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ASCI 254 Case Analysis PFC Should They Be Raised

PFCs: Pros or Cons - Should They Be Raised to Pay for 21st Century Airport Infrastructure?

Case Analysis

ASCI 254

Summary

The Passenger Facility Charge (PFC) is a dollar amount that the commercial service airports charge to the passengers enplaned inbound or outbound. Currently, the rate is at $4.50 per passenger, and the money collected is remitted to the airport sponsor which can be the city, the county, the state or the authorities. This charge was a part of the Aviation Safety and Capacity Expansion Act of 1990.

Problem

One of the hot topics today in aviation is to increase a particular user fee. Before, due to the financial deficiency, they implemented the Passenger Facility Charge. Looking from the airlines’ point of view, increasing the Passenger Facility Charge can potentially lose customers resulting to a decrease in profit. Should the PFC increase to provide funding for future improvements, or should it be kept the same to avoid losing passengers because of the increased ticket prices?

Significance of the Problem

The current issue of financial shortage on commercial airport services is not something new. Whether they increase the Passenger Facility Charge or introduce another passenger fee, there will always be a need for financial support to provide the best service and to incorporate the latest technologies in the industry because it is fast phased and is still rapidly evolving. The main concern will be if the commercial airports under performs, if they cannot perform their intended purpose, or if they lack equipment to operate within standards. If for any reason that commercial airport safety standards are compromised, then we need to come up with a solution since it concerns the comfort and the safety of passengers and that should always be the main priority of aviation.

Alternative Actions

Alternative Action 1: The American Association of Airport Executives (AAAE) and Airports Council International-North America (ACI-NA) are asking Congress to raise the PFC from its current rate of $4.50, and cap it around $8.50. This can be solution to the infrastructure costs because of the growing number of passengers.

Alternative Action 2:  Airlines are saying that there is no need for an increase in the Passenger Facility Charge. Passengers are getting charged with so many fees and that increasing the PFC will have a lesser load factor. This will affect the overall airline operation meaning, less profit.

Recommendation

The rapid growth of patrons or passengers deeply affects the need for the airports to upgrade or to expand. These improvements primarily benefit the passengers with their comfort, their experience and especially with the safety. If the Passenger Facility Charges stays the same, the passengers would not really be able to tell the difference until such time that they are experiencing some discomfort or lack of good service or facility at the airport. If the congress will increase the PFC with a minimal amount, it should not affect the passengers’ willingness to travel and will not also be noticeable because of the slight difference in ticket prices. And in doing so, all parties, the airport, airlines, and passengers, will benefit from the increase. Airports can now generate the funds for modernization, the airlines will not decrease their load factor since the increase is minimal, and the passengers will receive much better service and utilize upgraded airport facilities that can prospectively attract more passengers because of experience.

References

Rodriguez, F. (2017, October 16). News | Airways Magazine. Op-Ed: Should Passenger Facility Charges Be Increased? | Airways Magazine. Retrieved October 16, 2018, from http://airwaysmag.com/airports/op-ed-should-passenger-facility-charges-be-increased/ 

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