Notice2023-26809
FAA Policy Regarding Air Carrier Incentive Program
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
December 7, 2023
Effective
December 7, 2023
Issuing agencies
Transportation DepartmentFederal Aviation Administration
Abstract
This policy statement updates FAA policy regarding incentives offered by airport sponsors to air carriers for improved air service. It is longstanding practice for airport operators to offer incentives to air carriers to promote new air service at an airport, including both new air carriers serving the airport and new destinations served. The updated policy statement supersedes the 2010 Air Carrier Incentive Program Guidebook. The policy statement includes general principles to assess whether an airport sponsor's air carrier incentive program (ACIP) complies with the sponsor's FAA grant assurances. It also includes guidance on the permissibility of various specific aspects of an ACIP, as well as ACIP implementation.
Full Text
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[Federal Register Volume 88, Number 234 (Thursday, December 7, 2023)]
[Notices]
[Pages 85344-85357]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-26809]
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DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
[Docket No. FAA-2022-1204]
FAA Policy Regarding Air Carrier Incentive Program
AGENCY: Federal Aviation Administration (FAA), DOT.
ACTION: Final policy statement.
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SUMMARY: This policy statement updates FAA policy regarding incentives
offered by airport sponsors to air carriers for improved air service.
It is longstanding practice for airport operators to offer incentives
to air carriers to promote new air service at an airport, including
both new air carriers serving the airport and new destinations served.
The updated policy statement supersedes the 2010 Air Carrier Incentive
Program Guidebook. The policy statement includes general principles to
assess whether an airport sponsor's air carrier incentive program
(ACIP) complies with the sponsor's FAA grant assurances. It also
includes guidance on the permissibility of various specific aspects of
an ACIP, as well as ACIP implementation.
DATES: This final policy statement is effective December 7, 2023.
ADDRESSES: For information on where to obtain copies of documents and
other information related to this policy statement, see ``How To Obtain
Additional Information'' in the SUPPLEMENTARY INFORMATION section of
this document.
FOR FURTHER INFORMATION CONTACT: Kevin C. Willis, Director, Office of
Airport Compliance and Management Analysis, ACO, Federal Aviation
Administration, 800 Independence Avenue SW, Washington, DC 20591,
telephone (202) 267-3085; facsimile: (202) 267-4629.
SUPPLEMENTARY INFORMATION: Airports obligated under the terms of an
Airport Improvement Program (AIP) grant agreement include virtually all
commercial airports in the United States. At each of these airports,
the airport sponsor must ensure that an air carrier incentive program
(ACIP) is consistent with the sponsor's FAA grant agreements, including
standard Grant Assurances relating to economic discrimination,
reasonable fees, and use of airport revenue. In the 1999 Policy and
Procedures Regarding the Use of Airport Revenue, the FAA provided that
certain costs of activities promoting new air service and competition
at an airport are permissible as a tool for commercial airports to
establish or retain scheduled air service. In the 2010 Air Carrier
Incentive Program Guidebook, the FAA provided more detailed guidance on
both the use of airport revenue and the temporary reduction or waiver
of airport fees as an incentive for carriers to begin serving an
airport or begin service on a route not currently served from the
airport. A number of U.S. airport sponsors have used ACIPs in recent
years, and the agency had the opportunity to review many of these
programs for consistency with the sponsor's grant agreements, Grant
Assurances, and other Federal obligations. Based on that experience,
the FAA is publishing its revised agency policy on ACIPs.
I. Authority for the Policy
This policy is published under the authority described in title 49
of the United States Code, subtitle VII, part B, chapter 471, section
47122(a). The policy will not have the force and effect of law and is
not meant to bind the public in any way, and the publication of this
policy is intended only to provide information to the public regarding
existing requirements under the law and agency policies. Mandatory
terms such as ``must'' in this notice describe established statutory or
regulatory requirements.
II. Background
A. Overview of Air Carrier Incentive Programs
Airports and communities of all sizes use air carrier incentives in
order to attract new air service. Incentives may be offered to new
entrant carriers to begin service at an airport or to incumbent
carriers at an airport to add new routes. Incentives may apply to
international or domestic service.
ACIPs can be divided into two primary categories: programs funded
by the airport itself (``airport-sponsored incentives'') and those
funded by the local community (``community-sponsored incentives''). The
primary distinction between these two groups relates to the funding
used for an incentive. For airport-sponsored incentives using airport
funds, the use of the funds must comply with the requirements of
Federal law and FAA grant agreements for use of airport revenue. In
contrast, community-sponsored incentives using non-airport funds may be
used in a broader set of ways. Community-sponsored incentives have been
funded by various community groups, including local governments, local
chambers of commerce and tourism organizations and local businesses.
Airport-sponsored incentives largely involve a reduction or waiver of
landing fees and other airport fees. Airport sponsors may also
contribute to marketing programs, provided the marketing focuses on the
airport rather than destination marketing. Community-sponsored
incentives can include more direct financing of routes, including
minimum revenue guarantees, travel banks, and marketing funding that
may include destination marketing. Another
[[Page 85345]]
important distinction is the role played by the airport sponsor. The
sponsor may have a direct management role of the airport-sponsored
incentive program, or a limited role advising the non-airport entity
responsible for the community-sponsored incentive program.
B. Federal Obligations
Airport sponsors that have accepted grants under the AIP have
agreed to comply with certain Federal requirements included in each AIP
grant agreement as sponsor assurances. The Airport and Airway
Improvement Act of 1982 (AAIA) (Pub. L. 97-248), as amended and
recodified at 49 U.S.C. 47101 et seq., requires that the FAA obtain
certain assurances from an airport sponsor as a condition of receiving
an AIP grant. Several of these standard Grant Assurances relate to the
extent to which an airport sponsor can provide incentives to an air
carrier in return for new air service at the airport.
Grant Assurance 22: Economic discrimination: Grant Assurance 22,
paragraph 22.a. requires the airport sponsor to allow access by
aeronautical operators and services on reasonable terms and without
unjust discrimination. Paragraph 22.e. of Grant Assurance 22 further
requires: ``Each air carrier using such airport . . . shall be subject
to such nondiscriminatory and substantially comparable rules,
regulations, conditions, rates, fees, rentals, and other charges with
respect to facilities directly and substantially related to providing
air transportation as are applicable to all such air carriers which
make similar use of such airport and utilize similar facilities,
subject to reasonable classifications such as tenants or non-tenants
and signatory carriers and non-signatory carriers.''
The FAA has determined that a carrier starting new service at an
airport is temporarily not similarly situated to carriers with
established route service at the same airport. Accordingly, an airport
sponsor may offer a waiver or reduction of fees and jointly market new
service, for a fixed time and within certain limits, without unjustly
discriminating against carriers not offering new service and not
participating in the air carrier incentive program.
Grant Assurance 22 also serves to prohibit an airport sponsor from
charging carriers and other operators not participating in an incentive
program for any costs of an air carrier incentive program. Charging
non-participating operators for the costs of an incentive would be a
cross-subsidy of the incentive program, and therefore not a reasonable
fee component for nonparticipating operators.
The FAA's Policy Regarding Airport Rates and Charges provides
detailed guidance on the acceptable components of carrier and other
aeronautical user fees. Any ACIP adopted under this Policy must conform
to the Policy Regarding Airport Rates and Charges.
Grant Assurance 24, Fee and Rental Structure: Grant Assurance 24
generally requires that an airport sponsor maintain an airport rate
structure that makes the airport as self-sustaining as possible. For
purposes of planning and implementing an ACIP, the airport sponsor must
assure that a marketing program to promote increases in air passenger
service does not adversely affect the airport's self-sustainability and
the existing resources needed for the operation and maintenance of the
airport. The Policy Regarding Airport Rates and Charges provides
further guidance on compliance with Grant Assurance 24.
Grant Assurance 25, Airport Revenues: Grant Assurance 25, which
implements 49 U.S.C. 47107(b), generally requires that airport revenues
be used for the capital and operating costs of the airport or local
airport system. Title 49 U.S.C. 47133 imposes the same requirement
directly on obligated airport sponsors. The FAA Policy and Procedures
Regarding the Use of Airport Revenue (Revenue Use Policy), in section
V.A.2, provides that expenditures for the promotion of an airport,
promotion of new air service and competition at the airport, and
marketing of airport services are legitimate costs of an airport's
operation. Air carrier operations are not a capital or operating cost
of an airport; therefore, use of airport revenue for a carrier's
operations is a prohibited use of airport revenue. Accordingly, while
an airport sponsor can assume certain marketing costs relating to
service at the airport, the sponsor may not make payments in any form
from airport revenue to a carrier for operating at the airport,
including for providing air service at the airport.
C. Related Federal Programs
Essential Air Service Program: Following deregulation of the
airline industry, the Essential Air Service (EAS) program was put into
place to guarantee that communities that were served by certificated
air carriers before airline deregulation maintain a minimal level of
scheduled air service. The United States Department of Transportation
(Department) implements this program by subsidizing at least a minimum
of daily flights from each designated EAS community/airport, usually to
a large- or medium-hub airport, except for within Alaska. As of May
2023, the Department subsidizes commuter and air carriers, and air
taxis to serve 61 communities in Alaska and 111 communities in the 48
contiguous states and Puerto Rico that otherwise would not receive any
passenger air transportation. Because the EAS program largely involves
Federal payments to air carriers, the EAS program does not affect the
responsibilities of an airport. Eleven (11) communities receive
funding, via grant agreements, through the Alternate Essential Air
Service (AEAS) program. Those 11 communities obtain their own air
service, currently all from a commuter air carrier, operating all
flights as public charters under DOT Part 380 regulations.
