The United States has the largest, most extensive aviation system in the world with over 19,000 airports ranging from large commercial transportation centers handling millions of passengers annually to small grass airstrips serving only a few aircraft each year. Of these, roughly 3,300 airports are designated by FAA as part of the national airport system and thus are eligible for federal assistance. The national airport system consists of two primary types of airports— commercial service airports, which have scheduled service and enplane 2,500 or more passengers per year, and general aviation (GA) airports, which have no scheduled service and enplane fewer than 2,500 passengers annually. FAA divides commercial service airports into primary airports (enplaning more than 10,000 passengers annually) and commercial service nonprimary airports. The 395 current primary airports are classified by hub type—large-, medium-, small-, and nonhub—based on passenger traffic. Passenger traffic is highly concentrated: 88 percent of all passengers in the United States enplaned at the 63 large- or medium-hub airports in 2013 (see fig. 1). More than 2,900 airports in the national system are designated as GA airports. These airports range from large business aviation and cargo shipment centers that handle thousands of operations a year to small rural airports that may handle only a few hundred operations per year but may provide important access to the national transportation system for their communities. Generally, the level of aviation activity, whether commercial passenger and cargo or general aviation business and private aircraft, helps to generate the funds that finance airport development. The three primary sources of funding for airport development are Airport Improvement Program (AIP) grants, PFCs, and locally generated revenue. All three sources of funds are linked to passenger aviation activity. AIP is supported by the Airport and Airway Trust Fund (AATF), which is funded by airline ticket taxes and fees; GA flights contribute to the AATF through a tax on aviation jet fuel. Airports included in FAA’s NPIAS are eligible to receive AIP entitlement (apportionment) grants based on airports’ size and can also compete for AIP discretionary grants. AIP grants can only be used for eligible capital projects, generally those that enhance capacity, safety, and environmental conditions, such as runway construction and rehabilitation, airfield lighting and marking, and airplane noise mitigation. The amount made available in AIP appropriations totaled $3.35 billion in fiscal year 2014. The grants generally require matching funds from the local match ranging from 10 to 25 percent depending on the size of the airport and type of project. PFCs, another source of funding for airport development projects, are a federally authorized, statutorily-capped, airport-imposed fee of up to a maximum of $4.50 per enplaned passenger per flight segment, and a maximum of $18 per round trip ticket. The PFC is collected by the airline on the passenger ticket and remitted to the airports (minus a small administrative fee retained by the airline). Introduced in 1991, and capped at $3.00 per flight segment, PFC collections can be used by airports for the same types of projects as AIP grants, but also to pay interest costs on debt issued for those projects. Since its inception, landside development projects—including, for example, new terminal projects—and interest payments on debt used to finance eligible projects have each accounted for 34 percent of total PFC collections spent. The maximum level of PFCs was last increased in Collections totaled almost $2.8 billion in calendar year 2014. 2000.According to FAA, 358 commercial service airports are collecting PFCs as of February 2015. Airports also fund development projects from revenues generated directly by the airport. Airports generate revenues from aviation activities such as aircraft landing fees and terminal rentals, and non- aviation activities such as concessions, parking, and land leases. Aviation revenues are the traditional method for funding airport development and, along with PFCs, are used to finance the issuance of local tax-exempt debt. Because of the size and duration of some airport development projects—for example, a new runway can take more than a decade and several billion dollars to complete—long-term debt can be the only way to finance these types of projects. FAA’s main planning tool for identifying future airport-capital projects is the NPIAS. FAA relies on airports, through their planning processes, to identify individual projects for funding consideration. According to FAA officials, FAA reviews input from individual airports and state aviation agencies and validates both eligibility and justification for the project over the ensuing five-year period. Because the estimated cost of eligible airport projects that airports plan to perform greatly exceeds the available grant funding available for these projects, FAA uses a priority system based on airport and project type to allocate the available funds. The Airports Council International-North America (ACI-NA), a trade association for airports, also estimates the cost of planned airport capital projects. While almost all airport sponsors in the United States are states, municipalities, or