Opinion ID: 150469
Heading Depth: 2
Heading Rank: 1

Heading: Unreasonable and Discriminatory Fees

Text: An airport may not charge a fee that is unreasonable or unjustly discriminatory. See 49 U.S.C. § 40116(e)(2) (airport may collect only reasonable ... landing fees); 49 U.S.C. § 47107(a)(1) (airport must be available for public use on reasonable conditions and without unjust discrimination). The ATA argues that (1) including the costs of future facilities and of secondary airports in the rate base and (2) charging a two-part landing fee comprising a weight-based charge and a per-operation charge are each independently both unreasonable and unjustly discriminatory.
The ATA brings only a facial challenge to the Amendments, presumably because, as the parties related at oral argument, no airport has implemented the system of congestion pricing allowed by the Amendments. To prevail in a facial challenge, the ATA must establish that no set of circumstances exists under which the [Amendments] would be valid. Reno v. Flores, 507 U.S. 292, 301, 113 S.Ct. 1439, 123 L.Ed.2d 1 (1993) (quoting United States v. Salerno, 481 U.S. 739, 745, 107 S.Ct. 2095, 95 L.Ed.2d 697 (1987)). Therefore, to make its point that the DOT lacked authority to promulgate the Amendments, it is not enough to show there is a mere possibility an airport might apply the Amendments in such a way as to set an unlawful fee. Bldg. & Constr. Trades Dep't v. Allbaugh, 295 F.3d 28, 33 (D.C.Cir.2002). Pursuant to Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), we give substantial deference to the DOT's interpretation of a statute that requires it to ensure fees are reasonable but does not set standards for assessing reasonableness because the Secretary of Transportation, not the court, is charged with administering the federal aviation laws. Northwest Airlines, Inc. v. County of Kent, 510 U.S. 355, 366-67, 114 S.Ct. 855, 127 L.Ed.2d 183 (1994) (citing Chevron, 467 U.S. at 842-845, 104 S.Ct. 2778). The ATA would have us apply the specific standard used in Northwest, 510 U.S. at 369, 114 S.Ct. 855, which was based upon that in Evansville-Vanderburgh Airport Auth. Dist. v. Delta Airlines, 405 U.S. 707, 716-17, 92 S.Ct. 1349, 31 L.Ed.2d 620 (1972): A fee is reasonable ... if it (1) is based on some fair approximation of use of the facilities, (2) is not excessive in relation to the benefits conferred, and (3) does not discriminate against interstate commerce. As the DOT points out, however, the Court in Northwest was evaluating a particular set of fees imposed by a single airport before passage of the statute that requires the Secretary to establish the standards or guidelines [he will use] in determining... whether an airport fee is reasonable, Pub.L. No. 103-305, 108 Stat. 1569 § 113, 49 U.S.C. § 47129(b). The Court explained that because it [l]ack[ed] guidance from the Secretary [of Transportation] regarding how to evaluate the reasonableness of those fees, it had to look elsewhere for a standard. Northwest, 510 U.S. at 367, 114 S.Ct. 855. The Court expressly noted that when the Secretary creates a standard, as he has here, for determining whether fees are `reasonable'... his exposition will merit judicial approbation so long as it represents `a permissible construction of the statute.' Id. at 368 n. 14, 114 S.Ct. 855 (quoting Chevron, 467 U.S. at 842-45, 104 S.Ct. 2778). For the same reasons, we defer to the DOT's reasonable interpretation of the statutory prohibition of unjust discrimination.
