February 14, 2014

-1-

BEFORE THE UNITED STATES DEPARTMENT OF TRANSPORTATION

FEDERAL AVIATION ADMINISTRATION

)

IN RE OVERFLIGHT FEES )

AVIATION RULEMAKING COMMITTEE )

)

RECOMMENDATION OF THE INDUSTRY 

MEMBERS OF THE 2013/2014 FAA AVIATION RULEMAKING 

COMMITTEE ON OVERFLIGHT FEES

The industry members of the U.S. Federal Aviation Administration (“FAA”) Aviation 

Rulemaking Committee for overflight fees (the “ARC”)1present this recommendation on user 

fees charged by the FAA for the provision of air traffic control services to airlines that neither 

take off nor land in the United States (see appendix I for a historical background).

The industry members of the ARC have engaged in constructive discussions with the FAA in an 

attempt to reach a suitable adjustment for the increase in fees, following the previous 5 year 

adjustment set by the FAA ending in FY2015. As a result of the ARC discussions – and 

conditional upon acceptance, representations and expectations that they have received in 

connection with the increased fees, – the industry members accept a change in fees as outlined 

below.

1. COST ACCOUNTING SYSTEM & COST RELATEDNESS

Although the industry members do not challenge the use of the Cost Allocation System (CAS) as

a basis for setting the overflight charges, they remain critical regarding elements of the cost base, 

the traffic and consequently the level of the overflight fees allocated to airlines that neither take 

off or land in the United States. As an example costs included in the en-route cost base such as 

flow control into major airports and costs associated with providing approach services at airports 

and airfields that are not served by a dedicated TRACON are not linked to services provided to 

overflying carriers and should therefore be removed. The industry members therefore 

recommend for the cost base to exclude certain elements of FAA’s overhead and other nonoverflight related costs of the cost base, and therefore do not endorse the currently used

methodology as a whole.

 

1The industry members of the ARC are Aeromexico, Air Canada, Air France, Air Transat, Air Transport 

Association of Canada, Association of Asia Pacific Airlines, British Airways, Plc, Cathay Pacific 

Airways Limited, International Air Transport Association, KLM Royal Dutch Airlines, Lufthansa 

German Airlines, National Airlines Council of Canada, Sunwing Airlines.
February 14, 2014

-2-

Similar to the documentation provided during the 2009 ARC, records continue to demonstrate 

that FAA is seeking to recover more than the reasonably related costs for providing ATC and 

related services to overflights, while the actual revenues from the overflight fee are not

reinvested in FAA services provided to overflights but rather are redirected to subsidize Essential 

Air Services (EAS). Costs for providing ATC and related services to flights that do take off or 

land in the United States in lieu of overflight fees are partially recovered through a contribution 

from the General Fund and through taxes that remained unchanged for several years while

overflight fees have continued to rise in a steady pace between 2010 and 2014.Overflight fees 

therefore continue to be assessed on terms that are “less favorable” to foreign airlines which do 

not take off or land in the United States, than to their U.S. counterparts. 

2. TRAFFIC

The industry members recommend FAA includes all traffic receiving services from FAA ATO 

personnel in en-route and oceanic ATRCC’s in the determination of the total flight miles as basis 

for the rate calculation. It is believed that currently only filed flight plans (IFR/VFR) in the 

system are being used to determine total flight miles while a significant portion of traffic consists 

of unfiled VFR traffic using flight following or being actively separated from IFR. Excluding 

this traffic from the total flight miles artificially increases the cost per NM for the en-route and 

oceanic portion of the cost base and therefore inflates the rate for overflight fees. 

3. TRANSPARENCY / CONSULTATION

As the overflight fees remain the only fees in the FAA that are intended to be related to costs and 

airlines that do not land or takeoff in the United States are subject to much more frequent 

changes to their fees. Without economic oversight or a direct influence on the cost base through 

user consultation, the industry members believe it is essential the FAA continues to engage in 

meaningful financial consultations with its Stakeholders and provides full transparency on its 

cost development through CAS. While the discussions with the FAA at the ARC have been 

constructive and provided the industry members with much needed background information on 

the CAS and cost / traffic development, the industry members recommend the FAA provides the 

industry (including the non-ARC members) on an annual basis with year to year comparisons of 

costs and traffic in a manner that allows future ARC members to better track development and 

make informed recommendations. The industry members recommend that major changes in 

allocations between cost centers are accompanied by a high level summary justifying the 

changes similar to NAV CANADA’s Management Discussion & Analysis (MD&A)

4. DEVELOPMENT OF UNIT COSTS & SEQUESTRATION

The information provided to the ARC clearly shows that (excluding the effects of sequestration), 

the FAA’s operational costs continue to increase at a steady pace while the industry as a whole 

still struggles with a sluggish economic recovery. ATC charges in neighboring States have 

remained flat in the past 5 years while the FAA raised its overflight fees with respectively 8% 
February 14, 2014

-3-

Oceanic charge and 14% Enroute charge per year during the same period, and is likely to 

continue to do so with the current cost development. The industry members recommend the FAA 

sets a target on its cost development that remains below inflation and takes into consideration the 

expected development of traffic. 

