Category AVIATION &ТНЕ ROLE OF GOVERNMENT

AIP funds are federal monies (derived from taxes and fees specifically collected for that pur­pose) administered by the FAA. These include a domestic ticket tax and flight segment fees on domestic flights, an international arrival and departure tax, a domestic tax on air freight, and a per gallon fuel tax on aviation fuels. The FAA distributes more than $3.8 billion annually out of AIP funds to airports. Airport owners and spon­sors provide a minimum of 10 percent share in any project funded by AIP grants.

Airport User Charges

Airport user charges are either (1) aeronautical user charges or (2) nonaeronautical user charges.

1. Aeronautical user charges include landing fees, apron, gate-use or parking fees, fuel – flow fees, and terminal charges for rent or use of ticket counters, baggage claim areas, administrative support quarters, hangars, and cargo buildings.

2. Nonaeronautical user charges include rentals to terminal concessionaires, automobile park­ing, rental car fees, and rents and utilities for hotel, gas station, and related facilities.

Passenger Facility Charges (PFCs)

In 1990, Congress authorized airports to charge a per-passenger enplanement fee to be used for the financing of airport capital improvements and the expansion and repair of airport infrastruc­ture. These are called Passenger Facility Charges (PFCs) and they are collected by the airlines as a part of the ticket price for the benefit of air­ports. As of 2012, the PFC program allows the collection of $4.50 for every boarded passenger at commercial service airports.4 These funds may be used for three specific purposes: (1) to

Interest

payments on outstanding debt for eligible capital improvements

FIGURE 33-5 98% of airport revenue comes from airport users: U. S. Airport Sources of Revenue, 2001.

preserve or enhance safety, security, or capacity;

(2) to reduce noise or mitigate noise impacts; and

(3) to enhance air carrier competition.

Over $84 billion in airport capital improve­ments have been made using PFC monies through September 2012. This amounts to over 30 percent
of all airport capital investment in the United States. PFC funds are used for airside projects; terminal area projects; interest costs on airport bonds; access projects such as roadways, people movers, or transit projects; and noise mitigation projects. They have been used specifically for new runway construction and new gate construction, but they are not permitted to be used for parking garages, terminal concession areas, or areas leased by a specific airline for more than five years.

The recession of the early 1990s began to abate toward the middle of the decade. And just as deregulation had produced the greatest losses in the history of the airline business just a few years before, now profits began to rebound under deregulation.

• In 1994, American Airlines saw the highest quarterly profit in its history and in the history of any airline since the beginning of commercial aviation.

• TWA emerged from Chapter 11 and restructured—with a 45 percent employee ownership.

• Northwest avoided bankruptcy with an employee trade-off of stock for concessions.

Beginning in 1995, the financial picture for most airlines markedly improved, and contin­ued to improve through the end of the decade. Net income for many airlines reached its peak that year as traffic figures spiraled upward in a continuation of a good economy and a cli­mate of stable wages and fuel prices. Each year from 1995 through 1999 were profitable ones for the airlines, reaching $5.6 billion that last year. Labor contracts were renegotiated, fleets were expanded, and employment rose. But there was trouble just over the horizon.

: Into the New Millennium

The airlines entered the new millennium riding the crest of the same wave that generally took the stock indices and corporate profits to their his­torical high point. The so-called dot. com computer and technological sector, now seen in context, pro­pelled an economic “bubble” that burst in the year 2000. That year a downturn began in the economy that produced concerns of a “bear” market, then turned to fears of a recession. Although passenger enplanements reached a then all-time high in 2000 of 693 million, the airlines, like everyone else, were now on the backside of the wave.

The year 2000 saw the end of six years of relative prosperity in the air carrier industry. The downturn in air carrier profits actually began in 1998 but it was not until 2001 that adversity took hold. As the year progressed, it was forecast that the industry, as a whole, would experience a loss of perhaps $3 billion. This projected loss was of a magnitude somewhat comparable to the early years of the 1990s, but less than either 1990 or 1992. While this projected loss was substantial, it was still within the bounds of the cyclical nature of the industry since deregulation.

Market Entry and Exit: Legacy airlines have entered new markets at a reduced rate and have exited markets at an increased rate since 2004, just the opposite of LCCs.

Route structure: Route overlap between the two sets of carriers was 13 percent in 1997 but had risen to 31 percent in 2009, indicat­ing an increasing competitive challenge to the legacy airlines.