An aircraft that lands at a congested time imposes a significant cost, in the form of delay, both upon other airlines that want to land aircraft at the same time and upon the passengers aboard those aircraft. Each additional aircraft seeking to land at that time adds to the congestion and imposes additional delays upon other users of the system. Meanwhile, the airline that successfully lands an aircraft at the peak time reaps a substantial benefit because it is able to offer a valuable service to its customers. As long as the costs to the airline landing the aircraft during a peak hour are less than the benefits to that airline, it will land the aircraft even if the total social costsincluding delays to other users of the systemexceed the total social benefits. See Garrett Hardin, The Tragedy of the Commons, 162 Science 1243 (1968). The ATA argues the fees authorized by the Amendments necessarily will be unreasonable because the Amendments do not comply with the principle, common in rate regulation, that an asset must be `used and useful' before it can be included in the rate base of a regulated utility. Mid-Tex Elec. Coop. v. FERC, 773 F.2d 327, 332 (D.C.Cir.1985) (citing Smyth v. Ames, 169 U.S. 466, 18 S.Ct. 418, 42 L.Ed. 819 (1898)). Neither an airport nor the DOT, however, is required to adhere to that principle. As the DOT argues, the relevant statutes require only reasonable and non-discriminatory fees, not fees based upon a particular form of cost recovery. We have explained elsewhere that the used and useful principle is simply one of several permissible tools of ratemaking, one that need not be, and is not, employed in every instance. Jersey Cent. Power & Light Co. v. FERC, 810 F.2d 1168, 1175 (D.C.Cir.1987) (en banc). Accordingly, an agency may depart from the `used and useful' standard in order to pursue another legitimate objective. Wash. Gas Light Co. v. Baker, 188 F.2d 11, 20 (D.C.Cir. 1951); see Mid-Tex, 773 F.2d at 346 (holding it reasonable, and consistent with the principle of used and useful, to include in the rate base certain funds for unfinished projects). We focus our inquiry not upon each asset included in the rate base, but rather upon whether the end result is reasonable. See Jersey, 810 F.2d at 1177-78; see also Fed. Power Comm'n v. Hope Nat. Gas Co., 320 U.S. 591, 603, 64 S.Ct. 281, 88 L.Ed. 333 (1944) (end result test for whether rates are just and reasonable). It is entirely reasonable to expect an airline, and in turn its passengers, to pay a premium for the opportunity to arrive at a peak time. If an airport is able to reduce congestion by using the two-part scheme and including in its rate base the costs of a future facility or of a secondary airport then, without more, it is impossible to say its increased landing fee must be unreasonable. The increased fee will drive other aircraft awaywhether in time or in spaceand thereby will benefit the airline that pays the fee to land at a peak time. Depending upon the actual amount of the fee, therefore, it may well be reasonable.
The ATA complains in various ways the Amendments will require an airline to subsidize its competitor, as though a cross-subsidy necessarily implies unjust discrimination. 49 U.S.C. § 47107(a)(1). The variation in the fees permitted by the Amendments need not be unjustly discriminatory, however. Each aircraft that lands at a particular airport during a particular hour will be subject to the same fee, adjusted only, as it is now, for weight. Although landing fees will vary from one airport to another and from one hour to another, the DOT has adequately justified such differences based upon variations in the degree of congestion at different airports and different times. First, the ATA complains that to include in an airport's rate base the costs of (1) a different but commonly owned airport or (2) an unfinished project is to force that airline to subsidize its competitors. The ATA's objection is implicitly based upon the principle that the total fees collected by an airport may not exceed the total costs incurred by the airport: If a primary airport includes in its rate base the cost of a secondary airport, then it must reduce its rate base in the second airport by an equal amount; similarly, if it includes the cost of a project under construction, then it may not recover the same costs again upon completion of the project. See 73 Fed.Reg. at 40,445/1-2. In each case the actual users of the facilities newly included in the rate base will pay lower fees than they would otherwise do. In other words, if the fees at one airport go up, then the fees at another must come down, and that is a subsidy for users of the secondary airport, including airlines that compete with the airlines that use the primary airport; likewise, the objection goes, present users paying for facilities to be used by future users subsidize them. The effect of the pricing scheme may look like a subsidy but it does not necessarily work an unjust discrimination, regardless whether all components of the rate base are actually used by the airlines that pay the landing fees, because off-peak users are not responsible for the costs of the present congestion or of any future expansion necessitated thereby. In an industry with high fixed costs it is not unreasonable or unjust for peak load users to pay more than off-peak users because the peak price is being used to allocate a scarce resource. See 1 Alfred E. Kahn, The Economics of Regulation: Principles and Institutions 89 (1970) (The off-peak users impose no such costs on society.... The necessity for expansion is imposed by the customers at the peak hours.). The ATA also argues a two-part fee will more adversely affect airlines with a business model dependent on the use of certain size aircraft flying at certain times of day or with certain frequencies. That is true, of course. An airline that lands a small aircraft at a peak time, however, imposes nearly as much cost upon the other users of the airport as does an airline that lands a larger aircraft. A landing fee increased to reflect that fact might make it unprofitable for the former airline to leave its present schedule and fleet unchanged, but that is the point of peak-load pricing, not a defect that makes the price differential unjustly discriminatory. We cannot, of course, rule out the possibility that an airport will implement a system of fees that complies with the Amendments but is nonetheless unreasonable or unjustly discriminatory. Because an airport can also implement the Amendments in a way that is reasonable and not unjustly discriminatory, however, the ATA's facial challenge must fail.