Small Community Air Service Development Program. The Small
Community Air Service Development Program (SCASDP) is a Federal grant
program designed to provide financial assistance to small communities
to help them enhance their air service. The program is managed by the
Associate Director, Small Community Air Service Development Program,
under the Office of Aviation Analysis, in the Office of the Secretary
of Transportation. Grantees must be public entities and can include
local governments and airport operators. Grant funds may be used for a
variety of measures to promote air service and are dispersed on a
reimbursable basis. SCASDP grant funds are not airport revenue and may
be used for purposes for which airport revenue is prohibited, including
direct subsidy of air carrier operations.
Holding a SCASDP grant does not affect an airport sponsor's
obligations under its AIP grant agreements. The Department's order
awarding SCASDP grants states that a SCASDP grant does not relieve the
airport sponsor from the obligation to use airport revenues only for
purposes permitted by the AIP Grant Assurances and Federal law.
Accordingly, if airport revenues are used as local match funds for a
SCASDP grant, those funds remain subject to Grant Assurance 25;
however, this would not prevent an airport sponsor using airport
revenue as a local match to SCASDP grants similar to airport revenue
being used as a local match to AIP grants. This permits airport
sponsors to pursue reasonable strategies to promote the airport and
provide incentives to encourage new air service.
[[Page 85346]]
D. The 2010 Air Carrier Incentive Guidebook
Previous FAA policy on ACIPs was published in the Air Carrier
Incentive Program Guidebook, issued in September 2010 (and referred to
below as ``the Guidebook'' or ``the 2010 Guidebook''). While the
Guidebook served as a useful description of FAA policy on ACIPs, with
the publication of this policy update, the FAA is grounding the policy
more in basic principles rather than in a detailed list of prohibited
practices. The intention is to provide more flexibility for airport
sponsors to design particular incentive programs while remaining in
compliance with Federal obligations regarding economic discrimination,
reasonable fees, and use of airport revenue.
E. FAA Experience With ACIPs
In the last 20 years, and particularly since the publication of the
2010 Guidebook, there has been a proliferation of ACIPs. ACIPs have
been implemented at more than 250 U.S. commercial service airports.
Some airport sponsors have used ACIPs on occasion or intermittently,
while others have maintained ACIPs on a recurring and renewable annual
basis. ACIPs have been used at smaller airports seeking to acquire and
maintain any level of air carrier service, while sponsors of larger hub
airports have also used ACIPs to add to existing service patterns.
While most ACIPs have complied with Federal obligations as outlined in
the 2010 Guidebook, several practices have raised issues of compliance:
<bullet> There have been cases where an airport sponsor has sought
service from a specific air carrier and tailored its ACIP for that
purpose, which can present an issue of unjust discrimination.
<bullet> While sponsors have avoided direct cash subsidies to
carriers, some ACIPs have included incentives that could be seen as
efforts to circumvent the clear prohibition on the use of airport
revenue for subsidy of carrier operations.
<bullet> Sponsors have made direct cash payments to carriers for
marketing costs under a joint marketing program without appropriate
documentation.
<bullet> Use of a sponsor's community funds for practices such as
airline subsidies and revenue guarantees for a carrier may be
inconsistent with the sponsor's Grant Assurances.
<bullet> Sponsors have entered into incentive arrangements with a
carrier with no notice to the public or other carriers of the terms of
the incentive program. Non-participating carriers may have no means of
determining whether and how the incentive program affects aeronautical
fees at the airport.
In consideration of agency experience with the oversight of ACIPs
in recent years, the FAA is issuing this restatement of the agency
policy on ACIPs.
F. Summary of the Notice of Proposed Policy
The FAA published a proposed policy on ACIPs on February 3, 2023,
with a request for public comment. The proposed policy articulated five
general principles to summarize the framework under which an airport
sponsor can implement an ACIP:
<bullet> Discrimination between carriers participating in an ACIP
and non-participating carriers must be justified and time-limited.
<bullet> A sponsor may not use airport revenues to subsidize air
carriers.
<bullet> A sponsor may not cross-charge non-participating carriers
or other aeronautical users to subsidize ACIP carriers.
<bullet> The terms of an ACIP should be made public.
<bullet> Use of airport funds for an incentive program must not
adversely affect the resources needed for operation and maintenance of
the airport.
The proposed policy also included a number of updates and
clarifications, several of which differ from the material in the 2010
Guidebook. Key provisions in the proposed policy include:
<bullet> Revising the definition of new service to comprise ``any
nonstop service to an airport destination not currently served with
nonstop service, or any service to an airport by a new entrant
carrier.'' This proposed definition would modify the definition in 2010
Guidebook primarily by eliminating increased frequencies from the
definition of new service, and by clarifying that only nonstop service
qualifies.
<bullet> Allowing incentives for three seasons (up to three years
from the start of service) for seasonal service, which is defined as
service offered for less than six months of the year.
<bullet> Clarifying that an ACIP may be offered for new cargo
service, separate from any ACIP offered for new passenger service.
<bullet> Clarifying that incentives may be based on the number of
passengers actually carried or the seat-miles associated with new
service, as long as they are constructed in a way that avoids unjust
discrimination and so that the resulting reduction in fees does not
exceed the amount of the standard fees the carrier receiving the
incentive would have been charged without the incentive.
<bullet> Articulating expectations for ACIP transparency, including
the disclosure of proposed ACIPs and incentives granted.
<bullet> Modifying the 2010 Guidebook's prohibition of airport
sponsor staff from assisting or advising a non-airport entity on an
ACIP that used general community funds, and clarifying the
circumstances and limitations under which an airport sponsor can
provide technical assistance to non-airport entities.
<bullet> Clarifying that payments of marketing and advertising
costs directly to a carrier under an ACIP will be considered a
prohibited diversion of airport revenue, and allowing payments of
airport revenue for marketing only to the entity providing the
marketing services.
<bullet> Modifying the expected process for airports with a limited
ACIP budget that may limit incentives to a single carrier so that a
request for proposals (RFP) process is no longer the stated preferred
way to award the incentive. Instead, the availability of an ACIP, along
with any limitations, needs to be publicly disclosed at least 30 days
prior to entering an agreement with a carrier. Another difference from
the 2010 Guidebook is that the proposed policy in this area does not
distinguish based on an airport's size.
<bullet> Clarifying that airport sponsors have discretion as to
whether their ACIP applies to an air carrier restarting service that
was previously subject to an incentive but had been canceled due to
various reasons.
<bullet> Allowing carrier incentives that were initiated prior to
the issuance date of the new policy to continue until they expire, as
long as they complied with the FAA's previous policy guidance (with a
maximum timeframe of two years, consistent with the 2010 Guidebook).
However, incentives initiated on or after the issuance date of the
final policy must conform to the guidance in the final policy
statement.
The FAA also requested comments on whether incentives for upgauging
to a larger aircraft type should continue to be allowed consistent with
the petition partially granted to the Clark County Department of
Aviation, Nevada, in 2012.
The proposed policy also addressed several other aspects of ACIPs
and the ACIP process.
The FAA invited comments on the proposed ACIP policy for 60 days,
and the comment period closed on April 4, 2023.
[[Page 85347]]
G. General Overview of Comments
The FAA received comments from 19 industry stakeholders. Commenters
included Airlines for America (A4A), the American Association of
Airport Executives (AAAE), Airports Council International--North
America (ACI-NA), 15 airport sponsors, and one private company. The
majority of individual airport sponsor comments represent large hub
airports; however, the FAA also received several comments from sponsors
for smaller airports.
Commenters generally supported the FAA's initiative to update its
ACIP policy and guidance given the evolution of the aviation industry
since the publication of the 2010 Guidebook. Most commenters,
particularly airport stakeholders, supported the FAA's stated goal of
providing additional flexibility to airport sponsors to design ACIPs
within the framework of the sponsors' federal obligations, although
there were differing perspectives on whether the proposed policy
accomplishes that goal.
Commenters had suggestions for modifications to several aspects of
the proposed policy. Some areas of the proposed policy generated
numerous and/or particularly strong comments, including:
<bullet> The definition of new service, particularly the exclusion
of new frequencies on routes that already have nonstop service;
<bullet> Procedures in cases where an ACIP has a limited budget and
can only be awarded to one carrier;
<bullet> Incentives for upgauging, as well as incentives that vary
based on passengers or seat-miles;
<bullet> ACIP transparency expectations;
<bullet> Technical assistance for non-airport entities; and
<bullet> Whether funds can be paid directly to an air carrier as
part of a marketing incentive.
Comments on these and other areas of the proposed policy, as well
as the FAA's responses and, in some cases, changes to the proposed
policy, are discussed in greater detail below.
III. Discussion of Public Comments and the Final Policy
The FAA has made changes to this policy in response to comments
made by the public. Some of the changes are to terminology to improve
clarity, while other more substantive changes are in response to
comments raised by stakeholders. Summaries of the comments and the
FAA's responses are grouped by category in the following subsections.
