Overflight Fee Rate Development Report

In Support of “Update of Overflight Fees”

Notice of Proposed Rulemaking

Office of Financial Analysis

Federal Aviation Administration

800 Independence Avenue S.W.

Washington, DC 20591

April 21, 2015
PURPOSE OF THE REPORT

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

fee rates that the Federal Aviation Administration (FAA) is proposing to charge for aircraft flights that transit U.S.-

controlled airspace, but neither land in nor depart from the United States. The FAA currently charges fees for such 

flights, pursuant to its Final Rule, “Update of August 2001 Overflight Fees (Docket No. FAA-2010-0326),” 76 Fed. Reg. 

43112-01 (July 20, 2011). 

The FAA issued a similar report in support of the Final Rule for the “Update of August 2001 Overflight Fees” in 2011. 

The general Overflight fee rate development methodology used for the current update has remained the same from 

the 2011 rule and the only adjustments made are the use of more recent data and an update to the methodology 

based on an ARC recommendation to exclude costs and miles for combined control facilities that may handle a mix of 

general and commercial aviation traffic. 

INTRODUCTION

Fees for FAA services for aircraft flights that transit U.S.-controlled airspace, but neither land in nor depart from the 

United States, are authorized by 49 USC 45301. These flights are commonly referred to as “Overflights”. Unlike flights 

that land and/or take-off in the United States1, Overflights did not have a mechanism to assess and recover the costs 

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

Fee Interim Rule.

The practice of charging Overflight Fees for ATC and related services provided to Overflights is common within the 

international community. For example, a flight from Frankfurt, Germany to Bogota, Columbia, could pass through 

airspace controlled by France, Portugal, the United States, the Netherlands Antilles, and Venezuela, in addition to 

airspace controlled by the countries of origin and destination, Germany and Columbia. The operator would have 

been charged ATC fees by all of these countries except the United States until the U.S. Overflight Fees were 

established on August 1, 2000. 

The level and type of air traffic services provided to Overflights depend, in part, on the portions of the U.S.-controlled 

airspace transited by such flights. This report is concerned with only the flight activity that occurs in the two ATC 

operating environments (Enroute and Oceanic) where Overflights occur. Figure 1 identifies the U.S.-controlled 

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

 

1 Which are subject to one or more of the following excise taxes: passenger ticket tax, international arrival/departure tax, or 

cargo waybill tax. 
Figure 1

U.S.-Controlled Airspace*

Cost of Services: 

The FAA’s Overflight fee rates are derived from the agency’s costs of providing Enroute and Oceanic services, which 

are two of the four services or cost pools into which all of the FAA’s costs for ATC and related services are distributed. 

The FAA’s Cost Accounting System (CAS) determines the costs of providing ATC and related services within the 

Enroute and Oceanic environments. The agency’s costs of providing the other two ATC services (Terminal and Flight 

Services), are not included in the cost base for the FAA’s Overflight fee rates. 

The FAA has determined, based on the structure and operation of its ATC system, that there is little or no difference 

between the cost of making ATC and related services available to an Overflight within a particular service 

environment (Enroute or Oceanic) versus making the same services available to any other operation within the same 

environment. Flights in the Enroute ATC environment (Overflights and domestic/international U.S. operations) use 

similar types of services. This is also the case for those flights receiving procedural control in U.S.-controlled Oceanic 

airspace.

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

following four steps: 

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

all flights; 

2. Determine which of these costs can be used as a basis for fee rates per the current statutory requirement 

that the Overflight fee rates be “reasonably related” to the FAA’s costs of providing the ATC and related 

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

4. Derive the Overflight Fee rates that will recover the costs of providing ATC and related services.

In the “Update of August 2011 Overflight Fees” rulemaking, overhead costs were included in the cost base. Since 

overhead costs are frequently and typically included in the costs base when setting fees to achieve full cost recovery, 

the FAA believes it is reasonable to include the overhead costs in the cost base for its Overflight fee rates. This 

methodology has remained unchanged in the currently proposed update of Overflight Fees. 

The step-by-step process of deriving the fee rates proposed in this Notice of Proposed Rulemaking (NPRM) is as 

follows:

STEP 1:

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

Introduction

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

determining Overflight fee rates, which were being developed initially by the FAA at about the same time. Each cost 

category in the CAS was individually analyzed to determine whether it was directly related to the provision of 

Enroute and/or Oceanic services. Other costs, such as those incurred for the provision of Terminal and Flight Services 

were not included, as they were determined not to be related to the provision of Enroute and Oceanic services.

All costs in the CAS have been assigned or allocated to services based on generally accepted accounting principles. 

The Federal Accounting Standards Advisory Board’s “Statement of Federal Financial Accounting Standards 4: 

Managerial Cost Accounting Standards and Concepts (July 31, 1995), the Federal Government’s guiding framework 

authority on cost accounting matters, was used throughout the development of the CAS. All assignments were 

performed using the best available data and, where economically feasible, new processes were created to enhance 

the fidelity of particular assignments. 

