Opinion ID: 150469
Heading Depth: 2
Heading Rank: 2

Heading: Regulation of Landing Fees

Text: As the air transportation system has become increasingly congested, the Department of Transportation's task of managing the system has become increasingly difficult. The Department has tried to solve the problem of congestion using its statutory authority to supervise the fees an airport charges its users, including the landing fees paid by airlines.
The Airports and Airways Improvements Act requires that airports be available for public use on reasonable conditions and without unjust discrimination. 49 U.S.C. § 47107(a)(1). [] We have interpreted that obligation as a requirement that [an] airport's fees be reasonable. Air Transp. Ass'n of Am. v. DOT, 119 F.3d 38, 39 (1997) ( ATA I ) (citing New England Legal Found. v. Mass. Port Auth., 883 F.2d 157, 169-70 (1st Cir.1989)). The Anti-Head Tax Act also requires that the fees be reasonable. See 49 U.S.C. § 40116(e). The Federal Aviation Administration Authorization Act requires the Secretary of Transportation to publish regulations, such as the ones here under review, establishing ... the standards or guidelines that [he will use] in determining... whether an airport fee is reasonable. 49 U.S.C. § 47129(b)(2). Airports currently operate under the DOT's 1996 Policy Regarding Airport Rates and Charges, 61 Fed.Reg. 31,994 (June 21, 1996), vacated in part by ATA I, 119 F.3d 38, as amended at 129 F.3d 625 (D.C.Cir.1997), which, as we have noted before, provides airports with precious little guidance, see ATA I, 119 F.3d at 41 (the `guideline' seems to be missing a `line'). As a result, airlines and airport proprietors regularly ask the DOT whether a particular landing fee is reasonable, see 49 U.S.C. § 47129, and seek judicial review of its decision in this court. See, e.g., Alaska Airlines, Inc. v. DOT, 575 F.3d 750 (2009); Port Auth. of N.Y. & N.J. v. DOT, 479 F.3d 21 (2007); City of Los Angeles v. DOT, 165 F.3d 972 (1999); Air Canada v. DOT, 148 F.3d 1142 (1998); City of Los Angeles v. DOT, 103 F.3d 1027 (1997).
The DOT finally sought to update its regulations regarding landing fees in 2008, more than a decade after we had vacated much of the 1996 Policy. Rather than address the various problems we identified with the original policy, however, the Department promulgated Amendments to the 1996 Policy solely in order to implement a system of congestion pricing. This the Amendments do by allowing an airport to: (1) add to its rate base certain previously excluded costs, which enables it to increase the landing fees it charges; (2) alter the structure of those fees so as to encourage airlines to use a more efficient mix of large and small aircraft at congested airports; and (3) charge higher fees during peak periods. See Policy Regarding Airport Rates and Charges, 73 Fed.Reg. 40,430 (July 14, 2008). Increasing the price. If an airport wants to reduce congestion then it must eliminate the excess demand by reducing the number of planes that airlines want to land during peak periods. In order to do so, it must have some method of allocating the scarce resource of the opportunity to land. Congestion pricing accomplishes this by increasing the price. If the fee is high enough, then an airline will adjust its schedule by shifting a flight to a less congested time or an alternate airport, using fewer but larger aircraft, or simply canceling some flights. An airport may not freely increase its prices, however, because of its public service obligation to charge only reasonable fees. The DOT enforces that obligation by limiting the total airfield fees an airport may collect, including landing fees. This limit is based upon the historical costs the airport is allowed to include in its rate base. In order to increase the allowable landing fee, therefore, an airport must somehow increase its rate base. The Amendments allow an airport to do just that. In certain circumstances an airport may now for the first time include in its rate base certain costs, viz., a portion of the costs of an airfield project under construction and the costs associated with another [commonly-owned] airport. The 1996 Policy allowed an airport to include the latter costs only if the costs of the other airport to be included in the first airport's rate base are reasonably related to the aviation benefits that the other airport provides or is expected to provide to the aeronautical users of the first airport. 61 Fed.Reg. at 32,020/3. That condition was, however, presumed to be satisfied if the other airport [was] designated as a reliever airport for the first airport [by] the FAA[]. Id. A reliever airport is an alternative to a primary airport for general aviation, see Federal Aviation Administration, 2009-2013 National Plan of Integrated Airport Systems at 28 (2008); Van Nuys Airport in Los Angeles, California, for example, is a reliever airport for Los Angeles International Airport (LAX), see id. at App'x A-22. Under the Amendments, that condition will also be presumed satisfied if the other airport has been designated by the FAA as a secondary airport. 