A. Policy Approach, ACIP Flexibility and Guiding Principles
ACI-NA and four individual airport sponsors affirmed their support
for the FAA's stated goal of providing more flexibility to airport
sponsors, but commented that they believe the proposed policy did not
live up to this intention. These commenters recommended that the FAA
adopt less prescriptive language in order to place fewer limits on
airport sponsors' ability to design ACIPs. ACI-NA went on to request
that the FAA clearly state that the final policy has no force of law
and eliminate any suggestion that airport sponsors must comply with it.
Tampa International Airport (TPA) requested that the policy
explicitly reaffirm that certain uses of airport revenue are
permissible in accordance with the Revenue Use Policy.
The FAA notes that without a policy that articulates criteria for
which incentives are allowed, there would be no protected ACIPs, as
such programs are inherently discriminatory. Grant Assurance 22
prohibits unjust discrimination and requires substantially comparable
fees for all air carriers that make similar use of the airport and
utilize similar facilities (subject to reasonable classifications such
as tenants or non-tenants and signatory carriers and non-signatory
carriers). The FAA is providing this policy to guide airports regarding
the FAA's interpretation of the grant assurances and to avoid unjust
discrimination.
For further clarity, and to address TPA's comment, the FAA has
added a sentence to the second principle in the policy affirmatively
stating, ``Fee reductions, fee waivers, and marketing assistance as
incentives to new service are permitted to the extent described in the
Policy and Procedures Concerning the Use of Airport Revenue.''
Regarding ACI-NA's comment about the final policy having no force
of law, the notice of proposed policy contained the following
statement: ``The policy proposed under this notice will not have the
force and effect of law and is not meant to bind the public in any way,
and the notice is intended only to provide information to the public
regarding existing requirements under the law and agency policies.
Mandatory terms such as ``must'' in this notice describe established
statutory or regulatory requirements.'' The FAA has maintained a
similar statement in the ``Authority for this Policy'' section of this
final policy statement.
B. Definitions
New Service: There were numerous comments on the definition of new
service, particularly focused on whether additional service to existing
markets should be included as eligible for an ACIP.
A4A and Rick Husband Amarillo International Airport (AMA) commented
that the proposed policy's definition of new service was too broad.
Some A4A members and AMA believe that new entrants who did not
previously serve an airport and enter a market that already has nonstop
service should not be eligible for incentives, as this may unfairly
advantage the new entrant carrier at the expense of the incumbent
carrier on the route.
ACI-NA, AAAE, and nine airport sponsors commented that the proposed
policy's definition of new service was too restrictive. All of these
commenters believe that ACIPs should be permitted to provide incentives
for frequency increases in existing markets, as stated in the 2010
Guidebook. Several commenters specifically raised discrimination
concerns or questions about situations where a new entrant carrier
(that previously did not provide any service to an airport) could
receive an incentive for starting service on a route that already had
nonstop service from another carrier, whereas a carrier that already
serves a different market from that airport could not receive an
incentive for starting service on that same route. Similarly, several
commenters believe that incumbent carriers should be eligible for
incentives if they add frequencies in markets that they already serve.
Some commenters had specific suggestions to limit the applicability
of incentives for additional frequencies. Denver International Airport
(DEN) recommended setting a minimum increased frequency that would
qualify as an incentive, such as 50% over the previous year, and
specifying the markets that qualify. Similarly, the Metropolitan
Washington Airports Authority (MWAA) and the City of Phoenix Aviation
Department (PHX) suggested that increased frequency incentives would be
most appropriate for markets that the airport sponsor identifies as
underserved.
Multiple commenters linked their comments on incentives for
frequency increases to incentives for upgauging, noting that both
represent increases in capacity in markets that already have nonstop
service and therefore it is logical that either both types of
incentives be permitted or both types be prohibited.
[[Page 85348]]
Finally, ACI-NA also commented that the definition of new service
should be expanded to include direct, one-stop service. Houston Airport
System (HAS) had a similar comment, noting that international air
service to interior U.S. destinations in particular may often begin on
a one-stop basis and that cargo service often has enroute stops. DEN
also requested clarification about whether ``any service by a new
entrant carrier'' includes both direct and nonstop service.
The FAA recognizes the logic in maintaining a consistent approach
between different forms of additional capacity on existing routes, and
that in many cases increased capacity on an existing route can be very
valuable to an airport and the community it serves. At the same time,
the FAA believes that there is a distinction between, on the one hand,
a route going from twice a week service to daily service (or daily
service to three times a day service), and, on the other hand, a route
going from 10 flights a day to 12 flights a day. Therefore, the FAA has
modified the definition of new service in the final policy to include
``a significant increase in capacity on preexisting service to a
specific airport destination'' as permissible for airport sponsors to
include in an ACIP. While the FAA is leaving the definition of
``significant'' to each airport sponsor to articulate in its ACIP based
on local circumstances, the agency encourages sponsors who choose to
offer incentives for frequency increases to consider defining a
threshold percentage increase in order to qualify for incentives.
The FAA has also added language to the Service Frequency section of
the final policy to clarify that if an airport sponsor chooses to offer
incentives for frequency increases on preexisting service, these
incentives:
<bullet> Are limited to one year;
<bullet> May not discriminate based on whether the frequency
addition is from a carrier that already serves the route;
<bullet> Cannot be the only type of incentive in a sponsor's ACIP;
and
<bullet> Should only apply to the increased frequencies to the
extent that those frequencies result in a significant net increase in
seat capacity to the specific airport destination. (In other words, if
a carrier adds frequency on smaller aircraft so that there is not a
significant increase in seat capacity, the frequency increase would not
be eligible for an incentive.)
The FAA is not adopting the suggestion to expand the proposed
definition of new service to incorporate one-stop service in addition
to nonstop service. While the FAA understands that there may be some
value in one-stop service as a way for an air carrier to test a market,
the value of one-stop service is significantly lower than nonstop
service from a passenger's perspective. In addition, the FAA is
concerned that, in a predominantly hub-and-spoke aviation system, the
different combinations and permutations of one-stop service would make
this very difficult to monitor.
Seasonal Service: A4A and San Diego International Airport (SAN)
both supported the proposed definition of seasonal service. However,
DEN and the Greater Orlando Aviation Authority (MCO) commented that the
International Air Transport Association (IATA) summer season lasts
approximately seven months, from March to October and suggested that
the FAA should define seasonal service as being offered less than seven
months per year rather than six months, as in the proposed policy.
The FAA agrees with the logic of matching IATA seasonal definitions
and has modified the final policy to define seasonal service as nonstop
service offered for less than seven months of the calendar year.
New Entrant Carrier and Incumbent Carrier: ACI-NA objected to the
proposed policy's definition of ``new entrants'' on the grounds that
there is a definitional gap between incumbent carriers (who are defined
as ``actively providing service'') and new entrant carriers (who are
defined as ``not previously providing any air service'') because a
carrier could have provided air service to a particular airport in
prior years, but not be actively flying to that airport. ACI-NA
recommended that the FAA not define ``new entrant carrier'' and
``incumbent carrier'' in this policy and instead allow individual
airport sponsors to define these terms in their ACIPs. ACI-NA also
commented that some air carriers have recently begun serving smaller
communities by contractual arrangement with bus companies and requested
that such service be eligible for incentives if it sold by air
carriers, even if it is not aeronautical.
Two airport sponsors, TPA and the Port of Seattle (SEA),
recommended modifying the new entrant definition so that new entrants
can be considered carriers that are new to a particular market rather
than a new carrier at a sponsor airport; several airports raised
similar comments under the new service definition.
The FAA's intent in defining new entrants as carriers who were
``not previously providing any air service'' was that the new entrant
carrier was not providing air service to the particular airport
immediately prior to starting service. To clarify, the FAA has modified
the final policy to use the word ``currently'' consistently to refer to
the state of air service at the origin airport immediately prior to the
execution of an incentive agreement (and has defined the term
accordingly). In addition, the flexibility that the policy affords to
airport sponsors regarding choosing whether to offer incentives for the
restart of service that had previously been offered at the airport
should help address the concern about the definitional gap. The FAA is
not expanding the definition of carriers to include bus operators. Bus
service is not considered to be aeronautical activity and is not ``a
local facility owned or operated by the airport owner or operator.''
Accordingly, use of airport revenue and resources to incentivize bus
service would be inconsistent with the requirements for the use of
airport revenue. The FAA believes that the modifications in the final
policy to allow incentives for incumbent carriers who add service in
markets that they did not previously serve effectively address the
comments from TPA and SEA on the new entrant definition.
Preexisting Service: SAN commented that there should be a threshold
of at least two flights per week on an annualized or a seasonal basis
in order to qualify as preexisting service. MWAA commented that the
seasonal service provisions should allow for a market to be considered
unserved during the months that the seasonal service does not operate
so that a carrier entering the market during the off-season could also
receive incentives.
The FAA believes that the modifications in the final policy to
allow incentives for significant frequency increases on preexisting
service obviates the justification for a minimum threshold for
preexisting service, as airport sponsors may offer incentives for
frequency increases, as long as they are consistent with the
limitations of the final policy. The FAA has modified the definition of
preexisting service to clarify that an airport destination served
nonstop on a seasonal basis is considered not to be currently served
nonstop in other months for the purposes of this policy.
Other Clarifications: The FAA has made several other clarifications
to the definitions and terminology throughout the policy. Based on
several comments, the proposed policy may have been unclear at times
when using the word ``airport'' whether the policy was referring to the
airport offering the incentive or the airport destination.
