End of the Runway: Rethinking the Airport Improvement Program and the Federal Role in Airport Funding

For decades, the federal government has been extensively involved in airport funding through grants and legal restrictions. The Airport Improvement Program (AIP) provides federal grants for capital improvements at public-use airports. The grants are funded primarily by federal taxes on commercial airline passengers and on a number of aviation activities. AIP functions as a middle-man scheme that redistributes fliers’ resources from the most important airports to those of far less significance. The 60 largest airports in the U.S. serve nearly 90 percent of air travelers. Though these airports have the greatest need for capital investment, these large airports receive only 27 percent of AIP grants. At the same time, the federal government restricts how airports can generate their own revenues through prohibitions in the Anti-Head Tax Act of 1973 and price controls on the Passenger Facility Charge.

Instead of continuing this top-down system, Congress should eliminate the AIP, reduce passenger ticket taxes, and reform federal regulations that prohibit airports from charging market prices for their services. These reforms would eradicate the inefficient and inequitable distribution of flier resources and would allow airports to fund capital improvements in a local, self-reliant, and free-market manner.

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