United States 

Environmental Protection 

Agency 

Economic Analysis for Final Effluent 

Limitation Guidelines and Standards 

for the Airport Deicing Category 

$SULO2012

 
U.S. Environmental Protection Agency 

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

Engineering and Analysis Division 

1200 Pennsylvania Avenue, NW 

Washington, DC 20460 

EPA-821-R-12-004 
Economic Analysis for Final Effluent Limitation Guidelines 

and Standards for the Airport Deicing Category 

TABLE OF CONTENTS 

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

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

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

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

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

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

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

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

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

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

2.3.1 Number and Size .................................................................................................... 2-7

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

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

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

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

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

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

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

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

2.4.3 Growth in Air Travel ............................................................................................ 2-15

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

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

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

2.5 Airport Survey ............................................................................................................ 2-18

2.6 Airport Management ................................................................................................... 2-19

2.6.1 Airport Ownership and Management ................................................................... 2-19

2.6.2 Airport Financial Management ............................................................................ 2-21

2.6.2.1 Funding Methods ................................................................................. 2-21

2.6.2.2 Revenue Categories and Operating Profit............................................ 2-23

2.6.2.3 Cost Trends .......................................................................................... 2-25

2.6.2.4 Capital Financing ................................................................................. 2-25

2.6.2.5 Net Operating Revenues ...................................................................... 2-31

2.6.3 Airport Finance and the Economic Impact Analysis ........................................... 2-32

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2.7 Airline Financial Management ................................................................................... 2-32

2.7.1 Historical Overview of Airline Profitability ........................................................ 2-32

2.7.2 Factors in Airline Profitability ............................................................................. 2-35

2.7.2.1 Industry Characteristics Affecting Profitability ................................... 2-35

2.7.2.2 Factors Controlled by the Airlines ....................................................... 2-36

2.7.2.3 Labor Costs .......................................................................................... 2-36

2.7.2.4 Fuel Costs ............................................................................................ 2-37

2.7.2.5 Landing Fees ........................................................................................ 2-37

2.7.3 Industry Concentration ......................................................................................... 2-38

2.7.3.1 Market Power ....................................................................................... 2-38

2.7.3.2 Barriers to Exit ..................................................................................... 2-39

2.8 Airport-Airline Interactions ........................................................................................ 2-41

2.8.1 Effect of Airline Bankruptcies on Airports .......................................................... 2-41

2.8.2 Airport-Airline Cost Pass-Through Analysis ....................................................... 2-41

2.8.2.1 Airports to Airlines .............................................................................. 2-41

2.8.2.2 Airlines to Passengers .......................................................................... 2-46

2.9 Alaska ......................................................................................................................... 2-47

2.9.1 Alaska International Airport System .................................................................... 2-50

2.9.2 Alaska Rural Airport System ............................................................................... 2-50

2.9.2.1 RAS Airport Funding .......................................................................... 2-50

2.9.2.2 AIP Spending ....................................................................................... 2-50

2.9.2.3 Other Funding Issues ........................................................................... 2-52

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

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

2.10 References .................................................................................................................. 2-53

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

3.1 Compliance Cost Annualization ................................................................................... 3-1

3.1.1 Airport Financing Methods for Capital Expenditures ............................................ 3-2

3.1.2 Compliance Cost Annualization ............................................................................ 3-3

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

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

3.2.1 Ratio of Annualized Compliance Costs to Operating Revenues ............................ 3-7

3.2.2 Annualized Compliance Cost per Enplaned Passenger .......................................... 3-8

3.2.3 Debt Service Coverage Ratio ................................................................................. 3-9

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3.3 Analysis of Potential Impacts to Air Service .............................................................. 3-11

3.4 Extrapolation of 2004 Compliance Costs to Analyze Additional Years .................... 3-11

3.5 Methodology for Estimating Costs and Projecting Impacts to Co-permittee 

Airlines ....................................................................................................................... 3-12

3.6 References .................................................................................................................. 3-14

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

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

4.2 Technology Basis for Aircraft Deicing Fluid Control .................................................. 4-2

4.2.1 Glycol Collection Vehicle ...................................................................................... 4-2

4.2.2 Plug and Pump ....................................................................................................... 4-2

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

4.2.4 Anaerobic Fluidized Bed Biological Treatment..................................................... 4-3

4.2.5 Technology Basis for Airfield Deicing Control ..................................................... 4-3

4.3 Analyzed Options ......................................................................................................... 4-3

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

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

5.1 National Costs of the Airport Deicing Effluent Limitation Guidelines ........................ 5-1

5.2 Airport Revenue Test Analysis ..................................................................................... 5-4

5.3 Cost per Enplaned Passenger ........................................................................................ 5-6

5.4 Debt Service Coverage Ratio Analysis ......................................................................... 5-9

5.5 Impacts on Airports Owned by the State of Alaska.................................................... 5-13

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

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

5.6 Impacts to Airline Cost per Available Seat Mile ........................................................ 5-14

5.7 Results of Co-permittee Airline Impact Analysis ....................................................... 5-18

5.8 New Source Performance Standards .......................................................................... 5-27

5.9 Summary of Projected Impacts for Final Regulatory Options ................................... 5-27

5.10 References .................................................................................................................. 5-28

 CHAPTER 6 IMPACTS ON SMALL ENTITIES ............................................................................... 6-1

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

6.2 Small Business Analysis ............................................................................................... 6-2

6.2.1 Impacts to Small Airports ...................................................................................... 6-2

6.2.1.1 Estimated Number of Small Airports .................................................... 6-2

6.2.1.2 Projected Compliance Costs for Small Airports .................................... 6-3

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6.2.1.3 Projected Revenue Impacts to Small Airports ....................................... 6-4

6.2.2 Impacts to Small Co-permittee Airlines ................................................................. 6-6

6.2.2.1 Estimated Number of Small Co-permittee Airlines ............................... 6-6

6.2.2.2 Projected Compliance Costs for Small Co-permittee Airlines .............. 6-7

6.2.2.3 Projected Revenue Impacts to Small Co-permittee Airlines ................. 6-7

6.3 Regulatory Flexibility ................................................................................................. 6-10

6.4 References .................................................................................................................. 6-11
Economic Analysis for Final Effluent Limitation Guidelines 

and Standards for the Airport Deicing Category 

LIST OF TABLES 

Table 2-1. Distribution of U.S. Airports in NPIAS (2004) ........................................................................ 2-4

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

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

Table 2-4. Commercial Service Passenger Enplanements ......................................................................... 2-6

Table 2-5. Number of Aircraft and Flight Hours (2006) ........................................................................... 2-9

Table 2-6. Air Carrier Definitions............................................................................................................ 2-10

Table 2-7. Air Carrier Statistics (2006) ................................................................................................... 2-11

Table 2-8. Operational Highlights of the U.S. Scheduled Service Airline Industry ................................ 2-17

Table 2-9. Regional Jet Versus Turboprop Departures (Passenger Data) ................................................ 2-18

Table 2-10. Airport Survey Sample Stratification ................................................................................... 2-19

Table 2-11. Airport Funding Methods (2004) ......................................................................................... 2-22

Table 2-12. Portions of Revenue Collection Using Residual-Cost Approach When Airport Uses 

Mixed Approach Overall ............................................................................................... 2-23

Table 2-13. Airside and Non-airside Operating Revenues and as a Percent of Total Revenues ............. 2-24

Table 2-14. Average Revenues and Expenditures by Hub Size, 2002-2006 ........................................... 2-25

Table 2-15. AIP Grants Awarded for Aircraft Deicing Related Projects ................................................. 2-27

Table 2-16. PFCs as Percent of Total Operating Revenues (2003-2006) and Total Value (2006) .......... 2-28

Table 2-17. Distribution of State Funding ............................................................................................... 2-28

Table 2-18. Sources of Airport Funding (2001-2005) ............................................................................. 2-29

Table 2-19. Capital Expenditure Financing (2001-2005) ........................................................................ 2-29

Table 2-20. Five-Year Average Financials for Domestic Operations by Airline Type (2002-2006) ..... 2-33

Table 2-21. Financial Highlights of the Airline Industry (U.S. Airlines, scheduled service, in 

millions except as noted) ............................................................................................... 2-34

Table 2-22. Changes in Domestic Operating Profit and Net Income, 2002 to 2006 ............................... 2-35

Table 2-23. Landing Fees by Hub ($/1000 lb landed weight) ................................................................. 2-38

Table 2-24. Average Departures and Enplanements by Hub Size, 2002-2006 ........................................ 2-44

Table 2-25. Ratio of Airport Operating Expense to Revenues, 5-Year Average (2002-2006) ................ 2-45

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Table 2-26. Average Capital Expenditure and Financing by Hub Size, 2002-2006 ................................ 2-45

Table 2-27. Commercial Service Aircraft Departures (Alaska) ............................................................... 2-49

Table 2-28. Commercial Service Passenger Enplanements (Alaska) ...................................................... 2-49

Table 2-29. Commercial Service Aircraft Passengers per Departure (Alaska) ........................................ 2-49

Table 2-30. Alaska Rural Airports AIP Spending Plan ........................................................................... 2-51

Table 2-31. Total AIP Spending by Project Type - Alaska Rural Airport System .................................. 2-52

Table 2-32. FY 2001 Capital & Operating Budget for the AK DOT&PF ............................................... 2-53

Table 5-1. National Compliance Costs of Final Regulatory Options, 2004-2005 Deicing Season 

(millions, 2006 dollars) .................................................................................................... 5-2

Table 5-2. National Compliance Costs for Final Regulatory Options, 2004-2005 Deicing Season, 

by Airport Size (millions, 2006 dollars) .......................................................................... 5-3

Table 5-3. Annualized Final Regulatory Option Costs as a Percent of Airport Revenues, 2004-

2005 Deicing Season ....................................................................................................... 5-5

Table 5-4. Annualized Final Regulatory Option Costs as a Percent of Airport Revenues by 

Airport Size, 2004-2005 Deicing Season ......................................................................... 5-5

Table 5-5. Annualized Final Regulatory Option Costs per Enplaned Passenger, 2004-2005 

Deicing Season ................................................................................................................ 5-6

Table 5-6. Annualized Final Regulatory Option Costs per Enplaned Passenger by Airport Size, 

2004-2005 Deicing Season .............................................................................................. 5-7

Table 5-7. Annualized Compliance Cost per Enplaned Passenger as Percent of Baseline Airline 

Cost per Enplaned Passenger, 2004-2005 Deicing Season .............................................. 5-8

Table 5-8. Annualized Compliance Cost per Enplaned Passenger as Percent of Baseline Airline 

Cost per Enplaned Passenger by Airport Size, 2004-2005 Deicing Season .................... 5-9

Table 5-9. Multi-Airport Authorities ....................................................................................................... 5-10

Table 5-10. Projected Impacts to Debt Service Coverage Ratio of Multi-Airport Authorities 

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

Table 5-11. Projected Impacts to Debt Service Coverage Ratio of Single Airport Owners 

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

Table 5-12. Impacts on the Alaska International Airport System (IAS), 2004 ........................................ 5-13

Table 5-13. Impacts on the Alaska Rural Airport System (RAS), 2004 .................................................. 5-14

Table 5-14. Annualized Compliance Cost per Available Seat Mile, 2004-2005 Deicing Season ........... 5-15

Table 5-15. Annualized Compliance Cost per Available Seat Mile by Airport Size, 2004-2005 

Deicing Season .............................................................................................................. 5-16

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Table 5-16. Incremental Annualized Compliance Cost per Available Seat Mile as Percent of 

Baseline Airline Cost per ASM by Airport Size, Final Regulatory Option, 2004-

2005 Deicing Season ..................................................................................................... 5-18

Table 5-17. Airports with Co-permittees, 2004 ....................................................................................... 5-20

Table 5-18. Airlines and Number of Airports at which they are Co-permittees, 2004 ............................ 5-23

Table 5-19. Compliance Costs Attributed to Co-permittees by Type, 2004-2005 Deicing Season 

(millions, 2006 dollars) .................................................................................................. 5-24

Table 5-20. U.S-flag Air Carriers Projected to Incur Co-permittee Compliance Costs by Cost 

Range, 2004-2005 Deicing Season ................................................................................ 5-25

Table 5-21. Co-permittee Airlines Incurring Costs Exceeding 2 Percent of Operating Profit, 2004-

2005 Deicing Season ..................................................................................................... 5-25

Table 5-22. Co-permittee Airlines Incurring Costs Exceeding 2 Percent of Net Income, 2004-

2005 Deicing Season ..................................................................................................... 5-26

Table 5-23. Co-permittee Airlines Incurring Costs Exceeding 0.25 Percent of Operating 

Revenues, 2004-2005 Deicing Season ........................................................................... 5-26

Table 5-24. Airport Impacts with Co-permittee Airlines Incurring Costs Exceeding 3 Percent of 

Operating Revenue, 2004-2005 Deicing Season ........................................................... 5-27

Table 5-25. Summary of Impacts under Analyzed Options ..................................................................... 5-27

Table 6-1. National Annualized Final Regulatory Option Compliance Costs by Small Business 

Category (2006 dollars) ................................................................................................... 6-4

Table 6-2. Annualized Compliance Costs as a Percent of Airport Operating Revenues by Small 

Business Category ............................................................................................................ 6-5

Table 6-3. Small Airlines and Number of Airports at which they are Co-permittees, 2004a

..................... 6-6

Table 6-4. Compliance Costs Attributed to Airline Co-permittees by Size, 2004-2005 Deicing 

Season (millions, 2006 dollars)........................................................................................ 6-7

Table 6-5. Co-permittee Airlines Incurring Costs Exceeding 2 Percent of Operating Profit by 

Size, 2004-2005 Deicing Season ..................................................................................... 6-8

Table 6-6. Co-permittee Airlines Incurring Costs Exceeding 2 Percent of Net Income by Size, 

2004-2005 Deicing Season .............................................................................................. 6-8

Table 6-7. Co-permittee Airlines Incurring Costs Exceeding 0.25 Percent of Operating Revenues, 

2004-2005 Deicing Season .............................................................................................. 6-9

Table 6-8. Airports Impacts with Co-permittee Airlines Incurring Costs Exceeding 3 Percent of 

Operating Revenue by Size, 2004-2005 Deicing Season .............................................. 6-10

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LIST OF FIGURES 

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

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

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

Figure 2-4. Airport Ownership................................................................................................................. 2-20

Figure 2-5. Comparison of Past Airport Funding to Future Development Costs .................................... 2-30

Figure 2-6. Comparison of Larger Airports’ Past Funding to Future Development Costs ...................... 2-31

Figure 2-7. Airline Operating Costs as Percentage of Total (2007)......................................................... 2-36
Economic Analysis for Final Effluent Limitation Guidelines Chapter 1. Introduction 

and Standards for the Airport Deicing Category 

CHAPTER 1 

INTRODUCTION 

1.1 Scope and Purpose 

The U.S. Environmental Protection Agency (EPA) proposes and promulgates technology-based effluent 

discharge requirements (effluent limitations guidelines and standards) for industrial sectors. This 

Economic Analysis document (EA) assesses the costs and economic impacts of the regulatory options 

EPA evaluated for the final regulation for the Airport Deicing Category. 

1.2 Report Organization 

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

• Chapter 2—Profile of the Air Transportation Industry 

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

• Chapter 3—Economic Impact Methodology 

Summarizes the economic methodology by which EPA examines incremental pollution 

control costs and their associated impacts on industry. 

• Chapter 4—Pollution Control Options 

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

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

• Chapter 5—Economic Impact Analysis Results 

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

associated with control of airfield and aircraft deicing fluid (ADF)-contaminated 

discharge, using the technologies outlined in Chapter 4. EPA then summarizes the 

projected economic impacts generated by the regulatory costs, including impacts on 

airports and co-permittee airlines. In other words, this chapter presents the findings on 

which EPA based its proposed determination of economic achievability under the CWA. 

• Chapter 6—Impacts on Small Entities 

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

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

significant adverse impact on a substantial number of small entities. 

1.3 References 

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

Standards for the Airport Deicing Category. EPA-821-R-09-004. 

1-1
Economic Analysis for Final Effluent Limitation Guidelines Chapter 2. Profile of the 

and Standards for the Airport Deicing Category Air Transportation Industry 

CHAPTER 2 

PROFILE OF THE AIR TRANSPORTATION INDUSTRY 

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

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

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

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

airports as co-permittees. 

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

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

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

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

are those of the air transportation industry itself. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

describes EPA’s airport questionnaire. Sections 2.6 and 2.7 discuss the nature of the economic 

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

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

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

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

2.1 Industry Overview 

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

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

U.S. gross output, 5.0 percent of personal earnings, and 8.8 percent of national employment (CampbellHill 2006). 

For the purpose of these effluent limitation guidelines (ELG), EPA has narrowed the definition of the air 

transportation industry to include only airports and airlines. The following list highlights some of the 

major current issues that may affect industry response to the costs imposed by the ELG. 

• Approximately 60 large airports are responsible for the vast majority of air traffic in the 

U.S., as will be described in Section 2.2. 

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

and Standards for the Airport Deicing Category Air Transportation Industry 

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

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

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

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

their own unique operational characteristics as discussed in Section 2.7. 

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

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

details). 

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

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

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

Finally, this profile and economic impact analysis were prepared using a 2004 through 2006 analytic 

period with a 2004 baseline. At that time it appeared the air transportation industry was emerging from 

perhaps its worst economic crisis since deregulation. However, this optimism proved unfounded as events 

in 2007 and 2008 inflicted further financial distress on the industry. This document maintains the 2004 

through 2006 analytic period used for the proposed regulation. EPA provides additional analysis 

extending from 2007 through 2009 in a separate document in the docket. 

2.2 Airports 

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

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

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

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

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

revenues of approximately $3.7 billion and 57,300 paid employees (Census 2005). However, the FAA 

and BTS provide more detailed data collection for the air transportation industry, and EPA relies on these 

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

2.2.1 Number and Size 

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

to privately owned landing strips (FAA 2006). Of this number, the FAA has designated 3,431 airports (17 

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

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

only two of these proposed airports will be primary commercial service airports. The NPIAS designation 

identifies those airports significant to the United States’ aviation infrastructure, which makes them 

eligible for federal funding. FAA makes its determination for inclusion in NPIAS based on the airport’s 

activity level and location. 

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

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

are primarily determined by passenger activity. Although deicing operations and deicing/anti-icing fluids 

(also known as aircraft deicing fluids, or ADF) generation are a function of aircraft operations, not 

passenger activity, the two measures are highly correlated, and FAA’s classification system provides a 

useful indication of airport size for EPA’s purposes. 

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

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Figure 2-1. FAA Categories of Airports 

Source: FAA 2006 

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

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

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

than 10,000 annual boardings.1

 Primary commercial service airports are further broken out by percent of 

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

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

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

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

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

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

 

1

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

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

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

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

definition. 

National Airport System

3,364 airports (plus 67 proposed airports)

Designated by FAA as important to national air transportation

Commercial Service Airports

517 airports (plus 8 proposed)

- publicly owned

- scheduled passenger service

- at least 2,500 boardings per year

General Aviation & Reliever Airports

2,847 airports (plus 59 proposed)

- no scheduled passenger service

- less than 2,500 boardings per year

- at least 10 based aircraft

Primary Airports

382 airports (plus 2 proposed)

- more than 10,000 boardings per year

Nonprimary Airports

135 airports (plus 6 proposed)

- at least 2,500 boardings per year

- no more than 10,000 boardings per year

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

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

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

Nonhubs (243 airports): less than 0.05% of total national boardings per year
Economic Analysis for Final Effluent Limitation Guidelines Chapter 2. Profile of the 

and Standards for the Airport Deicing Category Air Transportation Industry 

2-4

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

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

of deicing/anti-icing operations at military airports. 

Table 2-1 presents the number of airports in NPIAS by FAA definition, and percent of boardings and 

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

with more than 1 percent of total U.S. enplanements) in the air transportation network. The 30 large hubs 

accounted for almost 69 percent of all passenger boardings. Altogether the 67 large and medium hub 

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

Table 2-1. Distribution of U.S. Airports in NPIAS (2004) 

Airport Type 

Number of 

Airports 

Percentage of 

Enplanements 

Percentage of Based 

Aircrafta

Commercial Service Large Hub 30 68.7% 1.1% 

Commercial Service Medium Hub 37 20.0% 3.0% 

Commercial Service Small Hub 72 8.1% 4.7% 

Commercial Service Nonhub 243 3.0% 10.6% 

Non-primary Commercial Service 135 0.1% 2.4% 

General Aviation Relievers 274 0.0% 28.8% 

General Aviation 2,573 0.0% 41.2% 

Existing NPIAS Airports 3,364 99.9% 91.8% a

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

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

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

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

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

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

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

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

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

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

 carry this 

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

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

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

Large certificated4

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

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

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

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

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

certified carriers only. 

 

3

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

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

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

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

provided in Section 2.3.1.2 of this report. 
Economic Analysis for Final Effluent Limitation Guidelines Chapter 2. Profile of the 

and Standards for the Airport Deicing Category Air Transportation Industry 

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

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

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

experience this decline in departures in 2004. Table 2-3 shows cargo-only departures are highly variable 

over the 2003 through 2006 time period. Table 2-4 presents passenger boardings for 2003 through 2006. 

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

Airport 

Type

Number of Departures Annual Growth Rates 

2003 2004 2005 2006 2004 2005 2006 

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

Medium 

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

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

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

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

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

Source: EPA analysis of BTS T-100 database 

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

Airport 

Type

Number of Departures Annual Growth Rates 

2003 2004 2005 2006 2004 2005 2006 

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

Medium 

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

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

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

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

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

Source: EPA analysis of BTS T-100 database 

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Table 2-4. Commercial Service Passenger Enplanements 

Airport 

Type

Passenger Enplanements Annual Growth Rates 

2003 2004 2005 2006 2004 2005 2006 

Large 

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

Medium 

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

Small 

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

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

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

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

Source: EPA analysis of BTS T-100 database 

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

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

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

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

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

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

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

of departures declined. 

2.2.2 Airport Location and Climate Data 

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

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

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

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

 at airports nationwide. 

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

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

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

The survey and sampling plan are discussed in Section 2.5. 

 

5

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

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

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

and Standards for the Airport Deicing Category Air Transportation Industry 

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

2.3 Airlines 

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

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

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

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

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

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

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

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

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

2.3.1 Number and Size 

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

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

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

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

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and Standards for the Airport Deicing Category Air Transportation Industry 

2.3.1.1 Number of Aircraft 

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

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

composed of: 

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

• 2,743 regional passenger aircraft 

• 997 cargo aircraft 

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

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

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

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

efficient models. 

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

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

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

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

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

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

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

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

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

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

declined by 648 aircraft over the same time period. 

As shown in Table 2-5, commercial aircraft are utilized more intensively than general aviation aircraft. 

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

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

aviation aircraft. 

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and Standards for the Airport Deicing Category Air Transportation Industry 

Table 2-5. Number of Aircraft and Flight Hours (2006) 

Aircraft Type Number of Aircraft Total Flight Hours Hours Per Aircraft 

Commercial, Cargo and Commuter Carriersa

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

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

% of Total 83% 90% 

Turboprop 880 1,462,290 1,662 

% of Total 12% 8% 

General Aviation 

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

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

% of Total 80% 61% 

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

% of Total 6% 18% 

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

% of Total 3% 6% a

 Not including Part 135 On-Demand Air Taxis. 

Source: FAA 2007b and FAA 2007c. 

2.3.1.2 Definition and Number of Air Carriers 

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

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

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

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

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

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

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

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

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

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

flights. 

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

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

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

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

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

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

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

operating certificates are required for aircraft that are not turbojets, and carry nine passengers or less, or 

have a payload less than 7,500 pounds. Table 2-6 summarizes the combination of fitness and operating 

requirements for each classification. 

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Table 2-6. Air Carrier Definitions 

Air Carrier 

Type 

Defined by Combination of Following 

Description Fitness Criteria 

Operating 

Criteria 

Large 

Certificated 

Aircraft with more than 60 seats, or payload capacity 

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

international flights 

DOT Section 401 

Certificate 

FAR Part 121a

Small 

Certificated 

Aircraft with 60 seats or less, or payload capacity less 

than 18,000 pounds, and conduct domestic flights only 

DOT Section 401 

Certificate 

FAR Part 121a or 

FAR Part 135b

Commuter Air taxi with published scheduled service of at least five 

round trips per week between at least two locations 

Registered under 

14 CFR 298 

FAR Part 121a or 

FAR Part 135b

Air Taxi Primarily on-demand service Registered under 

14 CFR 298 

FAR Part 121a or 

FAR Part 135b

a

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

b

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

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

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

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

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

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

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

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

differences between their operations and larger carriers. 

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

annual revenue as shown below: 

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

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

$1 billion. 

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

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

$100 million) and small regional carriers (revenues of less than $20 million). 

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

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

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

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

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

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

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

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

complementary relationships than competitive ones. 

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

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

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

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

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

Table 2-7 depicts the BTS air carrier traffic statistics for 2006.6

 Twenty major airlines account for 84.5 

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

enplanements. 

Table 2-7. Air Carrier Statistics (2006) 

Carrier 

Type 

Number 

(% of 

Total) 

Passenger 

Enplanements

(thousands) 

Revenue 

PassengerMiles 

(millions) 

Available 

Seat-Miles 

(millions) 

Revenue 

Ton-Miles 

(millions) 

Available 

Ton-Miles 

(millions) 

Major 20 

(13.4%) 

634,202 

(84.5%) 

733,936 

(90.6%) 

922,667 

(89.8%) 

100,193 

(83.0%) 

163,090 

(81.9%) 

National 32 

(21.5%) 

88,112 

(11.7%) 

64,748 

(8.0%) 

87,643 

(8.5%) 

16,821 

(13.9%) 

29,669 

(14.9%) 

Regional 35 

(23.5%) 

8,893 

(1.2%) 

5,763 

(0.7%) 

8,347 

 (0.8%) 

3,166 

(2.6%) 

5,434 

(2.7%) 

Small 

Certificated 

35 

(23.5%) 

4,146 

(0.6%) 

1,320 

(0.2%) 

2,060 

(0.2%) 

151 

(0.1%) 

261 

(0.1%) 

Commuter 27 

(18.1%) 

15,443 

(2.1%) 

4,321 

(0.5%) 

6,808 

(0.7%) 

423 

(0.4%) 

780 

(0.4%) 

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

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

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

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

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

the number of miles flown. 

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

flown. 

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

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

miles that were filled. Table 2-7 shows that flying larger aircraft over longer distances, major airlines 

account for about 90 percent of industry RPM and ASM. 

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

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

number of miles flown. 

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

number of miles flown.7

Major airlines account for 83 percent of RTM and 82 percent of ATM. 

 

6

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

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

7

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

adjusted to account for the weight of the passengers carried. 
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2.4 Air Transportation Industry Trends 

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

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

generated an unusually pronounced dip in the air transportation industries’ financial health. Even prior to 

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

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

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

Syndrome (SARS) outbreak significantly reduced international travel, which accounts for about 25 

percent of U.S. airline RPMs (ATA 2003; ATA 2004). Currently, as the industry began recovering from 

these events in 2005 and 2006, increasing fuel prices are weakening the upside of the financial cycle 

(ATA 2005; ATA 2006; ATA 2007; Heimlich 2008). This section examines how the air transportation 

industry has evolved since its deregulation, and how it has adjusted to innovations such as the entry of 

low-cost carriers and the use of secondary airports. 

2.4.1 Deregulation of Airlines 

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

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

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

referred to as “legacy” airlines)8

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

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

• Low overhead and infrastructure costs 

• Ability to purchase only capital equipment that was needed 

• Lack of pre-existing labor contracts allowed for outsourcing 

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

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

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

air transportation industry. 

2.4.1.1 Development of Hub and Spoke Networks 

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

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

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

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

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

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

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

A hub and spoke network provides several advantages to airlines, including increased service frequency 

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

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

 

8

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

it operates on a different business model. 

9

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

with the FAA definition of a hub used to allocate AIP funds. 
Economic Analysis for Final Effluent Limitation Guidelines Chapter 2. Profile of the 

and Standards for the Airport Deicing Category Air Transportation Industry 

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

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

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

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

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

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

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

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

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

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

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

schedule. 

2.4.1.2 Emergence of Low-Cost Carriers 

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

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

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

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

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

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

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

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

times, thereby reducing maintenance costs and maximizing aircraft utilization. 

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

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

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

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

(GAO 2004). 

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

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

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

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

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

trend away from reliance of hub and spoke route structures. 

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

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

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

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

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

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

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

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

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

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

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2-14

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

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

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

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

in 2006 (FAA 2007b). 

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

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

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

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

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

2.4.1.3 Effect on Airports Served 

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

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

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

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

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

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

first flights to be eliminated during times of financial downturns. 

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

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

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

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

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

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

systems (Bonnefoy and Hansman 2007).10 

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

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

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

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

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

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

metropolitan area. 

2.4.2 Cyclical Nature of Air Travel Demand 

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

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

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

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

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

to a global economic recession. 

 

10 Although these airports are not necessarily under the same operational control and do not coordinate plans. 
Economic Analysis for Final Effluent Limitation Guidelines Chapter 2. Profile of the 

and Standards for the Airport Deicing Category Air Transportation Industry 

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

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

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

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

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

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

by 2000, expenses were again higher than revenue. 

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

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

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

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

characteristics for the airline industry that create this cyclical nature. 

Deregulation 

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

Source: GAP 2006 

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

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

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

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

revenue stream will be (Kwan 2008). More discussion about airport revenues is provided in Section 2.6.2. 

2.4.3 Growth in Air Travel 

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

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

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

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2.4.3.1 Airport Capacity Constraint 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

flying out of more congested hubs. 

2.4.3.2 Change in Airline Service 

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

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

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

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

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

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

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

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

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

revenue passengers, have been rising as shown in Table 2-8. The data shows that airlines are experiencing 

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

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

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Table 2-8. Operational Highlights of the U.S. Scheduled Service Airline Industry 

(in millions except as noted) 

Financial Statistics 2001 2002 2003 2004 2005 2006 

% Change 

2001 to 2006

Aircraft Departures 

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

Passengers Enplaned 622.1 614.1 646.5 703.0 738.3 744.2 19.6% 

Revenue Passenger 

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

Available Seat Miles 

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

Passenger Load Factor 

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

Source: ATA 2007a 

2.4.3.3 Introduction of Regional Jets 

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

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

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

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

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

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

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

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

EPA’s analysis of BTS data, as provided in Table 2-9, shows an overall growth trend in regional jet 

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

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

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

2.5 times more common than turboprop departures. 

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

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

provide capacity that complements market demand.11

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

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

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

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

fleet composition. 

 

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

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

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

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

and the FAA is currently deliberating the possibility of allowing VLJs to operate on scheduled services. 
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Table 2-9. Regional Jet Versus Turboprop Departures (Passenger Data) 

Year 

Regional Jets Turboprops 

Number of 

Departures 

% Change from 

Previous Year 

Number of 

Departures 

% Change from 

Previous Year 

2000 752,359 NA 1,183,591 NA 

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

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

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

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

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

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

Source: BTS T-100 database 

2.5 Airport Survey 

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

financial relationships with airlines, and funding sources for capital expenditures. The detailed profile of 

airports is presented in sections 2.6 and 2.7 based on information collected in the questionnaire as well as 

publicly available data from BTS (available at www.transtats.bts.gov), the National Flight Data Center 

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

FAA financial data (available at cats.airports.faa.gov/reports/reports.cfm). 

EPA used its authority under Section 308 of the Clean Water Act to collect information from a sample of 

airports potentially affected by the rule of operational and economic data that was not otherwise available. 

EPA used these detailed data to improve its understanding of the air transportation industry, and in 

models to project the impacts of the ELG. The rulemaking docket provides copies of the survey 

instruments (DCNs AD00354 and AD00355) and detailed information regarding implementation of the 

surveys. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

separately, which is discussed in Section 2.9. 

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

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

small and nonhub airports. EPA also included judgment sample airports with specific treatment 

technologies and Alaskan airports. The response rate for the Airport Questionnaire was 98 percent. Table 

2-10 shows the distribution of surveyed airports by size class. 

Table 2-10. Airport Survey Sample Stratification 

Airport Categoryb SOFP Days

Total 

Population 

Total # 

Sampled 

Large Hub NA 33 33 

Medium Hub NA 35 35 

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

Small Hub < 30,000 Jet Departures 

< 14.5 38 6 

> 14.5 24 9 

Nonhub 

< 14.5 99 13 

> 14.5 134 31 

Judgment Sample 

General Aviation/Cargo NA 5 4 

Alaskaa NA 85 11 

Specific Treatment Technologies NA NA 4 

Total 459 152 

a

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

a total population of 85 commercial service airports. 

b

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

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

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

represent the most current airport counts.