[[Page 85349]]
Therefore, the FAA has introduced and defined the term ``origin
airport'' as the airport which is offering an incentive under an ACIP
and clarified that references to the ``airport sponsor'' in the policy
are to the sponsor of the origin airport. The final policy also defines
``airport destination'' as the airport receiving new service from the
origin airport and uses that term consistently throughout the policy.
In response to comments from ACI-NA, HAS and MWAA, the FAA has also
clarified that it is permissible for ACIPs to define each airport
within a metropolitan area as a separate airport destination.
Finally, the FAA also re-ordered the definitions so that terms are
in alphabetical order.
C. Seasonal Service Applicability
Three airport sponsors commented that they support the proposed
policy's provision that permits incentives for up to three years for
new seasonal service to an airport destination that was previously
unserved. AAAE generally supports increased flexibility for incentives
for new seasonal service, but commented that the FAA should not be
prescriptive in terms of defining the eligible timeframe. TPA commented
that a two-year limit should be sufficient to establish a new seasonal
service in the market. A4A commented that seasonal service incentive
time limits should mirror time limits for other types of new service
(two years for previously unserved markets and one year for new service
in previously served markets).
The FAA believes that the rationale for allowing incentives for
seasonal service to continue for up to three years in order to build
the market remains valid, and therefore has finalized this aspect of
the policy as proposed.
D. New Entrant Incentives
The proposed policy reiterated the 2010 Guidebook in stating that
new entrants who begin nonstop service on a previously unserved route
from the origin airport can receive incentives for up to two years, and
that ACIPs may offer incentives to new entrant carriers for providing
service to an airport destination with preexisting service, while
excluding incumbent air carriers. In that case, the new entrant
incentives are limited to no more than one year.
PHX objected to the exclusion of incumbent carriers from incentives
that a new entrant carrier would be eligible for, and stated that an
airport should have flexibility to determine whether a destination
should be eligible for incentives, rather than limit incentives based
on whether the carrier is a new entrant. In addition, two commenters
asked for clarification regarding this provision. TPA asked what
happens if a second carrier begins nonstop service following the first
entrant in the same market but within the two-year incentive period and
specifically whether the first entrant would no longer be eligible for
a two-year incentive. MCO asked about a similar scenario, but whether
the second new entrant would also be eligible for two years of
incentives if minimal time has passed between start dates.
The FAA believes that the modifications to the new service
definition would allow ACIPs to provide incentives to incumbent
carriers who provide new service to an airport destination with
preexisting service. However, the FAA has retained the new entrant
language from the proposed policy, which gives airport sponsors
latitude to limit incentives to new entrants on routes with preexisting
service if they choose to do so, on the grounds that a new entrant
carrier is temporarily not similarly situated to an incumbent carrier
at the origin airport.
Regarding the questions raised by TPA and MCO, the FAA's
interpretation is that a second new entrant into a given market would
only be eligible for one year of incentives, as the airport destination
in question would no longer be ``not currently served nonstop from the
origin airport.'' The timeframe of incentives for the first new entrant
would need to be addressed according to the airport sponsor's ACIP and
the contract with the carrier. As discussed below, the FAA encourages
airport sponsors to define the criteria for the ``first air carrier to
establish service'' in their ACIPs in order to avoid disputes.
E. Procedures If ACIP Has a Limited Budget
ACI-NA, DEN, and SAN expressed support for the proposed policy's
provisions that permit airport sponsors of any size to limit incentives
to one carrier in cases where the sponsor has a limited budget,
provided that information regarding the ACIP, including the limited
availability, is disclosed at least 30 days prior to signing a contract
with a carrier. AAAE supports the flexibility to limit incentives but
commented that the FAA's proposed language on how to do so was too
restrictive.
A4A expressed general support for the disclosure provisions, along
with concern that the proposal may be insufficient to prevent
undisclosed dealings with a favored carrier. A4A recommended that the
policy state that disclosure is a requirement rather than an
expectation, that ``posting'' the ACIP on a website is insufficient and
should be replaced by direct communication to carriers, and that an
airport sponsor should not be allowed to commence individual carrier
discussions regarding incentives under a limited ACIP until after the
ACIP (including limitations) is disclosed. A4A also requested that the
FAA clarify what it means to be the first carrier to ``establish new
service'' or ``enter the market'' because these may have different
interpretations and pointed out that the proposed policy uses different
phrasing in the New Service vs Preexisting Service compared to the New
Entrant Carriers section. In contrast, ACI-NA recommended that the FAA
leave the interpretation of these phrases to the reasonable discretion
of airport sponsors.
The FAA believes that the proposed policy generally strikes an
appropriate balance between practicality and the benefits of
disclosure. The FAA remains convinced that it is appropriate for
disclosure to be an expectation rather than a requirement due to the
non-regulatory nature of this policy.
Regarding the definition of the ``first carrier'' that
``establishes new service'' or ``enters the market,'' the FAA agrees
with A4A that the language should be more consistent between the two
referenced sections of the policy (although not exactly the same
because the sections are describing different cases). The final policy
uses ``establishes service to the origin airport'' in the New Entrant
Carriers section. The FAA agrees with ACI-NA that the definition of
establishing service is best left to individual airport sponsors rather
than prescribed by the FAA; however, the FAA agrees with A4A that the
criteria should be clearly defined and disclosed. Therefore, the final
policy adds ``criteria by which the first air carrier to establish
service is determined'' to what airport sponsors are expected to
disclose at least 30 days prior to signing a contract with a carrier.
Finally, in response to comments discussed in the ACIP Transparency
section, and to be consistent with modifications made to that section
of the policy to clarify that airport sponsors are not expected to
disclose detailed air carrier incentives for specific routes in advance
of signing a contract, the FAA has removed language about posting
planned incentives as part of the disclosure expectations.
F. Service Frequency
The FAA received no comments on the proposed language to permit
airport sponsors to allow different incentive levels for different
frequencies of service
[[Page 85350]]
(e.g., three flights per week versus five flights per week), and has
maintained this language in the final policy.
The FAA has also expanded this section to describe the conditions
under which an airport sponsor may choose to offer incentives for
frequency increases on preexisting service, as detailed above under
Definitions.
G. Cargo Carriers
A4A, AAAE, and DEN all expressed support for the proposed policy's
clarification that it is not unjustly discriminatory for an ACIP to
distinguish between passenger and cargo carriers. The FAA has
maintained this language in the final policy.
H. Incentives Based on Number of Passengers or Seat-Miles
ACI-NA, along with three individual airport sponsors, expressed
support for the proposed policy regarding incentives that are based on
the number of passengers or seat-miles flown on new service. SAN, while
supporting the proposed policy, also commented that the FAA should also
consider incentives on a per passenger basis relative to the proportion
of total passengers that an incentivized airline carries at the
airport. A4A expressed strong opposition to these types of incentives,
alleging that they violate the Airline Deregulation Act (ADA), the
FAA's guiding principles on economic nondiscrimination, and the
prohibition on use of airport revenues to subsidize air carriers.
The FAA believes that the underlying rationale for these types of
incentives, as discussed in the proposed policy, continues to justify
incentives that vary based on passengers or seat-miles flown and that,
provided that ACIPs are not restricted to particular aircraft types,
these types of incentives do not violate the ADA or other restrictions.
In addition, the FAA notes that in many cases airport charges increase
based on the size of the aircraft or number of passengers carried, and
the policy limits fee reductions to the charges that an air carrier
would have otherwise incurred. The FAA has made minor wording changes
to this section in the final policy to improve clarity. Based on the
modification to the final policy to allow incentives for frequency
increases, the FAA believes that the scenario outlined by SAN in its
comment would generally be consistent with the policy, subject to
review of a particular incentive for discriminatory effect.
In the section on aircraft type, the FAA has clarified in the final
policy that incentives based on specific aircraft types are unjustly
discriminatory, in order to distinguish from incentives that vary based
on the size of an aircraft.
I. Incentives for Upgauging
ACI-NA, AAAE, and eight individual airport sponsors expressed
general support for upgauging incentives. Several of these individual
airport sponsors suggested specific limitations. MCO and the Gerald R.
Ford International Airport Authority (GRR) commented that incentives
for upgauging should be permitted if there is a net increase in service
offered. DEN suggested a minimum capacity increase threshold, such as
50 percent above the previous year, in order to qualify for an
upgauging incentive and that airport sponsors should clearly designate
markets that qualify. AMA similarly recommended limiting upgauging
incentives to cases where the new aircraft has at least 50 percent more
seats than the previous aircraft. In addition, AMA suggested
restricting upgauging incentives so that upgauging cannot be the only
incentive in the sponsor's ACIP, upgauging cannot be the only incentive
granted to a carrier for any specific incentive period, and the carrier
receiving an upgauging incentive cannot contract its schedule in order
to operate fewer flights with the larger aircraft or cancel other
routes to the airport during the incentive period. SAN does not take a
stance on upgauging incentives, but notes that upgauging could be a
useful tool for airports in the future to maximize airfield capacity.
A4A, ACI-NA, and TPA all noted that there is a link between
upgauging and frequency additions on preexisting service, in that both
represent capacity increases in markets that are already served, and
therefore they should be treated consistently. ACI-NA and TPA asserted
that incentives should be permitted in both cases. A4A stated that
upgauging does not fit the definition of new service in the policy as
proposed. However, A4A added that if the FAA does not adopt the
previously proposed definition of new service, then A4A takes no
position on whether incentives for upgauging should be permitted, as
their members have different views on the issue.