Fleets: Legacy airlines reduced their fleets from 1995 to 2009 while LCCs increased their fleets from 257 in 1995 to 911 in 2009. The legacy airlines’ fleet is still about three times larger than the LCC fleet.

Employees: LCC employee numbers have increased and legacy airlines’ have decreased. Fares: The fare differential between legacy carriers and LCCs is lessening, partly due to increased market pressure and competition from the LCCs. Fare premiums due to hub concentrations (hub premiums) by the legacy carriers was 24.9 percent in 1995 but had dropped to 6.6 percent in 2009 (greater N. Y. area) and respectively from 18.6 percent to 6.4 percent in Chicago and Dallas.

Customer Satisfaction: An objective criteria standard called the “Airline Quality Rat­ing” was created in 1991 by Wichita State University (now in cooperation with Purdue University), to report passenger satisfaction levels. It is based on 15 criteria, including on-time performance, denied boardings, mis­handled baggage, and customer complaints. See Figures 35-24, 35-25, and 35-26.

■ Regional Airlines

Regionals are a mixed bag. Regionals can be large or small; they can be independently owned or owned by larger carriers; they can operate jets (30-108 seats) or turboprops (9-78 seats). Most operate under contract to mainline carriers called “pro-rate agreements” or “capacity agreements” and they all serve the function of feeding pas­sengers from smaller airports to larger ones and back. At 498 airports in 2010, regional airlines provided the only service. Stated differently, 72

percent of U. S. communities rely exclusively on regional airlines for all scheduled air service.

In 2012, the FAA said that the U. S. com­mercial aviation industry at the end of FY 2011 consisted of 16 scheduled mainline air carriers that used large passenger jets (over 90 seats) and 68 regional carriers that used smaller piston, tur­boprop, and regional jet aircraft (up to 90 seats). Regional carrier international service is con­fined to the border markets in Canada, Mexico, and the Caribbean.17

Under a pro-rate or revenue-sharing agree­ment, ticket revenues are shared according to a proration formula. All costs incurred in the
regional airline portion are borne by the regional airline, and it is responsible for pricing, scheduling, and ticketing. The regional airline assumes the risk of its operation, but also presumes to benefit from declines in fuel prices and increased passenger counts and ticket prices. While the risks are greater under these agreements, so can be the profits.

Under a capacity purchase or fixed-fee agreement, part or all of a regional’s seat capacity is purchased by a mainline partner. The regional carrier is paid a fixed fee for each block hour of aircraft operation. The mainline carrier assumes the cost of ground support and gate access, as well as operating expenses. The regional airline

is responsible for labor costs, aircraft mainte­nance, and ownership or lease expense. Under this arrangement, the regional carrier is protected from fluctuations in load factors, cost of fuel, and ticket prices.

Under either contractual arrangement, the regional airline is an independent contractor and the mainline carrier assumes no third-party liabil­ity for the regional’s acts, including liability for aircraft accidents.

As the larger new legacy carriers have cut back on route mileage and networks, regionals have increased their percentage of total miles flown. While the number of regionals has diminished from 247 carriers in 1980 to 61 carriers in 2010, they have flown increasing numbers of passengers, longer distances, and in larger aircraft over that period. In 2010, regionals carried over 163 million passengers and operated almost half of all sched­uled airline flights in the United States, a 40 percent increase since 2003 at a time when traffic volumes have remained static. Code sharing with larger air­lines accounts for 99 percent of all regional traffic, and the regional aircraft may fly the livery of its larger contracting carrier or it may fly its own.

1. United/Continental has contractual rela­tionships with Atlantic Southeast Airlines, Chautauqua Airlines, Colgan Airlines, CommutAir Airlines, ExpressJet Airlines, GoJet Airlines, Mesa Airlines, Shuttle American, SkyWest Airlines, and Trans States Airlines.

2. Delta has contractual arrangements with nine regional carriers: Comair is wholly owned. The others are Atlantic Southeast Airlines, SkyWest Airlines, Chautauqua Air­lines, Shuttle American, Compass Airlines, Pinnacle Airlines, Mesaba Aviation, and American Eagle.

3. American has capacity agreements with two wholly owned subsidiaries of AMR: American Eagle Airlines and Executive Air­lines, and also has a capacity agreement with Chautauqua Airlines.

4. Alaska Airlines has a capacity agreement with its wholly owned subsidiary Horizon Air.

5. US Airways has capacity agreements with two wholly owned subsidiaries: PSA and Piedmont. It also has agreements with Air Wisconsin Airlines, Mesa Airlines, Chautau­qua Airlines, and Republic Airways.

