This month, the Senate has been considering S. 2658, the Federal Aviation Administration (FAA) Reauthorization Act of 2016. The two-year bill authorizes FAA funding for airport improvements, Air Traffic Control, and various aviation safety oversight functions. Congress last reauthorized the FAA in March in the Airport and Airway Extension Act of 2016, which simply extended spending authority through July 15, the beginning of Congress’s extended election-year recess.
While the Senate ostensibly wants to avoid another short-term extension that prolongs the status quo, this two-year, $33.5 billion bill is not the answer. The authorization not only fails to make any meaningful reforms, but also is laden with regulatory power grabs and congressionally directed spending that expand the federal government’s presence in the aviation sector.
Perpetuating Ineffective Spending Programs
First, the bill maintains burdensome taxes on airline passengers and inefficient, federally administered funding for airports. The bill authorizes a total of $16.5 billion for 2016 and $17 billion for 2017 for all FAA functions.
Specifically, the authorization would increase spending on Airport Improvement Program (AIP) grants from $3.35 billion in 2016 to $3.75 billion in 2017—a 12 percent increase. According to the Congressional Budget Office (CBO), this change would increase AIP outlays by $3.4 billion through 2026, subject to annual appropriations. The problem with the AIP is that it redistributes funding from major airports to airports that serve relatively few travelers. The FAA classifies the nation’s most critical airports as large and medium hubs, which together account for 88 percent of commercial enplanements. Yet even though these airports move the vast majority of travelers, they receive just 26.6 percent of airport improvement grants. Since the grants are funded primarily by taxes paid by these passengers, this represents a gross misallocation of resources due to political machinations in Congress.
Furthermore, the bill maintains the wasteful Essential Air Service program, which subsidizes rural flights that are less than half full on average and often nearly empty. This inefficient program was originally intended to be temporary and subsidizes convenience for a small group of travelers at the expense of taxpayers and the overall aviation system. It should be eliminated.
Layering on Cumbersome Regulations
In addition to wasteful spending, the bill empowers Congress and federal bureaucrats to micromanage virtually every aspect of the aviation industry. In a throwback to the pre-deregulation days when the government imposed price controls on air carriers, a proposed amendment to the bill would allow the government to regulate the fees airlines charge for ancillary services such as checking baggage. Even though many customers dislike having to pay extra for baggage, these fees are a key part of many carriers’ business models that enables them to keep base ticket fares low, in part because the fees are not taxed exorbitantly as base fares are. Even if limits on these fees were imposed, it is likely that air carriers would make up the costs elsewhere.
Furthermore, flexible pricing encourages competition among carriers, allowing customers to choose from various pricing schemes. For example, Southwest Airlines does not charge baggage fees in addition to base fares, while budget carrier Spirit Airlines charges additional fees for all amenities, including fees for carry-on baggage, levied on top of a “bare fare.” This range of choices and low-base fares benefit all passengers, especially budget travelers.
While this overreaching amendment was narrowly rejected in committee, the bill nevertheless heads in that direction. It instructs the Department of Transportation to study “airline ancillary fees and their impact on ticket pricing and taxable revenue” and requires air carriers to provide a refund for baggage if it is not returned within an arbitrary time frame that Congress has deemed acceptable. The CBO estimates that the baggage refund mandate could cost airlines $10 million annually, which would likely be passed on to all passengers in the form of higher fares.
The 360-page bill is rife with other heavy-handed mandates. Section 2306, for example, seeks to dictate limits on flight attendants’ working hours and rest periods. This is a decision that is made more appropriately between the air carriers and their attendants, as is the case between employers and employees in other industries. Section 2303 mandates new flight data recorders for commercial aircraft, even though they would have no noticeable effect on safety and would come at an estimated cost of $700 million. This cost would likely be passed on to passengers through higher fares. Even the size of airline seats is not beyond the federal government’s reach: Section 3121 mandates that the Secretary of Transportation review the minimum seat pitch for passengers’ seats. Sports stadiums, theaters, and other close-knit venues should be wary of facing the government’s measuring tape next.
Nor does the bill spare the burgeoning drone industry from its regulatory stranglehold. Most onerously, Section 2124 requires all makes and models of unmanned air systems (UAS) flown in U.S. airspace to receive FAA approval, imposing agency micromanagement on all manufacturers and effectively outlawing the use of recreational UAS constructed by hobbyists at home. The CBO projects that the cost of this mandate “could be substantial” for the fledgling UAS manufacturing industry. And most And anyone wishing to fly a recreational drone weighing more than 4.4 pounds would have to pass a federally administered test on aeronautical knowledge and safety, as required by Section 2130. As anyone who has tried to force a child to read an instruction manual before going outside to play with a new toy knows, this might not be the most effective approach.
More importantly, however, this knee-jerk regulatory regime is imposed on an innovative new industry despite the fact that the dangers it seeks to mitigate are largely hypothetical. When considering dangers posed by similar existing threats, it is apparent that the introduction of small UAS does not pose significant risk to the national airspace.
Critical Reforms Missing, but Special-Interest Giveaways Make the Cut
While Congress piles on these private-sector mandates, the bill makes no major reforms in Air Traffic Control or implementation of the NextGen system, on which the FAA has spent billions with little progress to show for it. Congress evidently has more interest in telling private companies how to run their businesses than in undertaking the transformational changes required to improve the services that the government currently controls.
To round it out, the Senate is considering the addition of $1.4 billion in unrelated energy tax breaks as a way to grease the skids for the legislation. Congress sensibly chose to leave these special-interest giveaways out of a proper tax bill four months ago, but many Members see the FAA reauthorization as one of the only vehicles for their pet projects and are scrambling to get them included. Free-market groups have criticized this deplorable addition of corporate handouts, and Congress would be wise to avoid including them in an aviation bill.
Overall, the Senate’s FAA reauthorization perpetuates ineffective funding programs and further expands the government’s reach into a crucial sector of the economy. This broken plan should be grounded in favor of developing a real free-market vision for the FAA and the aviation sector.
—Michael Sargent is a Research Associate in the Thomas A. Roe Institute for Economic Policy Studies, of the Institute for Economic Freedom and Opportunity, at The Heritage Foundation.