Expenditures Vs. Obligations

The FAA has used CAS data for fiscal year (FY) 2013 (October 1, 2012 through September 30, 2013) for this update of 

its Overflight fee rates. Total expenses recorded for FY 2013 do not precisely match the FAA’s FY 2013 budget as 

enacted by the U.S. Congress. This is due to the Governmental budgeting rules that allow obligations (legal 

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

budget by Congress. 

As Figure 2 below indicates, expenses for FY 2013 were actually obligated against budgets enacted from FY 2001 

through FY 2013, depending on whether the expenditures were for Facilities & Equipment or Research, Engineering

& Development.
Figure 2

Description of the Cost Accounting System (CAS)

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

1. To provide information to help improve the management of the FAA.

2. To determine the costs of Enroute and Oceanic services in support of Overflight Fees.

The first phase of the CAS developed the cost information for the agency’s Enroute and Oceanic air traffic services. 

This cost information was the basis from which the agency’s 2001 and 2011 Overflight fee rates and fee rate update

were derived. 

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

assignment of costs to the Enroute and Oceanic ATC services are available in a separate report. A copy of that report 

titled “Costing Methodology Report,” will be placed in the Overflight Fee rulemaking docket.
Enroute and Oceanic Costs

Table 1 below indicates the cost categories and the total costs for the FAA’s Enroute and Oceanic ATC and related 

services, as determined by the FAA’s CAS. In response to an ARC recommendation related to cost elements used in 

the fee derivation, Enroute FAA costs have been updated to exclude Guam and San Juan, which are combined control 

facilities that may handle a mix of general and commercial aviation traffic. Enroute costs for Honolulu, which is a 

similar facility type, are also excluded and handled similarly to Guam and San Juan. With this change, the Enroute 

costs for Honolulu, Guam and San Juan, which are similar facility types are excluded and treated similarly. The FAA 

costs are based on the FAA’s FY 2013 expenditures.
Table 1

TOTAL COST OF ENROUTE AND OCEANIC SERVICES

FAA COST ACCOUNTING SYSTEM

COST OF SERVICE REPORT

FOR THE YEAR ENDING SEPTEMBER 30, 2013

ENROUTE OCEANIC

Level 1 - Facility ATC Direct Labor $1,304,384,380 $53,685,995 

ATC Indirect Labor $326,715,366 $12,429,776 

ATC Direct Non-Labor $3,401,181 $261,404 

ATC Indirect Non-Labor ($1,688,235) ($153,501)

ATC Contract Training $21,851,229 $1,030,452 

ATC Academy Training $10,613,924 $289,998 

Tech Ops Direct Labor $156,535,661 $2,894,691 

Tech Ops Direct Non-Labor $30,556,186 $194,138 

Tech Ops DO Indirect $140,229,293 $6,703,565 

Tech Ops Academy Training $13,204,567 $96,667 

Telecommunications $87,290,335 $29,448,227 

Telecommunications Support $39,428,112 $563,896 

Flight Inspection Services $15,019,084 -

Logistics $29,146,083 $14,760 

Utilities $33,657,877 $874,092 

Subtotal: $2,210,345,041 $108,334,162 

Level 2 - Service Unit ATC Workers' Compensation $31,161,044 $1,136,726 

Tech Ops Workers' Compensation $1,167,510 $7,256 

Direct Field Support $238,853,940 $12,688,431 

Contract Weather $13,480,541 $527,018 

Contract Weather Observations - -

Contract Tower - -

Contract Flight Service - -

DUATS - -

F&E Expenses $787,067,106 $10,644,942 

Depreciation & Capital Leases $421,737,138 $23,150,208 

Subtotal: $1,493,467,279 $48,154,581 

Level 3 - ATO ATC System Command Center $48,319,025 -

Atlantic Operations Control Center $2,879,926 $101,235 

Mid-States Operations Control 

Center $4,021,769 $16,284 

Pacific Operations Control Center $3,760,094 $125,178 

National Network Control Center $7,987,678 $76,718 

Charting $36,839,222 -

Service Area Indirect $51,729,206 $2,206,360 

Service Unit Indirect $85,997,824 $3,526,826 

ATO Indirect $189,779,402 $7,793,132 

Subtotal: $431,314,145 $13,845,733 

Level 4 - FAA FAA Regional Indirect $19,272,271 $789,859 

FAA Headquarters Indirect $293,903,598 $7,621,308 

Medical $9,889,355 $407,356 

Loss on Disposition of Asset $22,755,478 -

Employee Benefits Liability $159,107,141 $5,238,603 

Environmental and Legal Liability ($42,246,250) -

Subtotal: $462,681,594 $14,057,127 

Grand Total: $4,597,808,058 $184,391,603 
As shown by the table above, the total cost, as determined by the CAS, for the FAA’s provision of Enroute services in 

FY 2013 was $4,597,808,058 and the total cost for the FAA’s provision of Oceanic services in FY 2013 was

$184,391,603.

