Devil’s Lake Regional Airport in northwestern North Dakota is flying high after hitting the jackpot of a lifetime under the CARES Act.
Despite reporting less than 7,000 annual enplanements in 2018, the general aviation airport netted nearly $17 million under the coronavirus stimulus law—enough money to fund its operations until 2070.
The situation is nearly as sweet at West Yellowstone Airport near Yellowstone National Park in Montana. With just over 8,000 annual enplanements, the rural airport won $17.8 million, enough money to last until 2048. That’s not a bad deal considering it only has two full-time employees.
It doesn’t stop there. Up and down the list of 413 airport grant recipients, roughly 100 small and mid-size airports raked in unprecedented windfalls, while their competitors in many cases only got enough to skate by for a few months to a year. That disparity has led to a fear among many airport executives that the FAA’s administration of the stimulus could warp local competitive dynamics in regions across the country for years to come.
But why such a disparity in the first place?
The answer to the puzzle lies in the legislative sausage-making that led to the $10 billion in emergency aid for airports included in the CARES Act. While the bulk of those grants were based on factors like enplanement levels and debt service, the anomalies all concern a $1.85 billion pot of funds that was allocated based on an airport’s ratio of unrestricted cash vs. debt service.
The upshot is that many smaller airports with some cash and little to no debt achieved excessively high ratios and huge payouts under the formula, while their mid-size and larger counterparts with more debt on their balance sheets received only modest payments. At some point, the FAA capped off awards under the formula at $17.5 million, a figure that appears nearly 70 times across the list of grant recipients.
For an example of the distortive effects caused by the ratio’s application, take Merrill Field Airport in Anchorage, Alaska. The small general aviation airport with 10,000 annual enplanements reported just $200 in unrestricted cash and nothing in the way of debt service, smashing through the cap imposed by the FAA and netting an automatic $17.5 million—enough to cover the next 9.4 years of operating expenses.
Contrast that with Ted Stevens Anchorage International, Alaska’s largest airport with 2.6 million enplanements in 2018. With $70,000 in unrestricted cash and $390,000 in debt, the airport only scored $1.5 million from the ratio, a far cry from Merrill Field’s allocation despite having more than 250 times as many annual enplanements.
It’s not just the U.S.’s smallest airports that won out big from the cash/debt formula. In numerous regions, local competitors of roughly equivalent size and in close proximity to one another received wildly differing award sizes. This phenomenon is illustrated by two more Alaskan airports, Fairbanks International and Juneau International, the state’s second and third largest airports by annual enplanements, respectively. Despite being roughly similar in size, Fairbanks received zilch from the formula, while Juneau got the $17.5 million maximum award. Such local disparities, replicated in numerous regions across the country, risk throwing the sector’s competitive balance into disarray.
If you’re wondering how an airport could get nothing from the cash/debt ratio, there are two ways. One is if the airport reports nothing in the way of unrestricted cash reserves, giving it a zero in the numerator of the ratio. The other, which is more common, is that the airport did not submit the right materials and was excluded from the $1.85 billion pot of funds altogether.
In implementing the law, the FAA chose to use the F-127 form from calendar year 2018 to make financial calculations based on the debt and cash levels, ignoring the fact that many airports did not submit that form or did so but reported the relevant data elsewhere. Instead of giving most of those airports a window to amend and re-submit the form, the agency pressed ahead, simply inputting $0 for a recipient’s unrestricted cash reserves and effectively nullifying its grant calculation for the tranche of funds based on the ratio.
The end result is that 79 small and mid-size airports maxed out at $17.5 million under the $1.85 billion tranche, while 175 others that did not submit the F-127 form received virtually nothing for that portion of funds.
“The real travesty is that a lot of airports with good-sized operations are losing a lot of money with airline traffic down 97%, and 79 airports just hit a bonanza getting a $17 million bonus,” said Allan Penksa, CEO of Gainesville Regional Airport in Florida, which received nothing from the cash/debt tranche because it did not submit an F-127 form in 2018. “The effects of COVID-19 on their operations might be minimal, with 5,000 or 10,000 annual enplanements, but they’re still getting all that money for years to come.”
Rep. Steve Cohen (D-Tennessee) was among the first in Congress to seize on the issue, expressing shock recently that the McGhee Tyson Airport in Knoxville received a larger award than the much busier Memphis International Airport in his Congressional district.
“The purpose of the CARES Act emergency relief is to support U.S. airports that are experiencing severe economic disruption caused by the COVID-19 public health emergency, not to bolster or double smaller airports’ budgets based on an arbitrary formula,” Cohen wrote in a letter to FAA administrator Steve Dickson and deputy administrator Dan Elwell.
For its part, the FAA insists that the funds were allocated as intended and in accordance with the CARES Act, arguing that the number of enplaned passengers is just one of several factors used to assess airports’ financial needs under the law.
“These funds are not standard AIP grants. The CARES Act requires funds be allocated based on a formula that reflects debt service, unrestricted airport reserves and enplanements. Some airports will receive more money than others, despite having fewer enplanements,” an FAA spokesperson said in response to a request for comment. “Comparing the final allocations among airports based solely on enplanements does not accurately reflect the totality of factors in the formula as required by the statute.”
After the grants were announced, the agency partially walked back some of the most exorbitant awards, informing airports that all grant money must be used within four years, and only for essential operating expenses. Still, many airport executives believe even four years’ of paid expenses for some airports is too much, warning that airports with lower operating costs have numerous levers to pull to gain an unfair advantage in the marketplace for airline customers, especially when it comes to things like waiving fees for cash-strapped carriers.
“There were 413 airports on that list, and when they allocated those funds, 111 got a nonproportional share and 300 airports were dealt an unfair competitive disadvantage,” said Melinda Crawford, executive director at Charlottesville Albemarle Airport in Charlottesville, Virginia, which only got $2 million from the cash/debt formula compared to $17.5 million at nearby Roanoke Regional Airport. “Was the CARES Act really ever written to float an airport for four years?”