2.6 Airport Management 

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

presents data showing the financial characteristics of different airport types. 

2.6.1 Airport Ownership and Management 

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

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

ownership types at airports throughout the United States. 

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

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

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

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

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

 

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

military airport and therefore determined to be out of scope for this analysis. 
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own approximately 40 percent of airports. Airport authorities tend to be independent entities in which a 

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

Figure 2-4. Airport Ownership 

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

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

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

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

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

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

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

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

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

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

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

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

about these funding sources is provided in the next section. 

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

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

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

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

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

 

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

and development of public-use airports. 

Top 100 Airports (2005) Surveyed Airports (2004) 
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operating with losses, which may have impaired its access to low cost financing. Currently, the City of 

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

While the anticipated trend toward full-scale privatization of airport operations has certainly stalled, it 

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

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

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

2.6.2 Airport Financial Management 

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

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

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

inform EPA’s impacts analysis. 

2.6.2.1 Funding Methods 

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

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

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

charges may be adjusted. 

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

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

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

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

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

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

receive approval by the airlines before undertaking capital expenditures. GAO (2001) found that majorityin-interest clauses provide dominant airlines at an airport “veto” power, in effect, over large capital 

projects that could increase capacity. A survey conducted in 1998, found that 84 percent of airport/airline 

residual use and lease agreements include a majority-in-interest clause (FAA and OST 1999). 

Under the alternative compensatory approach, the airport assumes the financial risk; airlines pay rates set 

equal to their estimated cost of using the facility. Using the compensatory approach, there is no guarantee 

the airport will cover costs; however, the airport can keep any surplus revenue over cost and accumulate 

capital for future development. Only 20 percent of the airports surveyed in 1998 with a compensatory use 

and lease agreement had a majority-in-interest clause in their agreements (FAA and OST 1999). 

Many airports use a mixed approach of residual and compensatory funding, with some rates and charges 

and some airline buy-in. Of the 213 weighted responses to this question from the EPA deicing survey, a 

smaller percentage are using a pure residual cost method than a compensatory or mixed approach as 

illustrated in Table 2-11. 

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Table 2-11. Airport Funding Methods (2004) 

Funding Method 

Number of Weighted 

Respondents

Percent of Weighted 

Respondentsa

Residual 41 18.8% 

Compensatory 78 35.8% 

Mixed 73 33.5% 

Other 21 9.6% a

Percentages do not add to 100 because 5 weighted respondents did not answer this question. 

Source: EPA Airport Deicing Questionnaire 

Determining the financial risk of an airport depends on the number of carriers it hosts; those with one 

primary carrier are more vulnerable to an unstable economy than those with competing airlines and 

diversified market shares. Airports with smaller and fewer air carriers are even more vulnerable than 

primary airports because their operations are more likely to be reduced in the case of an economic 

downturn. As a result of the downturn in air transportation after September 11, 2001, airports that host 

large carriers were seeing with increasing frequency a reduction in carrier hub presence and the breaking 

of long-term lease agreements (DOT 2003). 

Recently airports have been working to become more financially stable through reducing costs to carriers 

and increasing their revenue. According to the U.S. DOT, they have taken part in various efforts to reach 

this goal by: refinancing debt at lower interest rates, redirecting passenger facility charge (PFC) revenues 

to reduce airline charges, reducing expenditures on non-essential operations, raising revenue by applying 

for reimbursement on security costs, and increasing non-airside rates. The airports have also engaged in 

adjusting income-sharing to increase the airlines’ share and offering benefits to airlines by allowing them 

additional time to repay underpayments (DOT 2003). 

Airport operating statements often break down the operating revenues and expenditures for key cost 

centers. Typical cost centers might be: 

• Airfield operations (e.g., runways, taxiways, aprons). 

• Terminal area concessions (e.g., food and beverage services, car rentals, specialty shops, 

personal services, amusements, advertising, ground transportation, hotels). 

• Airline leased areas (e.g., ground equipment rentals, offices, ticket counters, cargo 

terminals, hangers, operations and maintenance areas). 

• Other leased areas (e.g., fixed base operators (FBO), freight forwarders, government 

offices, businesses in airport industrial parks, equipment and cargo terminals rented by 

non-airline users). 

Table 2-12 shows that of the 73 weighted respondents using a mixed approach, the majority (84.9 

percent) use the residual-cost approach to determine airline fees for airfield operations based on the actual 

cost of running these areas, while a much larger percentage of airports use a compensatory approach for 

terminal concessions. 

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Table 2-12. Portions of Revenue Collection Using Residual-Cost Approach When Airport 

Uses Mixed Approach Overall 

Method Number of Respondents Percent of Respondents 

Airfield operations 62 84.9% 

Terminal area concessions 15 20.5% 

Airline leased areas 22 30.1% 

Other leased areas 16 21.9% 

Source: EPA Airport Deicing Questionnaire 

2.6.2.2 Revenue Categories and Operating Profit 

Commercial service airports are required to annually file standardized financial statements with FAA 

(Form F-127). This section takes a closer look at the airport operating revenues and expenditures as 

reported to the FAA. These statements request revenue data for the following categories: 

Aeronautical Operating Revenue

• Landing fees 

• Terminal/International arrival area rental or other charges 

• Apron charges/tie-downs 

• FBO revenue (contract or sponsor-operated) 

• Cargo and hangar rentals 

• Aviation fuel tax retained for airport use 

• Fuel sales net profit/loss or fuel flowage fees 

• Security reimbursement 

• Miscellaneous 

• Other 

Non-aeronautical Operating Revenue

• Land and non-terminal facilities 

• Terminal – food and beverage 

• Terminal – retail stores 

• Terminal – other 

• Rental cars 

• Parking 

• Miscellaneous 

• Other 

As discussed earlier, airline payments to the airport (e.g., landing fee, terminal rentals) are often 

established in airport use agreements. The most common financial mechanisms include a square footage 

charge for rented space and a landing fee based on aircraft weight. Signatory airlines are committed to 

leasing airport resources for a fixed period of time. 

Table 2-13 lists eight general categories of revenue generation. Large hubs generate the largest portion of 

their revenue from landing fees (22.7 percent) and terminal rentals (24.5 percent). As hub size decreases, 

the proportion of revenue generation from these two sources steadily decreases down to 10.2 percent for 

landing fees and 11.9 percent for terminal revenues for nonhubs. The top revenue generator for medium 

and small hubs is parking (25.8 and 22.9 percent of total revenue generated, respectively). Nonhubs 

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generate the largest proportion of their total revenue from ground/land rentals (15.2 percent) and “other 

aviation” fees (29.4 percent). Significant proportions of the “other aviation” revenue for nonhubs comes 

from FBOs (5.4 percent), cargo and hangar rentals (7.8 percent), and fuel sales and flowage fees (10.2 

percent). “Other aviation” fees and ground/land rentals are relatively small revenue generators for larger 

hubs. 

Table 2-13. Airside and Non-airside Operating Revenues and as a Percent of Total 

Revenues 

Revenue Categories 

Total Revenue by Hub Size 

(millions) Percent Revenue by Hub Size 

Large Medium Small Non Large Medium Small Non 

Landing Fees 

$1,865.

5 $451.0 $149.0 $54.4 22.7% 19.2% 14.3% 10.2% 

Terminal Rentals 

$2,016.

4 $511.5 $191.1 $63.5 24.5% 21.8% 18.3% 11.9% 

Other Aviation $753.7 $213.9 $130.1 $157.2 9.2% 9.1% 12.5% 29.4% 

Ground/Land Rentals $257.6 $81.3 $91.8 $81.5 3.1% 3.5% 8.8% 15.2% 

In Terminal Concessions $875.0 $159.2 $60.0 $18.8 10.6% 6.8% 5.7% 3.5% 

Rental Cars $623.8 $274.4 $151.2 $63.1 7.6% 11.7% 14.5% 11.8% 

Parking 

$1,318.

0 $603.8 $238.9 $65.4 16.0% 25.8% 22.9% 12.2% 

Other $515.1 $49.4 $32.2 $31.3 6.3% 2.1% 3.1% 5.8% 

Total 

$8,225.

0

$2,344.

5

$1,044.

3 $535.1 

100.0

%100.0% 

100.0

%

100.0

%

Source: FAA AAS-400 CATS Report 127 by Hub Size for Year 2004 

EPA further explored the revenue differences among airport hub sizes in Table 2-14. Average operating 

revenues at medium hubs are 23.2 percent of those at large hubs; for small and nonhubs those figures are 

7.2 percent and 1.1 percent respectively. Similarly, the revenue generation by airports through landing 

fees is on par with operating revenues with average landing fees at medium hubs 20.0 percent of those at 

large hubs; for small and nonhubs those figures are 4.8 percent and 0.7 percent respectively. The 

difference among airport sizes is significant to this analysis in at least two ways. First, rates and charges 

(e.g., landing fees) tend to be a key means for airports to pass compliance costs through to airlines. 

Second, landing fees might also be indicative of an airport’s market power when negotiating with airlines. 

More discussion about the ability to pass the rule’s compliance costs on is found in Section 2.8.2. 

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Table 2-14. Average Revenues and Expenditures by Hub Size, 2002-2006 

Large Hubs Medium Hubs Small Hubs Nonhubs 

Airport Count 33 35 25 54 

Total Operating Revenues $259,059,243 $60,033,358 $18,778,255 $2,789,776 

As Percent of Large Hub Average -- 23.2% 7.2% 1.1% 

Landing Fees $57,985,445 $11,600,777 $2,809,179 $387,957 

As Percent of Large Hub Average -- 20.0% 4.8% 0.7% 

Concessions Revenues $40,486,606 $10,496,019 $3,115,883 $383,742 

As Percent of Large Hub Average -- 25.9% 7.7% 0.9% 

Parking Revenues $42,276,451 $15,605,612 $4,825,623 $495,553 

As Percent of Large Hub Average -- 36.9% 11.4% 1.2% 

Total Operating Expenses $165,811,794 $37,771,069 $12,321,288 $2,722,125 

As Percent of Large Hub Average -- 22.8% 7.4% 1.6% 

Net Operating Revenues $93,247,449 $22,262,289 $6,456,967 $85,835 

As Percent of Large Hub 

Average -- 23.9% 6.9% 0.1% 

Source: EPA analysis of FAA Form 127 airport financial data. Surveyed airports only. 

Finally, more than 75 percent of the airports sampled in the EPA Deicing Questionnaire indicated that 

they received no direct operating subsidies from state, city, or county governments in 2004. 

2.6.2.3 Cost Trends 

For airports, much of the direct impacts from the events of September 11, 2001 are reflected in changes in 

protocol and safety measures. FAA (2004b) found that airports experienced a decline in financial health 

due to increased security costs combined with reduced revenue from decreased air travel. These airports 

had substantial fixed costs that provided few options for quick reduction of operating costs. EPA 

conducted a literature review, but found limited information regarding the direct financial impacts on 

airports with the exception of changes to security procedures. Much of the literature discussed the 

significant impacts to the airlines, which results in an indirect effect on airports (e.g., reduced collection 

of landing fees and other passenger-based charges). 

2.6.2.4 Capital Financing 

If an airport implements enhanced deicing/anti-icing pads and other storm water environmental mitigation 

projects, it will likely pay for the new infrastructure as a capital expenditure. The primary capital funding 

sources available to airports (e.g., bonds, AIP grants, PFCs, state/local contributions) are discussed in the 

following subsections. 

2.6.2.4.1 Airport Bonds 

As publicly owned entities, airports do not access private equity markets and instead issue debt through 

the municipal bond market. There are four principal types of bonds generally issued by airports to fund 

capital expenditures (TRB 2007): 

• General obligation (GO) bonds 

• General airport revenue bonds (GARBs) 

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• PFC-backed bonds 

• Special facility bonds 

GO bonds have been the primary capital financing tool in recent years for the nation’s smaller airports; 

GARBs, however, are most commonly used overall for financing airport infrastructure improvements 

(TRB 2007). As most of the bonds issued by airports are municipal bonds, they are usually tax-exempt for 

the purchasers. While many airlines have defaulted on their debt issuances, no airports have defaulted 

(DOT 2003, Kaps 2000). Because revenue to pay the bond debt is based on airlines serving that airport, 

bond investors recognize the connection between airline health and airport revenues (Schoenberger 2003). 

2.6.2.4.2 AIP grants 

Airport Improvement Program (AIP) grants are administered by the FAA and funded through aviation 

user taxes. AIP grants are not equally available to all airports; in fact, there are at least six mechanisms for 

granting AIP funds to airports: 

• Entitlement funds 

• Small airport funds 

• “Set aside” funds 

• State apportionments 

• Non-primary apportionments 

• Discretionary funds 

Prior to applying for AIP grants, airports must meet the eligibility requirements. The airport must be 

included in the NPIAS and meet one of the following criteria: 

• Publicly owned 

• Privately owned but classified by FAA as a reliever airport 

• Privately owned with a minimum of 2,500 annual enplanements 

AIP funded projects must be directly related to the safety and construction or rehabilitation of airstriprelated areas and activities. Aesthetic improvements to the grounds, hangars, offices, parking lots, or the 

terminals are not eligible. For large and medium primary hub airports, AIP funds can cover up to 75 

percent of costs (80 percent for noise reduction projects), and for small primary, reliever, and general 

aviation airports, they can cover up to 95 percent of costs. 

In FAA Order 5100.38C, Airport Improvement Program Handbook (effective June 28, 2005) FAA 

includes aircraft ground deicing and anti-icing systems as eligible safety projects (FAA 2005b). Section 

547(d) states: 

At commercial service airports, construction or reconstruction of aircraft deicing, anti-icing, 

and ice inspection facilities on the ground, including pavement, drainage, fluid collection, and 

environmental mitigation to reduce storm water discharge contamination, is eligible when 

designed in accordance with Advisory Circular 150/5300-14 [i.e., FAA design standards]. 

During fiscal year (FY) 2007, the FAA issued 2,022 AIP grants totaling more than $3.3 billion. EPA 

reviewed grants made in 2005 and 2006 for aircraft deicing containment facility construction or 

rehabilitation. Table 2-15 depicts those airports receiving grants specifically related to deicing 

containment. 

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Because demand for AIP grants is greater than AIP funds (GAO 2007) and airport sponsors must apply 

for project-specific grants, a process that is time consuming and costly, EPA does not assume airports will 

be able to use AIP grants to pay for projects to meet effluent guidelines. 

Table 2-15. AIP Grants Awarded for Aircraft Deicing Related Projects 

Airport 2005 Grant 2006 Grant 

Akron-Canton Regional $5,000,000 $5,000,000 

Bandette International $553,932 

Bangor International $1,384,222 

Buffalo-Niagara International $816,891 

Denver International $13,211,130 $3,450,000 

Detroit Metropolitan $2,950,000 

Kansas City International $7,464,005 $4,463,462 

Morgantown Municipal $1,018,589 

Scott Air Force Base/Midamerica $709,672 

Toledo Express $746,767 $861,735 

Pittsburgh Internationala $2,663,274 

a

 For the design and permitting for environmental mitigation in conjunction with existing deicing treatment 

plant. 

Source: EPA analysis of FAA 2007d and 2008b 

2.6.2.4.3 PFCs 

Since the early 1990s, most of the nation’s passenger service airports have been able to fund capital 

development projects using a passenger facility charge (PFC). Approved airports are allowed to collect 

PFC fees of up to $4.5014 for every enplaned passenger. The FAA manages the program and is authorized 

to approve an airport’s application to participate and the specific projects for which the collected money 

will be used. Eligible PFC-funded projects include those that: 

• Enhance safety or security of the national air transportation system. 

• Reduce airport noise. 

• Facilitate competition between or among air carriers. 

Airlines collect the PFCs when tickets are purchased and forward the funds to the airports. PFC revenues, 

which totaled more than $2.4 billion in 2006, can be applied to projects two ways: (1) “pay-as-you-go”, in 

which the revenues and interest are directly spent on capital projects, or (2) leveraged to repay debt (TRB 

2007). Table 2-16 provides a break down of the PFC as a percent of the total operating revenue by hub 

size. 

 

 

14 There have been legislative efforts recently to increase the PFC (GAO 2007). 
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Table 2-16. PFCs as Percent of Total Operating Revenues (2003-2006) and Total Value 

(2006) 

FAA Hub 

Size 

PFCs as % of Total Operating Revenues Total Value of PFCs % of Total PFC 

2003 2004 2005 2006 2006 Revenue in 2006 

Large 17.7% 18.9% 19.4% 19.4% $1,814,337,475 74% 

Medium 15.7% 16.8% 16.5% 17.0% $388,841,623 16% 

Small 13.1% 14.6% 15.4% 15.7% $178,209,216 7% 

Nonhub 6.6% 7.1% 7.4% 7.0% $62,144,102 3% 

Source: EPA calculations on BTS Form 127 Airport Financial Data 

The GAO found that large and medium hub airports participate at a higher rate than small airports for 

various reasons. Of the total PFC funding, large airports receive the most benefit since the fee is based on 

enplanements. As seen in Table 2-16, large airports received 74 percent of total PFC revenues. For the 

small airports, revenues from the PFCs may be too low (i.e., too few enplanements) to offset the expected 

costs of applying and administering the program. In an effort to combat this inequity, $0.50 of every 

dollar up to 50 percent of the annual revenues collected by large airports is transferred to FAA to be 

added to the general PFC fund. These PFCs are awarded to other commercial service airports to fund 

capital investment projects (FAA 2007b). 

As of May 1, 2008, the FAA had approved 372 airports to collect PFCs. Of these, 280 (75 percent) were 

approved to collect at the maximum level of $4.50. Total approved PFC collections were approximately 

$62.1 billion as of May 1, 2008, although actual collected amounts are less (FAA 2008d). These data 

indicate that since most airports currently approved to collect PFCs are already doing so at the maximum 

rate, the ability of PFC revenues to cover additional increased capital expenditures (whether directly or as 

the revenue stream to cover bond issues) is questionable. 

2.6.2.4.4 State and Local Contributions 

The GAO (2007d) examined state and local government contributions to airports and found that they 

contribute $0.7 billion of total annual airport capital funding of $13 billion annually (or 4 percent of the 

total). The same GAO report also provides information on the distribution of the grant funds to various 

airport categories as presented in Table 2-17. A majority of the state and local funding (57 percent) is 

directed toward general aviation reliever airports. 

Table 2-17. Distribution of State Funding 

Airport Category 

Percent of State 

Grants Receiveda 

Large Hub 7% 

Medium Hub 7% 

Small Hub 7% 

Nonhub 7% 

Non-primary CS 2% 

General Aviation/Reliever 57% 

a The report does not document the distribution of the remaining 13 percent of grants. 

Source: GAO (2007d) 

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2.6.2.4.5 Overview of Capital Funding 

Annual capital expenditures by the nation’s airports are substantial, and a variety of funding sources exist 

to cover these expenditures. The GAO estimated the source of airport capital funding as listed in Table

2-18. The report further stated that large and medium hub airports accounted for 72 percent of all capital 

expenditure ($9.4 billion annually). Their finding that grants and state/local contributions make up a 

smaller proportion of funding is consistent with EPA’s survey responses. 

 Table 2-18. Sources of Airport Funding (2001-2005) 

Funding Source 

Average Funding 

(billion, 2006 $) 

Percent of Total 

Funding 

Airport bonds $6.5 50% 

AIP grants $3.6 29% 

PFCs $2.2 17% 

State and local contributions $0.7 4% 

Total $13 100% 

 Source: GAO 2007d 

For a more detailed look at this information by hub size, EPA examined the responses to its Airport 

Deicing Questionnaire.15 The answers provided by surveyed airports were slightly different than what is 

reported in aggregate in the GAO report. Table 2-19 below provides a breakdown of weighted responses 

to the question of airport capital financing. 

Table 2-19. Capital Expenditure Financing (2001-2005) 

Hub Size 

Grants “Pay As You Go” Financed By: 

Airport 

AIP Other PFCs Bonds 

Rates and 

Charges Other

Large Hubs 13.7% 3.7% 16.2% 8.0% 18.0% 46.8% 

Medium Hubs 34.4% 5.7% 18.3% 11.1% 10.9% 44.8% 

Small Hubs 55.7% 2.9% 20.1% 9.5% 9.6% 20.8% 

Nonhubs 70.9% 8.4% 7.2% 5.5% 21.3% 12.4% 

Source: EPA’s Airport Deicing Questionnaire 

In EPA’s survey responses, between 12 percent and 47 percent of respondents of capital expenditures 

were financed with bonds in the previous five years, compared with GAO’s estimate of 50 percent. 

Airport bonds were the largest source of funds for large and medium hubs. The largest source of capital 

funding reported by small hubs and non hubs were grants, the majority of which were AIP grants. 

As shown in Figure 2-5, the GAO (2007d) found that airport projects planned for 2007-2011 exceed past 

funding levels by approximately $1 billion annually. Although some of these projects are ineligible for 

AIP grants ($5.8 billion), a total of $8.2 billion of AIP eligible projects is larger than the historical AIP 

funding of the five year period 2001-2005 at $3.6 billion. Some of difference is funded by other sources, 

such as PFC ($2.2 billion) and airport bonds ($6.5 billion). 

 

15 The specific question: “Using readily available information, characterize the percentage of capital expenditures at 

this airport of the last five years accounted for by [the categories shown in part in the first column of Table 2-18].” 
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As Figure 2-6 shows, the GAO (2007d) found that average annual planned development at larger airports 

for 2007-2011 exceeds the average annual funding from 2001-2005 by approximately $600 million. From 

2001-2005, larger airports collected an average of $9.4 billion each year while they plan to spend $10 

billion each year from 2007-2011. Of the $10 billion in planned development costs, $5.7 billion (57 

percent) is planned to go towards AIP ineligible projects. Funding through PFCs ($2.0 billion) and airport 

bonds ($5.9 billion) will help fund the majority of these development projects. 

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

Source: GAO 2007d 

AIP Ineligible, 

$5,738 

Standards, 

Capacity, 

Terminal, 

$5,295 

Reconstruction security, 

safety, 

environment, 

noise, $2,449 

Other, new 

airport, access, 

$488 

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

(2006 dollars in millions)

$13,968

Average Annual Funding, 2001-2005 Average Annual Planned Development, 2007-2011 

GARBs, 

$6,458 

AIP, $3,636 

PFCs, $2,189 

State and local 

contributions, 

$732 

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

(2006 dollars in millions)

$13,014
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Figure 2-6. Comparison of Larger Airports’ Past Funding to Future Development Costs 

Source: GAO 2007d 

2.6.2.5 Net Operating Revenues 

The FAA reported that airports have recovered financially from the difficulties of the early 2000s (Shaffer 

2007). However, they also found a direct relationship between the size of the airport (measured by 

passenger enplanements) and the net operating revenues of the airport. Large and medium-sized airports 

consistently earn positive net revenues. FAA’s review found them financially stable in large part because 

of their ability to tap into funding sources beyond federal grants, such as GARBs and PFCs. However, it 

goes beyond this; the ability of large and medium-sized airports to tap into bond markets is at least 

partially a function of their ability to earn positive net revenues, that is, to earn revenues over and above 

costs that can be used to pay for the bonds. 

Although small hub and nonhub primary airports have returned to the financial health levels of the late 

1990s, these airports are not as financially stable as their larger counterparts. FAA found that even with 

Average Annual Funding, 2001-2005 Average Annual Planned Development, 2007-2011 

AIP Ineligible, 

$5,663 

Capacity, 

$1,416 

Reconstruction, security, 

safety, 

environment, 

$1,199 

Terminal, 

$1,118 

Other access 

standards, 

$614 

$0

$2,000

$4,000

$6,000

$8,000

$10,000

(2006 dollars in millions)

$10,010

GARBs, 

$5,921 

AIP, $1,327 

PFCs, $1,976 

State and local 

contributions, 

$198 

$0

$2,000

$4,000

$6,000

$8,000

$10,000

(2006 dollars in millions)

$9,424
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the option to collect PFCs, many of these airports continue to rely on federal AIP grants for major capital 

improvements (Shaffer 2007).16 

2.6.3 Airport Finance and the Economic Impact Analysis 

There are a number of distinguishing features of this industry that make the analysis different from the 

type of analysis EPA would perform for a more traditional for-profit manufacturing industry. Almost all 

potentially affected airports are publicly owned and operated by local, county, or state governments, or by 

quasi-governmental authorities created to operate the airport. As governmental or quasi-governmental 

entities, airports do not earn a profit or loss in the traditional financial sense; in fact, many airports have 

been operated with the expectation that they will break even financially, with airline customers legally 

required to cover expenditures in excess of costs. 

In addition, airport capacity is constrained, especially in the short run, and the demand for large capital 

expenditures necessary to maintain and expand U.S. airport network significantly exceeds supply. 

Although airports have access to federal, state, and local government grants, and PFCs, it is not clear 

these funds are available to meet capital expenditures associated with meeting effluent guidelines. 

Airports will likely have to rely on the bond market and airline rates and charges. As the preceding 

analysis shows, these are not equally available to all types of airports. 

2.7 Airline Financial Management 

2.7.1 Historical Overview of Airline Profitability 

The year 2006 represented the first profitable year for the airline industry since 2000. Increased revenues 

were attributed to “solid growth in passenger, cargo and ancillary revenues, and against a backdrop of 3.3 

percent growth in real U.S. gross domestic product (GDP)” (ATA 2007b). Passenger revenues in 2006 

were 0.75 percent of U.S. GDP, still well below the pre-September 11, 2001, share of 0.95 percent (ATA 

2007b). While revenues increased in 2006, so did operational expenses. The increase in operational 

expenses of 3.6 percent is largely attributed to higher fuel prices (which is discussed in Section 2.7.2.4). 

Following September 11, 2001, major airlines cut the number of flights by 20 percent or more, and one 

carrier ceased operations entirely (GAO 2001). As a result of decreased airline traffic, many airlines 

grounded part of their existing fleet and delayed delivery of new aircraft that had been on order (FAA 

2007). The largest effect on airlines following September 11, 2001, was an increase in operating costs. 

This increase occurred for several reasons: 

• Unit costs increased due to lower aircraft utilization, brought about by schedule 

reductions. 

• Increased security requirements and associated delays decreased airline productivity. 

• Both aircraft insurance and liability insurance costs increased substantially. 

In addition to the costs above, airlines were also faced with the implementation of the Aviation Security 

Infrastructure Fee (ASIF) to cover Transportation Security Administration screening costs (Belobaba 

2005). The fee is directly passed to passengers at an amount of $2.50 added to the fare for the first two 

legs of a flight in each direction (TSA 2004) (i.e., a maximum charge of $10 roundtrip). 

 

16 This may be related to the variance in year-to-year passenger enplanements at these airports. Passenger 

enplanements at smaller airports appears to vary more (relative to their average) than at larger airports. Thus, the 

stream of revenues from PFCs may be too uncertain to be used to guarantee sufficient backing for a bond issue. 
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In 2003, the airline industry suffered another sharp decrease in demand for flights, particularly to the 

Asian market, due to the SARS crisis. Since SARS is spread through inhalation of airborne droplets, 

primarily in areas of close contact with many people, it was of particular concern to airlines and airline 

passengers. United Airlines saw scheduled revenue passenger miles decrease by about 6 percent in 

March, 2003 compared with one year earlier; the airline’s passenger load factor declined from 78 percent 

in March 2002 to 74 percent in March 2003. US Airways also saw declines in revenue passenger miles 

(down 16 percent in March 2003 over March 2002) (Gola 2003). 

Between 2001 and 2005, the airline industry incurred operating losses of nearly $28 billion (GAO 2006). 

Table 2-20 lists various financial statistics for domestic operations only, by airline type over the five-year 

period from 2002 through 2006. The majority of airlines posted negative operating profit and net 

income.17 On average, only national, commuter and domestic cargo carriers earned positive operating 

profits and only regional and domestic cargo carriers posted average positive net income from 2002 to 

2006. 

Table 2-20. Five-Year Average Financials for Domestic Operations by Airline Type 

(2002-2006) 

Airline Type 

Five-Year (2002-2006) Average Financials (in thousands) 

Operating 

Revenue 

Operating 

Expenses 

Operating 

Profit Net Income 

Major Carrier $6,188,971 $6,404,253 -$215,282 -$622,568 

National Carrier $416,058 $398,878 $17,180 -$13,490 

Regional Carrier $46,735 $47,228 -$493 $82 

Medium Regional Carrier $12,968 $15,042 -$2,074 -$2,603 

Commuter Carrier $31,488 $26,916 $4,571 -$2,969 

Small Certified Carrier $4,981 $5,066 -$85 -$163 

Domestic Only All Cargo $544,950 $528,641 $16,310 $24,073 

Source: BTS Air Carrier Financial Reports (Form 41), Schedules P-11 and P-12. 

By 2006, however, there were gains in all operating revenue categories, with the exception of the charter 

market. Table 2-21 presents summary financial statistics for U.S. airlines, 2005-2006. Both operating and 

net profit margins improved, with net profit becoming positive. Particularly important to the industry are 

that the unit measurements of revenue per passenger mile (RPM), revenue per available seat mile (ASM), 

and revenue per cargo ton mile all increased significantly, with gains of 5.7, 7.9, and 4.6 percent 

respectively. 

 

 

17 Operating profit represents the profit (loss) from air transportation-related activities only and does not include 

non-operating income (expenses), nonrecurring items or income taxes. Net income represents the total profit (loss) 

and includes operating profit (loss), non-operating income (expenses), nonrecurring items and income taxes. 
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 Table 2-21. Financial Highlights of the Airline Industry 

 (U.S. Airlines, scheduled service, in millions except as noted) 

2005 2006 Change (%) 

Operating Revenues $151,255 $163,824 8.3 

Passengera 93,500 101,208 8.2 

Cargoa 20,704 22,544 8.9 

Charter 6,074 5,562 -8.4 

Other 30,976 34,510 11.4 

Operating Expenses 150,828 156,279 3.6 

Operating Profit (Loss) 427 7,545 1,668.1 

Net Profit (Loss) b -$5,782 $3,045 - 

Revenue per Passenger-Mile (¢/RPM)a 12.00 12.69 5.7 

Revenue per Seat-Miles (¢/ASM)a 9.32 10.06 7.9 

Revenue per Cargo Ton-Mile (¢/RTM)a 73.58 76.99 4.6 

Operating Profit Margin (%) 0.3 4.6 4.3 pts. 

Net Profit Margin (%) -3.8 1.9 5.7 pts. 

a

 Scheduled service only. 

b

 Excludes bankruptcy-related charges (reorganization expenses and fresh-start accounting 

gains). 

Source: ATA 2007b 

Table 2-22 highlights overall changes in domestic operating profit and net income for large 

certificated air carriers by type between 2002 and 2006. Although five-year average operating 

profits were negative (see Table 2-20), most air carriers experienced growth in operating profit; 

only medium regional and small certified carriers showed declining operating profit. Changes in 

net income from 2002 to 2006 were more mixed; major, national, commuter and domestic cargo 

carriers posted improved net income (although net income was still negative for major and 

national airlines), while regional, medium regional and small certified carriers showed declining 

net income. 

Despite the improved 2006 financial picture, in 2007, the Air Transport Association (ATA) 

reported that because of the industry’s high level of debt, airlines will continue to be extremely 

vulnerable to market fluctuations, such as fuel prices and economic recession. During 2006, the 

higher jet fuel prices are estimated to have added $8.9 billion to the industry’s operating costs, 

virtually negating any cost saving efforts that carriers made in reducing non-fuel related expenses 

during the year (Heimlich 2007). 

 

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Table 2-22. Changes in Domestic Operating Profit and Net Income, 2002 to 2006 

Airline Type 

Operating Profit 

(in thousands) 

Net Income 

(in thousands) 

2002 2006 Change 2002 2006 Change 

Major Carrier -$574,711 $239,115 $813,827 -$696,493 -$320,645 $375,847 

National Carrier $1,747 $23,074 $21,328 -$7,572 -$4,041 $3,532 

Regional Carrier -$1,959 $1,340 $3,299 $1,645 $205 -$1,440 

Medium Regional Carrier -$1,199 -$8,426 -$7,227 -$2,361 -$9,083 -$6,722 

Commuter Carrier -$9,173 $0 $9,173 -$35,761 $0 $35,761 

Small Certified Carrier $0 -$423 -$423 $0 -$815 -$815 

Domestic Only All Cargo $0 $42,785 $42,785 $0 $90,054 $90,054 

Source: BTS Air Carrier Financial Reports (Form 41), Schedules P-11 and P-12. 