Similar measures continue to be taken in other parts of the world challenging ATM providers to 

seek further efficiency and reduce unit costs or keep them flat. The industry members 

recommend the FAA take a similar approach to internal cost development especially for those 

cost centers that are directly linked to user fees such as the overflight fee.

5. CONDITIONAL ACCEPTANCE OF INCREASE IN OVERFLIGHT FEES.

The industry member’s acceptance of an increase in overflight fees is conditioned upon certain 

factors, including the lack of any increase until completion of the NPRM process, and a cap on 

the increase as set forth herein. The industry members have provided this consent pursuant to 

their desire to work in a collaborative effort with FAA to reach a mutually agreeable resolution 

with regard to FAA’s desire to increase the fees. However, if, for any reason, the conditions 

which the industry members have placed on their consent are not fulfilled, the members would 

be free to return to their multi-pronged objections to the fee increase sought by FAA, without 

limitation. (See appendix II).

As the currently published fees are based on the 2008 cost base and the FAA’s growth of costs 

(CAGR) between FY08 and FY2013 was 1.72% (en-route) and 3.76% (oceanic), the ARC 

members would not object to an annual increase of 1.7% for en-route fees and 3.76% for 

Oceanic fees over three consecutive years beginning in October 2015 (FY2016) and ending in 

FY2018, following FAA’s CAGR development.

The industry members recommend a new ARC is to be convened to determine the need for a 

further change of rates for FY2019. As traffic is expected to increase beyond the actual numbers 

used for FY2012 and FY2013 to establish the fees, revenues from overflight fees are expected to 

exceed costs, which are expected to grow at a much lower pace. 
February 14, 2014

-4-

6. CONCLUSION

The industry members would like to acknowledge the continued cooperative attitude 

FAA has demonstrated during this ARC process and the opportunity to provide our 

recommendations to FAA. Despite the issues that the ARC members still have with regard to 

FAA’s intention to increase the overflight fees, the members of the ARC, in the spirit of good 

faith cooperation and collaboration with the FAA, will conditionally not object to the fee 

increase set forth above, assuming that the above stated conditions are fulfilled. 

We assume that FAA will consider further changing their overflight fee structure as a whole

based on the concerns mentioned and the ARC members would be more than willing to provide 

an active role in this process. 

In the meantime, please feel free to contact the undersigned or any of the other ARC members if 

there are any further questions.

Respectfully submitted:

Cyriel Kronenburg

Vice Chairman, Aviation Rulemaking Committee,

International Air Transport Association, IATA
February 14, 2014

-5-

APPENDIX 1: HISTORICAL BACKGROUND

In October 1996, Congress enacted section 273 of the Federal Aviation Reauthorization Act of 

1996, Pub. L. 104-264, codified at 49 U.S.C. § 45301, which, for the first time, authorized the 

FAA to impose a user fee for the provision of air traffic control and related services to aircraft 

that neither takeoff nor land in the United States. In March 1997, the FAA issued an “Interim 

Final Rule” which sought to impose nearly $100 million in overflight fees, fifty million of which 

was set aside by Congress to fund the Essential Air Services program in the United States. In 

January 1998, the U.S. Court of Appeals for the D.C. Circuit vacated the IFR, ruling that the fees 

did not comply with the statutory directive that they be “directly related” to FAA’s costs of 

providing services to overflights because of FAA’s use of “Ramsey pricing” to determine the 

fees (footnote 2).

In June 2000 the FAA issued a new IFR which sought to recover approximately $40 million per 

year in overflight fees. In July 2001, the D.C. Circuit vacated the 2000 IFR because the FAA did 

not show that the fees were directly related to costs, in that FAA provided no basis for its 

assumption that FAA incurs the same level of costs to provide services to overflights as to nonoverflights.2 The following month (August 2001), FAA issued a final rule for overflight fees 

(the “Final Rule”) which continued to assume that the agency incurred the same level of costs to

provide ATC and related services to overflights as to non-overflights. 

