The Nation's Airports Are Receiving Billions of Dollars from the Federal Government in Grants
Airports are a part of our nation's crucial infrastructure the same as highways and ports. However, there are also business elements of operating an airport. When travel is disrupted, the airports are not able to realize enough revenues from the airlines to recoup their operating expenses. Thus, they end up in financial distress. The current round of federal grants related to the COVID-19 crisis has also had to go towards keeping airports fiscally solvent. Scores of airports have been applying for and receiving these grants so that they can keep their financial heads above water.
There was a provision in the CARES Act passed by Congress that was specifically devoted to airports. Unlike airlines who are owned by shareholders, airports are often operated by authorities that are specifically set up for the purposes of maintaining the airport. They have revenues and expenses just like any other business and they have the ability to borrow from the public through bonds. Almost every single airport in the U.S. is owned by public entities. As a result, the CARES Act appropriated $10 billion in aid to go to the airports.
Without the Federal Grant Money, the Airports Would Soon Go Broke
Airports need ridership to make their budgets each year. The bulk of their revenues come from payments made by the airlines for each passenger that goes through the facility. Airports also get money from renting out retail space in the facility to stories and restaurants. However, these restaurants have difficulty making their rent payments and some have even closed for the duration of the COVID-19 crisis. It goes without saying that passenger revenue has plummeted and that source of airport funding is largely gone.
However, because most airports are operated by public entities, they do not have the same ability to lay off or furlough employees that airlines have. They cannot even give pay cuts to employees because their salaries and benefits often have the same protections enjoyed by other municipal and state employees. Moreover, airports cannot simply shut down because they are critical infrastructure and need to keep operating in a national emergency. Therefore, they end up in a situation where they have unfunded expenses. Airports likely have some cash reserves, but they need to preserve them in case they need to perform critical maintenance on things such as the runways or the terminal.
The Money Is Based on Previous Ridership Numbers
The airport funding in the CARES Act is determined by an automatic mechanism. Each airport receives a grant that is calculated based on its 2018 ridership. All airports throughout the country are receiving this funding. The amounts of the grants range from the tens of thousands of dollars for smaller airports to hundreds of millions for larger airports. For example, the giant Dulles Airport was awarded $143.4 million in federal funding since it is one of the busiest airports in the country. In contrast, the nearby Leesburg Executive Airport received $69,000 from the CARES Act money. The Dallas-Fort Worth International Airport, which is one of the largest in the world, is expected to receive roughly $300 million in federal grant money.
There is still a question of whether this money will be enough for airports to both meet their payroll and continue to undertake critical safety projects needed to keep the airport operating smoothly. This is even more true if COVID-19 stays with us into 2021 as many experts are predicting. There may need to be more relief in the future if ridership continues to stay low even after the economy reopens. If not, airports may fall into disrepair even if they are able to keep making their payroll each month.
There are very few restrictions on how airports may use the federal grant money. They may use it to fund payroll and capital expenditure projects. Usually, federal money to airports is not allowed to be used to meet payroll and is just limited to safety and infrastructure spending. However, the CARES Act recognizes that the hit taken by the airports is so bad that it threatens their ability to pay their workers. They can simply not lay off their workers because they need to remain open no matter what. At the same time, many airports also have expansion and runway repair projects that are designed to help them keep meeting the needs of what was a growing number of travelers.
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