2.7.2 Factors in Airline Profitability 

2.7.2.1 Industry Characteristics Affecting Profitability 

Air transport is an intermediate product; that is, it is a product consumed so that another good (e.g., 

business meeting, leisure travel) can be obtained. Thus, the demand for air transport services is dependent 

on demand for the underlying product (Holloway 2003). As an intermediate good, the airline industry 

exhibits fixed capacity, sells a perishable product, and faces demand levels that vary both predictably and 

stochastically (Borenstein and Rose, 2007). 

While the industry itself has been deregulated, the majority of the infrastructure for air transportation 

remains controlled by the government (Borenstein and Rose, 2007). Holloway (2003) believes this creates 

an unusual dynamic between the publicly controlled airspace and airports and privately controlled 

airlines. Holloway (2003) found air transport demand is: 

• Heavily influenced by output supply. 

• Prone to market fluctuation impacts in the long run. 

• Subject to imbalances in volume or timing of traffic flows. 

Holloway (2003) suggested that approximately 80 percent of a scheduled carrier’s costs can be considered 

fixed in the short run. This translates into airlines not being able to quickly adjust to market changes. 

Indeed, airline profits have exhibited greater fluctuations since deregulation, but Borenstein and Rose 

(2007) believe this is due to both price inflation and the size of the industry. The observed fluctuations in 

net income, however, are no more severe than during regulation. The volatility inherent in the airline 

industry may be largely explained by two factors (Borenstein and Rose 2007; Morrison and Winston 

1995): 

• Fundamentals of the industry: quick and dramatic fluctuations in profit are driven by 

highly volatile demand, high levels of fixed costs, and slow adjustment of supply; 

• Strategic errors: changes in airline capacity can take years to implement (e.g., new 

aircraft orders, expansion of airport facilities), thus the industry relies heavily on 

economic forecasts, which means that their most important business decisions are based 

on the imperfect science of economic forecasting done by each airline individually. 

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2.7.2.2 Factors Controlled by the Airlines 

Many factors within the airline’s control can affect profits. The major determinants of profitability are: 

• Operating costs (e.g., employee compensation, fuel prices, maintenance expenses) 

• Fares 

• Network and operating characteristics 

• Managerial characteristics 

Operating costs have an inverse relationship to profits. An airline trade group, ATA publishes a quarterly 

airline cost index based on the data provided to U.S. DOT on Form 41. As illustrated in Figure 2-7, the 

highest percent of operating costs are labor and fuel, based on the most recent data available (ATA 

2007b). 

 Figure 2-7. Airline Operating Costs as Percentage of Total (2007) 

Landing fees

2%

Fuel

28%

Labor

23% Other operating 

expenses

13%

Professional 

services

8%

Rents and 

ownership

11%

Transport-related

15%

 Source: EPA analysis of ATA 2007b. 

2.7.2.3 Labor Costs 

Unions represent at least part of the labor force at all major U.S. airlines (GAO 2003). Contracts between 

airlines and their unionized employees are conducted in accordance with the requirements of the Railway 

Labor Act of 1936. Airline labor contracts do not expire, but instead have a date upon which parties can 

request revised terms for a new contract. Labor costs accounted for over 40 percent of the unit cost 

difference between legacy airlines and low cost airlines in 2003 (GAO 2004). Legacy airlines’ high labor 

costs are the result of a more senior workforce, higher pension costs, and work rules that differ from their 

low-cost carriers. Union contracts can also make it more difficult for airlines to adjust labor costs to 

changing market conditions. Legacy airlines that file for bankruptcy have been renegotiating union 

contracts to reduce labor cost. Even with its younger staff and lower pay, labor costs are still a significant 

portion of the low-cost carriers’ operating expenses. 

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2.7.2.4 Fuel Costs 

The U.S. airline industry consumes approximately 19.5 billion gallons of jet fuel per year (ATA 2008a). 

Fuel now exists as the largest contributor to airline costs, surpassing labor for the first time in 2006 

(Heimlich 2007). As of May 2008, the ATA reported that almost 40 percent of the price of an airline 

ticket goes to pay for fuel costs, as opposed to roughly 15 percent in 2000 (Maxon 2008). In terms of the 

reduction in fuel related costs, efforts have been made to reduce consumption across the commercial side 

of the industry with a 1.9 percent decrease in consumption from 2005 to 2006. Airlines have been cutting 

costs through reduction of plane weight and drag. For example, airlines have reduced reserve fuel carried 

by aircraft to reduce weight. Cutting heavy items from plane interiors, such as beverage carts, seats, 

ovens, and extra potable water, has proven to save thousands of gallons of fuel annually (Heimlich 2007). 

In FAA’s forecast of air transportation (2007), they found that if the price of oil increased to more than 

$100 per barrel, then the industry will experience major disruptions likely resulting in less capacity and 

passenger demand, along with reduced market competition. In February 2008, Merrill Lynch, a global 

financial management and advisory company, projected that if oil was available at $75 per barrel, then all 

12 airlines analyzed would have a profitable year (Reed 2008). The company further suggested that oil 

priced at $95 per barrel, would result in only five profitable airlines and a total industry loss of $322 

million. At $110 per barrel, only two airlines would be profitable and industry losses would be $3.3 

billion. The Energy Information Administration stated that in 2007, the average price for oil was $72 per 

barrel in 2007 and their June 10, 2008 short-term forecast projected an average of $122 per barrel in 2008 

and $126 per barrel in 2009 (EIA 2008).18

2.7.2.5 Landing Fees 

In the third quarter of 2007 landing fees composed 1.9 percent ($653 million of $33.9 billion) of 

operating costs, and since 1990, landing fees have composed of between 1.8 and 2.4 percent of operating 

costs (ATA 2008a). Absolute costs have increased at a slow but steady rate increase from $1.25 billion in 

1990 to $2.51 billion in 2006. 

An FAA rule issued in 1996 set some guidelines for the structuring of landing fees (FAA 1996). Airports 

had traditionally structured many of their landing fees based on weight of the aircraft, and the 1996 rule 

did nothing to alter that. However, it did require that all landing fees must be offset by costs of completed 

construction projects (not future or current projects) to avoid large revenue accumulation based on the 

landing fees. The rule also allowed for a “peak pricing” system (as long as it is not discriminatory) in 

which congested airports could charge carriers higher landing fees at the busiest times. 

There is a growing move to use “peak pricing” to encourage airport customers to use alternative airports, 

alter their flight schedules, or fly larger aircraft (GAO 2001). A proposed FAA rule issued in January 

2008 (FAA 2008c) clarifies that airports did have the authority “to establish a two-part landing fee 

structure consisting of both an operation charge and a weight-based charge, in lieu of the standard weightbased charge.” Additionally, the proposed rule allows airport managers the ability to offset a proportion 

of the landing fees with current (in addition to already constructed) construction projects, and the ability 

to offset their revenue from landing fees with construction costs of any other underutilized airports they 

may own. 

 

18 Prediction based on West Texas Intermediate crude oil market, which is slightly higher quality crude oil than the 

OPEC basket (but typically no more than $2 per barrel higher). The price of jet fuel is primarily based on the 

underlying price of crude oil (with additional costs imputed from the jet fuel crack spread), so as crude prices rise, 

so do jet fuel prices (Heimlich 2006). 
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In EPA’s airport questionnaire, EPA asked airports to identify the landing fees for commercial air carriers 

for 2004. Table 2-23 lists the weighted average of the responses according to hub size across five 

categories. A signatory airline is an air carrier that has signed a long term commitment with the airport. 

As shown in Table 2-23, signatory airlines often are provided with a reduced landing fee as a benefit of 

the agreement.19 EPA found that landing fees for the nonhubs airports are much higher than the other hub 

sizes. 

Table 2-23. Landing Fees by Hub ($/1000 lb landed weight) 

Hub Size 

Passenger Air 

Carrier 

Signatory 

Passenger Air 

Carrier NonSignatory 

Cargo Air 

Carrier 

Signatory 

Cargo Air 

Carrier NonSignatory 

Commuter/ Small 

Commercial 

Airlines 

Large 2.30 2.61 2.31 2.65 2.66 

Medium 1.80 2.27 1.89 2.25 2.00 

Small 2.34 3.09 2.43 2.80 2.24 

Nonhub 4.25 5.19 3.86 4.94 4.16 

Source: EPA Deicing Questionnaire 

EPA anticipates that airport costs associated with the deicing effluent guideline may be passed through to 

the airlines in the form of higher landing fees. 

2.7.3 Industry Concentration 

Despite many of the legacy air carriers ceasing operations in the years following deregulation, the largest 

carriers have retained market dominance. In 2005, with a combined market share of 66 percent, 9 of the 

original 23 legacy carriers continue to serve the U.S. market (Borenstein and Rose 2007). Since 2005, and 

the success of the US Airways and America West merger, there are continued rumors about proposed 

legacy airline mergers due to overcapacity (Bailey 2006; Blanton 2008). In theory, these mergers would 

consolidate overlapping operations on routes and airports, along with corporate overhead, in order to 

reduce operating costs. The decline in the number of traditional carriers through bankruptcy or merger has 

raised concerns among some observers that increasing market concentration might provide surviving 

airlines with market power. 

2.7.3.1 Market Power 

Economists typically measure industry competitiveness by market share accounted by the largest four or 

eight largest companies or an index such as Herfindahl that measures the number of “effective 

competitors.” Using such measures, the competitiveness of the airline industry has declined since 

deregulation due to mergers. However, airlines do not really compete at the national level, but at the route 

level. As Morrison and Winston (1995) pointed out: 

Four effective competitors at the national level can operate in two very different ways: with 

each having a monopoly share on one-quarter of the routes or each having a one-quarter share 

on all routes. Although the number of airlines is the same either way, the second situation is 

obviously more competitive because more airlines serve each route. Thus fewer effective 

 

19 The 1996 FAA rule mentioned above (FAA 1996) states that it is not considered a discriminatory process to 

charge different rates for signatory and non-signatory airlines, “The prohibition on unjust discrimination does not 

prevent an airport proprietor from making reasonable distinctions among aeronautical users (such as signatory and 

non-signatory carriers) and assessing higher fees on certain categories of aeronautical users based on those 

distinctions (such as higher fees for non-signatory carriers, as compared to signatory carriers).” 
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and Standards for the Airport Deicing Category Air Transportation Industry 

competitors at the national level does not necessarily mean that the industry is less 

competitive. 

Entry into a given route market is determined by existing competition on the route and how the route has 

been integrated into both the entering carrier’s and existing carriers’ networks (Morrison and Winston 

1995). Carriers are discouraged from entering a new route market if one of their competitors has a hub at 

either the origin or destination of that route (Morrison and Winston 1995), therefore, reducing 

competition on certain routes. 

Many airline markets tend to exhibit oligopolistic behavior in that price changes initiated by any one of 

the small number of competitors on a route are likely to bring a reaction in pricing by the other carriers 

(Holloway 2003). This aspect of air carrier behavior has been readily observable in the last two or three 

years as airlines struggle to cover increasing fuel costs. A carrier might announce a fare increase, then 

watch to see if competitors follow the increase; if not, the initiating airline often quietly reduces its fares 

to their previous level a few days later (see, for example: Grant, 2008; IHT, 2007; Reuters, 2007). 

Holloway (2003) also noted that additional airline costs can feed into passenger fares through changes in 

total fares (after all taxes and fees) even though base fares (advertised fares) might remain constant. An 

example of this strategy is fuel surcharges after oil price spikes; the addition of a fuel surcharge increases 

the total passenger fare. Thus airlines are able to increase revenues by increasing the total amount paid for 

a ticket without actually increasing base fares. 

In light of the unprecedented increases in jet fuel costs in 2008, airlines have increasingly made use of 

surcharges to generate additional revenues without raising base fares. These include: fuel surcharges, fees 

for checking a pet on board, making a phone reservation, checking a second piece of luggage, snacks and 

meals, and the opportunity to select a window or aisle seat (Chen and Prada 2008; Hamman, 2008). 

American Airlines has even added a new charge for checking the first piece of luggage; other airlines 

have not made this move yet, but are considering it for the near future (Chen and Prada 2008). 

In a 2005 report, GAO found that since 2000, the airline industry’s excess capacity has greatly diminished 

their pricing power. Profitability, therefore, depends on which airlines can most effectively compete on 

cost, which relates back to the increased market share of low-cost carriers. With the changing landscape 

of the airline industry, it suggests any legacy carrier exiting the industry would be replaced by a new lowcost entrant, thus resulting in an overall lowering of fares. On the other hand, the exit of the major lowcost carrier in the nation, Southwest Airlines, while it would affect a small percentage of overall 

passenger traffic, would send overall fares upward (Morrison and Winston 1995). 

2.7.3.2 Barriers to Exit 

Bankruptcy has been a common occurrence in the U.S. airline industry. Borenstein and Rose (2007) 

report that five of the top seven U.S. airlines (each having at least five percent of domestic market share) 

have filed for Chapter 11 bankruptcy at least once. These airlines are Continental, US Airways, Delta, 

United, and Northwest; all except Continental have filed for Chapter 11 since September 11, 2001 (ATA 

2008b). The only two top-tier airlines that have yet to declare bankruptcy are American and Southwest 

(Borenstein and Rose 2007). 

Chapter 11 bankruptcy allows a company to continue to operate while the company is protected from its 

creditors and allowed to reorganize in an attempt to once again become a financially viable company after 

its fresh start. Reorganization typically involves renegotiation of contractual (including union) and debt 

obligations; creditors and others, such as a unionized labor force, have incentive to agree to 

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reorganization in the hopes that the reorganized company will be worth more than they would receive if 

the company was shut down and its assets sold to repay creditors. 

Many in the airline industry have argued that continued operation of insolvent airlines is at least partially 

responsible for the financial instability of the industry as a whole (e.g., Crandall 1995, Kaps 2000, 

Holloway 2003). The primary issue here is that Chapter 11 bankruptcy provisions act as a “barrier to 

exit,” allowing otherwise financially nonviable airlines to remain in operation to the detriment of the 

industry as a whole. 

The issue can largely be traced to the economics of operating an industry with high fixed costs (e.g., 

aircraft ownership and/or leases, infrastructure) and low marginal cost. Given that an airline is already 

committed to undertaking a flight from one city to another, the marginal—or incremental cost of filling an 

empty seat on that aircraft is relatively low (primarily the incremental fuel burn). This creates incentive 

for airlines to reduce prices; as long as the ticket price exceeds marginal cost, the airline will make more 

money—or lose less money—by filling that seat even if the ticket does not cover the allocated full costs 

of providing that flight. This is exacerbated by the perishable nature of the product—the potential revenue 

represented by an empty seat on flight can never be recovered by selling it at a later date. 

Crandall (1995) aggressively states the case for the problems caused by a bankrupt airline remaining in 

operation. Airlines operating under bankruptcy protection are able to operate at artificially low cost due to 

restructured debt, renegotiated labor contracts, and other reduced obligations. Thus such airlines receive a 

cost advantage over other airlines, and are able to offer even lower fares. Non-bankrupt airlines are faced 

with an unpalatable choice between matching the lower fares, which are probably below that airline’s full 

costs, or maintaining fares that will cover costs but lose passengers. As discussed in the previous 

paragraph, their incentive would be to follow the competition and reduce fares as well. Crandall 

concludes that bankruptcy protection has resulted in ruinous fare wars, huge losses, high debt-to-equity 

ratios, and low-grade investment securities for U.S. airlines. 

Not all agree with this doomsday assessment of airline bankruptcy. According to Borenstein and Rose 

(2007), very little happens to the market when a large player files for bankruptcy. Typically, an airline 

will reduce fares immediately prior to filing bankruptcy. Competitors with healthier financial outlooks, 

however, do not tend to follow suit with the price decrease and therefore the fare decrease is usually 

temporary. Despite there being a lot of media attention paid to airline bankruptcy filings, it appears that 

there is little impact on competitors or consumers (Borenstein and Rose 2007). 

Crandall’s discussion of the implications of barriers to exit and bankruptcy on the industry intuitively 

makes sense. However, one can take the same logic that appears to be inherent in the nature of the airline 

industry and argue that the problem of bankruptcy protection might be overstated. The incentive to fill 

aircraft seats even at fares below fully allocated cost exists whether the carrier is bankrupt or not. Because 

aircraft seats are a perishable product and the marginal cost of filling those seats is low, there will always 

tend to be downward pressure on air fares as long as the market is competitive. 

Furthermore, the value of an airline, even if bankrupt, is far greater than the value of its components: “the 

value of an airline’s assets—individual aircraft, buildings, ground leases, etc.--is substantially less than 

the stream of cash flow which can be produced by using those assets in concert” (Crandall 1995). Thus, 

whether an airline is protected by the courts or not, there are strong incentives for creditors (and 

employees) to reach agreement to keep a vulnerable airline in operation. 

Finally, Crandall points out that renegotiated labor contracts give bankrupt airlines lower labor costs than 

the non-bankrupt competition. However, since deregulation, the industry has seen a stream of low cost 

start-ups, of which a majority do not have union labor, and all of which have lower labor costs (e.g., they 

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do not have pilots, mechanics, and other employees with 20 or more years of seniority because the airline 

hasn’t been in existence that long). Thus, low labor cost competition is not resulting solely from bankrupt 

airlines. 

In conclusion, the economics of the industry appear to be such that there is inherently downward pressure 

on prices. With high fixed costs and low marginal costs, this provides incentive for airlines to offer fares 

below fully allocated costs. Because many of an airline’s costs may be associated with aircraft leases and 

other long term financial commitments, there are incentives for those airlines to remain in operation for 

long periods of time even if they cannot meet their full costs. Thus, although the importance of Chapter 

11 bankruptcy provisions might be overstated in the financial performance of the industry, the underlying 

economic fundamentals suggest there are inherent factors in operation that will always make the airline 

industry a difficult financial environment. 

2.8 Airport-Airline Interactions 

2.8.1 Effect of Airline Bankruptcies on Airports 

With financial instability being an inherent trait of the airline industry, it bears mentioning the impact 

such instability has on airports. Borenstein and Rose (2007) found that while carriers do tend to reduce 

service levels during bankruptcy, there are always other airlines willing to meet market demand. They 

also found that in both small and large airports there is no statistically significant service effect when a 

carrier at those airports declares bankruptcy. There is a small statistically significant effect at medium 

airports, but “total service to the airport declines by less than half the number of flights that the filing 

carrier offered before bankruptcy” (Borenstein and Rose, 2007:19). 

2.8.2 Airport-Airline Cost Pass-Through Analysis 

The ability of a supplier to pass through costs to the purchaser depends on the fundamentals of supply and 

demand. The demand for aircraft deicing services–as well as the demand for airport services in general–is 

derived from consumers’ demand to travel from one place to another or to ship their cargo from one place 

to another. In short, it is due to consumers’ demand for air transportation that airlines demand services 

from airports, such as landing slots and access to the terminal, apron, and hanger space necessary to 

support their flight operations. Determining cost pass-through for deicing services thus involves not one, 

but two pass-throughs: from airport to airline and from airline to passenger. 

In perfectly competitive markets–with many small sellers and many small purchasers–the relative price 

elasticities of supply and demand essentially determine cost pass-through. However, neither the market 

for airport services nor the market for airline services can be described as perfectly competitive. Both 

airports and airlines appear to have some ability to set prices, although this pricing power probably varies 

with the type and location of the airport, and the size, type, and route structure of the airline. In the air 

transportation industry, although cost pass-through might depend on market fundamentals in the long run, 

in the short run it is subject to negotiation. Section 2.8.2.1 and Section 2.8.2.2 describe some of the 

attributes that affect the determination of cost pass-through between airports and airlines and between 

airlines and customers, respectively. 

2.8.2.1 Airports to Airlines 

Historically, it has been something of a truism that all airport costs are eventually paid for by airlines and 

airline customers. Airlines pay for airport operating costs through rates and charges. They also pay for 

airport capital expansion either through aviation user taxes that formed the basis for AIP grants or by 

providing the revenue stream to finance bond issues. These costs are then generally passed on to their 

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customers. In addition, airline passengers directly pay for airport costs through the airport revenue 

streams from concessions, parking, and car rentals. In addition, much capital expenditure is now funded 

through PFCs (which are added to ticket prices).20 Although these recent trends have modified airport 

finance, the overall impression is still that in the long-run, a large percentage of airport costs are passed 

through to airlines and airline passengers in the form of increased fees. However, in the short-run, cost 

pass-through (CPT) from airports to airlines might be significantly smaller than 100 percent. 

Although sparse, and more suggestive than definitive, available literature indicates that airports are able to 

pass on costs to airlines. But there is a delicate balance to maintain, especially in the short run: 

“A major consideration to be made by airport personnel at airline-served airports in 

forecasting their projected revenues is that of how to charge the airport’s major tenants, the 

airlines. Because such charges impact heavily on the airport’s revenue stream, it is important 

to be fair to the tenants as well as to gain sufficient revenue to operate the airport and make 

related major purchases” (Kaps 2000). 

An analysis by the DOT supports this claim. DOT examined how the severe airline financial distress 

following September 11, 2001, affected airports and looked at actions taken by airports to ensure their 

own financial viability. Among the actions taken were the following: 

“Reducing or refunding the effective rates that air carriers pay for airport facilities by 

suspending or reducing airline rates and charges, under-recovering certain costs allowable 

under airline agreements, contributing discretionary cash flow to reduce airline charges, 

adjusting the income-sharing formula to enlarge the airline share, offering airlines additional 

time to repay any underpayments of prior rates and charges, and consolidating unspent 

construction fund amounts to refund airlines” (DOT 2003). 

This indicates that the reality of the airlines’ financial situation impeded pass-through of airport capital 

expenditures to airlines. 

In addition, the ability of airports to increase fees is dependent on the nature of the particular airport and 

its relationship with the tenant airline(s). For example, airports with only one major airline are more 

financially vulnerable and may be less willing to pass on capital costs to the airline if the airline is in 

financial distress. Also, secondary airports are more vulnerable than primary airports because the services 

at secondary airports are more readily suspended during times of financial difficulty for the airlines. 

Increased competition at airports will lessen the likelihood that an airport will be dominated by a single 

airline in the future (DOT 2003). In addition, airports compete among themselves to attract and retain 

airline tenants by creating favorable working environments for the airlines. Anecdotally, some airports in 

relatively close proximity to other significant airports have indicated to EPA that they are reluctant to 

increase airline rates and charges for fear of losing traffic to competitors. 

The DOT report also finds that airports turn to alternative revenue sources when trying to reduce costs on 

airlines. Such alternatives may include altering staffing levels and benefits, reducing non-essential 

business operations expenditures, and increasing parking rates. In strong financial markets when interest 

rates are low, airports may also seek to refinance their outstanding debt, redirect PFC revenues to pay for 

outstanding debt and/or reduce some airline rates and charges (DOT 2003). 

 

20 To the extent that PFCs increase the cost of air transportation, and therefore decrease the quantity of air 

transportation purchased by consumer, airlines indirectly pay some cost of PFCs in the form of forgone revenues 

(see Section 2.8.2.2). 
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In summary, the impression from analyzing the industry and its financial and market structure and 

reviewing the literature, is that most airport costs, both capital and operating, will eventually be passed 

through to airlines and/or their customers. However, this represents a long-run trend. In the short-run, 

airports might face significant resistance to increased costs, especially when the airlines are in financial 

distress. The years since the events of September 11, 2001, have largely been a period of financial distress 

for airlines. As the price of oil continues to rise, it is not clear how much this financial stress on airlines 

has eased. Thus, while costs might conceptually be passed through, it is not clear how much scope is 

available for cost pass-through at this point in time. 

Finally, cost pass-through from airports to airlines cannot be discussed without consideration of the 

complexity of the airport sector. Airports vary considerably not only in their ability to pass through costs, 

but their need to pass through costs as well. These differences appear to be systematically related to 

airport size. Large airports have significant financial resources on which to draw, both from ability to 

accumulate operating surpluses as well as their access to various capital funding programs. Smaller 

airports have much more limited financial resources. It is difficult for them to generate operating 

surpluses, and they appear to be much more dependent on various grant programs to fund capital projects. 

These two issues: financial resources generated through operations, and through participation in 

government programs, are discussed in detail in the following two sections. 

2.8.2.1.1 Review of Operational and Financial Characteristics of Airports 

If an airport is constrained in its ability to pass through costs to airlines, then its ability to implement a 

regulatory option will largely be a function of its financial resources in the absence of significant 

additional revenues. These resources include the ability of an airport to access capital markets to fund the 

initial capital expenditure; if costs can be passed through, capital markets should be easier to access since 

a revenue stream is available to fund the incurred debt. 

The potential for airports to pass through costs to airlines is at least partially a function of the financial 

resources the airport can call upon. The difference in the scale of operations, and hence their access to 

financial resources is significant. Table 2-24 compares average operational data by airport hub size. The 

implications of this table are clear; even medium hub airports, the second largest category of airports after 

large hubs, operate at a fraction of the scale at which large hubs operate: 

• Average departures at a medium hub are less than 30 percent and enplanements are less 

than 24 percent of the average large hub figure. 

• For small hubs, departures are less than 12 percent and enplanements less than 7 percent 

of the average large hub figure. 

• For nonhubs, departures are less than 4 percent and enplanements less than 1 percent of 

the average large hub figure. 

 

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Table 2-24. Average Departures and Enplanements by Hub Size, 2002-2006 

Large Hubs Medium Hubs Small Hubs Nonhubs 

Airport Count 33 35 25 54 

Departures 190,093 56,313 21,849 6,244 

As Percent of Large Hub Average -- 29.6% 11.5% 3.3% 

Enplanements 15,285,072 3,589,355 1,023,525 118,173 

As Percent of Large Hub Average -- 23.5% 6.7% 0.8% 

Source: EPA analysis of BTS T-100 airport operations data. Surveyed airports only. 

The consequences of the difference in operational scale are reflected in average airport revenues and 

expenditures. Average operating revenues at medium hubs are 23.2 percent of those at large hubs; for 

small and nonhubs those figures are 7.2 percent and 1.1 percent respectively (see Table 2-15, Section 

2.6.2.). 

The differences between airport size classes in landing fees are significant in at least two ways. First, rates 

and charges (e.g., landing fees) tend to be a key means for airports to pass-through compliance costs to 

airlines. Second, landing fees might also be indicative of an airport’s market power when negotiating with 

airlines. 

• Average landing fees at medium hubs are 20.0 percent of those at large hubs; for small 

and nonhubs those figures are 4.8 percent and 0.7 percent respectively. 

• Landing fees at these airports are smaller relative to large hub landing fees than are 

departures; for example, medium hub departures are 29.6 percent of those at large hubs 

but landing fees are only 20.0 percent of those at large hubs. This most likely reflects the 

weaker passenger demand at these airports in two ways: 

o Airlines tend to fly smaller aircraft into smaller airports (e.g., regional jets rather than 

Boeing 737s), and 

o Airlines may be more willing to reduce or withdraw services at these airports if fees 

become too large, thus constraining an airport’s ability to raise fees. 

In addition, airports are often able to accumulate reserves for capital expenditure programs through 

concession and parking revenues, which are also related to the scale of passenger service at the airport. 

Table 2-14 also shows that revenues from these sources are relatively small at smaller airports, 

particularly nonhubs. These revenue sources can be particularly valuable to an airport because airlines 

have less influence on rate setting for concessionaires and how those revenues will be used than they do 

over landing fees and terminal and gate rents. 

Finally, capital expenditures can be funded out of net operating revenues. To the extent that operating 

revenues exceed operating expenditures, airports can accumulate the difference in its capital accounts. 

EPA compared operating revenues with operating expenses by airport type over five years to determine 

airports’ ability to accumulate reserves for capital projects out of operating surpluses. These results are 

presented in Table 2-25. Large, medium and small hub airports appear to have the ability to accumulate 

reserves. Nonhub airports, however, spend more than they take in from operating revenues, meaning they 

may have to find alternative funding sources just to finance their day-to-day operations. It appears clear 

that nonhubs do not have significant internal financial resources to draw on to support capital projects. 

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Furthermore, this limits their access to bond markets, as GARBs typically require that net revenues 

exceed annual debt service by at least 25 percent. 

Table 2-25. Ratio of Airport Operating Expense to Revenues, 5-

Year Average (2002-2006) 

 FAA Classification Ratio of Operating Expenses to Operating Revenues 

Large Hubs 0.65 

Medium Hubs 0.64 

Small Hubs 0.76 

Nonhubs 1.42 

Source: FAA Form 127 data as compiled by EPA. 

2.8.2.1.2 Airport Capital Improvement Programs and Financing Sources 

Average capital expenditures and significant sources of funding for capital expenditures are summarized 

in Table 2-26. On average, capital improvement programs at smaller airports tend to be relatively small 

scale, on the order of $5 million for nonhubs to $15 million for small hubs. It should be noted that these 

capital programs must cover replacement of current capital stocks such as fire-fighting equipment, radar, 

lighting, communications and other equipment, resurfacing of runways, and similar projects; they do not 

necessarily represent expansion programs. 

Table 2-26. Average Capital Expenditure and Financing by Hub Size, 2002-2006 

Large Hubs Medium Hubs Small Hubs Nonhubs 

Airport Count 33 35 25 54 

Total Project Expenditures $177,874,771 $39,616,089 $14,705,868 $4,956,860 

As Percent of Large Hub Average -- 22.3% 8.3% 2.8% 

PFC Revenues $48,059,002 $9,561,662 $3,012,540 $334,152 

As Percent of Large Hub Average -- 19.9% 6.3% 0.7% 

Grant Receipts $22,809,305 $10,716,828 $7,010,565 $3,679,966 

As Percent of Large Hub Average -- 47.0% 30.7% 16.1% 

Bond Indebtedness $1,335,074,774 $253,756,033 $57,327,526 $2,631,704 

As Percent of Large Hub Average -- 19.0% 4.3% 0.2% 

Total Indebtedness $1,418,440,732 $268,293,030 $59,921,343 $4,223,407 

As Percent of Large Hub Average -- 18.9% 4.2% 0.3% 

Source: EPA analysis of FAA Form 127 airport financial data. Surveyed airports only. 

Table 2-26 demonstrates that nonhub airports in particular do not rely on debt financing of capital 

programs. This is largely an implication of the operating income figures discussed above; these airports 

do not have the revenue streams necessary to support large amounts of debt. Furthermore, PFCs are not a 

large source of funds for these airports; they do not have the passenger flow that will generate significant 

PFC revenues. 

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Smaller airports are much more heavily dependent on grants to fund capital expenditures than are large 

hubs. For example, departures, enplanements, operating revenues and expenditures, capital expenditures, 

indebtedness, and PFC revenues for nonhubs are all less than about 3 percent of the same figures at large 

hubs. The single exception to that rule is grant receipts; grant receipts at nonhubs are 16 percent of grant 

receipts at large hubs. In fact, grant receipts comprise 74 percent of capital project expenditures at 

nonhubs, 48 percent at small hubs, 27 percent at medium hubs, and about 13 percent at large hubs. 

Clearly, smaller airports are highly dependent on grants to pay for capital expenditures. These grants must 

fund replacement of necessary existing capital plant, not just new capital expenditures. Since funding of 

grants, especially AIP grants, is low relative to the demand for those grants, only the highest priority 

projects tend to get funded at smaller airports. 

In summary, it appears that in the short run, at least, the largest airports have the most ability–or 

leverage–to pass through costs to airlines. They also have the best access to other means of funding 

capital construction programs. Small airports are the most vulnerable to changes in airline service, and 

thus have little market power to enable them to pass through costs to airlines. In addition, the smallest 

group of potentially affected airports, small hubs and nonhubs, has the fewest alternatives for funding 

capital programs; nonhubs in particular appear to be almost entirely dependent on AIP grants for capital 

expenditures. 

2.8.2.2 Airlines to Passengers 

The ability of airlines to pass through costs to passengers in the form of higher ticket prices depends 

largely on market specific factors such as the desirability of an airport as a final destination, whether a trip 

to that final destination is for business or pleasure, and whether other airports with acceptable standards of 

airline service are close to that destination. If an airport serves a highly desirable final destination, with a 

high percentage of business travel, and there are no alternative airports nearby, airlines might be able to 

pass through significant costs to their passengers. Conversely, if customers are flying to airports primarily 

as a means to get elsewhere (e.g., connecting flights), if multiple airlines serve that airport, or if there are 

other airports just as suitable for that purpose, customers will be less willing to pay higher ticket prices, 

and airlines will thus be less able to pass through costs on flights using that airport.21 

Very few studies examine or try to estimate the intensity of demand for services at specific airports. A 

number of studies have measured the intensity of demand for airline services in general. EPA used two 

papers (FAA 1995, Button 2005) that contained extensive literature reviews of studies of the price 

elasticity of demand for air transportation. The price elasticity of demand evaluates the responsiveness of 

consumers to changes in product price and is defined as the percentage change in quantity demanded (in 

this case, air travel) caused by a given percentage change in price (in this case, airfare). 