In April 2003, the D.C. Circuit vacated the Final Rule (footnote 3). The Court stated that: “For 

the third time, we must review the lawfulness of a Federal Aviation Administration regulation 

establishing fees for air traffic control services for ‘overflights’ . . . . For the third time, we find 

that the FAA disregarded its statutory mandate.” The Court found that the airlines’ experts had 

made “a substantial case refuting the agency’s unexplained insistence that miles of overflights 

and non-overflights in the Enroute and Oceanic airspaces are approximately equivalent in their 

per-mile generation of costs.” The Court acknowledged the FAA’s assertion that some 

overflights spend some time at low altitudes, but pointed out that this did “not undermine 

petitioners’ claim that they fly predominately in the high altitude sector, to a degree far greater 

than do non-overflights.” The Court also rejected FAA’s contention that fixed and common 

costs dominate, and therefore any difference in the marginal cost of servicing an additional 

overflight versus an additional non-overflight is immaterial. 

During the interim between the July 2001 and April 2003 D.C. Circuit decisions, Congress 

enacted Section 119(d) of the Aviation Transportation and Security Act of 2001 (“ATSA”). 

Section 119(d) amended the 1996 overflight fee statute to provide that (1) overflight fees must be 

“reasonably related” (rather than “directly related”) to the FAA’s costs of providing services to 

overflights, and (2) the FAA’s determination of its costs for providing services to overflights is 

not subject to judicial review. Although the D.C. Circuit, in its April 2003 decision, ruled that 

 

2Air Transport Association of Canada v. FAA, 254 F.3d 271 (D.C. Cir. 2001). 

3Air Transport Association of Canada v. FAA, 323 F.3d 1093 (D.C. Cir. 2003). 
February 14, 2014

-6-

Section 119(d) did not apply retroactively to the FAA’s final rule on overflight fees, in 

December 2003 Congress enacted certain legislative language in Section 229 of Vision 100, 

which was intended to retroactively nullify the April 2003 Court ruling. Section 229 states: “The 

interim final rule and final rule referred to in subsection (a), including the fees issued pursuant to 

those rules, are adopted, legalized, and confirmed as fully to all intents and purposes as if the 

same had, by prior Act of Congress, been specifically adopted, authorized, and directed as of the 

date those rules were originally issued.” The new law also purported to make ATSA Section 119 

applicable to the overflight fees.

Pursuant to a settlement reached between FAA and the parties that had successfully challenged

the 2000 IFR and the 2001 Final Rule, FAA agreed to “make payments to the litigating [carriers] 

from previously collected fees” based on a formula agreed to by the parties “in addition to 

whatever refunds and credits” were otherwise available to the litigating carriers. Following the 

settlement, FAA resumed assessment and collection of overflight fees based on the methodology 

of the Final Rule. As a result, the carriers have been paying $33.72 per 100 nautical miles for 

Enroute services, and $15.94 per 100 nautical miles for Oceanic services. 

As part of the settlement with the litigating carriers, the FAA agreed to the creation of the ARC, 

which was to consist of FAA and industry representatives working to examine in depth the 

FAA’s methodology for overflight fees and to recommend whether it should be modified. 

Section 4 of the ARC Charter states that the “Committee’s primary task is to identify the services 

rendered to overflights by the FAA, to determine the FAA’s costs of providing services to 

overflights, and, based upon that determination, to make recommendations to the Administrator 

regarding the level of future overflight fees that would be consistent with the provisions of the 

1996 Act, as amended.” Section 5(a) of the Charter states that the “Committee is to evaluate 

information regarding the services rendered to overflights by the FAA and the costs of providing 

those services to overflights, and, based on that evaluation, to make recommendations regarding 

future overflight fees, including possible modification to, or replacement of, the fees currently 

being charged by the FAA.” Section 6(h) states that “Committee recommendations to the 

Administrator must be approved by at least a two-thirds vote of the members. The Chair shall 

have the right to submit a separate report or recommendation to the Administrator.”