Some of the largest regionals are combined in corporate ownership groups.

There has been a succession of treaties and agreements between nations, beginning in 1929, dealing with the issue of liability of airlines to their passengers and shippers. The reason for this progression of agreements concerns the way in which airlines themselves were viewed during the early years of their existence. We have pre­viously seen how the attempt to establish and maintain a viable airline business was as risky as, and often directly proportional to, the dangers of flying itself. Flying was dangerous and aircraft were relatively primitive and unreliable. Since commercial aviation was considered by most governments to be a national resource and its promotion to be a government responsibility, the laws governing the liability of such companies reflected their inherent financial frailty.

As air travel became progressively safer and more reliable over the years, the concern of government shifted from promoting aviation for its own sake to concerns over the way and man­ner that the airline business was conducted, and to the protection of the people who used the air­lines for personal travel or shipping cargo.

Below we will consider each of these agree­ments, culminating in the Montreal Conven­tion. All of these agreements were important during the time that they were in effect, but all except the last, the Montreal Convention, are now relegated to historical significance only. The Montreal Convention, like all other international treaties, had to go through a ratification process to become binding upon those countries that subscribe to it. This process began in 1999 and has now about run its course as most civilized countries on earth have signed on. It is to be con­sidered the law for all purposes in this course.

The Warsaw Convention-1929

At the same time that the hemispherical confer­ences were going on in the West, conferences were held in Europe, first in Paris in 1925 and then in Warsaw in 1929. Commercial air trans­portation between far-flung nations, including Europe and the United States, was being rec­ognized as a probability since the significant aerial accomplishments of 1919. In that year the first transatlantic flight had been completed by the United States Navy in a Curtiss flying boat,

NC-4, from North America to Lisbon via the Azores (requiring 57 hours of actual flying time). Englishmen Captain John Alcock and Lieutenant Arthur W. Brown made the first nonstop cross­ing from Newfoundland to Ireland (completed in just over 16 hours flying time). The English dirigible R-34 made a round trip from Scotland to Roosevelt Field, Long Island (between July 2 and July 8), and the first scheduled airplane pas­senger service was inaugurated between London and Paris. The primary concerns at the Paris and Warsaw conferences related to the lack of uni­formity in commercial and legal transactions in international civil aviation. In 1929, the signatory nations established through the Warsaw Conven­tion, effective on February 13, 1933, the first rules relating to carrier liability for passenger and cargo interests in international air transportation. The Warsaw Convention (Warsaw) provides the legal framework for the payment of claims for personal injury and death of passengers, claims for damaged goods, cargo and baggage, and claims for delay. Simply put, airlines must pay regardless of fault (strict liability) up to the limits of liability prescribed, subject to certain defenses set out therein. Warsaw also prescribed form and content for tickets, air waybills, and other lading documents.

I • he sudden abrogation by the United States 1 Congress of economic regulation of Ameri­can airlines in 1978 caught the world by sur­prise. The air carrier industry worldwide, for practically its entire existence, had been oper­ating under the benevolent supervision of national governments. But in the United States, although air carriers were subject to the eco­nomic control of the Civil Aeronautics Board, they operated within a greater free enterprise system that reflected the philosophy of the national government and American heritage. In Europe, governments after World War II largely embraced socialist economic philosophy and policies. Conceptually, the complete removal of all government economic control of the air carrier industry was a more difficult hurdle for Europeans than for Americans.

Airline management in the United States after deregulation was quick to embrace the competition of the free market. The competitive spirit had been there all along, as demonstrated by the rivalry between American Airlines and United Airlines during the 1970s, as they fought for market share even under CAB constraints. After deregulation, U. S. airlines simply joined the ranks of most other American businesses and operated under the same national laws that

governed everybody else. Competition, after all, ‘ was what the American economy was all about.

In Europe, on the other hand, national governments were quite less ready to accept full free market principles in most economic endeav­ors. Philosophical concerns of government typi­cally ran to issues of citizen welfare, access to medical treatment, worker benefits, and other social entitlements, not to the state of competi­tion in routine business affairs. With the prospect of privatization of air transport, all of these social concerns were present. Added to these concerns was anxiety over the loss of government control in directing the future of their airlines as organs of national influence.

