Introduction
Governments have demonstrated their incapacity to invest in airport expansion and also other budgetary commitments ( Vasigh & Fleming, 2016 ). It then requires airports to raise funds on their own to support their developmental operations. Further Havel & Sanchez (2014 ), denotes that the source of funding ought to retain the airport’s financial muscle to servicing and repaying borrowings via an improved efficiency as well as better resource management in a bid to generate additional revenue. In regards to this, privatization of airport infrastructure is the essential element and is developing a paradigm shift in the aviation sector. Privatization in airport financing increases competitiveness as well as economic development opportunities as shall be discussed in this paper. Further, the paper will also look into the requirements for federal funding as well as the vital Airport Improvement Program (AIP) as well as its uses.
Aviation Funding
The government is tasked with several functions in the civil aviation industry. The roles assist in the process of developing and maintaining operations in the industry ( Oster & Strong, 2008 ). For instance, the government is responsible for airline regulation, air service agreement, airport development, air traffic management, aircraft certification and regulation as well as personal licensing. Over the recent past, there have been institutional changes in the aviation sector. These changes targeted airline deregulation and ownership, airport corporatization and privatization, intermodalism, and sustainability. The aspects of change brought about changes in the funding in the aviation industry. As a result, airlines deregulated, and ownership shifted from the government to private entities. Hence, the primary source of funding was devolved from the federal government to private institutions – privatization.
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With privatization the airline industry benefitted in some ways for instance, new entrants in the industry were promoted by the change in structure. Further, freedom of entry was enhanced, and substantial improvements realized as a result of competition. Moreover, real-time fare prices averagely reduced by an average of 30-33% ( Hanlon, 2007 ). Productivity gains were reported owing to the deregulation which further facilitated urban and suburban development through connectivity. The benefits mentioned need a lot of investment that the government is incapacitated . The federal government is faced with numerous roles to play and hence their financial capacity to invest in airport expansion is downplayed by their budgetary commitments. Hence the idealism of liberation, privatization, and globalization becomes the best alternative to effect developmental growth in the airline sector.
The airports hence are required to raise funds through alternative means to grow sustainably. The government encourages incorporation of private funding to airport management and development primarily in developed and developing economies in a bid to collect sufficient revenues that shall, in turn, carry out proper functions as well as maintain quality services acceptable to users. Privatization takes place in five different forms ( Hanlon, 2007 ) including the sale of existing airports. Further, long term leases to private firms privatize and sources funds for the airport. Thirdly, contract operations open up finding for developmental purposes. Also, it is of significance that airports benefit from the creation of new terminal facilities, primarily through build-operate-transfer consortia . Lastly, privatization can take the form of private business ventures to fund the creation of new airports.
Creation of intermodal systems is pivotal in the airport planning process. However, its achievement requires a hefty financial investment that the government is incapacitated to finance. Hence, privatization remains the best option for finding airport planning processes. The privatization of the airports is vital in that it encourages growth and sustainability in the long-run. Proper infrastructure is achieved, and hence the safety of passengers in the airport as well as during their flights is assured. The competitiveness of the private sector is incorporated in the airline's industry and results in splendid results of consumer satisfaction.
Funding Programs
The Airport Improvement Program (AIP) is a popular grant program that is usually among the heavily funded of airport projects ( Kirk, 2009 ). The federal airport improvement program was established under the Airport and Airway Improvement Act of 1982. The program was mandated to be administered by the Federal Aviation Administration (FAA). Owing to its nature , the program requires annual appropriations. The program is responsible for providing grants to public agencies as well as private entities in a bid to boost their planning and development of public-use airports. The funding is a statutory provision requiring some of the AIP funds to be apportioned by formula to specified airports. The funds also allow provisions for priority projects through program reserves of a given percentage.
The program is responsible for airport categorization with regards to airport activity. In this regards, the classes include commercial service airports, non-primary airports, primary airports, cargo service airports, reliever airports, and general aviation airports. The classification is done based on the capacity as well as received revenue from operations conducted in the terminals . Also, the AIP funding is categorically classified. The classifications include apportioned funds detailing passenger, non-primary, and cargo entitlements, and state and supplemental apportionments. Even under this funding are discretionary funds that are divided into two categories. The first category includes set aside funds that are further subdivided into programs – noise program, military airport program, and reliever airport program. The remaining discretionary funds are used for preserving as well as enhancing capacity, security, safety, and compatibility planning and programs at either primary or reliever airports. Also, the funds are distributed to any airport on a national priority system.
Apart from AIP, other funding programs are also available ( Kirk, 2009 ) for the American airlines. These finding programs include ConnectOregon that was authorized by the legislature for funding air, marine, rail, and transit infrastructure. The funds are deposited into Oregon’s Multimodal Transportation Fund and distributed by Oregon Department section of Local Government Transportation. Another program is the Financial Aid to Municipalities (FAM) Grant Program. The funding program aims at funding planning, development, and capital improvement projects at Oregon airports. It is defined in the Oregon Revised Statute 738-120. These funds are availed on a discretionary basis based on the department’s budget. The source of these funds is state taxes on aviation fuel. The funding source allows revenue collected at Oregon airports to be utilized on the same facilities for developmental purposes. Oregon municipalities meeting grant eligibility criteria and matching requirements are open to making applications. Another program – Pavement Maintenance Program (PMP) – is developed in a bid to protect airport investments by merely preserving airport pavement. Other programs include pavement evaluation program (PEP), military airport program (MAP), and navigational aids (NAVAIDs).
In conclusion, the aviation sector or rather a system receives funding efforts from federal, state, and local governments. The funding is depended on airport’s ownership as well as an operational structure where various alternatives and responsibilities apply. Locally owned airports, for instance, utilize airport-generated revenue or also local funds to drive their developmental agenda. The operations include finance operations, maintenance, and administrative costs. State-owned airports, on the other hand, are funded through user fees. However, an ideal situation to foster developmental growth and sustainability in the aviation sector is to privatize the industry . Different privatization methods exist that include partial or full control of airport operations by private institutions. The FAA which is a government formulated authority is charged with air traffic and navigation controls in the aviation industry. Further, FAA provides for flight planning and other safety services in the industry.
References
Hanlon, J. P. (2007). Global airlines: competition in a transnational industry : Routledge.
Havel, B. F., & Sanchez, G. S. (2014). The principles and practice of international aviation law : Cambridge University Press.
Kirk, R. S. (2009, May). Airport Improvement Program (AIP): Reauthorization Issues for Congress. Congressional Research Service, Library of Congress.
Oster, C. V., & Strong, J. S. (2008). An assessment of aviation security costs and funding in the United States: Aviation Security Management , 3 .
Vasigh, B., & Fleming, K. (2016). Introduction to air transport economics: from theory to applications : Routledge.
