Is the Port Authority of New York New Jersey Stealing Money from Newark Airport (and United)?

Back in September United threatened to pull out of Newark over $20 million in fuel taxes targeted at its operations. They were never going to leave, but made their (perfectly reasonable) point about New Jersey trying to extract revenue from just them.

United has also complained that Newark airport is overcharging them, and the FAA agrees. This past fall the FAA found that the Port Authority of New York New Jersey which manages the airport “routinely diverted airport revenue to non-airport activities.” United claims it’s paying 75% higher fees than what the Port Authority charges at JFK airport. The FAA also found there was no proper accounting procedure to justify what it charged.

United Newark Terminal C

Aviation Policy News explains that the FAA gave the Port Authority of New York New Jersey 30 day to calculate how much revenue had been diverted from its airports since 2012, “adjust Newark’s rates and fees to reflect those amounts, modify its accounting practices, and explain how it will apply that revised method at Newark.” The Port Authority appealed.

When the federal airport improvement grant program was created in 1982 an obvious concern was that airports would take the federal money and use it for something else. It’s not enough though to say grant funds to an airport can only be expended on the airport. Money is fungible, and an airport could take a grant and divert a similar amount of other revenue for other purposes and the federal funds would effectively get used for something else.

So the law creating the program also said that airport revenue had to be used for airport costs in order to be receive grants. Some airport authorities were exempted which had been siphoning money out of their airports already for years. (The 1994 FAA reauthorization bill froze diversions to the amount diverted in that year, adjusted annually for inflation.)

The Port Authority of New York New Jersey is granted this exemption. So are:

  • Hawaii airports
  • Massachusetts Port Authority
  • Maryland
  • Chicago
  • San Francisco
  • Denver
  • St. Louis
  • Niagara Frontier Transportation Authority which runs the Buffalo and Niagara Falls airports

According to Aviation Policy News the DOT Office of Inspector General found that half of the exempted airport authorities weren’t keeping proper books and that Maryland, Massport, and Hawaii, diverted more funds than legally allowed.

The DOT did not reveal findings for the Port Authority New York New Jersey but did report over $3 billion in allowable (grandfathered) diversions between 1995 and 2015. The other 8 diverted $5.3 billion over this period, while the law would only have allowed them to divert $3 billion.

We don’t know yet whether the New York New Jersey diversions were improper, but the DOT’s request for justification and detailed accounting practices going forward suggests they believe either that there’s shady bookkeeping or improper siphoning of funds from the airports – especially Newark.

United Airlines at Newark

Don’t feel too badly for United, which lost its last Chief Executive Jeff Smisek in a scandal involving the airline bribing the Chairman of the Port Authority. And don’t feel badly for any of the major airlines operating out of congested government-run airports in the U.S., where use of slots and leases of gates is treated as a government-granted perpetual property right in those gates and slots, keeping new competitors from entering those markets.

Even if airlines are being overcharged at some airports based on a federal formula, they still largely appear to come out ahead.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. I don’t feel bad for United as in partnership with OTG, they are in turn stealing from consumers with the sea of iPads for terrible, overpriced food and beverages

  2. Why are any of those airports given an exemption, and why are they given money up front? Shouldn’t they at least have to account for expenses and have them reimbursed as a tax credit?

  3. “Don’t feel too badly for United, which lost its last Chief Executive Jeff Smisek in a scandal involving the airline bribing the Chairman of the Port Authority.”

    I feel that is unfair, it’s pretty clear “The Chairman’s flight” was a matter of United getting extorted, just shrugging, and taking it.

  4. I’m surprised that the Metropolitan Washington Airports Authority (MWAA) doesn’t come up I this story. They are an incompetent unaccountable bunch with no regard for enplanement fees. Their part-time Chairman is one of the highest paid airport executives in the world and we have incredibly overpriced airports (IAD/DCA) that drive away competition because fees are so high.

  5. @A_B – United choose to pay a bribe in exchange for official action instead of notifying the FBI. United’s CEO at the time not only was himself a lawyer, but his airline’s former general counsel.

  6. So United found out what everyone in New York and New Jersey already knew: The Port Authority is a kleptocracy accountable not even to the two governors

  7. What a surprise, the Port of NYNJ is corrupted. This has been going on since I was in diapers 70 years ago and continues today.

  8. @Gary Leff

    Maybe under law it was a bribe, but morally: A bribe is to get unfraily good treatment… If the staties pull you over when you are doing 20 over and you try to give them a Dunkin’ Donuts gift card to let you off THAT is a bribe.

    IF some immigration agent in crapholistan says the machine cannot recognize your passport until you kick him a 20 THAT is extortion.

    From what I can tell the Smisek situation is the latter and not former, sometimes you have to choose your battles and who knows if you can trust the FBI?

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