Moreover, the demonstrated economic tur­moil, bankruptcy, and labor strife that American deregulation had unleashed in the United States presented a foreboding view of the future under deregulation, and constituted another justification for European pause. The countries of Europe and the institutions of the EC debated the pros and cons of deregulation and its effect on the greater economy. Their approach was one of caution. The consensus generally formed was that air transport should be more the object of a policy of “liberalization” of regulation than an “abroga­tion” of regulation.

Then there was the matter of national diver­sity. The history of Europe through the first half of the 20th century is a history of conflict based largely on nationality or allegiances. European wars were the historical rule, not the exception. But after World War II, Europeans began to believe that things could be different. The coun­tries that made up the EEC had agreed in the Treaty of Rome to embark on a more enlightened path for the future of Europe; cooperation and free competition, without national constraints, was the course set to be followed. But when it came to implementing the vision, old habits proved hard to break. National interests were dif­ficult to ignore, particularly given the history of the continent. Progress was slow.

In short, the United States was far more pre­pared to deal with the radical idea of economic deregulation of the airlines (free competition) than were the states of Europe. Still, the Treaty of Rome had been signed and ratified; it was the law. It had been the law, in fact, for over 20 years when American deregulation came along in 1978. The institutions of the European Commu­nity had been set up, and they were staffed and operating. Many of those who had been charged with making the EC a reality were serious about their charge, and none more so than those within the European Commission.

The Space Age arrived during the International Geophysical Year (IGY), which was actually an 18-month period that extended from July 1, 1957 to December 31, 1958. The IGY was an interna­tional effort to coordinate worldwide measure­ments and data collection of geophysical (earth, oceans, atmosphere) properties, as well as to investigate an expected peak of sunspot activity and a number of solar eclipses. It was apolitical and non-nationalistic, coordinated by the Inter­national Council of Scientific Unions, and 67 nations participated.

The American participation was done under the auspices of the National Academy of Sci­ences, with the stated goal: “. . . to observe geo­physical phenomena and to secure data from all parts of the world. . . .” The IGY sought to capitalize on the many innovative technologies that were appearing after the Second World War, including computers, rocketry, and radar.

The International Geophysical Year was patterned on two previous international scien­tific undertakings. The first was the Interna­tional Polar Year (IPY), which took place from 1881 to 1884, now known as the 1882 IPY. It was the first series of coordinated interna­tional expeditions ever undertaken to the Polar Regions. The project was inspired by the Aus­trian explorer, Carl Weyprecht, who believed that nations should put aside their competition for geographical dominion and, instead, fund a series of coordinated expeditions dedicated to scien­tific research. Eleven nations participated in the effort, and 12 stations were established and main­tained in the Arctic for the three-year period.

A second expedition was conducted on the 50th anniversary of the first, and it became known as the 1932 Polar Year, or the Second

International Polar Year. The Second IPY was promoted by the International Meteorological Organization to take advantage of several new technologies, such as precision cameras and high frequency radio, and to investigate the newly discovered “jet stream.” Forty countries partici­pated and 40 permanent observation stations were established in the Arctic. The contribution of the United States was the establishment in Antarctica of the meteorological station on the Ross Ice Shelf during the second Byrd expedition. The Second IPY was primarily concerned with the investiga­tion of meteorology, magnetism, atmospheric sci­ence, and the mapping of ionospheric phenomena that advanced radio science and radio technology.

Many scientific accomplishments have been recorded through these three international cooperative endeavors. Because of the IGY, for example, scientists defined the mid-ocean ridges (furthering the understanding of the effects of plate tectonics and verifying the formation of continental shapes), discovered the Van Allen radiation belts, charted ocean depths and cur­rents, studied earth’s magnetic field, measured upper atmospheric winds, and studied Antarctica in great detail.

The first licensed commercial space launch occurred in the United States in March 1989 when a Starfire suborbital vehicle carried aloft the Consort 1 payload from White Sands Mis­sile Range in New Mexico. By the end of 2011, the DOT/FAA had licensed 205 orbital and suborbital commercial launches. From 1989, the number of annual launches increased each year through 1997 with a high that year of 24 launches. Beginning in 1998, launch activity lev­eled off, and even began to decline on an annual basis. Launches peaked again during the 2007­2008 period. For historical and forecast launch and satellite data, see Table 41-1 and Figures 41-4, 41-5, and 41-6.

Until the 1990s, most commercial satellites were telecommunications orbiters that were placed in geostationary orbit (GSO). Since 1997,

satellites have also been placed in low earth orbit (LEO) or nongeosynchronous orbit (NGEO)31 in order to serve new markets in commercial mobile telephones, data messaging, and remote sensing.

