My thought is that for operations, one can use the profit or not-for-profit model. Both are efficient and can produce high quality service. But if you add in trying to cover infrastructure, you need the government.
Over the past 30 years approximately 85 to 88 per cent of the FAA’s budget has been covered by fuel taxes, ticket taxes, license fees, aircraft registration fees, etc., all of which are paid for by passengers, business operators, private pilots, etc.
In FY12, the percentage of the FAA budget covered by these items fell to 74.6 per cent because of several Administrative initiatives aimed largely at the airport improvement program. The remainder is transferred from the general fund. Many of the monies spent on the airport improvement program are for airports that are not served by commercial airlines. This information can be found in the FAA’s 2012 Performance Report.
In 2011 the United States had 19,782 airports, of which 13,450 were suitable for fixed wing operations. Of these only 547 or 4.1 per cent were served by commercial airlines.
NARP as well as others appear to believe that the nation’s commercial airlines account for the majority of the FAA’s air traffic control activities. This is not true. In FY11, the latest year for complete numbers, 34.2 per cent of the aircraft handled by the FAA’s Air Route Traffic Control Centers was for air carriers, whilst 34.3 per cent of tower operations were for them. The others were for air taxis, civilian aircraft, and military aircraft operating in civilian airspace. This information can be found in the FAA’s 2012 Fact Book.
What does this have to do with intercity passenger rail? Very little. The key question is where does passenger rail make sense, what should it look like, how should it be funded, and how should it be managed?
You need the government to facilitate the construction of transport infrastructure, i.e. highways, waterways, railways, etc. The key question is whether the operators can generate sufficient funds to pay for the cost of the infrastructure.
Recent history (30-40 years) informs us that they usually cannot. But that doesn’t mean we should conclude it is not worthwhile. If you serve many passengers, then it is a success.
The comparisons are interesting.
The best comparison between airlines and Amtrak would be to the LD trains because of they way they consume fixed assets.
The airlines pay out of their operating expenses for their share of airport facilities - a fixed asset usually owned by a government at some level. This is a sweet deal for the airlines for a couple reasons. One is that the ownership cost paid by the airlines is decoupled from actual costs. The “rent” may or may not be enough to service the bonds used to build the place. The owing government can decide whether losing money on their airport has off
Didn’t the airlines require a big infusion of federal money after 911 to keep them afloat?
As I recall, yes. Several have dumped their pensions onto the federal agency. And several (AA, UA, Delta?) have gone through bankruptcy reorganizations to reduce debt.
Additionally, I believe the Federal Gov’t helps with runway construction. However, I don’t imagine many municipalities could afford to run much of a deficit on their airport. Do we have any figures on this?
I worked for investor owned employers all of my working life. I spent eight years with a Wall Street Bank, four years with a Connecticut bank, and nearly 30 years with an investor owned electric utility. They were all tuned by the profit motive.
The banks were highly competitive. The electric utility was a regulated monopoly, with relatively little competition. It behaved a lot like a government agency prior to deregulation. it was effective but not very efficient. After deregulation, it changed dramatically, in large part because of competition, and it became much more efficient.
Profits and competition help drive efficiency and effectiveness. Without them executives and managers have little incentive to do things better, faster, cheaper. This is one of the reasons, I believe, why Amtrak is not managed very well. It does not have to be well managed to stay in business.
I may mis-remember, but I think the airlines were already begging for help before 911 happened.
The airlines pay a variety of fees for the airport facilities that they use. They pay landing fees, gate fees, fuel taxes, excise taxes, inventory taxes and property taxes. If they have maintenance facilities on the field, they usually lease them, which means that they pay rents for them. These are variable costs, for the most part, that are charged to current period operating expenses.
The airlines usually own the rights to their gates under a long term lease. Sometimes they can sublease them. The price of the gates is usually settled through a robust bidding process, i.e. witness the recent scramble for gates at Laguardia, Ronald Reagan, and Dallas Love Field.
The airlines don’t pay any of the aforementioned fees and/or taxes. They are paid by the airline’s passengers through a variety revenue collection mechanisms.
Whether airline passengers pay their fair share of the airport facilities, as well as the air traffic control facilities, that they use, is debatable. As noted the nation’s airlines serve a very small percentage of the nation’s airports and account for only 1/3 of air traffic control operations. So they don’t consume anything like the total spend on the nation’s airports and air traffic control systems.
Most airports in the United States are owned and operated by a government authority. They are expected to cover all of their costs from airport generated revenue sources. It is not just the landing or other fees mentioned above. Because they have been very successful, they generate revenues from all sorts of vendors, i.e. car parking, retail vendors, rental car agencies, taxi stands, etc.