The FAA agrees with the commenters that there should be consistency
in the treatment of increased capacity in markets that are already
served. Therefore, in the final policy, the FAA adopts similar language
for upgauging as described for frequency additions above, which also
incorporates many of the suggestions from AMA, DEN, GRR, and MCO.
Specifically, if upgauging incentives are permitted as part of a
sponsor's ACIP, those incentives are limited to one year, and cannot be
the only incentive in the sponsor's ACIP. In addition, in order to
receive incentives, the upgauging must result in a significant net
increase in seat capacity to the airport destination involved. As in
the case of incentives for frequency increases, the FAA is leaving the
definition of ``significant'' to each airport sponsor to articulate in
its ACIP based on local circumstances, but encourages sponsors who
choose to offer incentives for upgauging to consider defining a
threshold percentage increase in order to qualify for incentives. The
FAA is not adopting AMA's suggested restriction that upgauging cannot
be the only incentive granted to a carrier for any specific incentive
period, but notes that an airport sponsor could choose to add that
provision in its published ACIP if deemed appropriate for its local
circumstances.
J. Legacy vs Low-Cost Carriers
The FAA received no comments regarding the proposed provision to
prohibit ACIPs from targeting carriers with particular types of
business models or being designed for a preferred carrier; the final
policy adopts this provision as proposed with one minor clarifying
change.
K. ACIP Transparency
A4A and five individual airport sponsors expressed general support
for the proposed policy's provisions regarding ACIP transparency.
However, several of these commenters also gave specific suggestions for
modifications in this area. A4A recommended that the policy state that
disclosure is a requirement rather than an expectation and that the
airport sponsor be required to provide direct notification to the air
carriers through their designated airport affairs representative, as
posting the ACIP on the airport sponsor's public website or notifying
industry trade groups may not constitute sufficient notification. A4A
also recommended expansion of the provision regarding airport sponsors
providing the necessary financial documentation to demonstrate that
there is no cross-charging and that an ACIP has no effect on rates and
charges of other aeronautical users. A4A stated that the only way to
demonstrate that landing fee and terminal rental waivers meet these
requirements is for the airport sponsor to include the associated
landed weight and/or terminal space in the rates and charges
calculation along with an associated credit for the waived fees, and
also suggested the addition of language
[[Page 85351]]
specifying that an ACIP may not reduce payments or credits that a non-
incentivized carrier would otherwise receive from the airport sponsor
in the absence of the incentivized service.
While supporting most of the transparency provisions, three airport
sponsors raised concerns that the proposed policy could be interpreted
as calling for airport sponsors to provide advanced notice of each
specific incentive agreement with an air carrier, which may be
impractical and raises competitive issues. ACI-NA and several other
airport sponsors also raised concerns or questions regarding this
issue. While expressing general support for transparency, West Virginia
International Yeager Airport (CRW) requested that the final policy
clarify that the airport sponsor may negotiate and adjust the published
ACIPs on a case-by-case basis (so long as the agreed-to elements of the
incentives comply with the ACIP policy), depending on the needs of the
airline and the airport for the new service offered.
ACI-NA, AAAE and five individual airport sponsors generally
objected to the transparency policy as proposed. Most of these
commenters expressed concern that the public disclosure provisions were
overly burdensome, in some cases impractical, and unnecessary because
the information is in many cases already publicly available or would be
obtainable through a public records request. Several of these
commenters suggested eliminating the transparency section entirely and
allowing airport sponsors to determine what and when to disclose. ACI-
NA expressed support for the public notice not being an ``absolute
requirement.''
Several stakeholders also raised clarifying questions regarding the
interpretation of proposed provisions regarding ACIP transparency. A4A
requested clarification on whether the transparency provisions are
intended to apply to air carriers as well as the public, noting
potential inconsistent use of terms in the proposed policy. DEN
requested clarification as to whether the policy calls for airport
sponsors to post incentives actually granted under incentive agreements
with carriers or incentives dispersed, since these may not be the same
thing. TPA requested that the FAA provide a more specific definition of
``periodic'' in terms of how frequently airport sponsors should post
listings of carriers benefiting from incentives. TPA also inquired
whether full incentive agreements and the financial documentation need
to be published as public notice documents.
The FAA believes that increased transparency is a necessary element
in the policy, both in terms of public availability before an ACIP is
implemented and disclosure once it is in effect, because the
transparency helps to ensure compliance with Grant Assurances 22, 23,
24, and 25 and related policies, including Rates and Charges and
Revenue Use. The policy attempts to strike a balance of setting an
expectation of reasonable disclosure without being overly burdensome.
The final policy largely adopts the proposed policy in this area with
some clarifications.
The intent of the policy is that airport sponsors disclose the
existence of an ACIP and its terms and conditions at least 30 days in
advance of signing an incentive agreement with a carrier so that all
carriers are aware of the existence of an incentive program and have an
opportunity to participate or raise concerns. However, there is not an
expectation for advance notice of a specific incentive agreement
because, as noted in several comments, such notice would potentially
prematurely disclose competitive commercial information. Such
information would be published periodically on a retroactive basis.
Therefore, the FAA has added a clause in the final policy to clarify
that advance notice of specific incentive agreements is not expected as
long as those agreements comply with the terms and conditions of the
previously published ACIP. The FAA notes that if an airport sponsor
were to adjust the published ACIP as a result of negotiations with a
particular air carrier so that the terms would be different than those
previously published, the FAA's expectation would be that the airport
sponsor would publish the revised terms of conditions of its ACIP at
least 30 days prior to signing an incentive agreement. Such a
modification of the terms of an ACIP for a specific carrier without
notice would potentially raise concerns of unjust discrimination.
In response to one of A4A's comments, the FAA is adding language to
the third guiding principle to clarify that non-incentivized carriers
may not be charged ``directly or indirectly'' for the costs of an ACIP
unless all non-participating carriers agree.
The FAA remains convinced that it is appropriate for disclosure to
be an expectation rather than a regulatory requirement due to the non-
regulatory nature of this policy. The FAA believes that posting an ACIP
on an airport sponsor's public website or providing information through
appropriate industry trade groups likely provides broader notice than
communicating an ACIP through the designated airport affairs
representative; notification through the airport affairs representative
may provide effective notice to incumbent carriers serving the airport,
but may not reach potential new entrant carriers, who would also be
interested parties.
Regarding A4A's comments requesting clarification, the transparency
provisions are primarily intended to apply to airport sponsors
disclosing information to air carriers, although the information should
be available to the broadest possible universe of carriers (i.e., those
who currently serve the airport and those who do not). To avoid
confusion, the final policy deletes the phrase ``for the public'' from
the first clause of the proposed policy on ACIP transparency. In
response to DEN's question about whether airport sponsors are expected
to post incentives granted or actual dispersed funds, the policy does
set expectations of posting the incentives granted undersigned
agreements, although nothing prevents an airport sponsor from also
disclosing the actual dispersed funds if the sponsor believes that
doing so would provide a more complete picture. A sponsor may also have
separate obligations to disclose rate information to incumbent
carriers. Regarding TPA's request for a more specific definition of
``periodic,'' the FAA expects each airport sponsor to determine a
reasonable frequency for publishing this information, given that a
``one size fits all'' solution is likely not appropriate as incentive
programs may be utilized differently at different airports. Similarly,
in response to TPA's inquiry about whether documents must be published
as public notice documents, the FAA is not prescribing particular means
of issuing notice and recognizes that local public information
requirements may vary, but whatever means are used must be effective in
advising carriers potentially eligible for or affected by the ACIP of
its existence.
L. Subsidies/Third-Party Costs
ACI-NA, GRR, and the Port Authority of New York and New Jersey
(PANYNJ) expressed opposition to the proposed policy's statement that
``a waiver or assumption of costs that would normally be charged by a
third party (ground handling, fuel, etc.) would be considered a subsidy
and is not permissible for an ACIP.'' ACI-NA commented that ``costs
that would normally be charged by a third party'' has different
meanings at different airports and states that the airport sponsor
should be able to waive costs such as ground handling or fuel service
fees under an ACIP when the sponsor is
[[Page 85352]]
the sole provider of those services at the airport. ACI-NA and PANYNJ
suggested that airport sponsors should be able to waive fees that the
sponsor charges to third parties that are then passed on to air
carriers. GRR commented that several successful incentive programs have
included ground handling waivers and airport sponsors should have
flexibility to provide such a waiver if/when appropriate.
The final policy makes no changes to the proposed policy in this
area. The FAA is concerned that permitting waivers of charges for
ground handling by a commercial operator would cross a line into
subsidies prohibited by the requirements for use of airport revenue.
Allowing the sponsor to pay these charges would also potentially result
in inequitable treatment across airports depending on whether the
airport sponsor is the sole provider of ground handling services.
Therefore, the final policy maintains the prohibition on including
costs that are normally charged by a third party, with ``normal''
having the meaning of standard practice industrywide.
M. Airport v. Non-Airport Revenues and Technical Assistance
A4A, AAAE, ACI-NA, and five individual airport sponsors expressed
general support for the FAA's proposed policy regarding distinctions
between airport revenues and non-airport revenues, including the
proposal that airport staff be permitted to provide certain types of
technical assistance to non-airport entities regarding ACIPs that do
not use airport revenue, which represents a change to the 2010
Guidebook.
