exhibit A Affidavit of John J. Kish, June 1, 2007. 

• Exhibit B Federal Express Apron Expansion (Draft), April 3, 2006, Letter from 

Patrick F. Dooley, SCMD, Airport Director, BAA Indianapolis LLC to 

Mr. Dan Hindes, Northwest Airlines, Inc, April 5, 2006, and 

Agreement and Lease of Premises at Indianapolis International Airport 

with Indianapolis Airport Authority, Indiana, March 15, 2001. 

• Exhibit C Amended and Restated Land Lease Agreement and exhibits, 

August 19, 1993, Amendment No. 1 to Amended and Restated Land 

Lease Agreement and exhibits, October 26, 1994, and Amendment 

No. 2 to Amended and Restated Land Lease Agreement and exhibits, 

June 5, 2000. 

Q Exhibit D Amendment No. 3 to Amended and restated Land Lease Agreement 

between Indianapolis Airport Authority and Federal Express 

Corporation, dated April 14, 2006. 

• Exhibit E Airline Activity Report, December 2006. 

a Exhibit F E-mail Heitkamp, Erin to Patrick Dooley, February 8, 2007. Includes 

table attachment. 

• Exhibit G E-mail exchange between Heitkamp, Erin and Patrick Dooley, 

January 31, 2007. Includes table insert. 

• Exhibit H None. 

a Exhibit I Indianapolis Airport Authority Analysis of FedEx Amendment Jun 

2007. (Table). 

a Exhibit J Indianapolis Airport Authority Analysis of FedEx Landed Weights For 

the Period 2005 through March 2007. (Table). 

32 
• Exhibit K Affidavit, John George, June 1, 2007. 

a Exhibit L Letter from Patrick F. Dooley, SCMD, Airport Director, BAA 

Indianapolis LLC to Erin Heitkamp, Northwest Airlines, Inc., May 3, 

2006, and Lease Synopsis Federal Express [13 pages]. Report dated 

January 31, 2007. 

• Exhibit M IND Landed Weights, Passenger v. cargo, 1990-2005. 

Q Exhibit N Letter from David L. Bennett, Assistant Chief Counsel for Airports 

and Environmental Law, FAA, to Joseph R. Niemarm, General 

Counsel, City of St. Louis Airport Authority, December 2, 1993. 

• Exhibit H News Article entitled Adding Multimedia FedEx Express, Indianapolis 

Airport Authority Unveil Plans for Expansion of Carrier's Hub, May 4, 

2006. 

Item 11 Unopposed Motion for Extension of Time, June 8, 2007. 

Item 12 Reply and Answer to Motion to Dismiss of Northwest Airlines, Inc., Delta Air 

Lines, Inc., Airtran Airways, Inc., Continental Airlines, Inc., and Southwest 

Airlines, Inc., June 25, 2007. Included Declaration of Erin L. Heitkamp, June 22, 

2007. 

Item 13 Rebuttal, July 16, 2007, including the following exhibits: 

a Exhibit A Rebuttal Affidavit of John J. Kish, July 12, 2007. 

• Exhibit B Financial tables, numbered Exhibits C through G. 

• Exhibit C Indianapolis International Airport, Memo from Jeannie Weiss to Bob 

Duncan, (undated) 

• Exhibit D Signatory Airline Rates and Charges for the Last Ten Years Ended 

December 31. 

Q Exhibit E Letter from John J. Kish, Midfield Project Director, New Indianapolis 

Airport, to Erin Heitkamp, Northwest Airlines, Inc., June 13, 2007. 

Includes two financial tables. 

Item 14 Motion for Leave to File and Response of Northwest Airlines, Inc., Delta Air 

Lines, Inc., Airtran Airways, Inc., Continental Airlines, Inc., and Southwest 

Airiines Co., July 30, 2007. 

Item 15 Respondent's Answer to Complaining Airlines' Motion for Leave to File and 

Response, August 9, 2007. 

Item 16 (a) FAA Form 5010, dated November 14, 2007 

Item 16 (b) FAA Form 5010, dated September 25, 2008 

Item 17 Notice of Extension of Time, December 5, 2007. 

33 
Item 18 AIP grant history for IND., dated December 10, 2007. 

Item 19 Official Statement for the Indianapolis Local Public Improvement Bond Bank 

Bonds, Series 2006 (Indianapolis Airport Authority Project). 

Item 20 Response of the Indianapolis Airport Authority to FAA's Request for Additional 

Information - May 12, 2008 

Item 21 Reply of the Northwest Airlines, Inc., Delta Airlines, Inc., Airtran Airways, Inc., 

Continental Airlines, Inc., and Southwest Airlines Co., to the Response of the 

Indianapolis Airport Authority, June 11,2008. 

Item 22 Request for Additional Information From Respondents and Notice of Extension 

of Time, March 28, 2008. 

Item 23 Notice of Extension of Time, dated June 23,2008. 

Item 24 Director's Determination, dated August 19, 2008 

Item 25 Errata to the Director's Determination, dated October 7, 2008. 

Item 26 Appeal of the Indianapohs Airport Authority, dated September 22, 2008. 

Attachment A September 18,2008 letter from Robert E. Cohn and Patrick R. Rizzi of 

Hogan & Hartson, L.L. P. representing complainant air carriers 

requesting clarification of the Director's Determination. 

Item 27 November 21, 2008, Notice of Extension of Time extending the date by which 

the Complainant's Reply is due to December 5, 2008. 

Item 28 Reply of the Complainants, received December 4, 2008. 

Item 29 February 3, 2009, Notice of Extension of Time extending the date by which the 

Final Agency Decision will be issued to March 3, 2009. 

Item 30 February 26, 2009, Notice of Extension of Time extending the date by which the 

Final Agency Decision will be issued to April 2, 2009. 

Item 31 March 24, 2009, Notice of Extension of Time extending the date by which the 

Final Agency Decision will be issued to May 14, 2009. 

Item 32 May 12, 2009, Notice of Extension of Time extending the date by which 

the Final Agency Decision will be issued to June 24, 2009. 

Item 33 June 19, 2009, Notice of Extension of Time extending the date by which 

the Final Agency Decision will be issued to August 19, 2009. 

Item 34 July 30, 2009, Notice of Extension of Time extending the date by which 

the Final Agency Decision will be issued to September 28, 2009. 

34 
Item 35 September 28, 2009, Notice of Extension of Time extending the date by 

which the Final Agency Decision will be issued to November 2, 2009. 

Item 36 September 25, 2008, letter to Randall S. Fiertz, Director, Office of Airport 

Compliance and Field Operations, from Spiegel & McDiarmid, LLP, 

regarding letter from Complainants dated September 18, 2008. 

35