- Despite aging aviation infrastructure, U.S. airlines are among the safest in the world, and the United States’ airports serve more passengers than any other country’s.
- Aviation infrastructure financing and operation is a complex medley of public and private efforts. Some experts say more investment is needed.
- High-profile air traffic control fiascos, new technologies, and climate concerns are challenging regulators and policymakers tasked with maintaining the system.
In January 2023, U.S. officials in charge of the nation’s airspace grounded all domestic flights for the first time since September 11, 2001. The cause was not a terrorist attack, but a glitch in a system the Federal Aviation Administration (FAA) has used to monitor aircraft since 1947. The disruption demonstrated both the centrality of civil aviation to the U.S. economy and transportation network, as well as its potential fragility in an age of ever bigger and faster aircraft.
Today, U.S. air carriers transport the most passengers in the world, and U.S. airlines have become among the safest and most profitable in the world. But with airports in the United States falling behind global leaders in performance, many experts say U.S. aviation infrastructure is in dire need of an upgrade. Meanwhile, the industry is facing looming questions over its future, including how to handle climate change and new technologies such as drones. To address these concerns and keep airports afloat during the COVID-19 pandemic, President Joe Biden announced a $25 billion commitment to aviation in 2021, as part of a trillion-dollar investment in U.S. infrastructure.
What’s the state of U.S. aviation infrastructure?
The U.S. civil aviation industry carries almost one billion passengers a year, more than any other country, but aviation infrastructure faces mounting challenges. After a COVID-19 pandemic-related dip, demand for air travel is again soaring, and the industry is enduring growing capacity constraints that could inhibit it from servicing the 2.9 million passengers who pass through U.S. airports daily.
Experts say airports are in need of extensive repairs and upgrades. The American Society of Civil Engineers (ASCE), an industry group, gave aviation infrastructure a “D+” rating in 2021, citing a prepandemic $237 billion investment need. The last major new airport opened more than twenty-five years ago in Denver, and many highly-trafficked hubs have not been renovated in decades. At the same time, worsening air traffic controller and pilot shortages have further decreased the number of available flights.
However, not all aviation infrastructure is in bad shape. According to the FAA, 98 percent of runways are in excellent, good, or fair condition, beating a federally mandated minimum of 93 percent. The U.S. airline industry also maintains a stellar safety record. After a spate of deadly aviation accidents in the 1990s led to an overhaul of safety procedures, the number of aviation-related fatalities plummeted; no commercial airline has fatally crashed since 2009.
How important is aviation to the U.S. economy?
Civil aviation, including airlines, airports, and aircraft manufacturers, all play a major role in the U.S. economy, and adjacent industries such as tourism benefit from the movement of people. In 2019, aviation directly supported [PDF] 4 million U.S. jobs and indirectly supported another 7 million—a total of about 7 percent of the U.S. labor force. It also contributed $1.8 trillion in economic activity that year, equal to about 5 percent of U.S. gross domestic product, netting almost $15 billion in profits.
In the following years, however, pandemic-related disruptions rocked the industry, cutting aviation-supported jobs in half. Airline ridership has returned to near-2019 levels, but its recovery still lags behind driving, the leading form of U.S. transportation: Cars recorded almost twenty-seven times more passenger-miles than planes in 2021. (Train travel came in a distant third, transporting less than 2 percent as many passengers as planes.)
Airlines also play a major role in trade, especially the international transport of high-value goods. Globally, air freight transports about $6 trillion worth of goods, or about 35 percent of the total value of international trade.
Aircraft manufacturing is a big business too. The United States is the world’s largest exporter of aircraft equipment, with exports reaching $12 billion in 2021. Four of the top five aerospace manufacturers by revenue are U.S.-based, including Boeing, the world’s largest commercial aircraft producer. However, the industry has shrunk in recent years amid supply chain woes.
How is the aviation industry structured?
The sector is a mix of private and public enterprise. Airplane manufacturing and airlines are handled by private companies, and the airlines pay rent and other fees to airports to use their facilities. Nearly all U.S. airports and their infrastructure, including terminals, runways, and airfields, are publicly owned, typically at the local level. For example, Hartsfield-Jackson Atlanta International Airport, the busiest U.S. airport by passengers served, is owned by the city of Atlanta. Air traffic control, which manages the nationwide aircraft navigation system, is split nearly equally between towers run by the FAA and those contracted to private companies. Whether public or private, the roughly twenty-one thousand air traffic controllers are subject to a plethora of strict employment requirements.