A4A commented that the policy should be modified to have airport
staff disclose the details of their technical assistance to the air
carrier airport affairs representative (or designee), and to clarify
that the policy prohibits airport staff from handling or co-mingling
non-airport funds. ACI-NA, AAAE and the Cedar Rapids Airport Commission
(CID) commented that the policy should not list three specific types of
technical assistance that airport staff can provide, should include an
expanded list, or should clarify that the list is a non-exhaustive set
of examples. AAAE also commented that many of its members believe that
the policy should be modified to allow airport staff to participate in
decision-making processes (including voting) regarding non-airport
ACIPs and/or handle non-airport funds in certain limited circumstances.
CRW requested that the FAA clarify that the term ``local'' as used
throughout the policy includes programs sponsored by state governments
and other non-federal entities.
In the final policy, the FAA has updated references to ``local''
governments to include state and other non-federal entities. In
addition, the final policy explicitly clarifies that airport staff may
not have responsibility for the handling and disposition of non-airport
funds. The FAA did not adopt the suggestion to set an expectation that
airport staff disclose the details of their technical assistance to
their air carrier airport affairs representative, as doing so could
reveal confidential commercial information. The FAA believes that
having airport staff participate in decision-making processes or handle
non-airport funds crosses the line between technical assistance and
active participation and therefore the final policy continues to
prohibit these activities. The FAA also believes that it is helpful to
list types of technical assistance that are permitted and notes that
these are fairly broad categories that encompass the longer list of
examples of technical assistance that were included in ACI-NA's
comment. The final policy therefore maintains this listing. However,
the FAA has added text to clarify that other similar types of technical
assistance consistent with the intent and parameters of this section
are also permitted.
N. Marketing Incentives
A4A, AAAE, ACI-NA, and 13 individual airport sponsors commented
that the FAA's proposal to prohibit airport sponsors from transferring
marketing incentive funds to a carrier was infeasible and inconsistent
with industry practice for how marketing programs are executed. Several
of these commenters stated that it would be impractical for airport
sponsors, particularly as public entities, to execute individual
contracts with marketing service providers, as called for under the
proposed policy. Many commenters suggested alternate approaches that
are closer to current practice and would permit airport sponsors to
transfer marketing incentive funds to a carrier provided that there is
appropriate documentation of the expenditures. PANYNJ suggested that in
order for an airport sponsor to transfer marketing ACIP funds directly
to an air carrier, the sponsor should maintain sufficient documentation
that demonstrates that funds would be used only for approved marketing
activities and that those funds are not transferred until after
services have been rendered.
The FAA appreciates the unified insight from the industry on this
issue and believes that PANYNJ's suggestion strikes an appropriate
balance between practicality and ensuring that prohibited subsidies are
avoided. The final policy incorporates the suggested language
describing the requisite documentation to support the payment of
marketing funds directly to an air carrier.
O. Incentives for Individual Travelers
The FAA received no comments regarding the proposed provision; the
final policy adopts this provision as proposed.
P. Charges for Non-Participating Carriers
A4A expressed support for the proposed policy's provision that an
ACIP may not increase fees charged to non-participating carriers or
other aeronautical users and tenants of the airport subject to the
requirement for reasonable fees under 49 U.S.C. 47107(a)(1) and Grant
Assurance 22.
A4A provided a recommendation to clarify that an ACIP may not
reduce payments or credits that would otherwise be received from the
airport sponsor in the absence of the incentivized service because cash
payments are not always provided to air carriers.
The FAA has incorporated the proposed clarification into the final
policy, as this is consistent with the intent of the policy language.
Q. Self-Sustaining Rate Structure
The FAA received no comments regarding the proposed provision; the
final policy adopts this provision as proposed.
R. Restart of Previous Service
AAAE, ACI-NA, PANYNJ, and SAN all expressed general support for the
proposed policy's provision to permit airport sponsors to use their own
discretion when choosing whether to offer incentives for a carrier to
restart service that the same carrier had offered previously but
cancelled due to significant external circumstances or poor route
performance, with examples of the COVID-19 pandemic or the 9/11
terrorist attacks provided as circumstances where such flexibility
would be helpful. A4A expressed conceptual support of the discretion to
provide incentives to restart service that ended due to significant
external circumstances but opposition to the inclusion of poor route
performance as a justification, on the grounds that this raises
concerns of unjust discrimination and potential abuse by an air
carrier. A4A also recommended that the policy include specific waiting
periods in
[[Page 85353]]
order to qualify for incentives related to the restart of service. DEN
also requested more specific guidelines in this area, and expressed
concern that leaving incentives for the restart of service to the
discretion of individual airport sponsors may put some airports at a
competitive disadvantage due to varying interpretations.
The FAA has made two modifications to the final policy as a result
of the comments. The FAA's intent was that this flexibility would be
exercised in the aftermath of extraordinary external events such as
natural or manmade disasters, including (for example) the COVID-19
pandemic. To convey this, the final policy refers to ``extraordinary''
external circumstances rather than ``significant,'' and eliminates the
reference to ``poor route performance in past years'' as a
justification for an airport sponsor to offer incentives for the
restart of previously cancelled service. After this adjustment, the FAA
believes it is not necessary to add a specific waiting period or
further guidelines regarding the implementation of incentives for the
restart of previous service, given that the impact of an extraordinary
external circumstance may vary depending on the event and may be quite
different in different locations. Therefore, airport sponsors should
have flexibility to implement such an incentive if they choose to do so
based on their individual circumstances, as long as it is consistent
with other provisions in the final policy (including the limits on the
length of time an incentive can be in effect).
S. FAA Review of ACIPs
The proposed policy stated that the FAA will review an ACIP for
compliance with an airport sponsor's Federal obligations if the airport
sponsor requests such a review, but that the agency does not approve
ACIPs. A4A commented that air carriers should also be permitted to
request that the FAA review an airport sponsor's ACIP. HAS commented
that if an airport sponsor seeks FAA's input on an ACIP, the agency
should provide either approval or a detailed explanation of what
specifically needs to be changed. DEN recommended that the FAA develop
and implement a mechanism for airport sponsors to request formal
written approval that a proposed ACIP is consistent with the five
general principles of acceptable ACIPs.
The FAA agrees that it would be appropriate for an air carrier to
request FAA review of an ACIP and notes that this informal review could
reduce the likelihood of more formal disputes; therefore, the final
policy permits a potentially affected air carrier to request FAA review
of an ACIP. While the FAA does not formally approve ACIPs, the agency
would provide feedback on whether the ACIP appears to be in line with
Grant Assurances and will provide recommendations for modification if
appropriate. The FAA also notes that ACIPs are typically reviewed as
part of the agency's regular airport financial reviews.
T. Existing Incentives/Effective Date
SAN expressed support for the proposed policy's provision allowing
existing ACIPs that complied with the 2010 Guidebook to sunset as
programs compliant with the new policy are brought online. DEN
commented that it would be better for the FAA to set a firm date when
the final policy would be effective and noted that airports would need
at least 60 days' notice from the date of publication of a final policy
in order to provide time to revise and gain internal approval of the
revised ACIP and provide the requisite 30 day notice to air carriers.
PHX noted that the FAA should allow ample time for airports to respond
to proposed changes and implement them, given that the ACIP guidance
has remained unchanged since 2010.
The FAA recognizes DEN's comment about the logistics involved in
revising an ACIP and posting it for 30 days in compliance with this
policy. At the same time, FAA believes it is important to minimize the
transition period. Therefore, the agency has modified the final policy
so that incentive agreements contracted under ACIPs 60 days or more
after the issuance date must comply with the new policy. The agency
notes that any specific incentive agreements contracted prior to that
point under ACIPs that were in effect prior to this new policy being
issued should comply with the 2010 Guidebook and all grant assurances
and other FAA policies. The FAA has also clarified that the relevant
date is when the contract is signed, as the terms ``initiated'' and
``provided'' may have been unclear. Finally, the FAA has clarified that
any new ACIP or modification to an existing ACIP (as opposed to a
specific incentive agreement under an ACIP that was already in effect)
after the issuance of this new policy must comply with the new policy
(i.e., without a 60-day grace period).
U. Other Topics/Miscellaneous
CRW commented that the FAA should provide clarification as to the
circumstances when a sponsor can use airport funds as a SCASDP match
without violating Grant Assurance 25. The relationship of SCASDP to FAA
grant assurances and the Revenue Use Policy is discussed in Section C.
(Related Federal Programs) under the Background section of this
document.
CID's comments raised the question of whether those portions of the
2010 Guidebook not addressed in the updated policy will continue to
apply. The FAA reiterates that the updated policy entirely supersedes
the 2010 Guidebook.
A4A suggested that FAA consider developing a supplemental document,
such as a frequently asked questions (FAQs) or quick reference guide,
in conjunction with the final policy. The FAA will consider developing
such a document on an as-needed basis.
ACI-NA requested that the FAA allow incentives based on time of day
to allow airport sponsors to provide incentives to air carriers to fly
at off-peak times. The FAA believes that the suggestion by ACI-NA is
effectively a congestion management program using airport fees. As
such, it is outside the scope of this policy.
Exhaustless, Inc., objected to what it characterizes as FAA and
State interference in the open, competitive market for air
transportation. Exhaustless recommended that all states, airports,
cities, and any other governmental entity stop all activity to
subsidize air carriers to comply with various laws and air transport
agreements. The FAA notes that air service incentives are standard
practice within the aviation industry, including in other countries.