specially created public authorities, there is still a significant reliance on the private sector for finance, expertise, and control of airport assets. For example, we have previously reported that the majority of airport employees at the nation’s major airports are employed by private sector firms, such as concessionaires, and some airports are also operated by private companies. Pursuant to statutory authorization, since 1996, FAA has been piloting an airport privatization program that relaxes certain restrictions on the sale or lease of airports to private entities. A variety of factors has had a substantial impact on the airline industry. We reported in June 2014 that economic issues such as volatile fuel prices and the economic recession have affected the industry as have airlines’ consolidation and an adoption of business models that focus For instance, the 2007-2009 recession more on capacity management.combined with a spike in fuel prices, helped spur industry mergers and a change in airline business models. Specifically, Delta acquired Northwest in 2008, United and Continental merged in 2010, Southwest acquired AirTran in 2011, and US Airways and American Airlines merged in 2014. Although passenger traffic has generally rebounded as the economy has recovered, the number of commercial aircraft operations has not returned to 2007 levels as airlines are flying larger and fuller aircraft. In June 2014, we found that one outcome of economic pressures and industry changes had been reductions in U.S. passenger aircraft operations as measured by scheduled flight operations. Many airports lost both available seats and flights since 2007 when aircraft operations last peaked. However, medium- and small-hub airports had proportionally lost more service than large-hub or nonhub airports, as major airlines merged and consolidated their flight schedules at the largest airports. In June 2014, we found—based on our analysis of Department of Transportation’s (DOT) data—that there were about 1.2 million fewer scheduled domestic flights in 2007 as compared to 2013 at large-, medium-, small-hub, and nonhub airports. The greatest reduction in scheduled flights occurred at medium-hub airports, which decreased nearly 24 percent from 2007 to 2013, compared to a decrease of about 9 percent at large-hub airports and about 20 percent at small-hub airports. Medium-hub airports also experienced the greatest percentage reduction in air service as measured by available seats (see fig. 2). While 2014 passenger activity as represented by the number of passengers onboard aircraft departing U.S. airports has rebounded nearly back to 2007 levels (down 4 percent), the total number of commercial passenger and cargo aircraft departures (operations) in 2014 is still down 18.5 percent since 2007. Declining operations reduces pressure on airports’ airside capacity, while rebounding passenger traffic could put pressure on airports’ terminals and gates to accommodate passengers. We found in June 2014 that air service to small airports, which generally serve small communities, has declined since 2007 due, in part, to volatile fuel costs and declining populations in small communities. According to a study by the Massachusetts Institute of Technology (MIT), regional aircraft—those mostly used to provide air service to small communities— are 40 to 60 percent less fuel efficient than the aircraft used by mainline carriers at larger hub airports. Further, from 2002 to 2012, fuels costs quadrupled and became the airlines’ largest expense at nearly 30 percent of airlines’ operating costs. While more recently oil prices have dropped, it remains uncertain whether currently low oil prices will continue. The second major factor affecting small community service is declining population in many regions of the country over the last 30 years. As a result, in previous work, we have found that population movement has decreased demand for air service to certain small communities. For example, geographic areas, especially in the Midwest and Great Plains states, lost population from 1980 through 2010, as illustrated in figure 3 below. As a result, certain areas of the country are less densely populated than they were 35 years ago when the airlines were deregulated and the Essential Air Service (EAS) was created. For small communities located close to larger cities and larger airports, a lack of local demand can be exacerbated by passengers choosing to drive to airports in larger cities to access better service and lower fares. The EAS program was created in 1978 to provide subsidies to some small communities that had service at the time of deregulation. We reported last year that EAS has grown in cost but did help stem the declines in service to those communities as compared to other airports. In June 2014, we reported that GA activity has also declined since 2007, particularly affecting airports that rely on general aviation activity for a large share of their revenue. For GA airports—which generate revenues from landing fees, fuel sales, and hangar rents—the loss of traffic can have a significant effect on their ability to fund development. A 2012 MIT study that examined trends for GA operations at U.S. airports with air- traffic control towers indicated that from 2000 to 2010, total GA operations dropped 35 percent.