Federal Government Airport Funding Mechanisms

Federal Government Airport Funding Mechanisms

In support of the various airport development projects, the federal government employs several imperative mechanisms. The first mechanism is the issuance of loans on generous conditions and terms. In some instances, the repayments of loans considered deeply subordinated are based on specific thresholds such as earnings, main financial metrics and revenue (Wittman, 2014). In cases where the payment of the interests accrued through these loans seems to affect the company’s ability to pay other debts, the government might also defer the interest payment and only ask the company to pay the principal only.

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Though not often utilized, offering discounts on user charges is the other mechanism that the government uses to fund the airports. The government funds the airport based on the discount offered on user charges. The government might provide a fixed amount of funds to the airport based on its financial projection and set financial objectives. Funding might also be provided based on the airport’s passenger numbers and the movement of the aircraft.

The other mechanism is the provision of grants and equity injections. The nature of this funding is determined by beneficiaries of equity injections and grants provided. It is also dependent on the nature of ownership. Many airports in the USA are fully owned and managed by local, state, or federal entities. Therefore, these entities are mandated to carry out and oversee the development process of the airports and thus, they provide direct grants, which can be equated as equity injections (Harris & Ball, 2016). The federal government established various public agencies that help provide grants to public agencies and, in some instances, to private agencies that are mandated to carry out the development of airports for public use. One example of such agencies is the Airport Improvement Program.

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