Uncertainty In Airport Funding

A quick look at the Kansas City Aviation Department’s (KCAD) financial statement shows that without money from the Airport Improvement Program (AIP), which the Federal Aviation Administration (FAA) distributes, the department would be on shaky financial ground. This program provides a large partition of money for projects that maintain or increase aviation capacity at airports. However, just as the Kansas City Aviation Department will require more, there may be less to go around.

KCAD is taking a risk by relying on the AIP to cover additional airport expenses. The Airport and Airway Trust Fund (AATF) funds both the AIP and 75 percent of the FAA’s operating budget. Sequestration has frozen growth in the FAA’s federal funding, requiring it to reach further into the AATF. More for the FAA means less for the AIP, which the FAA proposed to cut by 38 percent in 2013. To make matters worse, the FAA plans to cut grants to most large airports, such as Kansas City International Airport (MCI). The FAA has proposed an increase in the other federal programs to cover the gap, but this requires congressional action.

Should there be a reduction in the AIP without commensurate increases in other funds, it might require the Aviation Department to seek alternative funding sources for its proposed $1.2 billion terminal. This would likely mean greatly increasing landing fees. While the airlines pay these costs, they will respond by either raising ticket prices and/or reducing service. Should this not cover the increased debt, the KCAD will be hard-pressed to maintain the airport without local subsidies.

While federal law disallows the use of airport funds to support a city’s other expenses, there is no barrier to a city funding an airport. With the future of federal funds uncertain, airport planners should fully consider the effects of potential higher landing fees or taxpayer subsidies.