The Impact of Airline Bankruptcies on Airports (2009)

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55 Appendix B—Federal Aviation Provisions 49 U.S.C. 40117. Passenger facility fees. http://frwebgate.access.gpo.gov/cgi- bin/getdoc.cgi?dbname=browse_usc&docid=Cite:+49USC40117. (m) Financial Management of Fees.— (1) Handling of fees.—A covered air carrier shall segregate in a separate account passen- ger facility revenue equal to the average monthly liability for fees collected under this sec- tion by such carrier or any of its agents for the benefit of the eligible agencies entitled to such revenue. (2) Trust fund status.—If a covered air carrier or its agent fails to segregate passenger facility revenue in violation of the subsection, the trust fund status of such revenue shall not be defeated by an inability of any party to identify and trace the precise funds in the ac- counts of the air carrier. (3) Prohibition.—A covered air carrier and its agents may not grant to any third party any security or other interest in passenger facility revenue. (4) Compensation to eligible entities.—A covered air carrier that fails to comply with any requirement of this subsection, or otherwise unnecessarily causes an eligible entity to ex- pend funds, through litigation or otherwise, to recover or retain payment of passenger facil- ity revenue to which the eligible entity is otherwise entitled shall be required to compensate the eligible agency for the costs so incurred. (5) Interest on amounts.—A covered air carrier that collects passenger facility fees is en- titled to receive the interest on passenger facility fee accounts if the accounts are established and maintained in compliance with this subsection. (6) Existing regulations.—The provisions of section 158.49 of title 14, Code of Federal Regulations, that permit the commingling of passenger facility fees with other air carrier revenue shall not apply to a covered air carrier. (7) Covered air carrier defined.—In this section, the term “covered air carrier” means an air carrier that files for chapter 7 or chapter 11 of title 11 bankruptcy protection, or has an involuntary chapter 7 of title 11 bankruptcy proceeding commenced against it, after the date of enactment of this subsection. PART 158—PASSENGER FACILITY CHARGES (PFCs) www.faa.gov/airports_airtraffic/airports/resources/publications/regulations/media/ pfc_14cfr158_062207.pdf Subpart A—General Sec. 158.1 Applicability. 158.3 Definitions. 158.5 Authority to impose PFCs. 158.7 Exclusivity of authority. 158.9 Limitations. 158.11 Public agency request not to require collections of PFCs by a class of air carriers or foreign air carriers or for service to isolated communities. 158.13 Use of PFC revenue. 158.15 Project eligibility at PFC levels of $1, $2, or $3. 158.17 Project eligibility at PFC levels of $4 or $4.50.

56 158.18 Use of PFC revenue to pay for debt service for non-eligible projects. 158.19 Requirement for competition plans. 158.20 Submission of required documents. Subpart B—Application and Approval 158.21 General. 158.23 Consultation with air carriers and foreign air carriers. 158.24 Public notice and comment. 158.25 Applications. 158.27 Review of applications. 158.29 The Administrator’s decision. 158.30 PFC authorization at non-hub airports. 158.31 Duration of authority to impose a PFC after project implementation. 158.33 Duration of authority to impose a PFC before project implementation. 158.35 Extension of time to submit application to use PFC revenue. 158.37 Amendment of approved PFC. 158.39 Use of excess PFC revenue. Subpart C—Collection, Handling, and Remittance of PFCs 158.41 General. 158.43 Public agency notification to collect PFCs. 158.45 Collection of PFCs on tickets issued in the U.S. 158.47 Collection of PFCs on tickets issued outside the U.S. 158.49 Handling of PFCs. 158.51 Remittance of PFCs. 158.53 Collection compensation. Subpart D—Reporting, Recordkeeping, and Audits 158.61 General. 158.63 Reporting requirements: Public agency. 158.65 Reporting requirements: Collecting carrier. 158.67 Recordkeeping and auditing: Public agency. 158.69 Recordkeeping and auditing: Collecting carrier. 158.71 Federal oversight. Subpart E—Termination 158.81 General. 158.83 Informal resolution. 158.85 Termination of authority to impose PFCs. 158.87 Loss of Federal airport grant funds. Subpart F—Reductions in Airport Improvement Program Apportionments 158.91 General. 158.93 Public agencies subject to reduction. 158.95 Implementation of reduction. Appendix A to Part 158—Assurances § 158.49 Handling of PFCs. (a) Collecting carriers shall establish and maintain a financial management system to ac-