Incentives offered by airport sponsors are intended to be temporary and
justified on the basis of unique issues associated with the start-up of
new air service. No changes to the policy were adopted in response to
this comment.
MWAA commented that the FAA should engage in more meaningful
dialogue with airport sponsors, and that a 60-day comment period is
insufficient for sponsors to provide meaningful input. The FAA
disagrees with this comment and notes that the development of the draft
policy included discussions with industry stakeholders. FAA chose to
engage in a formal public comment process and believes that the 60-day
comment period is sufficient given the scope of the policy.
IV. Availability of Documents
A. Policy Documents
You can get an electronic copy of this policy using the internet
by:
[[Page 85354]]
(1) Searching the Federal eRulemaking portal (<a href="http://www.regulations.gov">www.regulations.gov</a>);
(2) Visiting FAA's Regulations and Policies web page at (<a href="https://www.faa.gov/regulations_policies">https://www.faa.gov/regulations_policies</a>; or
(3) Accessing the Government Printing Office's web page at (heep://
<a href="http://www.gpoaccess.gov/index.html">www.gpoaccess.gov/index.html</a>).
You can also get a copy by sending a request to the Federal
Aviation Administration, Office of Airport Compliance and Management
Analysis, 800 Independence Avenue SW, Washington, DC 20591, or by
calling (202) 267-3085. Make sure to identify the docket number, notice
number, or amendment number of this proceeding.
B. Comments Submitted to the Docket
Comments received may be viewed by going to <a href="https://www.regulations.gov">https://www.regulations.gov</a> and following the online instructions to search the
docket number for this action. Anyone is able to search the electronic
form of all comments received into any of the FAA's dockets by the name
of the individual submitting the comment (or signing the comment, if
submitted on behalf of an association, business, labor union, etc.).
C. Small Business Regulatory Enforcement Fairness Act
The Small Business Regulatory Enforcement Fairness Act (SBREFA) of
1996 requires the FAA to comply with small entity requests for
information or advice about compliance with statutes and regulations
within its jurisdiction. A small entity with questions regarding this
document may contact its local FAA official, or the person listed under
the FOR FURTHER INFORMATION CONTACT heading at the beginning of the
preamble. To find out more about SBREFA on the internet, visit <a href="https://www.faa.gov/regulations_policies/rulemaking/sbre_act/">https://www.faa.gov/regulations_policies/rulemaking/sbre_act/</a>.
The Policy
In consideration of the foregoing, the FAA issues the following
statement of policy on air carrier incentive programs, to supersede the
Air Carrier Incentive Program Guidebook issued in 2010.
Air Carrier Incentive Programs
Many U.S. airport sponsors have found it beneficial to encourage
new air service and new carriers at their airports by offering air
carrier incentive programs (ACIPs), in the form of reductions or
waivers of airport charges, and/or support for marketing new service.
ACIPs represent a limited exception to the general rule stated in
Grant Assurance 22 paragraph 22.e., guaranteeing all carriers non-
discriminatory and equivalent rates and charges for each carrier's
category. FAA has reconciled this exception with the general rule on
the understanding that a new carrier operating at an airport, or a
carrier starting a new route, operates at a disadvantage with
established carriers until the new service becomes known and accepted.
In that sense, the carrier operating new service is not similarly
situated to established carriers, and a sponsor may reduce charges to
the new service carrier in some circumstances, for a limited time,
without violating Grant Assurances 22, 23, 24, or 25.
In considering whether an ACIP complies with a sponsor's Federal
grant agreements, the FAA will apply these general principles to the
particular elements of the ACIP:
<bullet> Discrimination between carriers participating in an ACIP
and non-participating carriers must be justified and time-limited.
Differences in airport charges for carriers under an ACIP from those
charged to other carriers at an airport must not be unjustly
discriminatory. Differences in charges must be justified by differences
in the carriers' costs of starting and marketing new service at the
airport and must be temporary.
<bullet> A sponsor may not use airport revenues to subsidize air
carriers. Using airport revenue for cash payments and other forms of
subsidy for a carrier providing new service is considered revenue
diversion and is therefore prohibited by grant agreements and Federal
law. Fee reductions, fee waivers, and marketing assistance as
incentives to new service are permitted to the extent described in the
Policy and Procedures Concerning the Use of Airport Revenue.
<bullet> A sponsor may not cross-charge non-participating carriers
or other aeronautical users to subsidize ACIP carriers. Carriers not
participating in an ACIP may not be charged directly or indirectly for
the costs of the ACIP or for airport costs left uncovered as a result
of the reduction or waiver of charges for an ACIP carrier, unless all
non-participating carriers agree.
<bullet> The terms of an ACIP should be made public. Publishing the
intent to implement an ACIP, as well as information on how the ACIP is
being used, ensures all eligible carriers are aware of the program,
allows nonparticipating operators to review the potential effect of the
ACIP on standard airport rates and charges, and minimizes the grounds
for complaints of unjust discrimination.
<bullet> Use of airport funds for an ACIP must not adversely affect
airport operations or maintenance. A sponsor adopting an ACIP must
maintain a self-sustaining rate structure that continues to provide
funds for necessary operations and maintenance responsibilities,
without increasing rates charged to non-participating operators.
Guidance on particular program elements in this policy applies
generally to each of those elements. For variations on those elements,
or program elements not specifically addressed in this guidance, the
above five principles will govern the agency's ultimate determination
of whether a particular ACIP is consistent with the sponsor's AIP Grant
Assurances.
I. Definitions
A. Airport destination: The airport receiving new service from the
origin airport. Each airport within a metropolitan area may be defined
as a separate airport destination for purposes of this policy.
B. Currently: For the purposes of this policy, ``currently'' means
the time immediately prior to the signing of an incentive agreement.
C. Incumbent Carrier: An air carrier currently providing air
service to the origin airport.
D. New Entrant Carrier: An air carrier that is not currently
providing any air service to the origin airport.
E. New Service:
1. Any nonstop service to an airport destination not currently
served with nonstop service from the origin airport;
2. Any service to the origin airport by a new entrant carrier; or
3. A significant increase in capacity on preexisting service to a
specific airport destination.
F. Origin airport: The airport that is providing an incentive under
an ACIP. For the purposes of this policy, the ``airport sponsor'' is
the sponsor of the origin airport.
G. Preexisting service: Service to any airport destination that is
currently served nonstop from the origin airport. An airport
destination served nonstop only in one season is considered not
currently served nonstop during the off-season.
H. Seasonal Service: Nonstop service that is offered for less than
7 months of the calendar year.
[[Page 85355]]
II. An ACIP May Contain Any of Several Elements That Do Not Unjustly
Discriminate Against Non-Participating Carriers, Consistent With Grant
Assurances 22 and 23
A. New Service v. Preexisting Service
1. Limiting an incentive to new service is not in itself unjust
discrimination. Incentives for flights to an airport destination not
currently served with nonstop service may be provided for up to two
years.
2. New seasonal services (to an airport destination not currently
served) are allowed to receive incentives for 3 seasons of service, up
to 3 consecutive years from the start of the incentive.
3. Generally, new service incentives must be available to all
carriers offering new service on the same basis but are subject to the
distinctions permitted under other paragraphs in Section II of this
policy.
a. However, airport sponsors are allowed to restrict incentives for
new service if they have a limited budget. Airport sponsors are allowed
to restrict incentives to one carrier if they have disclosed to all
carriers that they are limiting incentives to only the first air
carrier that establishes new service.
b. Airport sponsors are expected to provide public notification of
the availability of an ACIP, including any limits on availability and
criteria by which the first air carrier to establish service is
determined, for a minimum of 30 days before signing a contract with a
carrier.
B. New Entrant Carriers
1. Incentives for a new entrant carrier on nonstop service to an
airport destination that is not currently served nonstop from the
origin airport can be provided for up to two years.
2. Incentives can be offered to new entrant carriers for providing
service to an airport destination with preexisting service, while
excluding incumbent air carriers. In that case, the new entrant
incentives are limited to no more than one year. After one year, the
new entrant would be considered an incumbent air carrier, and similarly
situated to other carriers at the airport. This applies to new entrants
providing seasonal service as well as those providing year-round
service.
3. Generally, new entrant incentives must be available to all new
entrant carriers on the same basis. The ACIP may not select one new
entrant and deny the program to another new entrant.
a. However, if an airport sponsor has a limited budget and has
disclosed to all carriers that they are restricting incentives to only
the first new entrant that establishes service to the origin airport,
then the airport sponsor is allowed to limit incentives to one carrier.
b. Airport sponsors are expected to provide public notification of
the availability of an ACIP, including any limits on availability and
criteria by which the first air carrier to establish service is
determined, for a minimum of 30 days before signing a contract with a
carrier.
C. Service Frequency
1. It is not unjustly discriminatory to offer different levels of
incentives for different frequencies of service (i.e., daily versus
less than daily). For example, incentives typically offered for 5 days
a week service can be discounted 40% for 3 days a week service.
2. If an airport sponsor offers incentives for increased
frequencies on preexisting service, these incentives are limited to no
more than one year. If offered, this incentive must be made available
to any carrier adding frequencies to the airport destination,
regardless of whether the carrier previously provided nonstop service
to that airport destination.
a. Incentives for increased frequencies on preexisting service are
considered supplemental to other incentives and cannot be the only
incentive in the sponsor's ACIP.
b. Incentives should only apply to the increased frequencies to the
extent that those frequencies result in a significant net increase in
seat capacity to the specific airport destination.