The first meeting of the ARC occurred in April 2005. It was followed by a visit of the ARC to 

the Enroute center near Cleveland, Ohio, in June 2005. In December 2008, the FAA issued a 

Federal Register notice to reconstitute the ARC. The reconstituted ARC held formal meetings in 

April and July of 2009. During these meetings FAA has discussed with the industry members 

possible ranges of increases in the overflight fees to be paid by affected carriers. FAA also 

provided certain items of information to the ARC industry members in connection with the 

increase in overflight fees which FAA announced it intended to seek. Also in 2009, both Houses 

of Congress proposed or otherwise considered statutory language for an update in the overflight 

fees.
February 14, 2014

-7-

APPENDIX II

1. The FAA is utilizing a methodology which the U.S. Court of Appeals for the D.C. Circuit 

ruled in 2003 failed to comply with the statutory standard that the fees be “directly related” to 

FAA’s costs of providing ATC and related services to overflights. The fact that the language has 

been changed to “reasonably related” from “directly related” does not change the core fact that 

the FAA incurs a lower level of costs (in terms of manpower and otherwise) to provide ATC and 

related services to overflights than to aircraft that operate at lower, transitional altitudes 

throughout the air traffic control system. This evidence was clearly placed before the FAA in 

connection with the litigation over the second IFR and the Final Rule, and there has been no 

development that has changed this fact or the import of the Court’s 2003 decision. In sum, in 

order for the fees to be truly cost based, the fee methodology would need to reflect the fact that 

the agency incurs more costs to provide service to non-overflights than to overflights. The 

members also believe that there is no basis for including the cost of overhead in the overflight 

fee methodology. 

2. The industry members object to the multiple efforts to deprive airlines of the right to 

obtain judicial review of FAA’s derivation of the overflight fees. Following the first two 

successful legal challenges to overflight fees, and commencing with Section 119 of ATSA in 

November 2001, and continuing with Section 229 of Vision 100 in December 2003 and language 

in proposed legislation being considered by Congress at this time, the FAA appears to have 

sought and obtained language to deprive airlines subject to overflight fees of the right to seek and 

obtain judicial review with regard to certain aspects of the fees. The timing of Section 119 of 

ATSA and Section 229 of Vision 100 appears to indicate that the legislation was intended to 

change the result of independent decisions of the judiciary branch, which would not have been 

appropriate. Beyond that, it is contrary to international norms and good policy to prohibit 

airlines from being able to obtain judicial review of user fees. The fact that Article 84 of the 

Convention on International Civil Aviation (“Chicago Convention”) and various bilateral and 

multilateral air services agreement to which the United States is a party provide for independent 

review of user charges demonstrates the international consensus that no State should be 

permitted to dictate the user charges imposed on foreign airlines without having a suitable review 

process before a disinterested dispute resolution body. However, the dispute resolution remedies 

in the international air services agreements are complex and time consuming. It is incumbent on 

each State that imposes user charges on aviation to provide for independent judicial review in the 

courts of that nation, so that the dispute resolution provisions which are binding on each State do 

not need to be needlessly invoked. Stated simply, the international airline community merely 

wants the ability to have an independent national judiciary review compliance by the feecharging entity with applicable legal requirements. That should not be objectionable to FAA or 

the U.S. Congress. 

3. Finally, the proposed overflight fees are not consistent with bilateral and multilateral air 

services agreement (with which the United States is a signatory), which require, among other 

things, that foreign airlines (which are the carriers subject to overflight fees) be assessed user 

charges on terms “not less favorable than the most favorable terms available” to other carriers. 
February 14, 2014

-8-

See, e.g., Article 12(1) of the “Air Transport Agreement” between the European Union and the 

United States (April 25, 2007) (“User charges that may be imposed by the competent charging 

authorities or bodies of each Party on the airlines of the other Party shall be just, reasonable, not 

unjustly discriminatory, and equitably apportioned among categories of users. In any event, any 

such user charges shall be assessed on the airlines of the other Party on terms not less favorable 

than the most favorable terms available to any other airline at the time the charges are 

assessed”); Article 9(1) of the “Air Transport Agreement Between The Government of the 

United States of America and The Government of Canada” (March 12, 2007) (“User charges that 

may be imposed by the competent charging authorities or bodies of each Party on the airlines of 

the other Party for the use of air navigation and air traffic control services shall be just, 

reasonable and not unjustly discriminatory. In any event, any such user charges shall be 

assessed on the airlines of the other Party on terms not less favorable than the most favorable 

terms available to any other airline”); see also Article 15 of the Chicago Convention (“like 

uniform conditions shall apply to the use, by aircraft of every contracting State, of all air 

navigation facilities . . . which may be provided for public use for the safety and expedition of air 

navigation”) (“charges . . . imposed . . . for the use of air navigation facilities by the aircraft of 

any other contracting State hall not be higher . . . than those that would be paid by its national 

aircraft engaged in similar international air services”).