57 count for PFCs in accordance with the Department of Transportation’s Uniform System of Accounts and Reports (14 C.F.R. part 241). For carriers not subject to 14 C.F.R. part 241, such carriers shall establish and maintain an accounts payable system to handle PFC reve- nue with subaccounts for each public agency to which such carrier remits PFC revenue. (b) Collecting carriers must account for PFC revenue separately. PFC revenue may be commingled with the air carrier’s other sources of revenue except for covered air carriers dis- cussed in paragraph (c) of this section. PFC revenues held by an air carrier or an agent of the air carrier after collection are held in trust for the beneficial interest of the public agency imposing the PFC. Such air carrier or agent holds neither legal nor equitable interest in the PFC revenues except for any handling fee or interest collected on unremitted proceeds as authorized in § 158.53. (c)(1) A covered air carrier must segregate PFC revenue in a designated separate PFC ac- count. Regardless of the amount of PFC revenue in the covered air carrier’s account at the time the bankruptcy petition is filed, the covered air carrier must deposit into the separate PFC account an amount equal to the average monthly liability for PFCs collected under this section by such air carrier or any of its agents. (i) The covered air carrier is required to create one PFC account to cover all PFC revenue it collects. The designated PFC account is solely for PFC transactions and the covered air car- rier must make all PFC transactions from that PFC account. The covered air carrier is not required to create separate PFC accounts for each airport where a PFC is imposed. (ii) The covered air carrier must transfer PFCs from its general accounts into the separate PFC account in an amount equal to the average monthly liability for PFCs as the “PFC re- serve.” The PFC reserve must equal a one-month average of the sum of the total PFCs col- lected by the covered air carrier, net of any credits or handling fees allowed by law, during the past 12-month period of PFC collections immediately before entering bankruptcy. (iii) The minimum PFC reserve balance must never fall below the fixed amount defined in paragraph (c)(1)(ii) of this section. (iv) A covered air carrier may continue to deposit the PFCs it collects into its general oper- ating accounts combined with ticket sales revenue. However, at least once every business day, the covered air carrier must remove all PFC revenue (Daily PFC amount) from those accounts and transfer it to the new PFC account. An estimate based on 1/30 of the PFC re- serve balance is permitted in substitution of the Daily PFC amount. (A) In the event a covered air carrier ceases operations while still owing PFC remittances, the PFC reserve fund may be used to make those remittances. If there is any balance in the PFC reserve fund after all PFC remittances are made, that balance will be returned to the covered air carrier’s general account. (B) In the event a covered air carrier emerges from bankruptcy protection and ceases to be a covered air carrier, any balance remaining in the PFC reserve fund after any outstanding PFC obligations are met will be returned to the air carrier’s general account. (v) If the covered air carrier uses an estimate rather than the daily PFC amount, the cov- ered air carrier shall reconcile the estimated amount with the actual amount of PFCs col- lected for the prior month (Actual Monthly PFCs). This reconciliation must take place no later than the 20th day of the month (or the next business day if the date is not a business day). In the event the Actual Monthly PFCs are greater than the aggregate estimated PFC amount, the covered air carrier will, within one business day of the reconciliation, deposit the difference into the PFC account. If the Actual Monthly PFCs are less than the aggregate estimated PFC amount, the covered air carrier will be entitled to a credit in the amount of the difference to be applied to the daily PFC amount due. (vi) The covered air carrier is permitted to recalculate and reset the PFC reserve and daily

58 PFC amount on each successive anniversary date of its bankruptcy petition using the meth- odology described above. (2) If a covered air carrier or its agent fails to segregate PFC revenue in violation of para- graph (c)(1) of this section, the trust fund status of such revenue shall not be defeated by an inability of any party to identify and trace the precise funds in the accounts of the air carrier. (3) A covered air carrier and its agents may not grant to any third party any security or other interest in PFC revenue. (4) A covered air carrier that fails to comply with any requirement of paragraph (c) of this section, or causes an eligible public agency to spend funds to recover or retain payment of PFC revenue, must compensate that public agency for those cost incurred to recover the PFCs owed. (5) The provisions of paragraph (b) of this section that allow the commingling of PFCs with other air carrier revenue do not apply to a covered air carrier. (d) All collecting carriers must disclose the existence and amount of PFC funds regarded as trust funds in financial statements. § 158.53 Collection compensation. * * * (b) A covered air carrier that fails to designate a separate PFC account is prohibited from collecting interest on the PFC revenue. Where a covered air carrier maintains a separate PFC account in compliance with § 158.49(c), it will receive the interest on PFC accounts as described in paragraph (a)(2) of this section. § 158.65 Reporting requirement: Collecting air carriers. (b) A covered air carrier must provide the FAA with: (1) A copy of its quarterly report by the established schedule under paragraph (a) of this section, and (2) A monthly PFC account statement delivered not later than the fifth day of the following month. This monthly statement must include: (i) The balance in the account on the first day of the month; (ii) The total funds deposited during the month; (iii) The total funds dispersed during the month; and (iv) The closing balance in the account.