Step 2: 

Determine the unit costs of Enroute and Oceanic Services

In the previous section, the total costs for Enroute and Oceanic services were identified. The next step is to derive the 

unit cost of providing services within the Enroute and Oceanic environments. The unit costs calculated herein reflect 

the FAA’s cost of making services available on a per 100-nautical-mile basis. The level and type of services provided 

are highly similar for all aircraft operators within a particular environment (i.e., Enroute or Oceanic), although the 

cost of making services available for safe flight to all users, including Overflights, constitutes much of the cost. The 

FAA has determined, based on the structure and operation of its ATC system, that there is little or no difference 

between the costs of providing services to an Overflight, versus any other operation within each of these service 

environments. Consequently, the unit cost of providing services to Overflights within each environment is considered 

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

To construct these unit costs, flight miles within each environment are identified on an annual basis. The costs of 

providing ATC and related services within each environment are divided by the respective flight miles to determine 

the unit costs of service. Flight miles are tracked using FAA’s Traffic Flow Management System (TFMS2), which

provides detailed information on a flight-by-flight basis for every aircraft operation. Using TFMS data, it is possible to 

track flights from origination to destination and thereby determine the amount of services provided based on the 

distance flown within U.S.-controlled airspace. To be consistent with the treatment of costs for the combined control 

facilities, the Enroute miles for Honolulu and Oceanic miles for Guam have been excluded from the total miles. San 

Juan Enroute miles were already excluded from the total miles and with this change, the costs and miles for these 

combined control facilities (Honolulu, Guam and San Juan) are treated consistently. 

Air Traffic Activity

Table 2 shows the total number of flights and miles traveled within the Enroute and Oceanic environments for FY 

2013. 

 

2

TFMS was formerly known as the Enhanced Traffic Management System (ETMS). 
Table 2

ENROUTE AND OCEANIC ACTIVITY

TOTAL TRAFFIC WORKED3

(10-1-2012 to 09-30-2013)

Enroute Airspace Oceanic Airspace

GCD nm* GCD nm

FY 2013 

Activity 7,445,668,883 695,620,413

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

Over the 12-month period, flights traveled 7,445,668,883 nautical miles (nm) within the Enroute environment and 

695,620,413 nm within the Oceanic environment. 

Unit Cost of Service

Using the total annual GCD flight miles shown in Table 2, the unit cost of each type of service (Enroute or Oceanic) is 

computed. Table 3 illustrates this calculation. The unit costs of ATC and related services are calculated by dividing the 

respective total costs by the respective number of miles flown. 

Table 3

UNIT COST OF ENROUTE AND OCEANIC SERVICES

Enroute Oceanic

Reasonably Related ATC and 

related Costs $ 4,597,808,058 $ 184,391,603

Total annual GCD (nautical 

miles -- nm) 7,445,668,883 695,620,41

Unit Cost (per 100 nm) = (ATC 

Costs/ GCD nm)*100 $ 61.75 $ 26.51

Because the FAA’s costs of making services available to Overflights have been determined to be the same as for any 

other aircraft operation (as discussed previously) within the same respective (Enroute or Oceanic) environment, 

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

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

 

3

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

individual flight, the point of entry and the point of exit are determined based on the best information available as determined 

by the FAA. The GCD is calculated for each set of entry and exit points per airspace. This mileage is then summed up by airspace 

and appropriate fee is applied to the total miles in each type of airspace (Enroute or Oceanic) to determine the total charge for 

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

with the calculation of the flight miles. 
$61.75 per 100 nm; similarly, the cost of providing ATC and related services to a flight within the Oceanic 

environment is $26.51 per 100 nm. 

Step 3: 

Derive the amount of Overflight Fees that, when fully implemented, will recover the reasonably related costs of 

providing ATC and related services in the Enroute and Oceanic environments

As explained earlier in this report, the statutory standard for the FAA’s Overflight Fees to be “reasonably related” to 

costs has allowed the FAA to include overhead in the cost base for Overflight fees. This is the same methodology that 

was used to derive the Overflight fee rate update in 2011. Since overhead has already been included in the cost base, 

the FAA has not adjusted the calculated unit costs to account for billing and collection costs in order to avoid double 

counting of those costs. 

Thus, the proposed updated Overflight fee rates will be, quite simply, the unit costs of providing services in the two 

operating environments, as detailed in Table 3, but with one significant caveat. As explained and detailed in the 

accompanying NPRM, the FAA is proposing that the updating of the fee rates be done incrementally over a threeyear period based on the compounded annual growth rate over the three-year period (2.79% for Enroute and 7.02% 

for Oceanic).

While it is difficult to predict how long a full notice and comment Rulemaking such as this might take, we are 

proposing an effective date for the first fee rate increase of October 1, 2015, to be followed by annual increases on 

October 1 for the next two years. The specific fee rate, by year, would be as follows (per 100 nm):

 Effective Date Enroute Oceanic

October 1, 2015 $58.45 $23.15

October 1, 2016 $60.07 $24.77

October 1, 2017 $61.75 $26.51