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
- San Francisco
- 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.