"Increased Security Spending Could Trigger Costly Delays"

Monday, November 4, 2002

Increased Security Spending Could Trigger Costly Delays
Airline Financial News


The government made record investments in aviation security this year,
but the chairman of the House Transportation Committee warns that costly
delays and congestion will return unless money also is plowed into
aviation infrastructure. 

The chairman, Rep. Don Young (R-AK), was responding to an analysis
released by the General Accounting Office (GAO) on Oct. 25. The report
found that 17 percent of Airport Improvement Program (AIP) funding in
fiscal 2002 went to improve security, up from an average of 2 percent.
Young said the government must be cautious that such spending does not
undercut other needs, such as improving equipment safety and enhancing
capacity to relieve congestion. 

"While the committee is pleased that security needs have been met
without compromising safety, we remain concerned that future safety and
capacity needs of the aviation system not be shortchanged in the drive
to improve aviation security," he said. "As the country climbs out of
the recession and fears of terrorism subside, air traffic is likely to
increase. We do not want to again see the sort of congestion and delays
that plagued the airlines and their passengers in previous years." This
will be a major issue during next year's congressional reauthorization
of aviation programs. 

Some $3.3 billion was available for AIP grants in fiscal year 2002. Of
this, GAO reports that $561 million, or 17 percent, was used to fund
security projects at airports. This $561 million was a dramatic increase
over spending. For example, only $2 million was spent on security
projects in 1982. Prior to fiscal year 2002, the high point for security
projects spending was $122 million in fiscal 1991, shortly after the
bombing of Pan Am 103 and the passage of the Security Act of 1990. In
fiscal 2001, $57 million was spent for security projects. 

According to Young, the Federal Aviation Administration (FAA) was able
to spend more money for security without short-changing projects to
enhance safety or reduce noise. It was able to do this for two reasons:
1) A large number of airports entitled to AIP grants as a result of the
formula in the law decided to forego those grants in 2002 and carry over
the rights to that money for future years, leaving FAA with some
additional money; and 2) The FAA provided less money than it had in the
past for projects to bring airports up to standards and for
reconstruction of deteriorating airport facilities. However, Young
emphasizes that as air transportation returns to pre-Sept. 11 levels,
the safety and capacity concerns that existed before the attacks will
continue to trouble the aviation community. 

GAO noted that the $561 million FAA awarded to airports for security
projects in fiscal year 2002 represents more than an 800 percent
increase over the $57 million awarded in fiscal year 2001. The Aviation
& Transportation Security Act (ATSA), passed in November 2001, amended
legislation governing AIP eligibility to permit funding for fiscal year
2002 of any security-related activity required by law or the Secretary
of Transportation after Sept. 11, 2001, and before Oct. 1, 2002. This
legislation also permits FAA to use AIP funds to replace airport baggage
systems and reconfigure terminal baggage areas for explosives detection
systems. 

When comparing grant award amounts for fiscal years 2001 and 2002, the
increase in AIP grant funds for security projects contributed to a
decrease in the amount of funding available for non-security development
projects, according to GAO. One large spending reduction occurred in
reconstruction, which decreased by $148 million - from almost 23 percent
of AIP funding in fiscal year 2001 to 18 percent in fiscal year 2002.
Environment, safety, and capacity projects also decreased by $97
million, $66 million, and $40 million, respectively. 

Airport Council International said the increase in AIP funding for
security has affected airport development projects. It reported that
airports have delayed almost $3 billion in airport capital development,
most of which dealt with terminal developments, because of new security
requirements. 

AIP funding to large hub airports increased by almost $111 million, or
almost 4 percent of total AIP funding, while funding to small hub
airports increased by almost $32 million, or 1 percent, in fiscal year
2002. In contrast, the greatest reductions in AIP funding were among
non-hub airports, which decreased from almost $650 million in fiscal
year 2001 to almost $510 million in fiscal year 2002, followed by
reliever airports, which decreased from $213 million in fiscal year 2001
to almost $164 million in fiscal year 2002. 

The increase in AIP funding to large hub airports is attributed to their
proportionally higher security needs. In the case of the decrease in AIP
funding to non-hub airports, FAA's Airport Planning and Programming
officials said that their security needs were much lower than those of
large hub airports, accounting for only $44 million, or 8 percent, of
the $561 million awarded in fiscal year 2002.


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