Although details may vary, the price elasticity of demand for business travel is generally less elastic than 

for non-business travel (e.g., vacation travel). That is, there will be a relatively small reduction in business 

travel compared to non-business travel in response to any given change in fares. If a business person has 

to be at a certain location on a certain date, those travel plans are unlikely to change if fares increase. 

Conversely, a person traveling for vacation has no need to be at a specific location on a specific date; a 

vacation traveler might respond to fare increases by changing destination, mode of travel, or perhaps even 

choosing not to travel. Second, the price elasticity of demand is less elastic for long trips than short trips. 

 

21 In another context, the importance of these factors is recognized when airports issue bonds. Airports perform 

analyses of these underlying demand fundaments, which become important components in determining bond ratings 

and prices. 
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The reasoning is similar to that for business travel: if fares increase, short trips might be feasible by car or 

train, while those alternatives will be less attractive for long trips. 

Econometric studies have estimated price elasticities of demand for air travel ranging from -0.26 for longhaul business travel (a 10 percent increase in fare reduces travel by 2.6 percent), to about -4.5 for shorthaul non-business travel (a 10 percent increase in fare reduces travel by 45 percent) (FAA 1995, Button 

2005). Analysts frequently use values of about -0.9 for business travel, and from -1.5 to -2.0 for nonbusiness travel (FAA 1995, Button 2005). 

Price elasticities of demand are of more than academic interest; they have significant implications for 

supplier income when prices change. If demand is inelastic (that is, if the price elasticity of demand lies 

between 0.0 and -1.0), then a fare increase will increase supplier revenues; the percentage reduction in 

demand is smaller than the percentage increase in fare, thus overall supplier revenues increase. If demand 

is elastic (that is, if the price elasticity of demand is from -1.0 to -∞), then a fare increase will trigger such 

a large reduction in demand that supplier revenues decrease. Vacation travel appears to account for a 

larger share of passengers than business travel (with the exception of certain destinations and times of the 

year), suggesting that if airlines try to pass through costs to their customers, revenues will decline. 

The exact impact of a fare increase on airlines will depend on airline specific factors such as flight 

destinations, overall route structure, frequency of departures, and a number of other factors that lead 

customers to choose one airline over another. The impact will also depend on other supply characteristics. 

If supply is very inelastic (e.g., in a supply-demand diagram, the supply curve is very steep or vertical), 

airlines will not change the number of seats offered for sale in the short run if the costs of offering those 

seats for travel increases. In this case, cost pass-through will be zero; there will be no increase in fare and 

no decrease in passengers carried, but cost per seat will increase and operating profit will fall by the same 

amount. Conversely, if supply is elastic (e.g., in a supply-demand diagram, the supply curve is very flat or 

horizontal), airlines will pass through 100 percent of costs. This will cause passengers to reduce the 

number of seats purchased, and revenues will fall. 

Data on the price elasticity of supply of airline seats are not readily available. However, at least in the 

short run, supply appears to be very inelastic. Airline tickets have become something of a commodity, 

where passengers largely base their choice on ticket price. This acts to drive prices down to a low level. 

The incentives for airline behavior driving this result were discussed in detail under “Barriers to Exit” 

(see Section 2.7.3.2). The results of this price competition might be observed in the recent behavior of 

airlines in reaction to rising fuel costs. With airline fuel costs projected to increase by 50 to 70 percent in 

2008, airlines have found it difficult to raise fares, at least in the short run. Announced fare increases by 

one airline have not been followed by others, forcing the airline raising its fares to return them to their 

initial level. While airlines have recently started charging or increasing fees for checked bags, phone 

reservations, and in-flight meals and snacks, these fees are expected to cover only a fraction of increased 

fuel costs. Thus, it appears that at least in the short run, it is difficult in today’s business climate for 

airlines to pass through a significant percentage of costs to their passengers. 

2.9 Alaska 

Aviation in Alaska is significantly different from aviation in the other 48 states in the continental United 

States. Approximately 90 percent of the State of Alaska is not serviced by roads, so aviation is important 

to the State’s infrastructure and basic way of life. Alaska has six times as many pilots per capita and 16 

times as many aircraft per capita compared with the rest of the United States (State of Alaska 2008a). 

With the exception of Juneau International Airport, the State of Alaska owns all the airports, which are 

divided into two distinct systems: 

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• The Alaska International Airport System—Ted Stevens Anchorage International Airport 

(only medium hub in Alaska) and Fairbanks International Airport (small hub). 

• The Alaska Rural Airport System (RAS)—256 rural airports scattered throughout the 

State. 

Juneau International Airport (small hub) is owned by the City and Borough of Juneau, and operated as a 

major enterprise fund of the local government. As such, it is considered to be a self-sufficient component 

of the City/Borough of Juneau (City and Borough of Juneau, 2004). 

Table 2-27 shows the number of departures of commercial services leaving Alaska from 2002-2006. After 

a large 15 percent increase in departures in 2003, there was a small but steady decline in total departures 

for the following three years with the exception of Ted Stevens Anchorage. Despite decreasing number of 

departures from 2004 to 2006, passenger enplanements increased during that time as shown in Table 2-

28. This data correlates with the increased number of passengers per departure—9.3 in 2003 to 11.1 in 

2006 (Table 2-29). 

Another indication of how different Alaska aviation is from the rest of the United States is that Alaska has 

many small airlines that operate only in Alaska. Based on analysis of BTS T100 data, there are 37 airline 

carriers which have at least 97 percent of their total flights depart from Alaskan airports; furthermore, 32 

of these 37 carriers operate exclusively within the state (i.e., 100 percent of their departures are within 

Alaska). While some of these 37 airlines have very few departures per year (i.e., eight airlines have fewer 

than 525 departures per year), 14 of these 37 airlines had more than 10,000 departures from Alaska in 

2006. The top three airlines in terms of Alaskan departures include: 

• Hageland Aviation Service (76,522 Alaskan departures [99.99 percent of the airline’s 

total departures]). 

• Grant Aviation (46,217 Alaskan departures [100 percent of airline’s total departures]). 

• Peninsula Airways (42,690 Alaskan departures [99.96 percent of the airline’s total 

departures]). 

In addition, these 37 airlines tend to be more reliant on propeller-driven aircraft; at least 83 percent of 

these airlines’ departing aircraft are propeller driven and most rely on a much higher percentage. Even 

national carriers tend to use propeller planes for their Alaskan departures. Delta, Continental, and United 

Airlines all had between 700 and 1,000 departures from Alaska, all of which were propeller-powered 

aircraft. This reliance on propeller-driven aircraft illustrates just some of the differences of air 

transportation in Alaska: smaller aircraft, frequent short hops, frequent bad weather, and dirt runways 

with little ground support at many airports (see, for example Carey, 2007). However, the key feature of 

air transportation in Alaska is that it provides the primary outside access to many towns and villages that 

cannot be reached by road. 
Economic Analysis for Final Effluent Limitation Guidelines 

and Standards for the Airport Deicing Category A

Table 2-27. Commercial Service Aircraft Departures (Alaska) 

Airport Type 

Number 

of Hubs 

Number of Departures Annual Grow

2002 2003 2004 2005 2006 2003 2004 

Large Hub 0 0 0 0 0 0 NA NA Medium Hub 1 74,838 83,211 90,641 95,607 99,607 11.19% 8.93% Small Hub 2 43,080 50,870 51,169 44,232 41,204 18.08% 0.59% Nonhub 23 146,443 170,748 163,656 169,212 167,229 16.60% -4.15% Non-primary 61 158,134 180,129 169,440 157,323 153,038 13.91% -5.93% Total 87 422,495 484,958 474,906 466,374 461,078 14.78% -2.07% 

Source: EPA analysis of BTS T-100 data 

Table 2-28. Commercial Service Passenger Enplanements (Alaska) 

Airport Type 

Number 

of Hubs 

Passenger Enplanements Annual G

2002 2003 2004 2005 2006 2003 2004 

Large Hub 0 0 0 0 0 0 NA NA Medium Hub 1 2,431,444 2,305,462 2,489,946 2,640,210 2,598,569 -5.18% 8.00% Small Hub 2 762,589 777,376 821,885 828,461 834,338 1.94% 5.73% Nonhub 23 1,087,004 1,104,889 1,172,959 1,203,034 1,227,718 1.65% 6.16% Non-primary 61 389,962 409,063 424,615 426,115 435,003 4.90% 3.80% Total 87 4,670,999 4,596,790 4,909,405 5,097,820 5,095,628 -1.59% 6.80% 

Source: EPA analysis of BTS T-100 data 

Table 2-29. Commercial Service Aircraft Passengers per Departure (Alaska) 

Airport Type 

Number 

of Hubs 

Passengers per Departure Annual Gro

2002 2003 2004 2005 2006 2003 2004 

Large Hub 0 0 0 0 0 0 NA NA Medium Hub 1 32.5 27.7 27.5 27.6 26.1 -14.72% -0.85% Small Hub 2 17.7 15.3 16.1 18.7 20.2 -13.67% 5.11% Nonhub 23 7.4 6.5 7.2 7.1 7.3 -12.82% 10.76% Non-primary 61 2.5 2.3 2.5 2.7 2.8 -7.91% 10.35% Total 87 11.1 9.5 10.3 10.9 11.1 -14.26% 9.06% 

Source: EPA analysis of BTS T-100 data 

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2.9.1 Alaska International Airport System 

The State operates the Alaska International Airport System as a separate major enterprise. It is considered 

a self-sufficient component of the State government, which can issue its own debt in the form of revenue 

bonds. Thus the two airports: Ted Stevens Anchorage International Airport and Fairbanks International 

Airport operate similar to the other state government-run airports in the United States. 

2.9.2 Alaska Rural Airport System 

The RAS is the other major component of the Alaskan aviation system, but it operates much differently 

from the International Airport System. The 256 airports of the RAS range from small municipal airports 

to simple dirt landing strips. The RAS is not a self-sufficient government unit, and the rural airports 

actually lose money every year. However, due to the nature of transportation in the State of Alaska, it is 

vital that these airports remain in operation despite being unprofitable. 

The Alaska Department of Transportation and Public Facilities (DOT&PF), as well as local or tribal 

governments are responsible for operating RAS airports. According to the DOT&PF, airports in the state 

are funded through a combination of user fees, state, local, or tribal funds, and federal funds. RAS airports 

have limited opportunities for generating revenue. In fact, these airports have found it difficult to finance 

the increased federal security mandates since September 11, 2001. The DOT&PF has limited funds to 

perform additional O&M at many of the state’s RAS airports. 

2.9.2.1 RAS Airport Funding 

According to Roger Maggard, Statewide Airport Development Manager for the RAS, almost every RAS 

capital project is funded through AIP grants. As the RAS loses money each year, they do not (and would 

not be able to) issue any bonds and therefore do not carry debt. Instead, to ensure continued operation, the 

RAS is heavily subsidized by the State government and local sponsors. Maggard estimated that the State 

of Alaska provides $23 to $24 million annually to cover RAS operating costs. These airports only 

generate between $3 and $4 million in revenues. These revenues are not received from typical sources, as 

there are no passenger facility charges and rarely any concessions or even building space to rent. The 

revenues are primarily comprised from land leases for aviation or non-aviation purposes (Maggard 2008). 

The RAS does receive approximately $1 to $2 million per year from the State Legislature for various 

projects. However, because this funding is spread over the 256 rural airports, it does not cover the total 

capital costs of necessary projects. Although there is the possibility of the Legislature approving 

appropriations from the General Fund to finance projects in the RAS, this appears highly unlikely and the 

RAS cannot assume that any money will be available through this avenue (Maggard 2008). 

2.9.2.2 AIP Spending 

Since most capital projects within the RAS are funded through the AIP, EPA examined the number and 

type of projects being funded over the past couple of fiscal years. Table 2-30 shows overall project counts 

and dollar amounts for AIP-funded projects at primary and non-primary airports within the RAS. 

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Table 2-30. Alaska Rural Airports AIP Spending Plan 

 

FY 2006 FY 2007 FY 2008 

Number of 

Projects 

Funding 

Amount 

Number of 

Projects 

Funding 

Amount 

Number of 

Projects 

Funding 

Amount 

Primary Airports 19 $80,899,778 20 $40,714,125 30 $75,394,000 

Non-Primary Airports 27 $66,100,891 27 $81,020,189 37 $143,814,950 

Total 46 $147,000,669 47 $121,734,314 67 $219,208,950 

As of December 12, 2007. Spending plan figures contain entitlement and discretionary funded AIP 

projects. 

Source: EPA calculations based on State of Alaska 2007

The majority of projects and money spent (or planned for) in 2007 and 2008 are at non-primary airports 

within the RAS. Four primary categories of projects are included in the AIP spending plan: 

• Airfield projects 

• Buildings 

• Equipment 

• Airport Planning 

A breakdown of AIP spending by project type, combined for primary and non-primary airports is 

provided in Table 2-31. The majority of AIP funded projects in the RAS, in terms of dollars spent, are 

airfield projects. These included runway and apron improvements and construction, runway surfacing, 

and general airfield upgrades. Most projects fall into the equipment category, though the amount spent is 

relatively small compared with airfield projects. Equipment projects include the purchase of new and 

replacement equipment such as snow blowers, deicing vehicles, plows, and other heavy machinery. 

Airport planning and buildings costs round out the projects funded through the AIP. 

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Table 2-31. Total AIP Spending by Project Type - Alaska Rural Airport System 

 

FY 2006 

Number of Projects Funding Amount Percent of Total Project Funding

Airfield Projects 16 $129,502,657 88.1% 

Buildings 3 $6,076,086 4.1% 

Equipment 19 $6,394,670 4.4% 

Airport Planning 8 $5,027,256 3.4% 

 

FY 2007 

Number of Projects Funding Amount Percent of Total Project Funding

Airfield Projects 15 $98,548,553 81.0% 

Buildings 2 $7,990,066 6.6% 

Equipment 16 $4,985,520 4.1% 

Airport Planning 14 $10,210,175 8.4% 

 

FY 2008 

Number of Projects Funding Amount Percent of Total Project Funding

Airfield Projects 25 $195,584,250 89.2% 

Buildings 6 $10,480,000 4.8% 

Equipment 28 $8,618,000 3.9% 

Airport Planning 8 $4,526,700 2.1% 

Source: EPA calculations based on State of Alaska 2007. 

All AIP-funded projects require state and local sponsors provide 6.25 percent of funding, of which the 

state covers half and local or tribal governments contribute the remaining. The figures in Tables 2-30 and 

2-31 above represent total project costs. 

2.9.2.3 Other Funding Issues 

As mentioned above, the RAS is heavily subsidized by the State of Alaska. However, detailed 

information on the State’s funding of the RAS has been difficult to obtain since it is not a specific line 

item in DOT&PF’s budget, as seen in Table 2-32, which represents the publicly available budget. 

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Table 2-32. FY 2001 Capital & Operating Budget for the AK DOT&PF 

Budget Category Amount (in thousands) Percent of Total Budget 

Measurement Standards $3,350.90 0.30% 

Planning/D&C $4,982.80 0.50% 

Administration $11,697.00 1.10% 

State Equipment Fleet $21,742.30 2.10% 

International Airports $41,465.20 4% 

Marine Highways $103,086.70 10% 

Maintenance & Ops $87,081.40 8.40% 

Capital Budget $756,130.40 73.60% 

 - Federal $643.2 

- General Fund $60.2 

- Hwy Working Capital Fund $11.8 

- Int’l Airport Revenue Fund $22.5 

- AHFC Fund $5.9 

- Capital Improvement Program $1.5 

Designated Receipts $9.1 

Investment Loss Trust Fund $1.9 

Source: DOT&PF 2000 

2.9.2.4 Operation and Maintenance 

The daily O&M at rural airports is handled in different ways, depending on the size of the airports. For 

the larger airports, O&M tasks are handled by staff from the DOT&PF; for other airports along the major 

highway system, these tasks are handled by the same crews that tend to the highways. For smaller rural 

airports, maintenance jobs (such as snowplowing) are generally contracted out to local residents (DOTPF 

2000). Routine maintenance needs for the entire Alaskan airport system (both International and Rural) is 

estimated at $39 million per year, and the budget available to cover these costs for the airport system has 

not kept pace with inflation. 

2.9.3 Alaska and the Economic Impact Analysis 

Since the majority of Alaskan airports are operated as part of a RAS, EPA has reviewed them separately 

in Chapter 5. 

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http://notes4.state.ak.us/pn (accessed May 15, 2008, and May 28, 2008). 

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and Standards for the Airport Deicing Category Air Transportation Industry 

2-59

State of Alaska. 2007. Draft FFY ’03-’09 rural airports AIP spending plan. December 12. Available 

online at http://www.dot.state.ak.us/stwdav/Documents.shtml. 

TRB. 2007. ACRP synthesis 1: Innovative finance and alternative sources of revenue for airports. 

Available online at http://www.TRB.org. 

TSA. 2004. Continuation of the Aviation Security Infrastructure Fee (ASIF). Federal Register 

69(190):58943. 

U.S. EPA. 2000. 14.0: Economic profile. In Preliminary data summary: Airport deicing operations. EPA821-R-00-016. 

Wells, Alexander T. 1996. Airport Planning and Management. 3rd ed. New York: McGraw-Hill. 

Yamanaka, Shiro, Joakim Karlsson, and Amedeao Odoni. 2006. Aviation infrastructure taxes and fees in 

the United States and the European Union. Transportation Research Record: Journal of the Transportation 

Research Board 1951:44-51. 
Economic Analysis for Final Effluent Limitation Guidelines Chapter 3. Economic Impact Methodology 

and Standards for the Airport Deicing Category 

CHAPTER 3 

ECONOMIC IMPACT METHODOLOGY 

This chapter presents the methodology EPA used to analyze and estimate the economic impacts of an 

effluent limitations guidelines and standards (ELGs) for discharges associated with deicing operations. 

The unusual aspect of this ELG is that the airport is likely to purchase and install treatment systems or 

implement best management practices to control aircraft deicing discharges, but airport tenants, that is, 

the airlines using the airport, generate the ADF-contaminated stormwater. 

Section 3.1 reviews funding sources available to airports to finance capital improvements, and describes 

how EPA chose to model airport capital finance and annualization of compliance costs. Section 3.2 

presents the methodology EPA used to project economic and financial impacts to airports as a result of 

those compliance costs. Section 3.3 provides the method by which the cost of supplying air transportation 

services to an airport is estimated. Section 3.4 describes how compliance costs projected for the 2004 

baseline are extrapolated to analyze additional years. Section 3.5 discusses EPA’s approach to analyzing 

the more complex situation where an airport and airlines are co-permittees on the airport’s National 

Pollutant Discharge Elimination System (NPDES) permit; this makes the co-permittee airlines directly 

subject to the requirements of the effluent limitation guidelines (ELG), and thus potentially impacted by 

the rule. Finally, Section 3.6 lists cited references. 

3.1 Compliance Cost Annualization 

In this section, EPA discusses how airports might finance capital programs and its implications for the 

annualization of capital costs. Selection of the appropriate rate for discounting future costs and benefits 

depends on the perspective taken in the analysis. Different elements of society have different preferences 

for future consumption (of both products and environmental “goods”), and this difference is represented 

in the interest rate. 

EPA has determined that overall societal preferences for future consumption are best represented by a 3 

percent real interest rate (EPA, 2010). EPA’s role is to take a societal perspective in evaluating the costs 

and benefits of this effluent guideline. Therefore, EPA uses a 3 percent real interest rate to project the 

national level costs and benefits of the rule from a societal perspective. 

However, airports that would incur cost to comply with the ELG must access financial markets to meet 

the requirements of the rule. Even if they do not need to borrow to finance capital expenditures, they 

forgo the opportunity to use that money for alternative purposes, the “opportunity cost of capital.” 

Economic impacts to airports depend on the actual costs incurred by airports, and therefore, to determine 

those costs and subsequent impacts, it is appropriate to use an interest rate that represents the airports’ 

opportunity cost of capital. Thus, EPA uses two different real interest rates to evaluate this effluent 

guideline. The first is the 3 percent real interest rate used to project aggregate national level compliance 

costs. Sections 3.1.1 through 3.1.3 below discuss EPA’s determination of the appropriate interest rate to 

use for airports for the purposes of evaluating economic impacts, and some of the implications of that 

determination. 

Section 3.1.1 reviews alternative means of airport financing of capital expenditures. Section 3.1.2 outlines 

EPA’s method for estimating the annualized cost of capital expenditures. Section 3.1.3 compares how 

financial impacts to might differ depending on the means used to fund capital expenditures. 

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Economic Analysis for Final Effluent Limitation Guidelines Chapter 3. Economic Impact Methodology 

and Standards for the Airport Deicing Category 

3.1.1 Airport Financing Methods for Capital Expenditures 

Projected airport compliance costs are of two distinct types: operating and maintenance (O&M), and 

capital; the ELG will result in most affected airports incurring a combination of the two. A number of 

funding sources exist for airports to finance capital expenditures. EPA expects that many airports will 

finance capital expenditures associated with this rule using tax-exempt General Airport Revenue Bonds 

(GARB). According to the Air Transport Association (ATA), 95 percent of all airport debt issued since 

1982 has been in the form of GARB (ATA, 2005a). Other funding sources exist for airports, such as 

Airport Improvement Program (AIP) grants from Federal Aviation Administration (FAA), state grants, 

Passenger Facility Charges (PFC), commercial paper, “pay-as-you-go” supported by airport rates and 

charges, or (assuming the capital expenditures are not too large) the airport’s capital improvement fund 

(CIF). 

The alternative with the lowest cost to the airport is clearly AIP or other grants. However: 

• Demand for AIP grants exceeds availability, and airports may already have committed 

anticipated AIP grants well into the future. 

• Switching AIP grants from an existing program to pay for deicing-related capital 

expenditures would require FAA approval, and entail additional work and expense. Also, 

FAA may be reluctant to permit such changes, since many AIP grants are for high 

priority safety and capacity-related projects. 

• State and other grants appear to be a relatively small source of capital funding. 

While it is more likely that PFCs may be used to fund capital expenditures than AIP grants, it cannot be 

generally assumed that airports will use those either because: 

• PFCs require FAA approval on a project-specific basis, and, like AIP grants, tend to be 

committed well into the future. 

• There is a maximum PFC that an airport may charge ($4.50); as of May 1, 2008, 280 of 

the 372 airports (75 percent) approved by FAA to collect PFCs were charging the 

maximum rate (FAA 2008). 

Furthermore, PFCs can be used as the revenue source to support a GARB issue. In such a case, if a capital 

program is economically achievable using rates and charges to support GARB, it should also be 

affordable if the GARB can be supported using PFC revenues. 

One of the primary drawbacks to funding capital expenditures through short-term commercial paper or 

pay-as-you-go is practical. It is more difficult to manage a project with uncertain revenue streams; a bond 

issue smoothes expenditure and revenue streams. In fact, commercial paper may commonly be used in the 

short run to fund a project until it can be rolled into a larger bond issue (Taylor, 2005). Pay-as-you-go has 

the advantage that it does not increase airport debt, and may therefore be used when an airport may be 

close to a debt ceiling or similar constraint that would make it reluctant to issue new debt. 

The primary advantage of using GARB over alternative sources of finance is that because they are a form 

of municipal bond, income to bond holders is tax exempt. This has been estimated to result in effective 

interest rates two percentage points lower than alternative non-tax exempt capital sources to bond issuers 

(CBO 1999). Although airports ostensibly do not pay interest if capital projects can be funded through 

grants instead of issuing bonds, airports do incur an opportunity cost: using an AIP grant to finance 

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and Standards for the Airport Deicing Category 

3-3

deicing-related capital expenditures means the AIP grant cannot be used for funding other capital 

programs. Thus, regardless of the funding source for financing capital expenditures associated with the 

capture and control of ADF-contaminated stormwater, the airport incurs an opportunity cost, which is best 

represented by the market interest rate associated with issuing bonds. 

In its economic analysis of the proposed rule, EPA assumed capital expenditures would be financed 

through the issuing of GARB, using an airport-specific interest rate equal to the rate each airport realized 

on its most recent GARB issue. For the economic analysis of the final rule, EPA has modified its 

approach, applying a real 7 percent interest rate to all capital expenditures. This change to the analytic 

approach is in response to comments on the proposed rule that many smaller airports do not have access 

to bond markets. Therefore their finance costs will exceed that used to annualize capital expenditures, and 

their compliance costs will be larger than those used in the economic impact analysis. By using a 7 

percent real interest rate in the final rule analysis, EPA ensures that airport compliance costs will be lower 

than estimated to the extent they can use alternative means of financing the capital expenditure. 

3.1.2 Compliance Cost Annualization 

Capital costs often vary substantially over the course of a project life; some years an airport may expend 

millions of dollars purchasing and installing equipment to collect and treat ADF-contaminated 

stormwater, while in most years these capital expenditures will be zero. Capital cost annualization takes a 

series of unequal capital expenditures over the project life, and converts them into a series of equal annual 

payments with a total value, after accounting for the time value of money, identical to original stream of 

expenditures, essentially the same way the initial purchase price of a house is converted into a series of 

equal monthly mortgage payments.22 

To annualize capital costs, EPA first calculates the interested present value (PV) of capital expenditures 

over an anticipated 20 year project life, incorporating equipment replacement as necessary. Future capital 

expenditures are discounted using a 7 percent real rate to determine their value at project start (year 1). 

EPA then calculates the annualized cost of these capital expenditures as a stream of 20 equal annual 

payments with a discounted present value identical to that of the stream of unequal expenditures. 

For example, EPA expects that glycol collection vehicles (GCVs) have a service life of 10 years. Thus, if 

an airport is modeled as purchasing a GCV, capital costs are incurred in year 1, and again in year 11 to 

replace the original GCV. The first year’s capital expenditures are equal to their nominal value, but the 

capital costs in year 11 are multiplied by 1/(1 + 0.07)10 to calculate their value in year 1. Piping and 

storage tank components have an expected service life of 20 years and those capital costs are only 

incurred in year 1. The PV of this stream of capital expenditures from year 1 through year 20 is calculated 

as: 

( )

( ) ∑ = − + = 20

1t 1t

t

r1

Capital Costs

CapitalofValueesentPr Costs

Where t is the project period (1 through 20) and r is the real interest rate (7 percent). In this example, 

capital costs are zero for all years except year 1 and year 11. After calculating the PV of these capital 

costs, they are annualized: 

 

22 Cost annualization covers cases where after the initial capital expenditure, all expenditures in subsequent periods 

are equal to zero, such as the mortgage on a house, or where additional nonzero expenditures are incurred in 

subsequent periods, such as this effluent guideline. 
Economic Analysis for Final Effluent Limitation Guidelines Chapter 3. Economic Impact Methodology 

and Standards for the Airport Deicing Category 

3-4

( )

( ) 1r1

r1*r Annualized Capital *PVCosts n

n

−+

+ =

Where n is the project life (20 years). In all cases, the PV of capital costs are annualized over 20 years to 

allow direct comparison between options despite differing service lives. EPA chose a 20 year project life 

because it represents the longest expected lifetime of any of the equipment that comprise the technology 

bases for the final regulation. EPA examined the expected service life of various equipment components 

of the technology bases for the final deicing rule. The components are described in more detail in the 

TDD. During development of this rule, EPA examined three different technological bases for ADF 

capture: (1) GCVs, (2) plug and pump (combined with GCVs), and (3) deicing pads (see Section 4, and 

the Technical Development Document for further details)23 and found: 

• GCVs have expected service lives of approximately 10 years. 

• Plug and pump technologies have expected service lives of approximately 10 years. 

• Deicing pads have expected service lives of approximately 20 to 30 years. 

• Equipment to spread potassium acetate instead of urea for airfield deicing has an 

expected service life of approximately 10 years. 

Additional costs requiring annualization are associated with the following major components: 

• Holding tanks and associated piping have expected service lives of approximately 20 

years. 

• Anaerobic fluidized bed (AFB) treatment has an expected service life of approximately 

20 years. 

• Permitting costs, such as engineering and monitoring costs to demonstrate that the 

airport’s ADF stormwater collection system meets the Collection Percentage Standard are 

incurred every 5 years. 

Of the component and requirements listed above, all are incurred as first year costs in the annualized cost 

calculation. Components with an expected service life of 20 years or more only incur those initial costs; 

components with an expected service life of 10 years incur replacement costs in year 11. Finally, those 

requirements that must be met every 5 years impose recurring costs in years 6, 11 and 16. 

In addition to annualized capital payments (the annualized PV of capital expenditures), each airport also 

incurs annual O&M costs. Each component specified under an option has O&M costs associated with it in 

addition to its capital cost. Also, certain airports are expected to incur costs annually because of the 

requirement to switch from using urea to the more costly potassium acetate for airfield deicing. An 

airport’s annual O&M costs under each option are therefore the sum of O&M costs for each component 

specified under that option. 

 

23 The economic impacts of meeting a 60 percent ADF collection and treatment requirement, for which deicing pads 

were considered a possible treatment technology, were analyzed for the proposed rule, but are not further analyzed 

here for the final rule. 
Economic Analysis for Final Effluent Limitation Guidelines Chapter 3. Economic Impact Methodology 

and Standards for the Airport Deicing Category 

The cost basis for the economic and financial impact analyses described below consists of: 

• Annual debt payments estimated as the annualized NPV of capital costs (including 

replacement of capital equipment if necessary), which will be used to determine if the 

airport can continue to service its debt after the proposed rule is promulgated (see Section 

3.2.2). 

• Annual operating costs estimated as the sum of the annual O&M costs associated with 

each component specified under an option, which will also be used to determine if the 

airport can continue to service its debt after the proposed rule is promulgated (see Section 

3.2.2). 

• Total annualized costs estimated as the sum of annual debt payments plus annual 

operating costs, which will be used to project airport revenues based on the revenue test 

(see Section 3.2.1). 

3.1.3 Comparison of Impacts under GARB, AIP Grants and PFCs 

EPA chose to modify the underlying assumptions for projecting annualized capital costs as incurred by 

airports; these are now calculated to use a standard 7 percent real interest rate. EPA assumes airports will 

use a lower cost method of financing these costs if such an opportunity is available. However, the use of 

such alternative financing has implications for airport financial health that extend beyond merely reducing 

impacts by lowering the annualized cost of the rule. In this section, EPA examines how different methods 

of financing might affect projected airport impacts. 

For the proposed rule, EPA used the nominal coupon rate from the airport’s most recent bond issue 

obtained from its Comprehensive Annual Financial Report (CAFR) to annualize capital costs. EPA found 

that nominal coupon rates range from 2.04 to 9.37 percent, with a median of 5.25 percent and an average 

of 5.26 percent. When deflated using the average Consumer Price Index (CPI) from 2002 through 2006 

(2.31 percent), real interest rates range from 0.0 to 6.9 percent, with a median of 2.87 percent and an 

average of 2.89 percent. These low effective real rates reflect the significance of the tax-exempt nature of 

GARB. Thus, the revised cost annualization assumptions result in the use of a significantly higher real 

interest rate to annualize costs for the final rule analysis. EPA expects many airports will be able to use 

GARB for this purpose; at a minimum, these airports are likely to incur lower costs and associated 

economic impacts will be smaller than reflected in this analysis. 

In addition to differences in the cost of capital implicit in assumptions concerning how such expenditures 

are financed, there are different implications for economic impacts associated with how an airport 

chooses to pay the stream of annualized capital costs regardless of how they are financed. The simplest 

assumption, and seemingly the most likely, is that airports will pay the stream of annualized capital costs 

over time by increasing rates and charges to airlines that utilize the airport. However, should an airport 

choose to use AIP or PFC funds to finance capital expenditures, these costs are unlikely to enter an 

airport’s rates and charges, and projected economic impacts will differ subtly from those outlined in 

Chapter 5 below. 

Airport Improvement Program funds come in the form of a grant. The primary effect of using an AIP 

grant to pay for deicing-related infrastructure improvements would likely be the delay in an alternative 

project for which the AIP grant was originally slated. Thus, there is an opportunity cost to using AIP 

grants, which is measured by the cost of capital. However, there is no direct effect on rates and charges, 

and therefore the capital component of compliance costs would not to be passed on to airlines or their 

passengers. However, as mentioned above, AIP grants tend to be accounted for well into the future and it 

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Economic Analysis for Final Effluent Limitation Guidelines Chapter 3. Economic Impact Methodology 

and Standards for the Airport Deicing Category 

would be highly speculative to assume the FAA would authorize whole-scale changes in the use of these 

grants to meet the requirements of this effluent guideline. EPA assumes AIP grants are not available for 

effluent guideline-related capital projects; if they become available, the cost of the proposed regulation 

should be lower than projected by EPA. 