73 Fed.Reg. at 40,445/2. A secondary airport is an alternative to a primary airport for commercial and general aviation, see 2009-2013 National Plan at 28; LA/Ontario International Airport in Ontario, California is a secondary airport for LAX, see Appendix to Notice, Docket No. FAA-2008-0036-0007.1 (Jan. 23, 2008). Allowing an airport to include the costs of facilities under construction and of secondary airports in its rate base enables the airport to raise the landing fee it charges. Price Structure. Increasing the landing fee will decrease the number of flights landing at an airport, but the DOT also has an interest in ensuring airports accommodate the flying public. Currently an airport may base its landing fees only upon the weight of the aircraft, which usually gives the airline little or no incentive to schedule fewer flights with more passengers on each. For example, at Chicago O'Hare International Airport the fee to land a Boeing 757-200, a midsize jet that seats about 200 passengers, is $520, or about $2.60 per passenger; landing a Canadair CRJ200, a regional jet that seats about 50 passengers, costs $120, or about $2.40 per passenger. See Katherine Ashley & Ian Savage, Pricing Congestion for Arriving Flights at Chicago O'Hare Airport, 12 J. Air Transp. Mgmt. 36, 40 (2010). E.g., the 20-cent difference in price per person per flight is unlikely to alter the choice of aircraft. Each flight, regardless of the number of passengers on board, imposes a cost upon all the other airlines serving the same airport and upon their passengers. The DOT wants to reduce congestion but also wants to accommodate as many passengers as possible consistent with reduced congestion. The Amendments, therefore, provide an incentive for airlines to offer fewer flights with more seats per aircraft, a practice called upgauging. This they do by authorizing an airport to institute a two-part landing fee consisting of a combination of a per-operation charge and a weight-based charge. 73 Fed.Reg. at 40,444-45. The per-operation ( i.e., per landing) charge is fixed because the number of landings an airport can accommodate in a given time does not vary greatly. The weight-based charge is variable, reflecting that marginal airport costs do tend to vary with aircraft weight. Steven A. Morrison, The Structure of Landing Fees at Uncongested Airports: An Application of Ramsey Pricing, 16 J. Transport Econ. & Pol'y 151, 151 (1982); see A.A. Walters, AirportsAn Economic Survey, 12 J. Transport Econ. & Pol'y 125, 133 (1978). Varying the Price. Finally, the Amendments allow an airport to use these new pricing techniques only during peak periods because there is no reason to alter the incentives facing off-peak users. This concept is not unfamiliar to airlines; prices for flights frequently vary depending upon the time of day, in line with the variation in demand. The practice is common in other industries, as well. For example, mobile phone plans typically allot a different number of minutes for calls at peak versus off-peak times. The Amendments encourage higher peak pricing only indirectly: During peak times, they allow an airport (1) to include the costs of secondary airports and unfinished projects, and hence to charge a higher price; and (2) to impose the two-part fee, including the per-operation charge. During other times, the airport will use the existing rate base and weight-based fee structure, resulting in lower fees at off-peak times. Specifically, the Amendments allow an airport to include in its rate base the costs of projects under construction and of a secondary airport only if doing so during congested hours would have the effect of reducing or preventing congestion and operating delays at [the primary] airport in those hours. 73 Fed.Reg. at 40,444-45. Similarly, the Amendments allow an airport to implement the two-part charge only if doing so reasonably allocates costs to users on a rational and economically justified basis. The Department gives the following example: The proportionately higher costs per passenger for aircraft with fewer seats that will result from the per-operation component of a two-part fee may be justified by the effect of the fee on congestion and operating delays and the total number of passengers accommodated during congested hours.[ [] ] 73 Fed.Reg. at 40,445. These three changesallowing an airport to include certain costs in the rate base for determining landing fees during congested hours, instituting the two-part fee structure, and permitting landing fees to vary throughout the dayare the basic elements of the DOT's plan to decrease congestion. The ATA argues that each one is facially inconsistent with one or more statutes.