D. Cargo Carriers
1. It is not unjustly discriminatory for incentives to distinguish
between passenger and cargo carriers.
E. Per-Passenger and Per-Seat Mile Incentives
1. Incentives that vary on a per passenger or per seat-mile basis
are not inherently unjustly discriminatory, but the airport sponsor
should ensure that the incentives offered would not be considered a
subsidy and would not result in unjust discrimination against non-
participating carriers.
2. The total value of fee reductions offered as an incentive on a
per passenger or per seat-mile basis cannot exceed the amount of the
fees that otherwise would have been incurred by a carrier for its
operations at the airport.
F. Aircraft Type
1. Incentives based on specific aircraft types are unjustly
discriminatory because they could unreasonably exclude certain carriers
that do not operate the type of aircraft identified.
2. Incentives for upgauging, to the extent they are allowed as a
significant increase in capacity on a preexisting route, must be
structured to avoid limitation to a particular aircraft type or types
and are limited to no more than one year.
a. Incentives for upgauging on preexisting service are considered
supplemental to other incentives and cannot be the only incentive in
the sponsor's ACIP.
b. Upgauging incentives should only apply to the increased capacity
if there is a significant net increase in seat capacity to the specific
airport destination.
G. Legacy v. Low-Cost Carriers
1. Incentives cannot target carriers with particular types of
business models (e.g., legacy versus low-cost carriers), nor should
they be designed for a preferred carrier.
H. ACIP Transparency
1. The FAA expects airport sponsors to provide effective
notification of the availability and implementation of ACIPs to both
incumbent and potential new entrant carriers (e.g., posting on an
airport sponsor's public website; notification to industry trade
groups). Information posted should include the incentives offered; the
program eligibility criteria; identification of new service; and for
incentives awarded, a periodic listing of all carriers benefiting from
the ACIP, the incentives received, and identification of the
incentivized service.
2. An airport sponsor is expected to provide effective public
notice of an ACIP at least 30 days before signing an agreement with a
carrier to implement an incentive.
3. Advance public notice is not expected of a specific incentive
agreement with a carrier as long as the agreement is consistent with
the previously publicized ACIP. Lists of specific incentive agreements
should be published periodically as described in paragraph H.1.
4. To ensure transparency, an ACIP agreement should be a standalone
document, consistent with the published ACIP information, and not
embedded with any other agreement the airport sponsor and the carrier
may enter into, such as a lease or operating agreement.
5. Airport sponsors should make information on funding for any ACIP
available to all aeronautical users at the airport, and sponsors should
be ready to provide the necessary financial
[[Page 85356]]
documentation to demonstrate that there is no cross-charging and that
the program has no effect on rates and charges of other aeronautical
users.
III. An ACIP May Not Include Direct or Indirect Subsidies of Air
Carriers, as Prohibited by 49 U.S.C. 47133 and 49 U.S.C. 47107, and
Grant Assurance 25
A. Incentives v. Subsidies
1. A subsidy occurs when airport funds flow, under all
circumstances or conditionally, to a carrier with no goods or services
being provided to the airport in return. For this purpose, air service
is not considered a ``service'' provided to the airport. Any incentives
where airport funds or assets (e.g., fuel) are transferred to a
carrier, directly or indirectly (e.g., revenue or loan guarantees)
would be regarded as prohibited subsidies.
2. A waiver of costs that an airport sponsor would otherwise charge
a carrier (e.g., landing fees or terminal rents) is not considered a
subsidy, if for a limited duration consistent with the policies above.
However, a waiver or assumption of costs that would normally be charged
by a third party (ground handling, fuel, etc.) would be considered a
subsidy and is not permissible for an ACIP. Incentives tied to specific
customer service metrics (on-time performance, luggage delivery, etc.)
are also not permissible.
B. Airport v. Non-Airport Revenues and Application to Subsidies and
Other Revenue Guarantees
1. Airport sponsors are prohibited from using airport funds to
subsidize air carrier operations.
2. A sponsor local government, state government, or other non-
Federal airport sponsor may use non-airport funds for subsidies and
other uses that would be prohibited if airport funds were used.
However, any use of funds would still need to meet Grant Assurance
obligations prohibiting unjust discrimination.
3. Local and state governments and community organizations not
party to an AIP grant agreement, however, can use non-airport funds for
incentives that would not be permissible for an obligated airport
sponsor, including directing incentives toward a specific carrier and
using their non-airport funds for revenue guarantees.
a. If a local or state government or community organization chooses
to fund a program to support new air service using non-airport funds,
those funds may not be commingled with airport funds, and airport staff
may not have responsibility for the handling and disposition of non-
airport funds. Any funds placed in an airport's account are treated as
airport revenues. As long as community incentives are kept separate
from airport funds, the community organization's funding would not be
considered airport revenue and therefore not subject to its special
requirements.
b. Airport staff can provide technical assistance to non-airport
entities regarding ACIPs that do not use airport revenue, where the
non-airport entity, and not the airport sponsor, is the agency
responsible for decisions on expenditure of the funds. The role of
airport staff can be advisory, but the airport staff cannot be involved
in the decision-making process or handle non-airport funds. The airport
staff's assistance may include:
i. Guidance on the economic viability of prospective markets;
ii. Understanding of carrier business models and aircraft
performance characteristics;
iii. Information on the availability of the airport sponsor's ACIP
to support the new service within the limits described in this policy;
iv. Other types of technical assistance consistent with the intent
and overall parameters of this section.
C. Marketing Incentives
1. Airport sponsors are permitted to contribute to the marketing of
new service, but airport funds must either flow directly to the
marketing provider, or be provided to a carrier only after the carrier
has paid the marketing provider and submitted an invoice to the airport
for incentive-related marketing with supporting documentation.
2. A marketing program must promote use of the airport. Use of
airport funds for general economic development or for marketing and
promotional activities unrelated to the airport is prohibited by 49
U.S.C. 47107(k)(2)(B).
D. Incentives for Individual Travelers
1. Airport sponsors are prohibited from offering cash incentives to
travelers for flying a route, as this indirectly subsidizes the carrier
serving that route.
2. However, airport sponsors are allowed to offer coupons for food,
parking or other benefits tied to general use of the airport, as long
as the benefit is not restricted to passengers who fly a specific
carrier or route.
IV. An ACIP May Not Result in an Increase in Charges for Non-
Participating Carriers or Other Aeronautical Users of the Airport
A. An ACIP May Not Increase Fees Charged to Non-Participating Carriers
or Other Aeronautical Users and Tenants of the Airport Subject to the
Requirement for Reasonable Fees Under 49 U.S.C. 47107(a)(1) and Grant
Assurance 22
1. The costs of an ACIP may not be passed on to non-participating
carriers or other aeronautical users in any form. The costs of an ACIP
include direct costs, such as marketing, and the general costs of
airport operation and maintenance that are not covered by the carrier
in an ACIP as a result of a reduction or waiver of fees.
2. An acceptable ACIP will not result in an increase in the sponsor
charges to non-participating carriers, i.e., on the charges that
carriers would have paid in the absence of the incentivized service.
3. For an airport sponsor with a residual fee methodology, an ACIP
may not reduce the residual payment to non-participating carriers each
year. An ACIP may not reduce any other payments or credits that would
otherwise be received from the airport sponsor in the absence of the
incentivized service.
V. An ACIP May Not Adversely Affect an Airport's Self-Sustaining Rate
Structure, as Required by Grant Assurance 24
A. An ACIP Must Be Funded From a Source That Not Only Does Not Increase
Rates for Non-Participating Parties, But Also Does Not Involve the Use
of Funds Necessary for the Proper Operation and Maintenance of the
Airport
VI. FAA Oversight/Administration
A. Restart of Previous Service
1. Airport sponsors can use their own discretion when choosing
whether to offer incentives for a carrier to restart service that the
same carrier had offered previously but cancelled either due to
extraordinary external circumstances (e.g., an extreme natural,
manmade, or public health crisis, such as hurricanes, terrorism, or
pandemic).
2. In any event, discretion for service restart may not be used to
extend an incentive beyond the limits provided in this policy.
B. FAA Review
1. The FAA does not approve ACIPs. At the request of an airport
sponsor or of an air carrier potentially affected by an ACIP, the FAA
will review an ACIP
[[Page 85357]]
for compliance with the sponsor's Federal obligations.
C. Existing, New, and Modified Incentives
1. Existing carrier incentives for which contracts are signed prior
to the issuance date of this policy and up to 60 days thereafter, under
programs that were in effect on the issuance date of this policy and
complied with the FAA's previous policy guidance, may continue as
implemented until they expire. All such existing incentives will expire
within two years of the first flight that is eligible for an incentive.
2. Incentives for which contracts are signed more than 60 days
after the issuance date of this policy must conform to the guidance in
this policy statement.
3. Any new incentive program or modification of an existing
incentive program after publication must comply with the requirements
of this policy (i.e., without a 60-day grace period).
Issued in Washington, DC.
Kevin C. Willis,
Director, Office of Airport Compliance and Management Analysis.
[FR Doc. 2023-26809 Filed 12-6-23; 8:45 am]
BILLING CODE P
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</html>Indexed from Federal Register on December 7, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.