In the case of PFCs, the availability of funding is less clear cut than AIP grants. Not all airports eligible 

for PFCs use them, and not all airports that use PFCs charge the maximum allowable rate. Many airports 

designate PFCs as the dedicated revenue stream to secure GARB. 

Funding capital expenditures with PFCs should result in lower impacts to airports than directly using rates 

and charges to support GARB. Servicing the debt associated with capital expenditures does not directly 

enter the airport’s rates and charges using PFCs. While costs of the rule might be passed on to airlines and 

their customers whether financed through rates and charges or PFCs, the impacts of the two funding 

mechanisms will differ. If capital improvements are funded through rates and charges, then airlines 

directly incur increased operating costs, some (or all) of which may be passed through to passengers in 

the form of increased ticket prices. To the extent that passengers react to increased ticket prices by flying 

less, airlines may also incur decreased revenues depending on the price elasticity of demand for travel to 

that airport. 

However, should an airport use PFCs to finance capital expenditures, while the passenger cost of air 

transportation directly increases, airline operating costs are unchanged. PFCs are added directly to ticket 

prices, collected by the airline, and transferred to the airport. Although the PFC charge is listed on the 

ticket separately from the fare, there is no evidence that passengers differentiate the PFC component in 

the total cost of purchasing the ticket when making their travel decisions. Presumably an increase in the 

total cost of purchasing a ticket attributable to an increased PFC will affect their travel decision in the 

same way as an identical increase in the total cost of purchasing a ticket attributable to increased landing 

fees. In such a case, passenger response, and the impact on airline revenues should be identical under both 

funding mechanisms. However, PFCs do not directly increase airline operating costs as would an increase 

in airport rates and charges. 

Thus, EPA’s method of analyzing the potential economic impacts of increased airport capital 

expenditures is conservative in multiple ways: 

• The cost of capital is significantly higher than if airports use GARB. 

• AIP grants do not enter airport rates and charges, and are not directly passed on to 

airlines and their passengers. 

• PFC do not enter airport rates and charges, although they are perceived by passengers as 

an increase in ticket prices. As such, they may affect airline revenues through their 

impact on the demand for air transportation services, but do not directly increase airline 

operating costs. 

To the extent that airports are able to use GARB, AIP grants or PFC to finance capital expenditures 

associated with this rule, economic impacts are likely to be smaller than projected in this analysis. 

3.2 Economic Impact Analysis of Airports 

As discussed in the Industry Profile, airports are generally non-profit government or quasi-government 

(e.g., port authorities) enterprise funds. Thus, the impact of effluent guideline-related compliance costs on 

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Economic Analysis for Final Effluent Limitation Guidelines Chapter 3. Economic Impact Methodology 

and Standards for the Airport Deicing Category 

3-7

airport income is not equivalent to that of a for-profit private sector business, nor can it be analyzed in the 

same manner using the same benchmarks. 

EPA has identified two measures to judge the economic achievability of the rule on affected airports: 

• Ratio of annualized compliance costs to operating revenues 

• Debt service coverage ratio 

The number (and/or percent) of entities incurring annualized compliance costs exceeding 1 percent and 3 

percent of operating revenues are frequently used standards of judging economic achievability. EPA uses 

them for small business impact analyses, impact analyses where cash flow or net income measures are not 

available, and screening analyses. It is also a measure often used by other agencies for impact analyses. 

Based on public comments on the proposed rule, EPA has also chosen to examine impacts using two 

additional measures: 

• Ratio of annualized compliance costs to aeronautical revenues 

• Annualized compliance costs per enplaned passenger. 

These measures will be described in Section 3.2.2 and 3.2.3 below. Because there are no hard and fast 

rules for using these measures as determinants of economic achievability, EPA presents the results of 

these additional tests as sensitivity analyses. 

3.2.1 Ratio of Annualized Compliance Costs to Operating Revenues 

EPA’s Guidelines for Preparing Economic Analyses (2010) specifically presents the “revenue test,” that 

is, the ratio of annualized compliance costs to operating revenues, as the relevant method to measure 

impacts of programs that directly affect government and not-for-profit entities. The airports potentially 

affected by this rule are owned directly by the government (e.g., city, county, or state), or by a quasigovernmental not-for-profit port authority.24 Thus, this is an appropriate measure of impacts for airports 

affected by the deicing effluent guideline. 

EPA therefore compared the ratio of total annualized compliance costs (costs) to total operating revenues 

(revenues) for each airport to determine the impact of the selected options on airport revenues. By EPA 

guidance (EPA 2010),25 when: 

• 0 percent < (estimated annualized compliance costs/revenues) < 1 percent: the option is 

generally considered affordable for an entity. 

• 3 percent < (estimated annualized compliance costs/revenues): the option is considered to 

be placing a heavy burden on an entity. 

To apply the revenue test to airports, EPA used the sum of 2004 aeronautical and non-aeronautical 

operating revenues reported by airports on FAA Form F-127 (Operating and Financial Summary) as the 

 

24 One surveyed airport, Airborne Airpark, is privately owned and is a private use facility; the revenue test would not 

be appropriate for this airport. However, Airborne Airpark is not expected to be affected by the proposed regulation. 25 The EPA guidance cited here was developed from EPA’s small business regulatory flexibility guidance. However, 

in this guidance (i.e., EPA 2000b), the guidelines apply to all affected entities, not just small entities. 
Economic Analysis for Final Effluent Limitation Guidelines Chapter 3. Economic Impact Methodology 

and Standards for the Airport Deicing Category 

measure of airport operating revenue for this analysis. The estimation of annualized compliance costs was 

described in Section 3.1.3, above, and the Technical Development Document (EPA 2011). 

Industry comments on the proposed rule pointed out that many airports use residual-cost approach to 

determine rates and charges for the airside cost center (see Section 2.6.2 for details on rate setting 

methodologies). EPA examined deicing questionnaire data and found that approximately 50 percent of 

respondents use a residual approach to setting airside rates and charges. If airports use a residual cost 

approach, then commenters argue that due to airport use agreements, airports are legally required to cover 

airside costs with airside revenues, and therefore compliance costs must be covered by aeronautical 

revenues. In this view, EPA should use the ratio of compliance costs to aeronautical revenues as the 

relevant measure of impacts to airport finances instead of the ratio of compliance costs to total airport 

operating revenues. 

EPA, however, concludes that the ratio of compliance costs to total operating revenues is the more 

appropriate measure of airport impacts. First, the sole purpose of an airport is to provide a base for air 

transportation services. Landside revenues, for example, raised through parking, retail, and food 

concessions are not designed to provide a revenue stream to support the provision of a different service or 

product, but instead allow airports to accumulate capital from non-airline sources. Thus the intent of these 

revenue streams is also to support the provision of air transportation services and is therefore a component 

of an airport’s resources relevant to determining the continued economic viability of the airport if it is 

required to implement this ELG. Second, airports have discretion in choosing what costs are passedthrough to airlines, especially in the short run (see Section 2.8.2). Third, if airports use a hybrid approach 

and operate the landside on a compensatory basis, then airports may have an agreement with signatory 

airlines that revenues in excess of operating costs will be shared with the airlines. Fourth, there is 

evidence of airports choosing to close a revenue gap by increasing landside rates and charges (on parking, 

for example) rather than increase rates and charges on airlines. 

3.2.2 Annualized Compliance Cost per Enplaned Passenger 

Airline cost per enplaned passenger (or simply cost per enplaned passenger; CPEP) is a measure 

commonly used in the air transportation industry to determine whether an airport is attractive to airlines, 

or if the airport is becoming too costly for airlines to use (Page, 2005). CPEP is calculated for each airport 

as revenues earned from airlines divided by enplaned passengers. EPA chose two measures based on 

CPEP for use in the determination of economic impacts: 

• Incremental cost per enplaned passenger, and 

• Percent Increase in CPEP. 

Industry comments on the proposed rule specifically recommended the second measure for use in this 

analysis. However, EPA found two problems with that approach: (1) baseline CPEP is not available for 

all airports, and (2) interpretation of baseline CPEP, as well as incremental changes to it, is problematic. 

When reviewing the recommended approach, EPA found that the measure of incremental CPEP has value 

in its own right as an indicator of what costs might be passed through per passenger to cover compliance 

costs. Hence both measures are included as a sensitivity analysis. 

EPA measured incremental CPEP for each airport as: 

EnplanedPassengers

AverageAnnualizedComplianceCosts CPEPlIncrementa =

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and Standards for the Airport Deicing Category 

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Average annualized costs are calculated as described in Section 3.1 above. Enplaned passengers for each 

airport are published by FAA (2010). 

EPA calculated the percent increase in CPEP as: 

BaselineCPEP

CPEPlIncrementa Percent CPEPinIncrease =

Where baseline airport-specific CPEP (where available) was obtained through an internet search of 

publicly available sources. 

EPA found baseline 2004 CPEP data for 86 of 198 in-scope airports, including 26 of the 46 airports 

projected to incur compliance costs under this ELG. Among these airports: 

• CPEP ranges from about $2.00 to $18.00 for all airports. 

• By airport hub size: 

 Large hubs have an average CPEP of $8.10 with a range of $2.00 to $18.00; 10 

of 27 large hubs have CPEP exceeding $10.00. 

 Medium hubs have an average CPEP of $6.20 with a range of $2.00 to $12.00; 4 

of 30 medium hubs have CPEP exceeding $10.00. 

 Small hubs have an average CPEP of $6.00 with a range of $3.00 to $12.00; 1 of 

25 small hubs has CPEP exceeding $10.00. 

 CPEP was publicly available for a single non-hub airport ($8.00). 

Clearly larger airports tend to have a higher CPEP, and are more likely to have a CPEP exceeding $10. 

However, even within airport size classes, a broad range of CPEP is evident, which makes the use of 

CPEP to determine economic achievability problematic.26 Again, there is no “bright line” for determining 

when cost per enplaned passenger becomes too high for airlines to continue service to that airport, or what 

relative differential in CPEP will induce an airline to switch service from one to another. In 

recommending this measure to EPA, industry stated there are no clear thresholds for CPEP to determine 

economic achievability (see comment EPA-HQ-OW-2004-0038-1240.1 – 134). 

Based on industry preference for an industry-specific measure, EPA chose CPEP as another yardstick to 

determine if compliance costs are in some sense large enough to make the rule economically 

unachievable. However, EPA found it more useful to measure whether compliance costs per enplaned 

passenger might be prohibitive, rather than the relative change in CPEP between airports. 

3.2.3 Debt Service Coverage Ratio 

Although EPA no longer assumes that airports will issue debt in the form of GARB to finance capital 

expenditures, it seems likely that debt financing will be used by many or most airports (see Section 2.6.2). 

Furthermore, even if an airport does not resort to debt-financing, airport income is affected by increased 

airport operating costs. In either case, an airport must maintain good financial standing to avoid defaulting 

on existing debt. Indeed, airports operated by quasi- governmental port authorities have financial 

 

26 At least some differences in CPEP are likely associated with airport specific attributes. For example, two 

otherwise similar airports may have significantly different CPEP if one is closer to an airport that might be 

considered a competitor, or if one has a higher percentage of “origin and destination” traffic. Thus, there is no single 

level of CPEP that can be considered economically sustainable. 
Economic Analysis for Final Effluent Limitation Guidelines Chapter 3. Economic Impact Methodology 

and Standards for the Airport Deicing Category 

requirements written into the controlling documents that establishing and governing the authority. These 

generally include limitations on the airport’s debt service coverage ratio (DSCR); if the DSCR does not 

remain above a certain threshold, the authority will be default on its debt. Although this threshold might 

vary in general, the applicable standard among airports affected by the rule is that the DSCR must remain 

above 1.25. 

EPA therefore examined the impact of the rule on each affected airport’s DSCR. The DSCR is defined as: 

pre

pre

pre Debt Service

Net Revenues

DSCR =

Analysis of airport financial data presented on FAA Form 127 demonstrated that an airport’s DSCR could 

not, in general, be estimated from this information. Therefore, EPA requested the airport’s current debt 

service coverage ratio, and the net revenues and debt service used to calculate that ratio on the survey. 

EPA also verified that all airports projected as incurring capital costs under the proposed option do use 

bonds to finance capital expenditures. 

EPA estimated post-regulatory DSCR in two ways: assuming 100 percent of costs are passed through to 

airlines in the form of higher rates and charges, and assuming zero percent of costs are passed through to 

airlines. 

Assuming 100 percent cost pass-through, post-regulatory DSCR is calculated as: 

Debt Service Annualized Bond Payment

Net Revenues

DSCR pre

pre

post

+ =

Assuming zero cost pass-through, post-regulatory DSCR is calculated as: 

Debt Service Annualized Bond Payment

Net OperatinglIncrementa Revenues Cost

DSCR

pre

pre

post

+

− =

The DSCR threshold that an airport must meet is specified in the statute creating the airport authority, or 

the standard that otherwise applies to the relevant airport owner, such as the county or municipal 

government. For all affected airports for which EPA was able to document the DSCR, the standard is 

1.25. Thus, an airport will be evaluated as impacted if its pre-regulatory DSCR is greater than 1.25 and its 

post-regulatory DSCR is less than 1.25. 

An airport will not necessarily default on its debt should the airport’s post-regulatory DSCR as measured 

in this analysis fall below the 1.25 threshold. Rather, this should be taken as an indication that the airport 

will potentially be in serious financial distress if it issues additional debt but does nothing to strengthen its 

financial condition. This is essentially a warning sign that the airport must undertake action to avoid 

default: rates and charges could be raised by a larger amount, debt might be restructured, and airports may 

have opportunities to pay for capital expenditures without incurring debt (e.g., “pay-as-you-go” funded 

through rates and charges or passenger facility charges (PFC)). This may help a marginal airport stay 

within its financial limitations. However, exceeding this threshold would constitute a potentially 

significant financial impact, and the economic achievability of the rule might be questionable for that 

airport. 

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Economic Analysis for Final Effluent Limitation Guidelines Chapter 3. Economic Impact Methodology 

and Standards for the Airport Deicing Category 

3-11

3.3 Analysis of Potential Impacts to Air Service 

EPA’s effluent limitation guidelines are imposed on airports, while airlines are the tenants or “customers” 

of those airports. Because airlines are the airport customers, any costs passed through from airport to 

airlines are secondary impacts of the rule. Historically, EPA determines the economic achievability of a 

rule based on primary or direct impacts (i.e., impacts to a NPDES permit holder), and does not consider 

secondary impacts. However, airports might be impacted by a reduction in flights even if an airport’s 

compliance costs do not exceed 3 percent of total operating revenues. EPA therefore examined the 

increase in airline operating costs at each airport, and thus the potential decrease in supply of air 

transportation services, if deicing compliance costs are passed-through to airlines. 

The airline industry’s basic measure of the supply of airline passenger transportation services is available 

seat-miles (ASM). A single ASM is equal to one passenger seat (empty or filled) flown one mile, thus a 

carrier’s ASM are calculated by multiplying the number of seats flown on a route by route distance, then 

aggregating ASM over all routes flown. 

For each airport affected by the rule, EPA estimated the increased unit cost of providing transportation 

services from that airport as: 

Total Available MilesSeat

Annualized Compliance Costs ASMperCostlIncrementa =

where airport-specific ASM are obtained from BTS (2010). 

In addition, EPA compared the airport-specific incremental cost per ASM with the national passenger 

airline average cost per ASM: 

National Average ASMperCost

ASMperCostlIncrementa Percent OverallinIncrease ASMperCost =

EPA estimated the U.S. national average cost per ASM using BTS data on system-wide ASM and 

operating costs for all passenger airlines with data available.27 Airlines with both operating costs and 

ASM data available accounted for almost 95 percent of total ASM flown in the U.S. This measure can be 

interpreted as the decrease in supply of airline services attributable to the effluent guideline. 

3.4 Extrapolation of 2004 Compliance Costs to Analyze Additional Years 

EPA estimated compliance costs using the Airport Deicing Questionnaire, which covers the 2002-2003, 

2003-2004 and 2004-2005 deicing seasons. Thus the baseline for estimating each airport’s equipment and 

operating needs to meet the effluent guideline are those conditions that existed in the 2004-2005 deicing 

season. EPA used equipment prices and operational costs from 2006 to project deicing compliance costs 

for the 2004 baseline. Therefore, to perform the economic impact analysis, EPA deflated costs in 2006 

dollars to 2004 using the Producer Price Index for Airport Operations (BLS, 2010), and compared 

projected airport compliance costs with 2004 airport financial data. 

 

27 BTS does not have data to estimate cost per ASM on anything but a system-wide basis, nor were airlines able to 

provide more granular data on the questionnaire. 
Economic Analysis for Final Effluent Limitation Guidelines Chapter 3. Economic Impact Methodology 

and Standards for the Airport Deicing Category 

3-12

EPA extrapolated 2004 average annualized compliance costs to extend the analysis beyond the 2004-2005 

deicing season. In this extrapolation, capital costs were treated differently from O&M costs. EPA held 

annualized capital costs constant in all years. Once construction is performed and equipment purchased, 

they become a fixed cost for the purposes of future deicing; neither the number of aircraft deiced in 2005 

or 2006, nor the price of the same capital equipment in those years affects capital expenditures (or their 

annualized value) that were made in 2004. Airports pay the amortized value of those costs over time, but 

those do not change from year to year, even due to inflation. 

The operating and maintenance costs of performing airfield deicing and collecting and treating ADF, 

however, are likely to vary over time. First, operating costs will vary from year-to-year as the wages, gas, 

potassium acetate and other component prices change from year-to-year. In addition, the number of 

aircraft departures and thus the number of aircraft deiced will vary from year to year.28 To model this, 

EPA calculated an airport-specific O&M cost per aircraft deiced in the 2004 baseline, and inflated those 

unit O&M costs to represent deicing operations in 2005 and 2006. To estimate annual O&M costs for 

those years, the unit deicing costs were multiplied by the number of airport-specific departures for those 

years. In summary, airport-specific compliance costs for year 200x, were calculated as: 

⎟

⎟

⎠

⎞

⎜

⎜

⎝

⎛ = + × x x x Airportx Departures PPI

PPI

Airport Departures

CostsMOAnnual ComplianceCosts Annualized Capital Costs 200

2004

200

2004

2004

200 2004

&

This approach accounts for both changes in the price of components and labor necessary to collect and 

treat ADF-contaminated stormwater, as well as airport flight operations that affect the demand for those 

services. This approach implicitly assumes that the winter weather conditions reflected in the Airport 

Deicing Questionnaire are representative of long-term average conditions at each airport. 

The results of extrapolating the impact analysis to cover the 2005 through 2009 period are provided in a 

memorandum to the rule-making record, DCN XXXX. 

3.5 Methodology for Estimating Costs and Projecting Impacts to Co-permittee Airlines 

In general, airlines are not directly subject to the Airport Deicing ELG. Under the Clean Water Act, EPA 

determines economic achievability of an ELG based on those entities directly impacted by the rule. 

Because airlines are not generally subject to the ELG, impacts to airlines are secondary impacts, and thus 

not generally part of the determination of economic achievability. However, at airports where an airline is 

a co-permittee on the airport’s NPDES permit, that airline is potentially directly subject to the ELG. 

While EPA does not generally expect airports to require co-permittees to directly pay some share of the 

cost of meeting the Airport Deicing ELG, neither can it rule out that possibility. Therefore EPA assessed 

the potential for the ELG to impact airlines when they are co-permittees at airports. 

Not all co-permittees at an airport are airlines. EPA found that fixed base operators (FBOs), aircraft and 

engine service and repair companies, on-demand air transportation providers, Air National Guard units, 

and even car rental agencies may be co-permittees on a NPDES permit. However, EPA believes airports 

are unlikely to directly charge such co-permittees compliance costs associated with the deicing ELG. 

Most of these co-permittees do not use ADF, and those that do (i.e., FBOs) do so only at the behest of 

airline customers. Therefore, EPA focused on airline co-permittees in this analysis. 

 

28 Because airfield deicing is primarily a function of the number and characteristics of weather events rather than 

aircraft departures, costs associated with ammonia substitution were adjusted to reflect inflation, but not for changes 

in aircraft departures. 
Economic Analysis for Final Effluent Limitation Guidelines Chapter 3. Economic Impact Methodology 

and Standards for the Airport Deicing Category 

EPA assumed that as the entity with the responsibility for airfield operations, the airport would take the 

lead in preparing plans and schedules, hiring contractors, arranging financing, and supervising 

construction, as well as operating collection and treatment. Therefore, we model the cost share passed 

through to co-permittees based on a percentage of the airport’s projected total annualized compliance 

costs. 

Each airline’s compliance costs are directly estimated for each airport at which the airline is a copermittee. EPA assumes airports will charge co-permittee airlines based on their share of business at the 

airport relative to other co-permittees. EPA estimates each co-permittee airline’s share of landed weight at 

the airport, because this should be highly correlated with the airline’s use of deicing services, and 

therefore the ADF collection and treatment costs attributable to its operations at the airport. However, this 

share is calculated relative to total landed weight by co-permittee airlines only, not total landed weight by 

all airlines. 

EPA used BTS T-100 database records of airport departures by airline and aircraft type augmented with 

rated landed weight by aircraft type (in general, obtained from the FAA Aircraft Characteristics Database) 

to estimate the total landed weight for each co-permittee airline providing service at each airport at which 

it is a co-permittee. EPA then allocated 50 percent of the airport’s total annualized compliance costs to 

co-permittee airlines based on their share of total co-permittee landed weight at each airport. EPA was 

unable to find data concerning what percent of costs might be shared with co-permittees through public or 

industry sources. Therefore EPA assumed 50 percent of compliance costs would be shared with copermittees as a standard, conservative, assumption. 

In summary, for the purpose of this analysis EPA assumes: 

• 50 percent of total annualized compliance costs at the 27 airports with co-permittees are 

borne by the airport; 

• 50 percent of total annualized compliance costs at airports with co-permittees are borne 

collectively by airlines that are co-permittees at that airport; 

Total annualized compliance costs to each co-permittee airline are calculated by summing its estimated 

annualized compliance costs for all airports at which the airline is a co-permittee. 

EPA obtained airline operating revenue, operating profit, and net income data from BTS. In performing 

economic impact analyses for an ELG, EPA has typically used estimated compliance costs and baseline 

cashflow or net income to perform a “closure” analysis. In such an analysis EPA projects the affected 

entities’ discounted compliance costs and cashflow over the period of analysis; if an entity’s preregulatory discounted cashflow is positive, and its post-regulatory discounted cashflow is negative (i.e., 

projected pre-regulatory discounted cashflow less discounted compliance costs), the entity would be 

projected to close as a result of the effluent guideline. In this context, EPA ideally would analyze each 

airline’s routes associated with airports at which it is a co-permittee, and a “closure” would mean the 

airline would reduce or eliminate service to that airport. However, this type of analysis is problematic in 

this case: 

• Airline service decisions may incorporate considerations of how a single route fits into 

the airline’s entire route structure; changes at one airport may affect the financial viability 

of other routes and other airports (Holloway, 2003). 

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Economic Analysis for Final Effluent Limitation Guidelines Chapter 3. Economic Impact Methodology 

and Standards for the Airport Deicing Category 

• If the impact of the ELG at a specific airport is large, airlines have alternatives to halting 

service at that airport; they could use smaller aircraft or otherwise reduce service to that 

airport without eliminating it. 

• Airline operating cost and revenue data are only available at the airline level, not at the 

level of specific routes or airports. 

• Airline profitability is highly cyclical, although, as documented in the Industry Profile, 

financial performance has been consistently poor over the last decade. Of the 49 U.S.-flag 

airlines that incur are projected to incur costs as airport co-permittees in 2004: 

 23 had negative operating profit; 

 25 had negative net income; 

 financial data were unavailable for three air carriers. 

For those airlines with positive operating profit and/or positive net income, the analysis can be treated like 

a closure analysis: 

• If estimated annual compliance costs exceed operating profit, or if estimated annual 

compliance costs exceed net income: the option is not affordable; essentially the airline 

would be projected to shutdown as a result of the regulation. 

Because 47 to 51 percent of co-permittee airlines could not be evaluated under the more stringent 

operating profit and net income metrics, EPA also examined the ratio of compliance costs to operating 

revenues for all co-permittee airlines to determine if they could be characterized as “large” (i.e., exceed 1 

percent of operating revenues). Finally, to the extent that costs are split between airports and their copermittee airlines, EPA evaluated how costs and impacts to airports are reduced if they do require copermittees to bear some of the compliance costs. 

3.6 References 

ATA. 2005a. Airline Handbook. Chapter 7: Airports. Air Transportation Association. Downloaded from 

www.airlines.org/about/, April 27, 2005. 

ATA. 2005b. Economics: Annual Revenues and Earnings: U.S. Airlines – All Services. Downloaded 

from www.airlines.org/econ/, September 20, 2006. 

ATA. 2005c. 2005 ATA Economic Report. Downloaded from www.airlines.org/econ/, September 20, 

2006. 

Boyd, 2006. Airline Industry Bankruptcies: Facts v. Myths. The Boyd Group. Downloaded from 

www.aviationplanning.com/asrc20, March 29. 

Bureau of Labor Statistics (BLS). 2010. Producer Price Index Industry Data: Airport Operations (Series 

Id: PCU48811-48811) Downloaded from: http://data.bls.gov:8080/PDQ/outside.jsp?survey=pc, October 

22. 

Bureau of Transportation Statistics (BTS). 2010. Available Seat-miles. Downloaded from 

http://www.transtats.bts.gov/Data_Elements.aspx?Data=4, December 12. 

Button, Kenneth. 2005. The taxation of air transportation. Center for Transportation Policy, Operations 

and Logistics, School of Public Policy, George Mason University. April. 

3-14
Economic Analysis for Final Effluent Limitation Guidelines Chapter 3. Economic Impact Methodology 

and Standards for the Airport Deicing Category 

CBO. 1999. Financing Small Commercial-Service Airports: Federal Policies and Options. CBO Paper. 

Congressional Budget Office. April. 

FAA. 2010. Passenger Boarding (Enplanement) and All-Cargo Data for U.S. Airports. Various years. 

Downloaded from: http://www.faa.gov/airports/planning_capacity/passenger_allcargo_stats/passenger/, 

September 7. 

FAA. 2008. Passenger Facility Charge Monthly Reports. May 1. Available online at 

http://www.faa.gov/airports_airtraffic/airports/pfc/monthly_reports/ (accessed May 21, 2008). 

FAA. 2006. FAA Aerospace Forecast Fiscal Years 2006-2017. Federal Aviation Administration, Office 

of Policy and Plans. Downloaded from www.faa.gov/data_statistics/aviation/aerospace_forecasts/2006-

2017/, September 21. 

FAA. 1995. Report to Congress: Child restraint systems. Volume 1. Federal Aviation Administration, 

May. 

Hill, Phil. 2006. Role of the Feasibility Consultant: Airport Financings. Presentation by Phil G. Hill of 

Ricondo & Associates at the AAAE Airport Finance and Bond Symposium. New York, New York. June 

26-27. 

Holloway, Stephen. 2003. Straight and Level: Practical Airline Economics (2nd ed.). Aldershot: Ashgate 

Publishing. 

Mullins, Crystal, and Deevana Kumar. 2006. Airport Revenue Bond Financing Options. Presentation by 

Crystal Mullins and Deevana Kumar of JPMorgan at the AAAE Airport Finance and Bond Symposium. 

New York, New York. June 26-27. 

Page, Sasha. 2005. Tweaking or Transforming Airport Performance. Presentation by Sasha Page of 

Infrastructure Management Group at the AAAE Rates and Charges Workshop. Washington, DC. April 5-

6. 

Spumberg, Howard. 2006. Financial Guaranty Insurance. Presentation at the AAAE/JPMorgan Airport 

Finance and Bond Symposium. New York, New York. June 26-27. 

Taylor, Elizabeth. 2005. Meeting with Elizabeth Taylor and Catherine Weatherall of MassPort, and Cal 

Franz, ERG. September 13. 

U.S. EPA. 2010. Guidelines for Preparing Economic Analyses. U.S. Environmental Protection Agency. 

EPA 240-R-10-001. December. 

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

Standards for the Airport Deicing Category. EPA-821-R-09-004. 

U.S. EPA. 2006. Final Guidance for EPA Rulewriters: Regulatory Flexibility Act as amended by the 

Small Business Regulatory Enforcement Fairness Act. U.S. Environmental Protection Agency. 

November. 

U.S. EPA. 2000. Preliminary Data Summary: Airport Deicing Operations (Revised). U.S. Environmental 

Protection Agency. EPA-821-R-00-016. 

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Economic Analysis for Final Effluent Limitation Guidelines Chapter 3. Economic Impact Methodology 

and Standards for the Airport Deicing Category 

3-16

Walsh, Tom. 2005. Financial Accounting Framework. Presentation by Tom Walsh of Leigh Fisher 

Associates at the AAAE Rates and Charges Workshop. Washington, DC. April 5-6. 
Economic Analysis for Final Effluent Limitation Guidelines Chapter 4. Pollution Control Options 

and Standards for the Airport Deicing Category 

CHAPTER 4 

POLLUTION CONTROL OPTIONS 

4.1 Effluent Limitation Guidelines and Standards 

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

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

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

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

for industrial dischargers. The standards EPA establishes include: 

• Best Practicable Control Technology Currently Available (BPT). Required under section 

304(b)(1), these rules apply to existing industrial direct dischargers. EPA establishes BPT 

effluent limitations based on the average of the best performances of facilities within the 

industry, grouped to reflect various ages, sizes, processes, or other common 

characteristics. EPA may promulgate BPT effluent limits for conventional, toxic, and 

non-conventional pollutants. 

• Best Available Technology Economically Achievable (BAT). Required under section 

304(b)(2), these rules apply to existing industrial direct dischargers. BAT represents the 

second level of stringency for controlling direct discharge of toxic and nonconventional 

pollutants. In general, BAT effluent limitation guidelines represent the best economically 

achievable performance of facilities in the industrial subcategory or category. The factors 

considered in assessing BAT include the cost of achieving BAT effluent reductions, the 

age of equipment and facilities involved, the process employed, potential process 

changes, and non-water quality environmental impacts including energy requirements, 

and such other factors as the EPA Administrator deems appropriate. 

• Best Conventional Pollutant Control Technology (BCT). Required under section 

304(b)(4), these rules apply to existing industrial direct dischargers, and represent an 

additional level of control, after BPT, for conventional pollutants. BCT limitations must 

be established in light of a two-part “cost-reasonableness” test. 

• Pretreatment Standards for Existing Sources (PSES). Required under section 307. 

Analogous to BAT controls, these rules apply to existing indirect dischargers, whose 

discharges flow to publicly owned treatment works (POTWs). PSES are designed to 

prevent the discharge of pollutants that pass through, interfere with, or are otherwise 

incompatible with the operation of POTWs. 

• New Source Performance Standards (NSPS). Required under section 306(b), these rules 

apply to new source industrial direct dischargers for all pollutants. NSPS reflect effluent 

reductions that are achievable based on the “best available demonstrated control 

technology.” New facilities have the opportunity to install the best and most efficient 

production processes and wastewater treatment technologies. As a result, NSPS should 

represent the most stringent controls attainable through the application of the best 

available demonstrated control technology. 

• Pretreatment Standards for New Sources (PSNS). Required under section 307. Analogous 

to NSPS controls, these rules apply to new source indirect dischargers (whose discharges 

flow to POTWs). Such pretreatment standards must prevent the discharge of any 

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Economic Analysis for Final Effluent Limitation Guidelines Chapter 4. Pollution Control Options 

and Standards for the Airport Deicing Category 

pollutant into a POTW that may interfere with, pass through, or may otherwise be 

incompatible with the POTW. EPA promulgates PSNS based on best available 

demonstrated technology for new sources. 

In the final regulation for the airport deicing category, EPA is promulgating BAT for airfield deicing 

discharges and NSPS for aircraft and airfield deicing discharges. 

4.2 Technology Basis for Aircraft Deicing Fluid Control 

EPA does not mandate technologies when establishing effluent limitations guidelines and standards. 

However, EPA evaluates various technologies in order to base the ELGs on demonstrated technologies 

and to evaluate the economic impact of the cost of those technologies on the regulated industry. If airports 

and/or airlines can find less costly ways to meet the ELGs, as they are free to do, then the analysis based 

on these technologies will be an overestimate. This section briefly describes the pollution control 

technologies evaluated for the final airport deicing ELGs. 