Launch forecasts consider five payload cat­egories, defined by the type of service the space­craft are designed to offer:

1. Commercial telecommunications;

2. Commercial remote sensing;

3. Science and engineering;

4. Commercial cargo and crew transportation services;

5. Other payloads launched commercially.

Commercial launch demand is driven by activity in the global satellite market, ranging from customer needs and the introduction of new applications to satellite lifespan and regional eco­nomic conditions. The GSO market is served by both medium and heavy lift launch vehicles, for which there is a constant commercial customer demand for telecommunications satellites. The NGSO market is served by small, medium, and heavy lift launch vehicles and has a wider variety of satellite and payload missions, but also has more demand fluctuation.

Globally, the United States lags both Europe and Russia in commercial launches. In 2010, for instance, there were 23 launches worldwide: 13 in Russia (57%), 6 by Europe (26%), and 4 for the United States (17%).

The Professional Air Traffic Controllers Organi­zation (PATCO) walked off their jobs on August 3, 1981, in violation of the Civil Service Reform Act of 1978 (CSRA), which forbids strikes among civil service workers. That same day, President Reagan went on radio and television to announce that any striker who did not return to the job within 48 hours would be fired, and would also be permanently prohibited from being reemployed at any federal agency in the future.

Of those controllers who went on strike (some 4,199 did not), 875 returned to work before the expiration of the deadline set by the president. The remainder of the strikers, over 11,000 con­trollers, were fired.

The FAA had made preparations to meet the strike. Controller positions were staffed by those who had refused to strike, supplemented by supervisors, military personnel, and retirees who were called back. Within 10 days the АТС system was operating at about 70 percent effec­tiveness. The FAA recruited new trainees and ran them through its Air Traffic Service Academy to fill the remaining vacancies. When the air traffic system regained full operational capacity less than two years later, a head count showed that there were 20 percent fewer controllers required to run the system safely and efficiently, implicit proof that АТС was over-staffed when the strike began.

PATCO was decertified as the bargaining agent for FAA controllers. The FAA and the Airline Transport Association filed civil lawsuits seeking damages and injunctive relief, and the PATCO strike fund, which in August 1981 held over $3 million, was impounded to pay dam­ages and fines. Criminal proceedings were com­menced and federal court contempt orders were entered.

The controllers hired after the PATCO strike subsequently formed their own union, the National Air Traffic Controllers Union (NATCO), which represents controllers today.

Response from other union groups in sup­port of the strike was muted. ALPA, in fact, pub­licly countered PATCO assertions that the АТС system was unsafe. Any tepid support voiced for the strike was seen as merely symbolic. Still, union leadership countrywide was apprehensive over the effect of such a devastating defeat suf­fered by any labor organization. They could not help but notice the overwhelming support that the administration’s response to the strike had engendered.

The strike caused large airline losses at a time when the airlines were having a difficult time due to deregulation and the economic down­turn then ongoing. It inconvenienced millions of air travelers, and reinforced the wisdom of the anti-strike provisions applicable to federal employees. Unions also took note of the pub­lic resentment generated by the strike and by the disruptions that it caused. It might even be concluded that the PATCO strike and its after­math had a chilling effect on militant union activity—during the ensuing three-year period there were only two strikes in the airline industry, an IAM strike against Northwest in May 1982 and another IAM strike in August 1983, this time against Lorenzo’s Continental. Each of the IAM strikes deserves further comment.

The strike against Northwest was called by the mechanics after negotiations had produced agreements with all of the other crafts. It was also generally conceded that the company’s offer to IAM was substantial. Union solidarity, most visibly expressed by a refusal by one union’s members to cross picket lines set up by different unions, has been a traditional and effective tool in job actions. When IAM struck Northwest, the pilots crossed the picket lines and continued to fly, as did the flight attendants represented by the Teamsters, thereby greatly reducing the effec­tiveness of the strike.

The Continental strike is technically still in progress given that Continental’s entry into Chapter 11, and the subsequent firing of its employees under the Bildisco decision, caused the loss of all of those employees’ jobs.

When economic deregulation of the airlines was suddenly decreed by the federal government in 1978, America’s commercial airports were poorly equipped or organized to service the new air transportation system. The relationship between the airlines and the airports they served was basically oriented toward airline control; airports were mostly junior partners that more or less accepted whatever the airlines dictated.

