Title
Airline Rates and Charges Program (Ordinance G-6321)
Description
Request to amend Phoenix City Code to implement 2017-18 Airline Rates and Charges Program, and to codify the Airport's Early Bag Check Program.
Report
Summary
The Aviation Department is requesting an ordinance amending City Code Sections 4-173, 4-174, and 4-179(B), to implement the 2017-18 Rates and Charges Program for airlines and air transportation-related companies at Phoenix Sky Harbor International Airport, adding new Section 4-176 to codify the Early Bag Check Program at the Airport, and renumbering existing sections 4-176 to 4-181, all effective July 1, 2017.
The airline rates and charges program generates revenue needed to fund the ongoing operations and maintenance of Phoenix Sky Harbor International Airport (Airport). The Phoenix City Council established the basic framework for the Airport's rates and charges program in 1981, and approves a new schedule each year based on the Airport's projected operating and capital costs. The Airport system is required to be operated and maintained as a self-sustaining business enterprise. Air carriers and other airport users pay for Airport expenses based on their proportional use of the facilities. Federal law requires the Airport to only charge the direct cost of that use, and no more.
The proposed terminal and cargo facility rental rates and landing fees will allow the Aviation Department to recover the approximately $139 million in costs associated with operating and maintaining Airport facilities. Total billings to the airlines are proposed to be an increase of 5.9 percent in comparison to current year billings. The main reason for this increase is the upcoming financing of the Terminal 3 Modernization Project. Staff has coordinated closely with the airlines during the past few years for this anticipated increase. Phase 1 of the project was completed, and has been in operation since November 2016.
The Aviation Department also recommends modifying the City Code to combine both International (Section 4-174(A)) and Domestic Common use fees (4-174(B)) into one section. If approved, this modification would have the effect of consolidating the common use rates for all airline carriers effective July 1, 2017. The proposed amendment to the international and domestic common use fees was negotiated with the affected airlines and has been phased in over the past four years. The amendment as proposed would establish the same per-turn fee in lieu of differing rates between airlines, when one of the airport's common use gates is used. This amended common use methodology would provide greater simplicity, more transparency, and enhanced accuracy in cost recovery.
Early Bag Check is a customer service initiative allowing Airport passengers to check their bags at a remote ticketing kiosk and bag facilities that are provided by the Airport at pre-determined locations. The service is free to the public. If approved, the new Section 4-176 would authorize the Aviation Director to apportion Early Bag Check costs to the airlines that use the service. An amount not to exceed 40 percent of the total costs for the service would be charged to the participating airlines based on their proportional use of the service.
The amended rates and charges are reflected in Attachment A.
Public Outreach
The proposed rates and charges were presented and discussed with affected airline representatives on May 4, 2017.
Location
Phoenix Sky Harbor International Airport's three passenger terminals, two cargo facilities, and associated airfield.
Department
Responsible Department
This item is submitted by Deputy City Manager Paul Blue and the Aviation Department.