Most aircraft deicing fluid (ADF) is applied to aircraft through pressurized spraying systems, either 

mounted on trucks that move around an aircraft, or on large fixed boom devices. Airlines typically 

purchase ADF in concentrated form and dilute it with water prior to spraying. Most applied ADF is Type 

I fluid, which predominately does not adhere to aircraft surfaces. Consequently most of Type I ADF is 

available for discharge due to dripping, overspraying, tracking and shearing during takeoff. Once the 

ADF has reached the ground, it will then mix with precipitation, as well as other chemicals found in 

airport stormwater. (These chemicals typically include aircraft fuel, lubricants and solvents, and metals 

from aircraft and utility vehicles.) This wastestream enters an airport’s storm drain system. At many 

airports, the storm drains discharge directly to waters of the United States with no treatment. 

The ADF application process has presented a challenge for airports attempting to manage their deicing 

stormwater streams. The airlines’ process of applying ADF to aircraft through high pressure spraying, 

combined with their typical practices of spraying the aircraft outdoors in multiple large unconfined 

spaces, results in pollutants being dispersed over a wide area and entering storm drains at multiple 

locations. EPA has identified three technologies that are available to collect the ADF wastestream, which 

are described in Sections 4.2.1 through 4.2.3. After collection, the ADF must be treated prior to direct 

discharge to surface water; EPA evaluated anaerobic fluidized bed (AFB) biological treatment as the basis 

for the numerical discharge component of the aircraft deicing discharge requirements (Section 4.2.4). 

More detailed information about the collection and treatment technologies described here is contained in 

the Technical Development Document (EPA 2012). 

4.2.1 Glycol Collection Vehicle 

A glycol collection vehicle (GCV) is a truck or trailer-based device that utilizes a vacuum mechanism to 

gather stormwater contaminated with ADF resulting from aircraft deicing operations. A GCV is a 

modular technology, in that collection capacity can be increased by using additional units, without the 

complicating factors of in-ground construction associated with some other technologies. An airport can 

easily increase its overall ADF collection capacity by purchasing larger and/or additional units. EPA 

estimates that GCVs are able to capture 20 percent of the available ADF. 

4.2.2 Plug and Pump 

The plug-and-pump collection system involves alterations to an airport's existing storm drain system 

infrastructure in combination with GCVs to contain and collect ADF-contaminated stormwater. Drainage 

system modifications involve the placement of temporary blocking devices at storm drain inlets, and/or 

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Economic Analysis for Final Effluent Limitation Guidelines Chapter 4. Pollution Control Options 

and Standards for the Airport Deicing Category 

installation of shutoff valves at one or more points in the storm sewer system. Before a deicing event 

begins, airport personnel activate the blocking devices, which trap the ADF-contaminated stormwater in 

the collection system. After the deicing activity ceases, vacuum trucks pump deicing stormwater from the 

storm sewer system. EPA estimates that plug and pump systems which incorporate GCVs are able to 

capture 40 percent of the available ADF. 

4.2.3 Centralized Deicing Pads 

A centralized deicing pad is a facility on an airfield built specifically for aircraft deicing operations. It is 

typically a paved area adjacent to a gate area, taxiway, or runway, and constructed with a drainage system 

separate from the airport's main storm drain system. It is usually constructed of concrete with sealed joints 

to prevent the loss of sprayed ADF through the joints. A pad is specially graded and captures and routes 

highly contaminated runoff to storage ponds or tanks, from which the deicing stormwater can be sent to 

on-site or off-site treatment. Central deicing pads minimize the volume of deicing wastewater by 

restricting deicing to very small areas, and managing the captured wastewater through a dedicated drain 

system. EPA estimates that central deicing pads allow airports to capture 60 percent of the available ADF. 

EPA proposed a 60 percent collection and treatment standard based on pads for some airports. 

4.2.4 Anaerobic Fluidized Bed Biological Treatment 

An anaerobic fluidized bed (AFB) biological treatment system uses a vertical, cylindrical tank in which 

the ADF-contaminated stormwater is pumped upwards through a bed of granular activated carbon at a 

velocity sufficient to fluidize, or suspend, the media. A thin film of microorganisms grows and coats each 

granular activated carbon particle, providing a vast surface area for biological growth. The anaerobic 

microorganisms that develop occur naturally in sediment, peat bogs, cattle intestines, and even brewer’s 

yeast. These microorganisms provide treatment of the ADF-contaminated stormwater. AFB treatment 

system by-products include methane, carbon dioxide, and new biomass. Effluent from the AFB can be 

discharged to a local publicly owned treatment works (POTW) or, in most cases, directly to surface water. 

4.2.5 Technology Basis for Airfield Deicing Control 

EPA is not aware of an available technology to control pollutants in airfield deicing discharges through 

collection and use of a conventional, end-of-pipe treatment system. It is possible, however, to reduce or 

eliminate certain pollutants by modifying deicing practices, such as using alternative chemical deicing 

products. In particular, EPA has identified ammonia and COD from airfield deicing as the primary 

pollutants of concern, as both of these pollutants are a byproduct of pavement deicers containing urea. 

EPA identified one candidate technology, product substitution, or discontinuing the use of pavement 

deicers containing urea and using alternative pavement deicers instead. 

4.3 Analyzed Options 

Using the technology bases identified above for airfield and aircraft deicing discharges, EPA developed 

three primary options for existing facilities in today's final rule. All three of these options have the same 

airfield pavement deicing discharge requirements based on product substitution, but would vary the 

approach to control aircraft deicing discharges: 

• Option 1: 40 percent ADF collection requirement for large and medium ADF users (based on 

plug and pump with GCVs); numeric COD limitations for direct discharges of collected ADF 

(based on anaerobic treatment); 

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Economic Analysis for Final Effluent Limitation Guidelines Chapter 4. Pollution Control Options 

and Standards for the Airport Deicing Category 

4-4

• Option 2: 40 percent ADF collection requirement for the large ADF users (based on plug and 

pump with GCVs) and 20 percent ADF collection requirement for medium ADF users (based on 

GCVs); numeric COD limitations for direct discharges of collected ADF (based on anaerobic 

treatment); and 

• Option 3: Site-Specific Aircraft Deicing Discharge Controls. 

In-scope existing airports that could be required to meet discharge requirements under at least one of 

these final rule options are primary airports with 1,000 or more departures by non-propeller driven aircraft 

annually that discharge deicing pollutants. For additional information on the final regulatory options and 

the applicability, see the TDD and the preamble to the final rul. Table 4-1 summarizes these regulatory 

options. The first column indicates the option number that appears in the cost and impact tables in the 

following chapters. The second column describes the criteria for inclusion in that option; the third column 

describes the discharge requirements; and the last column provides a description of the technology basis. 

Table 4-1. Summary of BAT Regulatory Options for Final Rule

BAT Option Criteria Discharge Requirement Technology Basis 

1 ≥ 60,000 gallons of 

normalized ADF used 

annually 

Collect40% of available ADF; 

treat direct discharges of collected 

ADF to numeric limit; 

no discharge of airfield pavement 

deicers containing urea 

Plug & Pump with Glycol 

Collection Vehicles; 

AFB Biological Treatment; 

Product substitution 

< 60,000 gallons of 

normalized ADF used 

annually 

no discharge of airfield pavement 

deicers containing urea 

Product substitution 

2 ≥ 460,000 gallons of 

normalized ADF used 

annually 

Collect 40% of available ADF; 

treat direct discharges of collected 

ADF to numeric limit; 

no discharge of airfield pavement 

deicers containing urea 

Plug & Pump with Glycol 

Collection Vehicles; 

AFB Biological Treatment; 

Product substitution 

< 460,000 but ≥ 60,000 

gallons of normalized 

ADF used annually 

Collect 20% of available ADF; 

treat direct discharges of collected 

ADF to numeric limit; 

no discharge of airfield pavement 

deicers containing urea 

Glycol Collection Vehicles; 

AFB Biological Treatment; 

Product substitution 

< 60,000 gallons of 

normalized ADF used 

annually 

no discharge of airfield pavement 

deicers containing urea 

Product substitution 

3 All in scope airports no discharge of airfield pavement 

deicers containing urea 

Product substitution 

[a] Airports in scope are defined as: primary commercial service airports at which deicing operations are 

performed and have at least 1,000 annual non-propeller aircraft departures. 

4.4 References 

U.S. EPA. 2012. Technical Development Document for the Final Effluent Limitation Guidelines and New 

Source Performance Standards for the Airport Deicing Category. EPA-821-R-12-005. 
Economic Analysis for Final Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

CHAPTER 5 

ECONOMIC IMPACT ANALYSIS RESULTS 

This section presents the projected economic impacts on existing airports resulting from complying with 

the regulatory options analyzed for today’s effluent limitations guidelines and standards (ELGs) for the 

Airport Deicing Category. The impacts are estimated using the methodology outlined in Section 3. 

Section 5.1 presents the national costs for the regulatory options described in Section 4. Section 5.2 

presents estimated impacts on airports based on airport operating revenues, while Section 5.3 examines 

airport impacts – and impacts to customers – using cost per enplaned passenger as a metric. Section 5.4 

summarizes impacts to airports’ Debt Service Coverage Ratio. Section 5.5 describes the analysis 

performed for airports owned by the state of Alaska. Section 5.6 describes the analysis of incremental 

compliance costs per available seat mile on the supply of air transportation services to in-scope airports. 

In Section 5.7, EPA discusses potential impacts should airports share compliance costs with co-permittee 

airlines. Finally, Section 5.8 refers the reader to documentation on NSPS, and Section 5.9 summarizes the 

impacts to existing airports under regulatory options evaluated for the final rule. A more detailed analysis 

of impacts on small business entities within the industry is presented in Section 6. 

5.1 National Costs of the Airport Deicing Effluent Limitation Guidelines 

Table 5-1 presents projected costs for the three regulatory options examined under for the final 

rulemaking effort. Capital costs were annualized over 20 years using both a 3 percent and a 7 percent real 

interest rate. The 3 percent real interest rate represents societal preferences and therefore is used to 

estimate the aggregate national costs of the final rule. The 7 percent real interest rate represents the 

private opportunity cost of capital and thus the cost to airports of complying with the rule; all economic 

impacts to airports are projected using option costs annualized with the 7 percent interest rate. 

For the reasons described in the preamble, EPA selected Option 3 as the basis for today’s final rule. EPA 

projects the societal average annualized national cost of today’s regulation at $3.43 million per year over 

20 years (3 percent real rate); of this, 11 percent are composed of capital costs, while annual operating 

and maintenance account for 89 percent of the total. In-scope airports are expected to incur a total of 

$6.83 million in (unannualized) capital costs, with a present value of $5.27 million after discounting 

replacement capital costs (7 percent real rate) in year 11. Annually, the rule is projected to cost airports an 

average of $3.50 million per year over 20 years, with annualized capital costs composing 13 percent of 

the total ($0.46 million), with the remaining 87 percent ($3.04 million) composed of annual operating and 

maintenance costs. 

 

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and Standards for the Airport Deicing Category 

Table 5-1. National Compliance Costs of Final Regulatory Options, 2004-2005 Deicing 

Season (millions, 2006 dollars)a

Option

Airports 

in Scope

Aggregate Capital 

Compliance Costs 

Aggregate Annualized 

Compliance Costs 

Total 

Present 

Value Capital O&M Total 

3 Percent Real Interest Rate

Option 1

Number 198 $319.9 $309.0 $20.2 $52.0 $72.1 

Percent 28.0% 72.0% 100.0% 

Option 2

Number 198 $250.3 $243.7 $15.9 $28.4 $44.3

Percent 35.9% 64.1% 100.0% 

Option 3

Number 198 $6.83 $6.02 $0.39 $3.04 $3.43

Percent 11.5% 88.5% 100.0% 

7 Percent Real Interest Rate 

Option 1

Number 198 $319.9 $299.0 $26.4 $52.0 $78.4 

Percent 33.7% 66.3% 100.0% 

Option 2

Number 198 $250.3 $237.6 $21.0 $28.4 $49.4

Percent 42.5% 57.5% 100.0% 

Option 3

Number 198 $6.83 $5.27 $0.46 $3.04 $3.50 

Percent 13.3% 86.7% 100.0% 

Table 5-2 projects compliance costs by airport size. Under the selected option, Option 3, about 21 percent 

of annualized compliance costs will be incurred by large hubs, 21 percent by medium hubs, 37 percent by 

small hubs, and 20 percent by non-hubs (based on a 7 percent real interest rate). 

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and Standards for the Airport Deicing Category 

Table 5-2. National Compliance Costs for Final Regulatory Options, 2004-2005 Deicing 

Season, by Airport Size (millions, 2006 dollars) 

Airports 

in Scope 

Aggregate Annualized Compliance Costsa

3 Percent Real Interest Rate 7 Percent Real Interest Rate 

Capital O&M Total Capital O&M Total 

Option 1

Total

Number 198 $20.2 $52.0 $72.1 $26.4 $52.0 $78.4 

% of Total 100% 100% 100% 100% 100% 100% 100% 

Large Hubs

Number 28 $11.3 $24.9 $36.1 $14.9 $24.9 $39.8 

% of Total 14% 56% 48% 50% 57% 48% 51% 

Medium Hubs

Number 35 $7.2 $18.6 $25.8 $9.5 $18.6 $28.1 

% of Total 18% 36% 36% 36% 36% 36% 36% 

Small Hubs

Number 41 $1.5 $7.8 $9.3 $1.8 $7.8 $9.6 

% of Total 21% 7% 15% 13% 7% 15% 12% 

Non-Hubs

Number 94 $0.2 $0.7 $0.8 $0.2 $0.7 $0.9 

% of Total 48% 1% 1% 1% 1% 1% 1% 

Option 2 

Total

Number 198 $15.9 $28.4 $44.3 $21.0 $28.4 $49.4

% of Total 100% 100% 100% 100% 100% 100% 100% 

Large Hubs

Number 28 $11.0 $22.4 $33.4 $14.6 $22.4 $36.9

% of Total 14% 69% 79% 75% 70% 79% 75% 

Medium Hubs

Number 35 $3.9 $3.7 $7.7 $5.2 $3.7 $8.9

% of Total 18% 25% 13% 17% 25% 13% 18% 

Small Hubs

Number 41 $0.8 $1.6 $2.4 $1.0 $1.6 $2.6

% of Total 21% 5% 6% 5% 5% 6% 5% 

Non-Hubs

Number 94 $0.2 $0.7 $0.8 $0.2 $0.7 $0.9

% of Total 48% 1% 2% 2% 1% 2% 2% 

Option 3

Total

Number 198 $0.39 $3.04 $3.43 $0.46 $3.04 $3.50

% of Total 100% 100% 100% 100% 100% 100% 100% 

Large Hubs

Number 28 $0.04 $0.70 $0.74 $0.05 $0.70 $0.75

% of Total 14% 11% 23% 22% 11% 23% 21% 

Medium Hubs

Number 35 $0.03 $0.71 $0.74 $0.03 $0.71 $0.74

% of Total 18% 7% 23% 21% 7% 23% 21% 

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and Standards for the Airport Deicing Category 

5-4

Table 5-2. National Compliance Costs for Final Regulatory Options, 2004-2005 Deicing 

Season, by Airport Size (millions, 2006 dollars) 

Airports 

in Scope 

Aggregate Annualized Compliance Costsa

3 Percent Real Interest Rate 7 Percent Real Interest Rate 

Capital O&M Total Capital O&M Total 

Small Hubs

Number 41 $0.17 $1.10 $1.27 $0.20 $1.10 $1.30

% of Total 21% 43% 36% 37% 44% 36% 37% 

Non-Hubs

Number 94 $0.15 $0.53 $0.69 $0.18 $0.53 $0.71

% of Total 48% 39% 18% 20% 39% 18% 20% a

 Estimated compliance costs to collect and treat ADF at each airport in category; in Section 5.7 EPA will 

consider whether some costs are incurred by airlines that are co-permittees on an airport’s NPDES permit. 

5.2 Airport Revenue Test Analysis 

EPA compared the ratio of total annualized compliance costs (costs) to total operating revenues 

(revenues) for each airport to determine the impact of the regulatory options on airport revenues. Table 5-

3 summarizes the results of this analysis for all in-scope airports. 

Under the selected option, Option 3, over 95 percent of in-scope airports (189 airports) are projected to 

incur compliance costs less than 1 percent of total operating revenues, while 1 airport (0.5 percent) is 

projected to incur costs exceeding 3 percent of operating revenues; 6 airports (3.0 percent) fall into the 

greater than 1 percent, but less than 3 percent range. However, even for the airport projected to incur 

compliance costs exceeding 3 percent of revenues, EPA believes those costs should not significantly 

impact its ability to continue to support air transportation. The revenue test makes no allowance for cost 

pass-through, and analyses of the industry and industry comments on the proposed rule indicate that 

airport cost are generally passed through to airlines relatively quickly. In addition, EPA’s estimate of 

compliance costs per enplaned passenger (presented in Section 5.3, below) indicate that on a per 

passenger basis, compliance cost are relatively small and airlines should be able to be pass these relatively 

small costs through to passengers. 
Economic Analysis for Final Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

Table 5-3. Annualized Final Regulatory Option Costs as a Percent of Airport Revenues, 

2004-2005 Deicing Seasona

Airports 

in Scope 

Compliance Costs as a Percent of Airport Operating Revenues 

≥ 0% ≥ 1% 

< 1% < 3% ≥ 3% Not Analyzable 

Option 1

Number 198 172 13 9 5 

Percent 100% 86.6% 6.3% 4.5% 2.5% 

Option 2

Number 198 176 13 5 5

Percent 100% 88.6% 6.3% 2.5% 2.5% 

Option 3

Number 198 189 6 1 2

Percent 100% 95.5% 3.0% 0.5% 1.0% a

 Airport-specific estimated annualized compliance costs (7 percent real interest rate) deflated to 2004 dollars 

divided by airport-specific 2004 total operating revenues. 

Table 5-4 presents revenue impacts by airport size. One of 41 small hubs is projected to incur costs 

exceeding 3 percent of airport operating revenue under the option selected as the basis for the final rule. 

Table 5-4. Annualized Final Regulatory Option Costs as a Percent of Airport Revenues 

by Airport Size, 2004-2005 Deicing Seasona

Airports 

in Scope 

Compliance Costs as a 

Percent of Airport Operating Revenues 

≥ 0% ≥ 1% 

< 1% < 3% ≥ 3% Not Analyzable 

Option 1 

Large Hubs 28 22 6 0 0 

Medium Hubs 35 27 1 7 0 

Small Hubs 41 36 3 2 0 

Non-Hubs 94 86 3 0 5 

Total 198 172 13 9 5 

Option 2

Large Hubs 28 23 5 0 0

Medium Hubs 35 30 2 3 0

Small Hubs 41 36 3 2 0

Non-Hubs 94 86 3 0 5

Total 198 176 13 5 5 

Option 3

Large Hubs 28 28 0 0 0

Medium Hubs 35 35 0 0 0

Small Hubs 41 37 3 1 0

Non-Hubs 94 89 3 0 2

Total 198 189 6 1 2 a

 Airport-specific estimated annualized compliance costs (7 percent real interest rate) deflated to 2004 dollars 

divided by airport-specific 2004 total operating revenues.. 

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and Standards for the Airport Deicing Category 

5.3 Cost per Enplaned Passenger 

This section reviews potential impacts measured in terms of cost per enplaned passenger, as 

recommended by industry comments. Results are presented as the incremental cost per enplaned 

passenger, as well as the incremental cost per enplaned passenger relative to baseline cost per enplaned 

passenger. 

Table 5-5 summarizes the results of the incremental compliance cost per enplaned passenger calculation 

for the final regulatory options. Under the selected option, Option 3, compliance costs less than $0.25 per 

passenger at 97.0 percent of in-scope airports (192 of 198 in-scope airports), and less than $0.50 per 

enplaned passenger at 99.5 percent of in-scope airports. One airport (0.5 percent) is projected to incur 

compliance costs that exceed $0.50 but less than $0.75 per enplaned passenger. If we interpret the 

incremental cost per enplaned passenger as a proxy for the cost that must be passed-through to airline 

passengers to pay the cost of the ELG, then this analysis suggests that at minimum, those costs appear to 

be reasonable at 97 to 100 percent of in-scope airports. 

Table 5-5. Annualized Final Regulatory Option Costs per Enplaned Passenger, 2004-

2005 Deicing Season

Airports 

in Scope 

Annualized Compliance Cost per Enplaned Passengera

≥ $0.00 ≥ $0.25 ≥ $0.50 ≥ $0.75 

< $0.25 < $0.50 < $0.75 < $1.00 ≥ $1.00 

Option 1

Number 198 175 13 4 2 4 

Percent 100% 88.5% 6.5% 2.0% 1.0% 2.0% 

Option 2

Number 198 179 13 5 1 0

Percent 100% 90.5% 6.5% 2.5% 0.5% 0.0% 

Option 3

Number 198 192 5 1 0 0

Percent 100% 97.0% 2.5% 0.5% 0.0% 0.0% a

 Airport-specific estimated annualized compliance costs (7 percent real interest rate) deflated to 2004 dollars 

divided by 2004 airport-specific enplaned passengers.

Table 5-6 reinforces the conclusions drawn from Table 5-4: the single airport projected to incur costs 

exceeding $0.50 but less than $0.75 per enplaned passenger is a small hub. All but 3 in-scope non-hubs 

(97 percent) are projected to incur costs less than $0.25 per enplaned passenger, as are 39 of 41 (95 

percent) small hubs. 

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and Standards for the Airport Deicing Category 

Table 5-6. Annualized Final Regulatory Option Costs per Enplaned Passenger by Airport 

Size, 2004-2005 Deicing Season 

Airports in 

Scope 

Annualized Compliance Cost per Enplaned Passengera

≥ $0.00 ≥ $0.25 ≥ $0.50 ≥ $0.75 

< $0.25 < $0.50 < $0.75 < $1.00 ≥ $1.00 

Option 1

Large Hubs 28 23 4 1 0 0 

Medium Hubs 35 26 2 2 2 3 

Small Hubs 41 38 1 1 0 1 

Non-Hubs 94 88 6 0 0 0 

Total 198 175 13 4 2 4 

Option 2

Large Hubs 28 24 3 1 0 0

Medium Hubs 35 29 3 3 0 0

Small Hubs 41 38 1 1 1 0

Non-Hubs 94 88 6 0 0 0

Total 198 179 13 5 1 0 

Option 3

Large Hubs 28 28 0 0 0 0

Medium Hubs 35 34 1 0 0 0

Small Hubs 41 39 1 1 0 0

Non-Hubs 94 91 3 0 0 0

Total 198 192 5 1 0 0 a

 Airport-specific estimated annualized compliance costs (7 percent real interest rate) deflated to 2004 dollars 

divided by 2004 airport-specific enplaned passengers.

Table 5-7 compares the airport-specific cost per enplaned passenger to its baseline cost per enplaned 

passenger (where available) for the three final regulatory options. As discussed in Section 3.2, simple 

interpretation of these results is problematic: (1) baseline cost per enplaned passenger ranges from $1.59 

to $18, (2) there does not appear to be a strong correlation between baseline CPEP and airport 

characteristics such as size, (3) airports appear to use this benchmark primarily to compare their 

“attractiveness” to airlines with the CPEP at airports they consider competitors, and (4) there are no welldefined thresholds for absolute values of CPEP or values relative to competitors’ CPEP that determine an 

airport’s financial stability. 

EPA found baseline CPEP data for 86 in-scope airports, 17 of which are projected to incur compliance 

costs under the regulatory option selected as the basis for today’s final rule. Of these 17airports, 14are 

projected to incur incremental compliance costs per enplaned passenger that compose less than 3 percent 

of baseline CPEP under the selected option, while 3 are projected to incur costs that would increase 

baseline CPEP more than 3 percent but less than 10 percent. 

• Of the 112 airports for which baseline CPEP data were not collected, 19 are projected to 

incur compliance costs under the regulatory option selected as the basis for today’s final 

rule1 is projected to incur annualized costs that are less than $0.01 per enplaned 

passenger; 

• 5 are projected to incur annualized costs between $0.01 and $0.10 per enplaned 

passenger; 

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Economic Analysis for Final Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

• 11 are projected to incur annualized costs between $0.10 and $0.25 per enplaned 

passenger; 

• 1 is projected to incur annualized costs between $0.25 and $0.50 per enplaned passenger; 

• 1 is projected to incur annualized costs between $0.50 and $0.60 per enplaned passenger. 

Due to the relatively small cost per enplaned passenger incurred by the majority of these airports, EPA 

believes the general pattern of impacts would not be substantially worse than shown in Table 5-7 had 

EPA been able to collect baseline CPEP data for all in-scope airports. For example, if an airport’s 

compliance costs are less than $0.10 per enplaned passenger, then compliance costs will increase CPEP 

by less than 3 percent if that airport’s baseline CPEP is $3.34 or more. Of the 86 airports for which 

baseline CPEP could be found, only seven had a value below $3.34. 

Table 5-7. Annualized Compliance Cost per Enplaned Passenger as Percent of Baseline 

Airline Cost per Enplaned Passenger, 2004-2005 Deicing Season

Airports 

in Scope 

Annualized Compliance Cost per Enplaned Passenger 

as % of Baseline Cost per Enplaned Passengera

≥ 0% ≥ 3% ≥ 10% ≥ 25% Not 

Analyzedb < 3% < 10% < 25% < 100% ≥ 100% 

Option 1

Number 198 67 12 6 0 1 112 

Percent 100% 33.7% 6.0% 3.0% 0.0% 0.5% 56.7% 

Option 2

Number 198 69 13 4 0 0 112

Percent 100% 34.7% 6.6% 2.0% 0.0% 0.0% 56.7% 

Option 3

Number 198 176 3 0 0 0 19

Percent 100% 88.9% 1.5% 0.0% 0.0% 0.0% 9.6% a

 Airport-specific estimated annualized compliance costs (7 percent real interest rate) per enplaned passenger in 

2004 dollars divided by 2004 baseline airport-specific airline cost per enplaned passenger (where available). 

Airline cost per enplaned passenger (CPEP) is equal to airport revenues from airlines divided by the number of 

enplaned passengers. 

b

 Baseline CPEP collected through internet search of publicly available information. Of 112 airports for which 

baseline CPEP was not collected, 19 are projected to incur costs under the selected option. Of these 19 airports: 1 

is projected to incur average annualized costs of $231,000; 14 are projected to incur costs ranging from $27,000 to 

$60,000; and 4 are projected to incur annualized costs less than $17,000.

Table 5-8 demonstrates that 3 small and non-hub airports incur the largest impacts. In general, impacts 

measured by incremental CPEP as a percent of baseline CPEP are consistent with the results presented 

above using revenue and incremental CPEP metrics. 

 

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Table 5-8. Annualized Compliance Cost per Enplaned Passenger as Percent of Baseline 

Airline Cost per Enplaned Passenger by Airport Size, 2004-2005 Deicing Season

Airports in 

Scope 

Annualized Compliance Cost per Enplaned Passenger as Percent of CPEPa

≥ 0% ≥ 3% ≥ 10% ≥ 25% Not 

Analyzedb < 3% < 10% < 25% < 100% ≥ 100% 

Option 1

Large Hubs 28 22 5 0 0 0 1 

Medium Hubs 35 25 1 6 0 0 3 

Small Hubs 41 20 4 0 0 1 16 

Non-Hubs 94 0 2 0 0 0 92 

Total 198 67 12 6 0 1 112 

Option 2

Large Hubs 28 22 5 0 0 0 1

Medium Hubs 35 27 2 3 0 0 3

Small Hubs 41 20 4 1 0 0 16

Non-Hubs 94 0 2 0 0 0 92

Total 198 69 13 4 0 0 112 

Option 3

Large Hubs 28 28 0 0 0 0 0

Medium Hubs 35 34 0 0 0 0 1

Small Hubs 41 35 1 0 0 0 5

Non-Hubs 94 79 2 0 0 0 13

Total 198 176 3 0 0 0 19 a

 Airport-specific estimated annualized compliance costs (7 percent real interest rate) per enplaned passenger in 

2004 dollars divided by 2004 baseline airport-specific airline cost per enplaned passenger (where available). 

Airline cost per enplaned passenger (CPEP) is equal to airport revenues from airlines divided by the number of 

enplaned passengers. 

b

 Baseline CPEP collected through internet search of publicly available information. Of 112 airports for which 

baseline CPEP was not collected, 19 are projected to incur costs under the selected option. Of these 19 airports: 1 

is projected to incur average annualized costs of $231,000; 14 are projected to incur costs ranging from $27,000 to 

$60,000; and 4 are projected to incur annualized costs less than $17,000.

5.4 Debt Service Coverage Ratio Analysis 

EPA analyzed the impact of the promulgated option on the ability of airport owners to service debt under 

EPA’s assumption that airports will finance capital by issuing debt. Among the estimated 198 in-scope 

airports, there are several multi-airport authorities that own more than one potentially affected airport. For 

these multi-airport authorities, debt is issued at the ownership level, not at the airport level. In these cases, 

EPA estimated the potential debt incurred by all airports owned by that authority. Table 5-9 presents the 

multi-airport authorities that own at least one in-scope airport surveyed by EPA, and their airports that 

received surveys.1

 

 

 

1

 Four airports from the Hawaii State Airports Division received surveys, but no airports owned by the State of 

Hawaii were deemed in-scope, and therefore all are excluded from the list. 
Economic Analysis for Final Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

Table 5-9. Multi-Airport Authorities

Owner Name Airports Owned 

City of Chicago Chicago O’Harea

Chicago Midwaya

City of Houston William P Hobbya

George Bush Intercontinentala

Columbus Regional Airport Authority Port Columbus Internationala

Rickenbacker Internationala

County of Sacramentob Sacramento Internationala

Sacramento Mather 

Metro Washington Airport Authority Washington Dulles Internationala

Ronald Reagan Washington Nationala

Port Authority of NY and NJ Newark Liberty Internationala

John F Kennedy Internationala

La Guardiaa

Stewart Internationala

State of Alaska Airport System Ted Stevens Anchorage Internationala

Fairbanks Internationala

State of Alaska Rural Aviationb Bethela

Ketchikan Internationala

Sitka, Rocky Gutierreza, c

Nomea

Ralph Wien Memoriala

Aniak 

Deadhorse 

Cold Bay 

Wiley Post-Will Rogers Memorial 

Wayne County Airport Authority Detroit Metropolitan Wayne Countya

Willow Run a

 Airport EPA has estimated will be in-scope of the effluent guideline.

b

 Additional airports are owned by this authority but are not included in the list because they were not 

surveyed and EPA determined they are unlikely to be in-scope of the proposed regulation. c

 Sitka, Rocky Gutierrez Airport did not receive an EPA survey, but based on publicly available data 

EPA believes it will be in-scope and analyzed it based on data for other Alaskan airports. 

EPA presents the results of the DSCR analysis separately for multi airport authorities (Table 5-10) and 

single airport owners (Table 5-11). EPA found that among the 9 multi-airport authorities responsible for 

27 airports shown in Table 5-9, 21 airports are in scope of the rule. All results for multiple airport 

authorities are unweighted because each airport was individually identified and therefore does not 

represent any other airports but itself with respect to ownership. EPA aggregated projected costs for all 

in-scope airports under that ownership and analyzed them using the owning organization’s debt service 

coverage ratio obtained from its Comprehensive Annual Financial Report. The remaining 90 

(unweighted) in-scope airports (representing 172 airports) were evaluated individually as single-owner 

airports. For single airport owners, the survey weights cannot be considered statistically reliable because 

the survey was not stratified on the basis of ownership. 

EPA cannot present summary results encompassing the 198 airports determined to be in the scope of this 

rule because the airport survey was not stratified by airport ownership. That is, EPA cannot use the survey 

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and Standards for the Airport Deicing Category 

5-11

weights to present on a basis completely consistent with the estimated 198 in-scope airports: (1) the 

number of airports operated by single-airport owners, (2) the number of multi-airport systems, (3) the 

number of airports operated by those multi-airport systems, and (4) the number of airports that are 

impacted by the rule. For example, EPA identified both the surveyed airports that belong to multi-airport 

systems and the total number of airports (and the identity of those airports) belonging to those same 

systems. Comparing the surveyed airports with the airports known to be owned by the system 

demonstrates that the survey weights are not entirely representative of multi-airport ownership patterns.2

However, because of the large number of single airport operators, and the relatively small number of 

multi-airport authorities, EPA believes the weighted airport results presented in the lower half of Table 5-

8 are generally reflective of the relative frequency of single airport ownership. In addition, the combined 

results of the unweighted multi-airport authority analysis and the weighted results for the single airport 

owners are broadly representative of impacts under this analysis. 