The amount of the airport improvement funds that flow through to major airports, i.e. DFW, Love Field, etc. is unknown. However, not all of it goes to airports with commercial airline service.
In 2012 DFW received a small amount of airport improvement money to upgrade its air traffic navigation aids. If I remember correctly the a
Dumped their pensions onto the Pension Benefit Guaranty Corporation (PBGC) is not technically correct. Under the bankruptcy laws a litigant can transfer a qualified pension plan to the PBGC as part of its plan to exit bankruptcy.
The airlines paid what amounts to an insurance premium for PBGC coverage. Thus, for those that were in the bankruptcy courts, transferring their legacy pension obligations to the PBGC had the same effect as submitting a claim under an insurance policy.
I don’t remember the numbers off the top of my head, but a very high percentage of employees covered by a private pension plan get PBGC benefits equal to what they would have gotten had their employer not gone through bankruptcy. It is the top dogs who get slammed. For a plan transferred in 2012, for example, a 65 year old employee could have received as much as $55,840 in annual pension benefits, whilst a 75 year old employee who was retiring could have gotten more than $14,000 a month. Needless to say, there are not many active 75 year old employees when a private employer declares bankruptcy.
Bankruptcy is a complex legal process. Coming out of it requires an exit plan that gives the emergent entity a reasonable probability of being successful. &n
Regarding profitable passenger trains, I have understood that there are only four in the world and they are, the Newark City subway, Amtrak’s auto train, the Amtrak line from Los Angeles to San Diego and the Heathrow express in London.
Essential services like commuter trains, sewage treatment plants, police and fire departments and streetlights are all part of the infrastructure, aren’t they? Having all these are why we pay taxes, right?
Of course they are profitable. Why else would companies bid on contracts to operate services for different agencies? Cars and locomotives all are bought and paid for: the manufacturers make money on that and on other supplies and needs. And that’s only the start…
That may be the major airports but many medium and small size airports have been hosed. Airline bankruptcies have left federal, state, and local governments building a facility that makes no money.
Prime examples are Raleigh Durham. Nashville, St. Petersburg, Chattanooga, Birmingham, Columbus Ga, and others. Federal money for new runways, extensions, navigation aids. State and local money for runways , taxiways, terminal buildings, roadways, etc. Several airports mentioned have an extra runway not needed. ( nice but not needed 0
The PBGC is a federal agency according to its website. What the airlines did is legal, but it did dump much of the net burden of paying the pensions they had provided to employees onto that agency, prior insurance premiums paid in notwithstanding.
I have neither the time or inclination to look at all the airports mentioned, but I did take a look at the financials for Nashville International.
Nashvile enplanements rose 3.2%, 3.4%, and 5.3% respectively in fiscal years 2013, 2012 and 2011. Airport operating revenues increased from approximately $84,000,000 in FY 12 to slightly more than $100,000,000 in FY 13 or an increase of 19.05 per cent. Instead of scaling back operations, the airport has seen an increase in emplanements and operations since the end of the recession.
In FY13 the airport had net income before capital contributions of $8,366,175. It had an operating loss of $4,605,153 in FY12 and an operating profit of $11,343,454 in FY11.
The airport has an intensive capital investment program. One of the objectives is to take advantage of the current low interest rates to build for the f
Personal experience. – PBGC only got 25 - 30 % of amount they pay out and that value is only about 1 /4 that was in defined benefits plan. The PBGC subsidy from the federal budget is some amount not know by this poster. Wonder what multiple it is of the federal Amtrak payment ?
I disagree with the term dump. What the bankrupt carriers did was use a legal gate, implemented by the federal government, to relieve themselves of their pension obligations. For that exit strategy they had paid substantial premiums, just like I pay for a variety of insurance coverages.
If I am involved in an automobile accident, filing a claim to be reimbursed for my loss is not dumping. It is simply collecting on a contract that I had with the insurance company.
Numerous factors contributed to the bankruptcy of the legacy airlines. Amongst them were intransigent labor unions, especially at American Airlines, that refused to acknowledge that the airline business had changed dramatically with deregulation, and insisted that they be compensated as if nothing had changed since the days when the airlines were regulated and could pass their costs onto the flying public through government set rates.
"PBGC is funded by assets from trusteed plans and premiums from plan sponsors, not by taxpayer dollars. Unfortunately, our premiums are set in law. 
They’re both too inflexible — so that some plans are unfairly paying for the risks of others — and too low to cover PBGC’s benefit guarantee levels.
In 2003, the Government Accountability Office added PBGC to its “High Risk” list of agencies, because we control neither the benefits we pay nor the premiums we charge. Congress has repeatedly raised PBGC’s premiums, but they remain too low to fund our obligations. That’s why, 10 years later, we remain on GAO’s High Risk List."
Because premiums out stripped benefits during the initial years of