The decision to serve any particular airport, as well as the identity of the airline(s) to serve the airport, was in the first instance dictated by the CAB. When a community and its airport found itself fortunate enough to be designated by the CAB, it usually went out of its way to accommodate the airlines designated to serve it. This included the nature of contractual relation­ships between airports and airlines that governed gates, baggage areas, ticket counters, and ground support facilities. Both the airlines and the own­ers of the airports preferred reliable, long-term arrangements.

Exclusive, long-term gate leases restrict entry by new airlines at airports. A GAO survey in 1990,10 12 years after deregulation, revealed that at the 66 largest airports in the United States, 85 percent of their gates were leased to estab­lished airlines under long-term and exclusive – use arrangements. Most seriously affected were Charlotte-USAir, Cincinnati-Delta, Detroit – Northwest, Minneapolis-Northwest, Newark- Continental, and Pittsburgh-USAir. This greatly contributed to the creation of fortress hubs, one characteristic of which is the limiting or exclusion of competition from the market. In 1995, at all of these airports, with the exception of Newark, one carrier accounted for over 75 percent of all passen­ger enplanements.

New startups were often denied access to these airports, although incumbent airlines would sometimes sublease gates to entrant air­lines. These arrangements often carried with them inequities to the new airline, such as being required to utilize the ground personnel of the lessor airline, usually at increased cost and diminished efficiency to the leasing airline. Occasionally, such subleases require that the entrant airline’s aircraft be maintained by the les­sor airline. Oftentimes, the duration of the sub­lease was also quite short.

Congress, in the year 2000, set about to correct some of these inequities in the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (AIR-21), to be further dis­cussed in Chapter 33.

State and local funding is most often used as matching funds in order to receive federal support, although direct funding of maintenance projects is sometimes provided. During the 1990s, state and local funds accounted for 7 percent to 11 percent of airport capital development expenditures.

Funding of Annual Airport Operating Costs and Expenses

Most commercial service airports are self – sustaining5 due to the receipt of rents, passen­ger and shipper expenditures, and business users. Entities doing business at airports as
concessionaires, such as car rental companies, res­taurants, book stores, clothing outlets, and airlines pay rents for the space they occupy and also usu­ally pay a gross receipts tax on the total income they receive from their business at the airport.

Airport Facilities Use Arrangements

Use of airport facilities, buildings, and land is normally arranged under use and lease agree­ments between the airport management and the user. Most of these agreements are between the airport owner and the airlines. These agreements generally fall into three separate categories: residual, compensatory, and hybrid agreements. In addition, the airlines normally pay landing fees based on the gross weight of the landing aircraft.

Residual Use and Lease Agreements

Under this type of agreement, which is more typ­ically found in airport operating practices before deregulation, airlines agree to assume the finan­cial risk of running the airport. Airlines guarantee that the airport will not lose money by agreeing to make up the difference between total cost of operations and the total of non-airline revenue received by the airport.

These types of agreements originated dur­ing the period of regulation when traffic vol­umes were low and the airlines were much more powerful than after deregulation. The trade-off an airport makes when entering into this kind of agreement is two-fold: [18]

These Mil clauses allow the airline to approve or disapprove, or at least delay, specific capital projects, the costs of which would be included in the future charges to the airline.

Some of these capital projects (like con­struction of new gates) could benefit new entrant airlines into the airport, which would be adverse to the interests of the signatory airline. The right to disapprove the project, of course, is anticom­petitive, so that the airline has been placed in a position of unfair advantage over its would – be competitor. These clauses are also against the public interest in having better, bigger, and more efficient airport facilities for use by pas­sengers. Mil clauses, however, do not give the airline approval authority over projects funded by AIP, PFCs, or special facility bonds, and airlines are legally barred from exercising veto rights over PFC-funded projects. Eighty-four percent of residual use and lease agreements have Mil clauses, and the average length of the agreement at large hub airports is 28 years.

As these agreements mature and come up for renegotiation, airports are taking a different approach with carriers. As an example, Dallas/Ft. Worth International recently replaced a 35-year residual use agreement that had been signed in 1974 with the “hybrid” model (discussed below) and limited the contract to a 10-year period. Indianapolis Airport Authority also reached a new 5-year deal with some of its airlines. Atlanta Hartsfield International extended its Delta leases for 7 years in 2010. These shorter-term agree­ments are becoming the norm in the industry. These agreements are not one-way streets favor­ing the airport, however, as negotiations include various concessions to the airlines in some areas, including reduced landing fees.