Airport expansion is a key part of improving urban America’s infrastructure. The ability of major metros to attract corporations, workers and tourists depends at least in part on whether their airports can provide cheap, frequent flights around the world. This has caused many municipalities to publicly subsidize mass expansions.
In November, the Denver City Council approved $1.5 billion to add gates to Denver International Airport. This mirrors similar expansion projects in Los Angeles and Dallas-Fort Worth. Meanwhile, calls for improvement persist for older terminals in Chicago, New York City and San Antonio.
The need for this mass airport modernization is evident. America’s population is growing, particularly in major metro areas. This is reflected in flight passenger numbers: Since 2009, more people have flown each year, reaching a record 895 million passengers in 2015, according to the U.S. Department of Transportation. As a result, major airport terminals are remarkably crowded, even at off-peak times.
Beyond just the terminals is the outdated surrounding infrastructure, which makes it hard to increase the frequency of flights. Today’s airports need longer runways, more gate capacity and modernized air traffic control systems.
The question is whether cities can address these needs in a way that pays for itself. The key is rethinking counterproductive subsidies and regulations, says Marc Scribner, a senior fellow at the Competitive Enterprise Institute, a libertarian think tank. This includes reforming regulations that prevent airports from collecting user fees.
Theoretically, says Scribner, major airport runways could reduce congestion by installing dynamic pricing systems -- such as the kinds found on toll roads -- that would charge for takeoffs and landings based on fluctuating traffic demand. But the Federal Aviation Administration has regulations that prevent this. Airports could also charge airline passengers market rates for their use of terminals. Right now, these rates are capped by Congress at $4.50 per passenger per flight segment. Deregulating these price systems would generate more money for airport expansion, while placing the costs onto the user, not the general taxpayer.
Another alternative would be privatization. This has already occurred in foreign countries, but has lagged in the U.S. because private airports here don’t enjoy the advantages given to public ones, such as receiving federal grants, tax-exempt bonds or waivers on federal income taxes. What this means is that America’s major airports function more like public utilities than profitable corporations. “They just don’t behave like businesses,” says Scribner, “and that’s in large part due to the fact that the federal government doesn’t let them.”
This not only limits airports’ ability to generate revenue, but also to obtain financing. So when it comes time to fund these needed expansions, airport authorities must go begging to the government -- including local governments that could use the money on other services. Denver’s $1.5 billion expansion is just the latest result of this public subsidy paradigm.