Table 5-10 presents the results of the debt service coverage ratio (DSCR) analysis for multi-airport 

authorities potentially affected by the airport deicing effluent guideline. A standard DSCR threshold is 

1.25; that is, revenues available for debt service must be at least 125 percent of debt service, or the airport 

owner will be in default on its debt.3

 Therefore, if an airport or multi-airport authority had a preregulatory DSCR greater than or equal to 1.25, but a post-regulatory DSCR less than 1.25, EPA projects 

that the airport or airport authority will be significantly impacted by the regulation. At a minimum, EPA 

expects the airport’s bond rating would be downgraded, making it more difficult for the airport to use debt 

financing in the future and requiring payment of higher interest rates. The DSCR analysis was performed 

alternately under the following assumptions: (1) 100 percent of compliance costs will be passed through 

to airlines in the form of higher rates and charges (which will still affect the owner’s DSCR by increasing 

debt service requirements but not net revenues, see Section 3.2.2); (2) 50 percent of compliance costs will 

be passed through to airlines; and (3) worst-case scenario, no compliance costs will be passed through to 

airlines. 

 

 

2

 For example, the Port Authority of NY and NJ owns four in-scope airports: LaGuardia, John F. Kennedy 

International, Newark Liberty International (each of which has a survey weight of 1.0), and Stewart International 

(with a survey weight of 2.9). Clearly the Port Authority does not own the 2.9 airports represented by Stewart, it 

only owns Stewart International. However, it cannot be determined if the additional 1.9 airports represented by 

Stewart are owned by multi-airport authorities or single airport operators. 3

 Forbes (2003) documented that no airport has defaulted on a bond issue; EPA has found no reports of airport bond 

defaults since that date. Thus it is difficult to determine what will happen if an airport defaults on a bond issue. 

Default on municipal bonds is rare; unlike corporations, municipalities in default (including public authorities) are 

almost never liquidated, defaulted municipal bonds have high recovery rates, and most bond issuers resume debt 

payments (see, for example, Moody’s 2002; Public Bonds 2004). The most likely result of default appears to be that 

the airport would receive lower ratings on future bond issues, making it more difficult to sell debt and requiring 

higher interest rates. 
Economic Analysis for Final Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

Table 5-10. Projected Impacts to Debt Service Coverage Ratio of Multi-Airport Authorities 

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

Option 

MultiAirport 

Authorities 

Incurring 

Costsa

Airports 

in Scope 

Incurring 

Costsa

Authorities 

Incurring 

Costs that 

Cannot be 

Analyzedb

Airports 

Incurring 

Costs that 

Cannot be 

Analyzeda

Number of Authorities with 

Pre-Regulatory DSCR > 1.25 and 

Post-Regulatory DSCR <1.25 

100% CPTc 50% CPTc 0%CPTc

1 9 21 1 5 0 0 0 

2 9 21 1 5 0 0 0 

3 4 6 1 2 0 0 0 a

 A total of 9 multi-airport authorities own 21 airports that are in scope of the rule. These columns present the 

number of authorities and airports that are projected to incur costs under the final rule. Under Options 1 and 2, all 9 

authorities and all 21 airports incur costs; under Option 3, only 4 authorities owning 6 airports incur costs.

b

 One multi-airport authority, the Alaska Department of Transportation and Public Facilities Rural Aviation System, 

which owns 5 airports projected to incur costs under the proposed option, could not be analyzed. 

c 100% CPT: 100 percent of airport compliance costs are passed through to airlines in the form of higher rates and 

charges; 50% CPT: 50 percent of airport compliance costs are passed through to airlines; 0% CPT: no costs are 

passed through to airlines. 

Table 5-11 presents the projected impact of the rule on the ability of the owners of single airports to 

finance their debt. Under the selected Option 3, no airports are projected to incur compliance costs that 

would result in their post-regulatory DSCR falling below the default threshold regardless of assumption 

concerning the percentage of costs passed-through to air carriers. 

Table 5-11. Projected Impacts to Debt Service Coverage Ratio of Single Airport Owners 

Incurring Costs for Various Cost Pass-Through Assumptions 

Option 

Airports 

in Scopea, b

Airports 

Incurring Costs 

Not Analyzedc

Owners with Pre-Regulatory DSCR > 1.25 & 

Post Regulatory DSCR < 1.25 

100% CPT 50% CPT 0% CPT 

Unweighted 

1 90 17 2 2 3 

2 90 17 1 2 2 

3 90 2 0 0 0 

Weighted 

1 172 59 2 2 3 

2 172 59 1 2 2 

3 172 3 0 0 0 a

 90 surveyed single-owner airports are in scope with weights representing 172 airports. Survey weights are not 

statistically reliable for determining number of single airport owners; however, EPA believes the weights 

generally reflect the relative frequency of potentially affected single airport owners. 

b

 Under Options 1 and 2, all 90 airports (172 weighted) incur costs; under Option 3, only 18 airports (29 

weighted) incur costs. 

c

Airports are not analyzable either because they did not provide the necessary data in the survey, or their baseline 

DSCR was less than 1.25. 

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and Standards for the Airport Deicing Category 

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5.5 Impacts on Airports Owned by the State of Alaska 

EPA determined that the impact of projected compliance costs on airports in the state of Alaska should be 

analyzed separately due to the unique nature of the airport system in the State. The State of Alaska owns 

and operates two separate airport systems: the International Airport System (IAS) and the Rural Airport 

System (RAS).4

 

5.5.1 Impacts on the Alaska International Airport System 

The IAS consists of Ted Stevens Anchorage International Airport and Fairbanks International Airport. 

The IAS is considered a separate major enterprise fund of the State of Alaska, and is considered to be a 

self-sufficient component of the State government. The IAS issues its own debt in the form of revenue 

bonds. In short, the IAS operates as many other government-run airports in the United States. 

Table 5-12 shows the impact of projected option costs on the two airports of the Alaska IAS. Under the 

selected option, total projected option costs for the Alaska IAS are $808,000, or 23.1 percent of national 

annualized compliance costs for the option. Ted Stevens Anchorage International Airport incurs projected 

compliance costs that are 0.8 percent of its total operating revenues, while Fairbanks International Airport 

incurs projected compliance costs that are 1.9 percent of total operating revenues. 

Table 5-12. Impacts on the Alaska International Airport System (IAS), 2004 

Option 

National 

Annualized 

Option Costs 

(millions of 2006 

dollars) 

IAS Total 

Annualized 

Option Costs 

(2006 dollars) 

IAS Costs as 

% of National 

IAS Airports with Ratio of Compliance 

Costs to Airport Operating Revenues: 

≥ 0% ≥ 1% 

< 1% < 3% ≥ 3% 

1 $78.4 $827,000 1.05% 1 1 0 

2 $49.4 $827,000 1.67% 1 1 0 

3 $3.50 $808,000 23.1% 1 1 0 

5.5.2 Impacts on the Alaska Rural Airport System 

The RAS consists of 256 rural airports scattered throughout the State (State of Alaska 2008). The RAS is 

not a self-sufficient government unit, and the rural airports lose money every year. However, due to the 

nature of transportation in the State of Alaska, it is vital that these airports remain in operation despite not 

being profitable. Operation of airports within the RAS falls on the Alaska Department of Transportation 

and Public Facilities (DOT&PF), as well as on local or tribal governments. According to the DOT&PF, 

airports in AK “are funded through a combination of user fees, state, local, or tribal funds, and federal 

funds” (DOTPF 2008). However, the rural airports have very limited opportunities for generating 

revenue, and the system is largely reliant on state subsidies to pay O&M costs at these airports. 

 

4

 One more Alaskan airport, Juneau International Airport, is expected to be in-scope of the final rule. Juneau is a 

small hub owned by the City and Borough of Juneau, and operated as a major enterprise fund of the local 

government. As such, it is considered to be a self-sufficient component of the City/Borough of Juneau (City and 

Borough of Juneau, 2004). This airport is included in the regular analysis, and is the small hub projected to incur 

compliance costs exceeding 3 percent of operating revenues. 
Economic Analysis for Final Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

5-14

Table 5-13 presents the impact of projected compliance costs on the 5 rural airports in the Alaska RAS 

that EPA determined would be in the scope of the rule (Bethel, Ketchikan International, Sitka Rocky 

Gutierrez, Nome, and Ralph Wien Memorial). Because data on the revenues of individual airports within 

the RAS could not be obtained, EPA used the estimated yearly contribution of $23 to $24 million by the 

State of Alaska to cover the operating costs of the RAS (Maggard, 2008) as a proxy to measure economic 

impacts. Under the selected option, two airports in the RAS are projected to incur compliance costs 

totaling $60,600 (1.7 percent of national option costs); these costs compose 0.26 percent of the State’s 

contribution to airport operations.5

 

Table 5-13. Impacts on the Alaska Rural Airport System (RAS), 2004

Option 

National 

Annualized 

Option Costs 

(millions of 2006 

dollars) 

RAS Total 

Annualized 

Option Costs 

(2006 dollars) 

RAS Costs as % 

of National 

Option Costs 

Ratio of Compliance Costs to State 

Operating Costs of RAS Airports:a

≥ 0% ≥ 1% 

< 1% < 3% ≥ 3% 

1 $78.4 $69,000 0.09% 5 0 0 

2 $49.4 $69,000 0.14% 5 0 0 

3 $3.50 $60,600 1.73% 2 0 0 a

 Represents the number of airports projected to incur costs under the specified option; however, the RAS as a whole 

will incur compliance costs exceeding the specified percent of system operating costs. 

5.6 Impacts to Airline Cost per Available Seat Mile 

Finally, EPA examined projected annualized compliance costs under the promulgated option on the basis 

of available seat miles (ASM) on flights departing in-scope airports. ASM is perhaps the most basic 

measure of the supply of air transportation passenger service. Thus, the analysis approximates the impact 

of the effluent guideline on the supply of air transportation services. 

For Options 1 and 2, this analysis is performed on flights departing a subset of in-scope airports. EPA 

restricted the analysis to 40 of 198 airports (20 percent), excluding 150 airports projected to incur 

annualized compliance costs less than $20,000, and 8 Alaskan airports. Thus, the analysis focuses 

primarily on those airports that incur costs for the collection and treatment of ADF and/or urea 

substitution. For Option 3, EPA included all 32 non-Alaskan airports that incur costs for urea substitution. 

EPA excluded Alaskan airports from this analysis because those airports operate in a distinctly different 

financial environment, and are used by an almost completely different set of airlines. Although the 

airports in this analysis for Options 1 and 2 compose a minority of all in-scope airports, they account for 

almost 98 percent of all projected compliance costs under the promulgated rule. The primary purpose of 

excluding the airports with the lowest projected compliance costs is to ensure that average impacts are not 

somewhat misleadingly deflated by including airports with large ASM and small costs in the calculations. 

Table 5-14 presents the distribution of the cost per ASM under all three options, distinguishing domestic 

departures from total departures. Under Option 3, no airports are projected to incur compliance costs 

exceeding 1/10th of one cent per ASM on either domestic or total departures, while 8 airports incur costs 

 

5

 The fiscal year 2006 budget for the entire Alaska Department of Transportation and Public Facilities was $407.2 

million (State of Alaska 2005). 
Economic Analysis for Final Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

exceeding 1/20th of one cent but less than 1/10th of one cent per ASM. Table 5-15 shows that these 8 

airports are non-hubs. 

Table 5-14. Annualized Compliance Cost per Available Seat Mile, 2004-2005 Deicing 

Seasona

Airports 

in Scope 

Annualized Compliance Cost per Available Seat Mile 

≥ $0.0000 ≥ $0.0001 ≥ $0.00025 ≥ $0.0005 Not 

Analyzedb < $0.0001 < $0.00025 < $0.0005 < $0.001 ≥ $0.001 

Option 1 

Domestic Departures 

Number 198 4 9 11 10 6 158 

Percent 100% 2.0% 4.5% 5.5% 5.0% 3.0% 80% 

Total Departures

Number 198 4 10 10 10 6 158 

Percent 100% 2.0% 5.0% 4.9% 5.0% 3.0% 80% 

Option 2 

Domestic Departures

Number 198 8 8 12 11 1 158

Percent 100% 4.0% 4.0% 6.0% 5.5% 0.5% 80% 

Total Departures

Number 198 8 9 11 11 1 158

Percent 100% 4.0% 4.5% 5.5% 5.5% 0.5% 80% 

Option 3 

Domestic Departures

Number 198 12 5 6 8 0 167

Percent 100% 6.1% 2.5% 3.0% 4.0% 0.0% 84.4% 

Total Departures

Number 198 12 5 6 8 0 167

Percent 100% 6.1% 2.5% 3.0% 4.0% 0.0% 84.4% a

 Analysis includes airports in lower 48 states that incur compliance costs for urea substitution and/or ADF 

collection and treatment. 

b

 The 158 airports not analyzed under Option 1 and Option 2 account for 2.1 percent of total national annualized 

compliance costs; on average, each of these airports incur less than $10,000 annualized compliance costs. The 167 

airports not analyzed under the selected Option 3 include 161 airports that do not incur compliance costs, 5 

Alaskan airports that incur $869,000 in annualized compliance costs, and 1 non-Alaskan airport that incurs $6,600 

in annualized compliance costs but for which no ASM data are available. 

 

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and Standards for the Airport Deicing Category 

Table 5-15. Annualized Compliance Cost per Available Seat Mile by Airport Size, 2004-

2005 Deicing Seasona

Airports in 

Scope 

Annualized Compliance Cost per Available Seat Mile 

≥ $0.0000 ≥ $0.0001 ≥ $0.00025 ≥ $0.0005 Not 

Analyzedb < $0.0001 < $0.00025 < $0.0005 < $0.001 ≥ $0.001 

Option 1 

Domestic Departures

Large Hub 28 2 2 4 0 0 20 

Medium Hub 35 0 0 1 2 5 27 

Small Hub 41 2 4 4 0 1 30 

Non-Hub 94 0 3 2 8 0 81 

Total 198 4 9 11 10 6 158

Total Departures

Large Hub 28 2 3 3 0 0 20 

Medium Hub 35 0 0 1 2 5 27 

Small Hub 41 2 4 4 0 1 30 

Non-Hub 94 0 3 2 8 0 81 

Total 198 4 10 10 10 6 158 

Option 2 

Domestic Departures

Large Hub 28 3 1 4 0 0 20

Medium Hub 35 3 0 2 3 0 27

Small Hub 41 2 4 4 0 1 30

Non-Hub 94 0 3 2 8 0 81

Total 198 8 8 12 11 1 158 

Total Departures

Large Hub 28 3 2 3 0 0 20

Medium Hub 35 3 0 2 3 0 27

Small Hub 41 2 4 4 0 1 30

Non-Hub 94 0 3 2 8 0 81

Total 198 8 9 11 11 1 158 

Option 3 

Domestic Departures

Large Hub 28 4 0 0 0 0 24 

Medium Hub 35 3 0 0 0 0 32 

Small Hub 41 5 2 4 0 0 30 

Non-Hub 94 0 3 2 8 0 81 

Total 198 12 5 6 8 0 167 

Total Departures

Large Hub 28 4 0 0 0 0 24

Medium Hub 35 3 0 0 0 0 32

Small Hub 41 5 2 4 0 0 30

Non-Hub 94 0 3 2 8 0 81

Total 198 12 5 6 8 0 167 a

 Analysis includes airports in lower 48 states that incur compliance costs for urea substitution and/or ADF 

collection and treatment. 

b

 The 158 airports not analyzed under Option and Option 2 account for 2.1 percent of total national annualized 

compliance costs; on average, each of these airports incur less than $10,000 annualized compliance costs. The 167 

airports not analyzed under the selected Option 3 include 161 airports that do not incur compliance costs, 5 

Alaskan airports that incur $869,000 in annualized compliance costs, and 1 non-Alaskan airport that incurs $6,600 

in annualized compliance costs but for which no ASM data are available. 

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and Standards for the Airport Deicing Category 

Table 5-16 shows the calculation of average incremental cost per total ASM for the 31 airports included 

in this analysis under the option selected for the final rule, as well as cost per ASM by airport size (1 

airport did not have ASM data available). These range from a high of $0.00042 per ASM among nonhubs to $0.00001 per ASM among medium hubs, with an overall average of $0.00004 per ASM. 

Inclusion of additional in-scope airports in this analysis would result in a lower cost per ASM in all 

airport categories. 

Table 5-16 also presents EPA’s estimated baseline airline operating cost per ASM for the 2004-2005 

deicing season. EPA downloaded system-wide 2004 ASM by airline from BTS (2010), as well as each 

airline’s operating cost for the same period, where available. EPA collected both pieces of data for 77 of 

154 airlines. EPA then edited the list of airlines to remove those that: 

• primarily operate in Alaska; 

• primarily operate in Hawaii, Caribbean, and Micronesia, 

• predominantly provide cargo services, or are 

• niche airlines that offer high cost service to relatively small numbers of passengers. 

Alaskan airports were excluded from this analysis, thus it was appropriate to exclude those airlines that 

operate almost exclusively from Alaskan airports from this analysis as well. Furthermore, airlines such as 

Continental Micronesia appear unlikely to provide significant traffic at airports in the scope of the rule. 

Finally, airlines that offer primarily cargo services, and niche passenger airlines operate at a high cost per 

ASM that is not representative of most passenger airlines, and were therefore excluded from the analysis. 

EPA included 43 airlines in the baseline calculation, with a cost per ASM ranging from $0.1593 (Horizon 

Air) to $0.0376 (Pan American Airways) that account for almost 95 percent of total ASM flown in the 

U.S. in 2004. 

Using EPA’s estimated baseline cost per ASM, this effluent limitations guideline is projected to increase 

airline cost per ASM on total departures by: 

• 0.008 percent at 3 medium hubs, 

• 0.012 percent at 4 large hubs, 

• 0.138 percent at 10 small hubs, and 

• 0.371 percent at 13 non-hubs. 

The overall average increase in cost per ASM at all 31 airports included in the analysis is 0.030 percent. 

 

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and Standards for the Airport Deicing Category 

Table 5-16. Incremental Annualized Compliance Cost per Available Seat Mile as Percent of 

Baseline Airline Cost per ASM by Airport Size, Final Regulatory Option, 2004-2005 Deicing 

Seasona

Annualized Option 

Costs (thousands, 

2004 dollars) 

Available Seat Miles 

(millions), 

Airports in ASM 

Analysis 

Average Incremental 

Cost per ASM 

Baseline 

Cost per 

ASM 

(systemwide) 

Percent Increase Cost 

per ASM, Airports in 

ASM Analysis 

Airports 

In-scope 

Airports 

in ASM 

Analysis Domestic Total Domestic Total Domestic Total 

Total $3,288 $2,248 56,843 65,538 $0.00004 $0.00003 $0.1134 0.035% 0.030% 

By Airport Size 

Large $701 $701 42,516 50,846 $0.00002 $0.00001 $0.1134 0.015% 0.012% 

Medium $697 $73 7,371 7,735 $0.00001 $0.00001 $0.1134 0.009% 0.008% 

Small $1,221 $862 5,497 5,498 $0.00016 $0.00016 $0.1134 0.138% 0.138% 

NonHub $670 $613 1,460 1,460 $0.00042 $0.00042 $0.1134 0.371% 0.371% a

 Analysis includes 31 airports in lower 48 states that incur compliance costs for urea substitution. 

EPA also performed this analysis for in-scope Alaskan airports. To summarize: 

• In 2004, 5.10 billion ASM were flown from the eight in-scope Alaskan airports 

(including Juneau) on domestic flights only, while 6.23 billion ASM were flown on total 

flights. 

• The 5 in-scope Alaskan airports are projected to incur annualized compliance costs of 

$1.03 million (2004 dollars). 

• Thus the expected incremental cost per ASM for Alaskan airports is $0.00017 for all 

flights ($0.0002 for domestic flights only). 

• The baseline cost per ASM for Alaska Airlines in 2004 was $0.1023 (EPA believes this is 

a lower bound cost per ASM for airlines that operate in Alaska, because most operate 

much smaller aircraft with higher cost per ASM). 

Therefore EPA projects that the incremental cost per ASM attributable to the airport deicing effluent 

guideline is less than 0.2 percent of baseline cost. 

5.7 Results of Co-permittee Airline Impact Analysis 

In general, airlines are not directly subject to the airport deicing rule. However, because airlines are copermittees on some airports’ NPDES permits, EPA examined potential impacts to such airlines should 

compliance costs be shared between co-permittee airports and airlines using the methodology described in 

Section 3.5. The impacts to co-permittee airlines presented here are not in addition to the impacts to 

airports. To the extent that airports and co-permittee airlines share compliance costs according to EPA 

assumptions, the costs and impacts to airports are reduced. 

The EPA Airport Deicing Questionnaire asked airports to list all co-permittees on the airport’s NPDES 

permit. Based on questionnaire data, EPA found: 

• 27 of 198 in-scope airports (14 percent) have co-permittees; 6 of these airports are 

projected to incur costs under the selected option. 

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and Standards for the Airport Deicing Category 

• At the 27 in-scope airports with co-permittees: 

 297 (73 percent) co-permittees are airlines, and 

 109 (27 percent) co-permittees are not airlines. 

• At the 6 airports with co-permittees that incur costs under the selected option: 

 54 (57 percent) co-permittees are airlines, and 

 40 (43 percent) co-permittees are not airlines. 

Table 5-17 summarizes the number and type of co-permittees at each of the 27 airports. 

 

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and Standards for the Airport Deicing Category 

Table 5-17. Airports with Co-permittees, 2004

Airport Co-permittee Type 

ID Name State 

NonAirline Airline Total 

ABQ Albuquerque Intl Sunport NM 6 12 18 

ATL Hartsfield - Jackson Atlanta Intl GA 1 13 14 

AUS Austin-Bergstrom Intl TX 0 9 9 

COS City of Colorado Springs Muni CO 5 9 14 

DAL Dallas Love Field TX 6 1 7 

DFW Dallas/Fort Worth International TX 3 9 12 

DSM Des Moines Intl IA 2 9 11 

EWR Newark Liberty Intl NJ 13 41 54 

GSO Piedmont Triad Internationala NC 9 11 20 

IAD Washington Dulles International DC 2 15 17 

IAH George Bush Intercontinental Arpt/Houston TX 1 6 7 

JNU Juneau Intla, b AK 5 5 10 

MEM Memphis Intl TN 0 10 10 

MHT Manchestera NH 2 8 10 

MKE General Mitchell International WI 5 11 16 

OKC Will Rogers World OK 2 9 11 

OME Nome AK 0 1 1 

ONT Ontario Intl CA 1 1 2 

ORF Norfolk Intl VA 1 10 11 

OTZ Ralph Wien Memoriala AK 0 1 1 

PDX Portland Intl OR 10 27 37 

PHX Phoenix Sky Harbor Intl AZ 4 18 22 

RDU Raleigh-Durham Intla NC 18 16 34 

RNO Reno/Tahoe Internationala NV 6 13 19 

SAT San Antonio Intl TX 6 9 15 

SJC Norman Y. Mineta San Jose International CA 0 17 17 

TUS Tucson Intl AZ 1 6 7 

Totals 27 Airports 109 297 406 a

 Airport incurs costs under the selected option. 

b

 Airport is small by SBA standards. 

Source: EPA Airport Deicing Questionnaire. 

Twenty-two of these 27 airports with co-permittees have nonairline co-permittees, including 5 of the 6 

airports that incur costs under the option selected for the final rule. In general, nonairline co-permittees 

are composed of fixed base operators (FBOs), pilot training, companies that provide aeronautical services 

such as aircraft and engine service and repairs, and on-demand transportation providers such as air taxi, 

sightseeing, and small executive and charter services. At two airports, the state Air National Guard is a 

co-permittee. In addition, car rental agencies are listed as co-permittees on the NPDES permit at two 

airports. EPA believes airports are unlikely to directly charge such co-permittees costs associated with 

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Economic Analysis for Final Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

deicing operations. Most of these co-permittees do not use ADF, and those that do (i.e., FBOs) do so only 

at the behest of airline customers. 

The 27 in-scope airports with co-permittees have from one to 41 airlines listed as co-permittees. The 

upper end of the range is an outlier: 25 airports have 18 or fewer airlines listed as co-permittees (and 16 of 

these have 10 or fewer airline co-permittees), Portland International has 27 airline co-permittees, and 

Newark Liberty International has 41 airlines listed as co-permittees. Among the six airports projected to 

incur costs, the number of co-permittee airlines ranges from 16 (Raleigh-Durham International) to one 

(Ralph Wien Memorial) . 

However, many airlines are co-permittees at more than one airport, and the number of directly affected 

airlines is much smaller than 297. 

• The 297 airline co-permittees at 27 airports consist of 76 distinct airlines, of which: 

 26 are foreign-flag carriers, and 

 50 are U.S.-flag carriers. 

• The 54 airline co-permittees at the 6 airports with co-permittees projected to incur costs 

under the selected consist of 28 distinct airlines, of which: 

 1 is a foreign-flag carrier, and 

 27 are U.S.-flag carriers; 

• 11 are major airlines. 

• 4 are cargo-only airlines. 

If an airport chooses to apportion co-permittees with some share of the cost of complying with the 

effluent guideline, it is likely that the foreign-flag air carriers will incur costs as well as the U.S.-flag air 

carriers. EPA did not, however, project impacts to foreign carriers because it has neither data to project 

impacts to foreign carriers, nor is it required to under the Clean Water Act. 

The number of airports at which an airline is co-permittee varies widely. 

• Of the 50 U.S.-flag carriers: 

 19 are co-permittees at one airport only, 

 14 are co-permittees at 2 to 4 airports, 

 5 are co-permittees at 5 to 9 airports, 

 8 are co-permittees at 10 to 19 airports, 

 3 are co-permittees at 20 or 21 airports. 

• Of the 26 foreign-flag carriers 

 23 are co-permittees at one airport only, 

 3 are co-permittees at 2 or 3 airports. 

The 11 U.S.-flag airlines that are co-permittees at 10 or more airports are all major airlines. A list of 

airlines and the number of airports at which they are co-permittees is presented in Table 5-18.At the 

subset of in-scope airports with co-permittees that are expected to incur costs, the pattern is more 

homogeneous: 

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and Standards for the Airport Deicing Category 

• Of the 27 U.S.-flag carriers: 

 13 are co-permittees at one airport only, 

 5 are co-permittees at 2 airports, 

 6 are co-permittees at 3 airports, 

 3 are co-permittees at 4 airports. 

• The single foreign carrier is a co-permittee at 1 airport. 

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and Standards for the Airport Deicing Category 

Table 5-18. Airlines and Number of Airports at which they are Co-permittees, 2004 

Airline 

Co-permittee 

at Airportsd Airline

Co-permittee 

at Airportsd

U.S. Flag Air Carriers UA United Air Linesc 18 (3) 

17 Piedmont Airlinesc 1 (1) US US Airwaysc 10 (3) 

5X United Parcel Servicec 14 (3) WI Tradewinds Airlinesa, c 1 (1) 

8C Air Transport Internationala 3 WN Southwest Airlinesc 13 (3) 

9E Pinnacle Airlines 1 WO World Airways 1 

AA American Airlinesc 17 (2) WRD Ward Aira, c 1 (1) 

ABX ABX Airc 15 (4) XJ Mesaba Airlines 1 

AL Skyway Airlinesa 1 XP Casino Expressa 1 

AQ Aloha Airlinesc 1 (1) YV Mesa Airlines 6 

AS Alaska Airlinesc 7 (2) YX Midwest Airlinea 4 

AX Trans States Airlinesa 1 ZK Great Lakes Aviationa 1 

B6 JetBlue Airways 3 ZW Air Wisconsin Airlinesc 2 (1) 

CO Continental Air Linesc 21 (4) Foreign-Flag Air Carriers 

DH Independence Airc 2 (1) 5D Aerolitoral 1 

DL Delta Air Linesc 20 (3) AC Air Canadac 3 (1) 

EM Empire Airlinesa 1 AF Compagnie Nat'l Air France 1 

EV Atlantic Southeast Airlines 2 AI Air-India 1 

EZ Evergreen Int'l 1 AZ Alitalia 1 

F9 Frontier Airlinesc 7 (1) BA British Airways 2 

FL AirTran Airwaysc 4 (1) BR Eva Airways 1 

FX Federal Expressc 17 (4) CA Air China 1 

G4 Allegiant Aira, c 3 (1) CEQ All Canada Express 1 

GQ Big Sky Airlinesa, b 0 JM Air Jamaica 1 

HA Hawaiian Airlines 2 KE Korean Air Lines 1 

HP America West Airlinesc 11 (2) LH Lufthansa German Airlines 2 

J5 Alaska Seaplane Servicea, c 1 (1) LX Swiss International Airlines 1 

K5 Wings Of Alaskaa, c 1 (1) LY El Al Israel Airlines 1 

KAQ Kalitta Aira 1 MH Malaysian Airline System 1 

KR Kitty Hawk Aircargoa 3 MX Compania Mexicana De Aviaci 3 

MQ American Eagle Airlinesc 7 (2) NH All Nippon Airways 1 

N5 Skagway Air Servicea, c 1 (1) OK Czech Airlines 1 

NW Northwest Airlinesc 20 (3) QK Air Canada Regional 1 

OH Comairc 5 (2) SK Scandinavian Airlines 1 

OO Skywest Airlinesc 3 (1) SQ Singapore Airlines 1 

PCQ Pace Airlinesa 1 SV Saudi Arabian Airlines 1 

QX Horizon Air 2 TA Taca Int'l Airlines 1 

RP Chautauqua Airlines 1 TP Tap-Portuguese Airlines 1 

SY Sun Country Airlinesa 2 VS Virgin Atlantic Airways 2 

TZ ATA Airlines 2 WS Westjet 1 a

 Airline is small by SBA standards. 

b

 Airline was listed as a co-permittee in survey but does not appear to have operated from that airport in 2004. c

 Airline operates from airport projected to incur costs under the promulgated option. 

d

 The number in parentheses indicates the number of airports at which the airline is a co-permittee and the airport 

is projected to incur costs under the selected option. 

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Economic Analysis for Final Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

EPA allocated 50 percent of compliance costs at airports with co-permittees collectively to the airlines 

listed in Table 5-18 based on share of landed weight among co-permittee airlines at that airport. 

Based on the EPA’s assumptions for modeling impacts to co-permittees: 

• 50 percent of total annualized cost at the airports with co-permittees are borne by the 

airport; 

• 50 percent of total annualized cost at airports with co-permittees are borne collectively by 

airlines that are co-permittees at that airport; costs to co-permittee airlines are distributed 

in proportion to their share of landed weight among co-permittee airlines at each airport; 

If airports with co-permittee airlines apportion those airlines 50 percent of the cost of the regulation, EPA 

projects that about 5 percent of annualized compliance costs ($0.18 million) will be passed through to copermittee airlines under the promulgated option, almost all of which is attributed to U.S.-flag air carriers 

(see Table 5-19). The 192in-scope airports that do not have both co-permittees and costs are projected to 

incur $3.15 million. 

Table 5-19. Compliance Costs Attributed to Co-permittees by Type, 2004-2005 Deicing Season 

(millions, 2006 dollars) 

Affected Entities 

Aggregate Annualized Compliance Costs 

Number Option 1 Number Option 2 Number Option 3 

Airports 

Airports with no Co-permitteesa 171 $39.4 171 $33.3 192 $3.15 

 Percent 50.2% 67.5% 90.0% 

Airports with Co-permittees 27 $19.5 27 $8.0 6 $0.18 

 Percent 24.9% 16.2% 5.0% 

Subtotal, Airports 198 $58.9 198 $41.4 198 $3.33 

 Percent 75.1% 83.8% 95.0% 

Air Carriers 

U.S.-flag Air Carrier Co-permitteesb 49 $18.8 49 $7.4 27 $0.18 

 Percent 24.0% 15.0% 5.0% 

Foreign-flag Air Carrier Co-permittees 26 $0.7 26 $0.6 1 $0.00c

 Percent 0.9% 1.3% 0.0% 

Subtotal, Airlines 75 $19.5 75 $8.0 28 $0.18

 Percent 24.9% 16.2% 5.0% 

Total $78.4 $49.4 $3.50d

a Under Option 3, 27 in-scope airports have co-permittees, but only six of those airports are projected to incur costs. 

b

 One U.S.-flag air carrier listed as a co-permittee on the Airport Deicing Questionnaire was not projected to incur costs in 

the 2004-2005 deicing season. 

c

 About $120; less than 0.01 percent of total. 

d

 Numbers in this column do not sum to total due to rounding.

EPA projects that under the assumptions set for this analysis, 1 of 27 (3.7 percent) co-permittee airlines 

might incur compliance cost exceeding $100,000 annually (2006 dollars) under the selected option; the 

remaining 26 airlines (61 percent) are projected to incur annualized costs less than $10,000 each. The 

single foreign-flag carrier is expected to incur compliance costs that are less than $120. 

