Red Rose

Rosebuds Blog

Why U.S. airports are in such disrepair

January 23, 2017
San Francisco International Airport
San Francisco International Airport

Infrastructure has been a major topic of discussion among business and political leaders for the past several years — particularly in the United States, where the degradation of infrastructure is trillions of dollars behind maintenance schedule.

The American Society of Civil Engineers have given U.S. infrastructure a grade of D+ and estimated the country must spend $3.6 trillion by 2020 to get up to snuff.

Travelers are privy to the problem because many U.S. airports are badly outdated (despite handling more passengers than any country in the world). Indeed, not a single U.S. airport is ranked in the top 25 in the world, and the country’s largest airports (including Chicago, Los Angeles and New York) are considered bottom-of-the-barrel when rated for traveler satisfaction. Politicians such as Donald Trump and Joe Biden, among others, have taken to calling U.S. airports Third World. But a recent Wall Street Journal article says that is an insult to many Third World airports that actually serve passengers better than some of the United States biggest airport. New York’s La Guardia Airport was offered as an example where traffic into the airport is “so nightmarish that passengers jump from cabs along the highway and schlep their bags on foot.”

Why does the problem persist at U.S. airports? That is a question that has been tackled by the Heritage Foundation, a conservative think tank. It studied the problem and come to some sobering conclusions. The overarching theme: U.S. airports are inhibited from running like normal businesses because of government involvement.

The Wall Street Journal story concurred that by global standards are terribly managed. The Journal offered this assessment: “Cities from London to Buenos Aires have sold or leased their airports to private companies. To make a profit, these firms must hold down costs while enticing customers with lots of flights, competitive fares and appealing terminals. The firm that manages London’s Heathrow, currently eighth in the international ranking, was so intent on attracting passengers that it built a nonstop express train to the city’s center. It’s also seeking to add another runway, as is the rival firm running Gatwick Airport.”

Both the Journal and Heritage Foundation point an accusatory finger at the fact that U.S. airports are typically run by politicians in conjunction with the dominant airlines, which help finance the terminals in return for long-term leases on gates and facilities. The Journal notes that “the airlines use their control to keep out competitors; the politicians use their share of the revenue to reward unionized airport workers. No one puts the passenger first.”

Consider that a local government or authority owns nearly every major U.S. airport. Even in heavily regulated European countries, about 75 percent of passenger traffic is funneled through airports that are entirely or partially owned by private parties.

Another obstacle airports face is the inequitable way they are funded in the United States, according to the Heritage Foundation. A portion of every the ticket sold (about 14 percent on average) goes to taxes and government fees. A large share of those levies is used to fund the federal Airport Improvement Program. That is the agency that supplies billions of dollars in grants for construction projects at U.S. airports. The problem: A disproportionate share of ticket tax dollars are transferred from the airports that people use most to those that are used least.

The Heritage Foundation reports that the top 60 airports in the United States carry 88 percent of the nation’s passengers, but receive only 27 percent of grants from the Airport Improvement Program. Non-commercial airports, whose fliers contribute nearly nothing to the program, receive 30 percent of the grants.

Besides disproportionate funding, the federal government overregulates airports’ business practices. One harmful rule prohibits airports from charging its customers a fee for using the airport, with the exception of a price-controlled and highly regulated Passenger Facility Charge.

“What other business is prohibited from charging its customers for its services?” the Heritage Foundation writes. “This forces airports to rely on highly regulated sources of government revenue and deals they cut with airlines, which have an interest in restricting access from competitors that might provide better or cheaper services for fliers.”

Airports are also required to get federal approval for new airport layouts, as well as what retailers are allowed to do business in their facilities.

The Heritage Foundation has recommended what it calls “simple reforms” that would significantly improve the funding and regulatory environment for U.S. airports:

  • Eliminate burdensome regulations that restrict how airports can raise and spend revenues.
  • Reduce costly passenger taxes and eliminate inefficient federal grants.
  • Allow self-sufficiency and privatization to move U.S. airports toward a modernized, free-market funding system.

The good news is that San Francisco Bay Area travelers can select from a trio of airports (in Oakland, San Francisco and San Jose) and — at least by U.S. airport standards — they are efficient, customer friendly and have multiple transportation options.