US FAA issues ruling finding PANYNJ charged United using unreasonable fee methodology

    Authority of New York and New Jersey (PANYNJ) violated grant assurance 22 (economic nondiscrimination) and grant assurance 25 (airport revenues), after United Airlines filed a complaint alleging PANYNJ charged unreasonable rates. The airline claimed the port authority’s fees were not “cost based” and lacked transparency, in order to generate “excessive surplus revenues” to subsidise non-aeronautical functions and “improperly” divert airport revenue. PANYNJ denied the claims, asserting its fees were not unreasonable or unjustly discriminatory, and as a grandfathered airport there is “no unlawful diversion of revenue”. Following a review, the FAAreleased the following initial determinations:

    • Costs charged to United are not based on a reasonable and transparent cost allocation methodology, and the PANYNJ did not maintain an “adequate” audit trail for the allocation of its expenses. The authority was also found to have engaged in deficient accounting practices and record keeping, and engaged in deficient accounting practices and record keeping;
    • PANYNJ did not clearly articulate the methodology used to calculate the amount grandfathered revenues, with a “history of large fluctuations in grandfathered payments”;
    • PANYNJ expended considerable amounts of airport revenue on non-aviation facilities it does not own. PANYNJ has used excess profits generated by aviation fees to fund non-airport related projects, and New York Newark Liberty International Airport users are improperly subsidising a portion of PANYNJ’s non-airport related projects;
    • PANYNJ also failed to demonstrate it has complied with the grandfathering exception permitted by 49 USC § 47107(b)(2) and § 47133, grant assurance 25, airport revenues, and FAA’s policy and procedures concerning the use of airport revenue..

    The FAA directed PANYNJ to submit a corrective action plan within 30 days. United Airlines responded to the ruling, saying: “We are pleased to see the FAA take seriously the concerns we raised” (Wall Street Journal, 20-Nov-2018). [more – original PR]