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and Standards for the Airport Deicing Category 

Table 5-20. U.S-flag Air Carriers Projected to Incur Co-permittee Compliance 

Costs by Cost Range, 2004-2005 Deicing Season

Projected Compliance Cost Range 

Number of 

U.S.-flag Air Carriers 

Option 1 Option 2 Option 3 

annualized compliance costs < $100,000 30 36 26 

$100,000 ≤ annualized compliance costs < $350,000 6 6 1 

$350,000 ≤ annualized compliance costs < $1 million 6 6 0 

$1 million ≤ annualized compliance costs < $2 million 4 0 0 

$2 million ≤ annualized compliance costs < $3.2 million 3 1 0 

Tables 5-21 and 5-22 show potential impacts to co-permittee airlines based on operating profit and net 

income measures. Based on the assumption of 50 percent cost-sharing between airports and co-permittee 

airlines, EPA found that under the selected Option 3, no airlines are projected to incur costs exceeding 2 

percent of operating profit or net income (of 10 and 9 airlines respectively than can be analyzed using 

these measures). The key threshold for these measures is 100 percent: if compliance costs exceed 

operating profit or net income (i.e., if compliance costs are greater than 100 percent of these measures), 

then the airline is projected to close as a result of this rule. Therefore these tables demonstrate that no 

airline remotely approaches that threshold based on the assumption that airports share 50 percent of 

compliance costs with co-permittee airlines. 

Table 5-23 shows that under Option 3, assuming 50 percent cost-sharing between airports and copermittee airlines, none of the 25 U.S.-flag co-permittee air carriers with revenue data available are 

projected to incur compliance costs that exceed 0.25 percent of operating revenues. 

Table 5-21. Co-permittee Airlines Incurring Costs Exceeding 2 

Percent of Operating Profit, 2004-2005 Deicing Season

Option

Co-permittee U.S.-flag Air Carriers Incurring Costs 

within Specified Range of Operating Profit 

≤ 2% > 2%

Negative 

Operating 

Profita NA

Option 1 22 1 23 3 

Percent 44.9% 2.0% 46.9% 6.1% 

Option 2 23 0 23 3

Percent 46.9% 0.0% 46.9% 6.1% 

Option 3 10 0 15 2

Percent 37.0% 0.0% 55.6% 7.4% a

 Airlines with negative operating profit in the baseline cannot be analyzed. 

NA: Data not available.

 

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Economic Analysis for Final Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

Table 5-22. Co-permittee Airlines Incurring Costs Exceeding 2 

Percent of Net Income, 2004-2005 Deicing Season

Option

Co-permittee U.S.-flag Air Carriers Incurring Costs 

within Specified Range of Net Income 

≤ 2% > 2%

Negative Net 

Incomea NA

Option 1 20 1 25 3 

Percent 40.8% 2.0% 51.0% 6.1% 

Option 2 21 0 25 3

Percent 42.9% 0.0% 51.0% 6.1% 

Option 2 9 0 16 2

Percent 33.3% 0.0% 59.3% 7.4% a

 Airlines with negative net income in the baseline cannot be analyzed. 

NA: Data not available.

Table 5-23. Co-permittee Airlines Incurring Costs Exceeding 

0.25 Percent of Operating Revenues, 2004-2005 Deicing Season

Option 

Co-permittee U.S.-flag Air Carriers Incurring Costs within 

Specified Range of Operating Revenues 

≤ 0.25% > 0.25% NA 

Option 1 45 1 3 

Percent 91.9% 2.0% 6.1% 

Option 2 46 0 3

Percent 93.9% 0.0% 6.1% 

Option 3 25 0 2

Percent 92.6% 0.0% 7.4% 

NA: Data not available. 

Finally, sharing costs with co-permittee airlines reduces impacts to airports. Table 5-24 shows projected 

impacts to in-scope airports if airports with co-permittee airlines share 50 percent of those costs with the 

airlines. When using this assumption, no airports are projected to incur costs exceeding 3 percent of 

airport revenues under the promulgated option. As shown in Table 5-3 above, 1 airport is projected to 

exceed that threshold if no costs are shared with co-permittee airlines. 

 

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Economic Analysis for Final Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

Table 5-24. Airport Impacts with Co-permittee Airlines Incurring Costs 

Exceeding 3 Percent of Operating Revenue, 2004-2005 Deicing Season

Option 

Airports 

In-scope 

Compliance Costs as a 

Percent of Airport Revenues 

≤ 3% > 3% NA 

Option 1 198 189 4 5 

Percent 100% 95.5% 2.0% 2.5% 

Option 2 198 191 2 5

Percent 100% 96.5% 1.0% 2.5% 

Option 3 198 193 0 5

Percent 100% 97.5% 0.0% 2.5% 

Assumes airports with co-permittee airlines share 50 percent of compliance costs with those 

airlines. 

NA: Data not available. 

5.8 New Source Performance Standards 

Under this rule, the Agency is promulgating new source performance standards (NSPS). Details of the 

economic impact analysis of NSPS may be found in the docket. 

5.9 Summary of Projected Impacts for Final Regulatory Options 

Table 5-25 summarizes the projected national annualized compliance costs and the number and percent of 

in-scope airports projected to incur compliance costs greater than 3 percent of operating revenues under 

the three analyzed final regulatory options. 

Table 5-25. Summary of Impacts under Analyzed Options 

Option 

National Annualized 

Compliance Costs 

(millions of 2006 

dollars)a In-Scope Airports 

In-Scope Airports with Projected Compliance 

Costs Exceeding 3% of Operating Revenuesb, c

Number Percent 

1 $72.1 198 9 4.5% 

2 $44.3 198 5 2.5% 

3 $3.43 198 1 0.5% a. National compliance costs annualized using a 3 percent real interest rate.

b

 Assuming zero percent cost pass-through. 

c

 Impacts were not projected for 5 airports are owned by the Alaska Department of Transportation and Public 

Facilities; impacts to these airports could not be projected because the airport owner does not maintain airportspecific revenue figures. 

Based on the analyses presented in this chapter, EPA has determined that all three options are 

economically achievable. In particular, EPA’s selected Option 3 is economically achievable both when 

airports are assumed to incur 100 percent of compliance costs, and when airports and their applicable 

airline co-permittees are assumed to share compliance costs. 

Under previous rulemaking efforts that directly impose compliance costs on government agencies, EPA 

used the revenue test to evaluate impacts to these agencies; when projected compliance costs exceed 3 

percent of operating revenues, the rule is judged to be unaffordable for a facility. As shown in Table 5–3, 

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Economic Analysis for Final Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

under the option EPA selected for the final rule, Option 3, only 1 airport, which composes 0.5 percent of 

the airports subject to BAT, is projected to incur costs exceeding 3 percent of operating revenue when 

airports are assumed to incur 100 percent of compliance costs. In reaching this conclusion, EPA used 

several conservative assumptions in evaluating impacts to airports: costs were annualized using a real 7 

percent interest rate, which is significantly higher than airports typically pay for debt financing. At the 7 

percent real interest rate, EPA demonstrated that airports’ ability to service debt would not, in general, be 

negatively affected by the rule. EPA also did not take into account airports’ ability access other funding 

for capital expenditure, such as AIP grants or PFCs. Also, EPA performed its analysis of airport impacts 

without distributing any costs to co-permittee airlines. As such, the estimates of impacts at airports with 

co-permittees may be overstated. 

With respect to airlines that are NPDES co-permittees, none of these airlines are shown to incur a 

demonstrable impact on three airline income measures: operating revenue, operating profit, or net income 

under either option. Therefore EPA find that the scenario of costs shared between co-permittee airports 

and airlines is also economically achievable under any of the options considered for the promulgated rule. 

Finally, EPA also assumed these costs would not be passed through to airlines and/or their passengers in 

the form of higher rates and charges. (As explained above, EPA did assume costs would be shared by copermittee airlines.) This is a conservative assumption and EPA believes that airports and, ultimately, 

airlines will use some or all of the above to reduce the cost and impact of the rule, which is further 

support for EPA’s conclusion that the final rule is economically achievable. 

5.10 References 

Bureau of Transportation Statistics (BTS). 2010. Available Seat-miles. Downloaded from 

http://www.transtats.bts.gov/Data_Elements.aspx?Data=4, December 12. 

DOTPF. 2008. Let’s Get Moving 2030: Alaska Statewide Long-Range Transportation Policy Plan. State 

of Alaska Department of Transportation & Public Facilities. Available online at: 

http://www.dot.state.ak.us. 

ERG. 2006. “Revised Draft Economic Impact Methodology”. Memo from Calvin Franz, ERG, to James 

Covington, EPA. November 20, 2006. 

Forbes. 2003. Airport Munis. Forbes.com. June 9. Available online at 

http://www.forbes.com/forbes/2003/0609.134.html

Logistics Management. 2007. Air shipping: financial woes force Kitty Hawk to cease network air freight 

and ground operations. October 31. Available online at 

http://www.logisticsmgmt.com/article/CA6496182.html 

Maggard, Roger. 2008. Statewide Airport Development Manager, AK Rural Airport System. Personal 

Communication with Dina Metivier, ERG. May 14, 2008. 

Moody’s. 2002. Moody’s US Municipal Bond Rating Scale. Moody’s Special Comment. Moody’s 

Investors Service. November. Available online at 

http://www.moodys.com/cust/content/content.ashx?source=StaticContent/Free%20pages/Credit%20Polic

y%20Research/documents/current/2001700000407258.pdf

MSCAA. 2007. Memphis-Shelby County Airport Authority Annual Report 2007. Available online at 

http://www.mscaa.com/MSCAA%20Annual%2007%20Complete.pdf 

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Economic Analysis for Final Effluent Limitation Guidelines Chapter 5. Economic Impact Analysis Results 

and Standards for the Airport Deicing Category 

5-29

Public Bonds. 2004. Municipal Bonds and Default. Available online at 

http://www.publicbonds.org/public_fin/default.htm 

State of Alaska. 2008. Official Website of the State of Alaska Rural Aviation Division. Accessed on 

May 15, 2008. Available online at http://www.dot.state.ak.us/stwdav/index.shtml. 

State of Alaska. 2005. State of Alaska FY 2006 Governor’s Operating Budget: Department of 

Transportation and Public Facilities. December 15. 

http://www.gov.state.ak.us/omb/06_OMB/budget/Trans/dept25.pdf. 
Economic Analysis for Final Effluent Limitation Guidelines Chapter 6. Impacts on Small Entities 

and Standards for the Airport Deicing Category 

CHAPTER 6 

IMPACTS ON SMALL ENTITIES 

This chapter analyzes the projected effects of the three regulatory options EPA assessed for the final rule 

on small entities engaged in airport deicing operations. This analysis is required by the Regulatory 

Flexibility Act as amended by the Small Business Regulatory Enforcement Fairness Act of 1996 

(SBREFA), hereafter jointly referred to as the RFA. The RFA acknowledges that small entities have 

limited resources and makes regulating federal agencies responsible for avoiding unnecessary burden on 

such entities. In response to the RFA, EPA has prepared an analysis of the impacts on small entities. 

Section 6.1 provides the initial assessment. Section 6.2 presents the analysis of economic impacts to small 

entities within the air transportation industry; section 6.2.1 reviews projected impacts to small airports, 

while section 6.2.2 considers potential impacts to small airlines should airports share compliance costs 

with co-permittee airlines. Section 6.3 summarizes the steps EPA has taken to minimize small business 

impacts under the promulgated rule. 

6.1 Initial Assessment 

For this rulemaking, EPA developed a profile of affected small entities in the airport deicing industry. 

This profile, provided in Chapter 2, includes all affected operations, as well as small businesses. Chapter 

5 of this EA presents the analysis of projected economic impacts to the industry as a whole, including 

both small and large businesses. Much of the information covered in these chapters applies to small 

businesses. 

Also, EPA’s assessment provides a determination on whether the rule affects small entities, as well as 

whether the rule would have an adverse economic impact on small entities. EPA has determined that 

some small entities may incur costs for incremental pollution control as a result of the promulgated. EPA 

examines the impacts of these additional costs in Section 6.2. 

The RFA defines a “small entity” as a: (1) small not-for-profit organization, (2) small governmental 

jurisdiction, or (3) small business. EPA expects the principal impact of the rule on small entities will fall 

on small airports that are primarily small governmental jurisdictions. A small governmental jurisdiction is 

defined as the government of a city, county, town, township, village, school district, or special district 

with a population of less than 50,000. EPA estimates that 20 of 198 in-scope airports (10 percent) are 

owned by small governmental jurisdictions. 

However, to the extent that airports with airline co-permittees share costs with those airlines, it is possible 

some small airlines might be affected under the ELG. As privately-owned, for-profit businesses, airlines 

are subject to the small business definitions as determined by Small Business Administration’s (SBA) 

size standards. SBA set standards that entities with 1,500 employees or less will be considered small for 

the Scheduled Passenger and Freight Air Transportation categories (NAICS 481111 and 481112). Based 

on these size standards, EPA found that 18 of the 49 airlines that are co-permittees at in-scope airports are 

considered small for the purposes of this analysis. 

EPA undertook a number of steps to minimize the impact of this rule on small entities. According to the 

FAA National Plan of Integrated Airport Systems (2007 – 2011), there are approximately 2,800 public 

use general aviation and reliever airports in the U.S., some of which have substantial cargo service. Many, 

if not most, of these airports are likely to be owned by small government entities. Also likely to be owned 

by small governmental entities are approximately 135 non-primary commercial service airports. EPA has 

chosen not to regulate any general aviation, reliever, or non-primary commercial service airports under 

the promulgated regulation. In addition to the 20 small government-owned primary commercial service 

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Economic Analysis for Final Effluent Limitation Guidelines Chapter 6. Impacts on Small Entities 

and Standards for the Airport Deicing Category 

airports, EPA also estimates that another 53 primary commercial service airports are owned by small 

government entities, but are out-of-scope of the rule because little deicing is performed at those airports. 

6.2 Small Business Analysis 

This section presents the projected economic impacts on small entities resulting from compliance with the 

three regulatory options EPA evaluated for the Airport Deicing category ELG. The impacts are estimated 

using the methodology outlined in Chapter 3. 

6.2.1 Impacts to Small Airports 

6.2.1.1 Estimated Number of Small Airports 

Small airports are defined according to the size of the population served by the governmental jurisdiction 

that owns the airport. To determine airport ownership, EPA downloaded the Federal Aviation 

Administration (FAA) Airport Data (5010) and Contact Information data file for National Flight Data 

Center (NFDC) facilities. This database lists the owner of each airport as of December 20, 2007. Using 

the airport code, city, and state, EPA matched the 198 in-scope airports to their owners and determined 

whether the owner was public or private. Airport ownership is composed of: 

• States

• Counties 

• Cities

• Airport Authorities 

• Multipurpose Port Authorities 

Thus, the size of in-scope airports for RFA purposes is determined by the population of the state, county, 

or city that owns the airport. 

In general, airport and multi-purpose port authorities are quasi-governmental agencies that maintain and 

usually operate airports, shipping ports, and other government owned facilities such as bridges. The 

authorities are legal entities created by legislation. Many of these authorities have the ability to issue debt, 

as well as charge fees for the use of the properties. 

As quasi-governmental organizations, EPA considers airport and port authorities as owned by the relevant 

government, and the airport is considered small for the purposes of RFA if the government that created 

the authority has a population of less than 50,000 people. For example: the owner of the Williamsport, PA 

airport is listed in the NFDC database as the Williamsport Municipal Airport Authority. Williamsport, PA 

has a population of 29,900, and is therefore a “small” government for the purposes of RFA. Conversely, 

Port Columbus International Airport is listed in the NFDC database as owned by Columbus Regional 

Airport Authority. Because Columbus, OH has a population of 728,000, the airport is not considered 

“small.” 

Based on this analysis, EPA found 20 in-scope airports are owned by small governmental jurisdictions. 

Of these 20 airports, 3 are small hubs, and 17 are non-hubs by FAA designation. All remaining 178 inscope airports are non-small for the purposes of the RFA. This includes five Alaskan airports that might 

otherwise be considered “small” when judged by most standards, such as departures or passengers 

enplaned. Because the governmental jurisdiction that owns the airports is the state of Alaska, they are 

therefore designated “non-small” even though they serve sparsely populated areas. 

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Economic Analysis for Final Effluent Limitation Guidelines Chapter 6. Impacts on Small Entities 

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6.2.1.2 Projected Compliance Costs for Small Airports 

Table 6-1 summarizes national annualized compliance costs attributed to small and non-small airports 

(i.e., annualized using a 3 percent real interest rate) for the three final regulatory options. EPA projects 

that of the expected $3.43 million annualized compliance costs of the promulgated rule under the selected 

option, $0.29 million (8.6 percent) will be incurred by the 20 small airports. 

EPA incorporated incremental recordkeeping and reporting requirements in this analysis; details of these 

requirements are described in the Technical Development Document, Section 12: Technology Costs (EPA 

2012). Incremental recordkeeping and reporting costs are generally already incorporated in the option 

costs used as the basis for the economic impact analysis (Chapter 5 of this document) and this RFA. A 

brief summary of treatment technologies that will meet the effluent guidelines is presented in Chapter 4 of 

this document. 

 

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Economic Analysis for Final Effluent Limitation Guidelines Chapter 6. Impacts on Small Entities 

and Standards for the Airport Deicing Category 

Table 6-1. National Annualized Final Regulatory Option 

Compliance Costs by Small Business Category (2006 dollars)a, b

Airports 

In-scope 

National Aggregate Annualized Compliance 

Costs (in millions)b, c

Capital O&M Total 

Option 1

Total

Number 198 $20.1 $52.0 $72.1 

% of Total 100% 100% 100% 100% 

Small

Number 20 $0.07 $0.25 $0.33 

% of Total 10% 0.4% 0.5% 0.5% 

NonSmall

Number 179 $20.1 $51.7 $71.8 

% of Total 90% 99.6% 99.5% 99.6% 

Option 2 

Total

Number 198 $15.9 $28.4 $44.3

% of Total 100% 100% 100% 100% 

Small

Number 20 $0.07 $0.25 $0.33

% of Total 10% 0.5% 0.9% 0.7% 

NonSmall

Number 179 $15.8 $28.2 $44.0

% of Total 90% 99.5% 99.1% 99.3% 

Option 3

Total

Number 198 $0.39 $3.04 $3.43

% of Total 100% 100% 100% 100% 

Small

Number 20 $0.07 $0.22 $0.29

% of Total 10% 19.1% 7.2% 8.6% 

NonSmall

Number 179 $0.32 $2.82 $3.13

% of Total 90% 80.9% 92.8% 91.4% a

 An airport is considered small for the purposes of the Regulatory Flexibility Analysis 

if owned by a government with a jurisdiction with a of less than 50,000 people; if the 

airport is owned an independent quasi-governmental authority the airport is considered 

small if the jurisdiction of the government that created the authority has a population of 

less than 50,000 people.

b

 Compliance costs annualized using a 3 percent real interest rate to represent the 

national costs of the rule. 

c

 Estimated compliance costs to collect and treat ADF at each airport in category; in 

Section 6.2.2 EPA will consider whether some costs are incurred by small airlines that 

are co-permittees on an airport’s NPDES permit.

6.2.1.3 Projected Revenue Impacts to Small Airports 

Table 6-2 summarizes the results of the revenue test as applied to small and non-small airports in-scope of 

this effluent guideline. Only one of 20 small airports is projected to incur compliance costs exceeding 3 

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Economic Analysis for Final Effluent Limitation Guidelines Chapter 6. Impacts on Small Entities 

and Standards for the Airport Deicing Category 

percent of revenues. Therefore, EPA has determined that a substantial number of small entities are not 

significantly affected by the promulgated rule. 

Table 6-2. Annualized Compliance Costs as a Percent of Airport Operating Revenues by 

Small Business Categorya, b, c

Airports 

In-scopec

Compliance Costs as a Percent of Airport Revenuesc

≥ 0% ≥ 1% Not 

< 1% < 3% ≥ 3% Analyzable

Option 1 

Total

Number 198 172 13 9 5 

 Percent 100% 100% 100% 100% 100% 

Small

Number 20 19 0 1 0 

 Percent 10% 11% 0% 11% 0% 

NonSmall

Number 179 153 13 8 5 

 Percent 90% 89% 100% 89% 100% 

Option 2 

Total

Number 198 176 13 5 5

 Percent 100% 100% 100% 100% 100% 

Small

Number 20 19 0 1 0

 % of Total 10% 11% 0% 20% 0% 

NonSmall

Number 179 157 13 4 5

 % of Total 90% 89% 100% 80% 100% 

Option 3 

Total

Number 198 190 6 1 2

 Percent 100% 100% 100% 100% 100% 

Small

Number 20 19 0 1 0

 Percent 10% 11% 0% 100% 0% 

NonSmall

Number 179 171 6 0 2

 Percent 90% 89% 100% 0% 100% a

 Airport-specific estimated annualized compliance costs deflated to 2004 dollars divided by airport-specific 2004 

revenues. 

b

 Estimated compliance costs to collect and treat ADF at each airport in category; in Section 6.2.2 EPA will 

consider whether some costs are incurred by small airlines that are co-permittees on an airport’s NPDES permit. c

 Component numbers may not sum to totals due to rounding. 

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Economic Analysis for Final Effluent Limitation Guidelines Chapter 6. Impacts on Small Entities 

and Standards for the Airport Deicing Category 

6.2.2 Impacts to Small Co-permittee Airlines 

6.2.2.1 Estimated Number of Small Co-permittee Airlines 

SBA defined airlines with fewer than 1,500 employees as small. Available employment data for airlines is 

limited to that provided by the Bureau of Transportation Statistics (BTS) in their Employment Statistics – 

Certificated Carriers report. Unfortunately, this data does not contain records for all airlines that are copermittees at airports in scope of the rule. EPA obtained employment figures from the airlines’ individual 

annual reports or the annual report of the Regional Airline Association for some of the airlines that were 

missing data. Finally, EPA examined departure and enplanement data for in-scope airlines for 2004 

through 2006 to find a proxy for determining the size classification of the remaining airlines with missing 

data. Comparing departures and employment for those airlines with both pieces of information available, 

EPA determined that airlines with fewer than 20,000 annual departures are a reasonable proxy for airlines 

with fewer than 1,500 employees. Therefore EPA classified airlines with fewer than 20,000 annual 

departures as small for the purpose of this analysis. 

Where employment data was available, it was used as the determinant of small airline status. Where 

employment data was not available, departures were used. Any airline with no employment data and 

fewer than 20,000 annual departures was considered to be small for purposes of this analysis. 

The airlines defined as small for this analysis are also listed in Table 6-3. Of the 18 airlines that are 

considered small, 5 are cargo-only airlines. Seven passenger airlines are commuter and small-certificated 

airlines. The remaining 6 passenger carriers are national and regional carriers. 

Table 6-3. Small Airlines and Number of Airports at which they are Co-permittees, 2004a

Airline 

Co-permittee 

at Airports Airline

Co-permittee 

at Airportsc

8C Air Transport International 3 KR Kitty Hawk Aircargo 3 

AL Skyway Airlines 1 N5 Skagway Air Service 1 (1) 

AX Trans States Airlines 1 PCQ Pace Airlines 1 

EM Empire Airlines 1 SY Sun Country Airlines 2 

G4 Allegiant Air 3 (1) WI Tradewinds Airlines 1 (1) 

GQ Big Sky Airlinesb 0 WRD Ward Air 1 (1) 

J5 Alaska Seaplane Service 1 (1) XP Casino Express 1 

K5 Wings Of Alaska 1 (1) YX Midwest Airline 4 

KAQ Kalitta Air 1 ZK Great Lakes Aviation 1 

EM Empire Airlines 1 a

 An airline is considered small for the purposes of the Regulatory Flexibility Analysis if it employees fewer than 

1,500 workers. 

b

 Airline was listed as a co-permittee in survey but does not appear to have operated from that airport in 2004. c

 The number in parentheses indicates the number of airports at which the airline is a co-permittee and the airport is 

projected to incur costs under the promulgated option.

 

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Economic Analysis for Final Effluent Limitation Guidelines Chapter 6. Impacts on Small Entities 

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6.2.2.2 Projected Compliance Costs for Small Co-permittee Airlines 

Using the method and assumptions for attributing costs to co-permittee airlines described in Section 3.5, 

EPA estimates that less than $10,000 in compliance costs will be collectively incurred by small copermittee airlines under the option selected for the final rule (see Table 6-4). This composes 22 percent of 

all costs projected to be incurred by co-permittee airlines. 

Table 6-4. Compliance Costs Attributed to Airline Co-permittees by 

Size, 2004-2005 Deicing Season (millions, 2006 dollars)a

Small NonSmall Total 

Option 1

Airlinesb 18 31 49 

Percent 36.7% 63.3% 100.0%

Costs $345,000 $18,464,000 $18,809,000 

Percent 1.8% 98.2% 100.0% 

Option 2

Airlinesb 18 31 49

Percent 36.7% 63.3% 100.0% 

Costs $159,000 $7,224,000 $7,383,000

Percent 2.2% 97.8% 100.0% 

Option 3 

Airlinesb 6 21 27 

Percent 22.2% 77.8% 100.0%

Costs $9,600 $166,000 $176,000

Percent 5.4% 94.6% 100.0% a

 Assuming airports with co-permittees apportion 50 percent of compliance costs with 

co-permittee airlines. 

b

Excluding foreign-flag air carriers.

6.2.2.3 Projected Revenue Impacts to Small Co-permittee Airlines 

EPA found that of the 18 co-permittee airlines considered small by SBA standards; 16 had financial data 

available. Six co-permittee airlines considered small by SBA standards operate from airports projected to 

incur costs under the promulgated rule, 5 of which had financial data available. When comparing 

compliance costs with operating profits and net income, 8 small co-permittee airlines that might incur 

costs under options 1 and 2 had positive baseline operating profits and net income, and therefore can be 

analyzed here. Under the selected option, 3 small co-permittee airlines that might incur costs had positive 

baseline operating profits and net income and can be analyzed. All three of the 6 small airlines with 

analyzable net income and operating profit are projected to incur compliance costs that compose less than 

2 percent of operating profit or net income under Option 3. This is well short of the 100 percent threshold 

that would indicate a closure. None of the 5 small co-permittee airlines that might incur compliance costs 

under option 3 is projected to incur costs exceeding 1 percent of operating revenues (Table 6-7). 

 

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Economic Analysis for Final Effluent Limitation Guidelines Chapter 6. Impacts on Small Entities 

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Table 6-5. Co-permittee Airlines Incurring Costs Exceeding 2 

Percent of Operating Profit by Size, 2004-2005 Deicing Seasona

AirlineSize 

&Option

Co-permittee Airlines Operating at In-scope Airportswith 

Compliance Costs/Operating Profit 

Total ≤ 2% > 2%

Negative 

Profit NA

Option 1

Small 18 7 1 8 2 

Percent 100.0% 38.9% 5.6% 44.4% 11.1% 

NonSmall 31 15 0 15 1 

Percent 100.0% 48.4% 0.0% 48.4% 3.2% 

Option 2

Small 18 8 0 8 2

Percent 100.0% 44.4% 0.0% 44.4% 11.1% 

NonSmall 31 15 0 15 1

Percent 100.0% 48.4% 0.0% 48.4% 3.2% 

Option 3

Small 6 3 0 2 1

Percent 100.0% 50.0% 0.0% 33.3% 16.7% 

NonSmall 21 7 0 13 1

Percent 100.0% 33.3% 0.0% 61.9% 4.8% a

 Assumes airports with co-permittee airlines share 50 percent of compliance costs 

with those airlines.

Table 6-6. Co-permittee Airlines Incurring Costs Exceeding 2 

Percent of Net Income by Size, 2004-2005 Deicing Seasona

Airline 

Size & 

Option

Co-permittee Airlines Operating at In-scope Airports with 

Compliance Costs/Net Income

Total ≤ 2% > 2%

Negative 

Net 

Income NA

Option 1

Small 18 8 1 7 2 

Percent 100.0% 44.4% 5.6% 38.9% 11.1% 

NonSmall 31 12 0 18 1 

Percent 100.0% 38.7% 0.0% 58.1% 3.2% 

Option 2

Small 18 9 0 7 2

Percent 100.0% 50.0% 0.0% 38.9% 11.1% 

NonSmall 31 12 0 18 1

Percent 100.0% 38.7% 0.0% 58.1% 3.2% 

Option 3

Small 6 3 0 2 1

Percent 100.0% 50.0% 0.0% 33.3% 16.7% 

NonSmall 21 6 0 14 1

Percent 100.0% 28.6% 0.0% 66.7% 4.8% a

 Assumes airports with co-permittee airlines share 50 percent of compliance costs 

with those airlines.

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Economic Analysis for Final Effluent Limitation Guidelines Chapter 6. Impacts on Small Entities 

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Table 6-7. Co-permittee Airlines Incurring Costs Exceeding 0.25 

Percent of Operating Revenues, 2004-2005 Deicing Seasona

Airline 

Size & 

Option 

Co-permittee Airlines Operating at In-scope Airports with 

Compliance Costs/Operating Revenues 

Total ≤ 0.25% > 0.25% NA 

Option 1

Small 18 15 1 2 

Percent 100.0% 83.3% 5.6% 11.1% 

NonSmall 31 30 0 1 

Percent 100.0% 96.8% 0.0% 3.2% 

Option 2

Small 18 16 0 2

Percent 100.0% 88.9% 0.0% 11.1% 

NonSmall 31 30 0 1

Percent 100.0% 96.8% 0.0% 3.2% 

Option 3

Small 6 5 0 1

Percent 100.0% 83.3% 0.0% 16.7% 

NonSmall 21 20 0 1

Percent 100.0% 95.2% 0.0% 4.8% a

 Assumes airports with co-permittee airlines share 50 percent of compliance costs 

with those airlines. 

Finally, one airport with airline co-permittees on its NPDES permit is considered small by SBA 

standards. This airport’s projected compliance costs exceed 3 percent of airport revenue if it does not 

share compliance costs with its co-permittee airlines (see Table 6-2). Its costs do not exceed 3 percent of 

revenue if it does share compliance costs with its co-permittee airlines. Thus, impacts to small airports are 

reduced if airports share compliance costs with co-permittee airlines (Table 6-8). 

 

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Economic Analysis for Final Effluent Limitation Guidelines Chapter 6. Impacts on Small Entities 

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Table 6-8. Airports Impacts with Co-permittee Airlines Incurring Costs Exceeding 

3 Percent of Operating Revenue by Size, 2004-2005 Deicing Season a, b

Airports 

In-scope 

Compliance Costs as a Percent of Airport Revenues

< 3% ≥ 3%

Not 

Analyzable

Option 1 

Total

Number 198 189 4 5 

 Percent 100% 100% 100% 100% 

Small

Number 20 20 0 0 

 Percent 10% 11% 0% 0% 

NonSmall

Number 178 169 4 5 

 Percent 90% 89% 100% 100% 

Option 2 

Total

Number 198 191 2 5

 Percent 100% 100% 100% 100% 

Small

Number 20 20 0 0

 % of Total 10% 10% 0% 0% 

NonSmall

Number 178 171 2 5

 % of Total 90% 90% 100% 100% 

Option 3 

Total

Number 198 196 0 2

 Percent 100% 100% 100% 100% 

Small

Number 20 20 0 0

 Percent 10% 10% 0% 0% 

NonSmall

Number 178 176 0 2

 Percent 90% 90% 100% 100% a

 Airport-specific estimated annualized compliance costs deflated to 2004 dollars divided by airportspecific 2004 revenues. 

b

 Assumes airports with co-permittee airlines share 50 percent of compliance costs with those airlines. 

NA: Data not available. 

6.3 Regulatory Flexibility 

EPA has chosen to minimize the impact of this rule on small entities by choosing to require only product 

substitution for airports that currently use urea to deice airport pavement; EPA does not require collection 

and treatment of ADF under the promulgated rule. EPA chose not to include any general aviation, 

reliever, or non-primary commercial service airports under the scope of the rule. In addition, another 53 

primary commercial service airports owned by small government entities are out-of-scope of the 

regulation because little or no deicing fluid/chemicals are used at those airports. Based on the results 

presented in Section 6.2, one small airport incurs projected compliance costs greater than three percent of 

operating revenues under the final rule. 

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Economic Analysis for Final Effluent Limitation Guidelines Chapter 6. Impacts on Small Entities 

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6-11

6.4 References 

FAA. 2006. Report to Congress: National Plan of Integrated Airport Systems (NPIAS) 2007-2011. 

http://www.faa.gov/airports/planning_capacity/npias/reports/index.cfm?sect=2007. 

SBA 2008. U.S. Small Business Administration. Table of Small Business Size Standards Matched to 

North American Industry Classification System Codes. U.S. Small Business Administration. Effective 

March 11, 2008. Downloaded at: http://www.sba.gov, May 13, 2008. 

U.S. EPA. 2012. Technical Development Document for the Final Effluent Limitation Guidelines and New 

Source Performance Standards for the Airport Deicing Category. EPA-.