User Fees and Air Travel

Edward Glaeser makes the case for financing the FAA and the TSA through user fees:

The time-honored economic principle is that efficiency requires people to pay the costs of their actions. Frequent fliers should cover the expenses that their lifestyle imposes on others, such as increasing the length of security lines. If the entire cost of the FAA and the TSA were paid for with fees for each flight segment, the segment charge would be $35, which would replace the current mixture of gas taxes and fees that rise with ticket prices.

There is a solid economic case for primarily using per- ticket charges because more-expensive seats don’t impose wildly higher costs on the TSA, the FAA or other passengers.

One concern, however, is about cost growth. In an ideal world, Glaeser’s segment charge would remain stable over time, or even decline. Assuming the FAA and the TSA are given the authority to raise the segment fees as they choose, it is not unreasonable to assume that they would choose to raise them every year rather than press for increases in efficiency. As Chris Edwards notes, Canada’s air-traffic control system is run by a nonprofit corporation, Nav Canada. Despite the fact that Nav Canada is a monopoly, growth in costs and charges have been restrained. And interestingly, Nav Canada doesn’t rely on segment charges of the kind Glaeser has in mind:

The 1996 privatization of Canada’s ATC system replaced a government ticket tax with direct charges on aircraft operators for services provided. Nav Canada’s $1.2 billion in revenues comes from charges for en route and terminal services. Thus, airlines get charged for flying through Canadian airspace and for landing at Canadian airports. For example, an airline flying an Airbus A330 from New York to Frankfurt through Canadian airspace would be charged $1,756.

As Tyler Duvall has argued, landing fees create an opportunity for innovative pricing schemes designed to minimize congestion:

In continuing with this warped pricing apparatus, the aviation system has neglected one very promising option for both reducing congestion and increasing airport revenues. Since only one plane can take off or land from a given runway at a given time (and since take-offs and landings must also be spaced out to avoid collisions), airport authorities have to allocate the use of their runways over the course of each day. They generally do this on a first-come, first-served basis, rather than by charging airlines directly for take-offs and landings (since the airlines already pay for space, overhead, the standard weight-based charge, and other costs). But if airports instead divided each day into take-off and landing “slots” (each being the amount of time a plane would require to depart or arrive), and charged the airlines for using the most coveted peak-time slots, they might be able to both manage demand and raise funds that could then be used to increase capacity and improve infrastructure.

Unfortunately, it’s far from clear that a privatized FAA could impose such a strategy on airports, which have resisted such pricing schemes in the past.

Reihan Salam — Reihan Salam is executive editor of National Review and a National Review Institute policy fellow.

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