As the aviation industry’s primary regulator, the FAA is responsible for safety rules, air traffic control, and other regulations. Unlike some other transportation modes, such as the railroad industry, there is no federal regulator specifically dedicated to antitrust; instead, the Department of Justice reviews mergers. Most recently, it sued to block JetBlue’s acquisition of Spirit, arguing that the merger would harm consumers by further concentrating the airline industry. The industry must also comply with environmental rules mandated by the Environmental Protection Agency, and the FAA follows global standards set by the United Nations International Civil Aviation Organization.
How is aviation infrastructure funded?
The sources of airport financing vary widely, though it is generally a mix of user fees, government funding, and debt issued by the airport authority.
The bulk of airport revenue comes from charging customers, both individuals and companies, to use the airport and its facilities. These user fees include business expenses, such as airline landing fees and terminal rents, and passenger spending, such as parking. Some airports also receive a tax-free status and an enhanced credit standing that allows them to issue municipal bonds at relatively low cost to finance infrastructure upgrades.
There are two main sources of federal funding. The Passenger Facility Charge (PFC) is a federal program that allows airports to collect fees of up to $4.50 on most airline tickets, which is reimbursed to the airport of departure. The Airport Improvement Program (AIP) is a federal grant backed by taxes, mostly on transportation. There are also a handful of other government funding streams, including state taxes on aviation fuel and appropriations from state governments.
Larger airports tend to generate more revenue from the PFC than the AIP. For example, in 2019 Hartsfield-Jackson Atlanta received about $568 million in business and passenger spending, $200 million in PFC fees, and just $21.6 million from AIP grants. At smaller airports, the reverse can be true, with AIP funding outstripping PFC revenue. Some experts have called to increase these revenue streams and index them to inflation, pointing out that the PFC has not been increased since 2000. Both programs come with various conditions; for instance, AIP disbursements can rarely be used for improvements to terminals, the infrastructure that ASCE says requires the greatest investment.
“There’s a lot of different money coming from different places with different strings attached,” says Ben Miller, an economist at the RAND Corporation who studies airport infrastructure.
Separately, about half of the over five hundred air traffic control towers are contracted by the FAA to private companies to operate and maintain them. The FAA says contracting provides safety and efficiency gains, but recent high-profile failures have cast a spotlight on these contractors’ role in aviation. When national air travel ground to a halt in January 2023, the cause was revealed to be a contractor who inadvertently deleted the wrong file. Critics say chronic underfunding of FAA infrastructure has raised the stakes of errors made by increasingly fatigued air traffic controllers. In 2023, the FAA allocated $8.85 billion, or about half its total budget, for air traffic organization.
What happened with airline deregulation?
Federal regulation of aviation began with the Civil Aeronautics Authority Act of 1938, which gave the federal government the power to regulate airlines’ routes, pricing, and safety standards. Airlines came to view it as overbearing, especially route restrictions that included requirements to serve smaller markets. In 1978, the Civil Aeronautics Act ended federal regulation of routes and prices, but maintained Washington’s authority over safety rules, as regulated by the FAA.
As a result, more low-cost carriers entered the market, pushing down airfares. Since 1978, consumer ticket prices have fallen by 45 percent (after adjusting for inflation). Deregulation may also have aided U.S. competitiveness: by 1988, American travelers were paying 25 percent less than Europeans for air fares. However, the deregulatory process was not without turbulence. Airlines competing on lower fares faced new struggles to remain profitable, and many did not survive. The industry underwent a wave of consolidation; today, the “big four” airlines—American, Delta, United, and Southwest—together control 80 percent of the domestic market. Small markets in particular are feeling the effects of consolidation; those airlines have halted service to sixty-eight cities since April 2020.
Major aviation meltdowns, including a December 2022 holiday travel debacle that saw Southwest cancel nearly seventeen thousand flights, have renewed scrutiny on airline regulation. Critics say deregulation went too far, with consolidation resulting in less competition, worse service, and rising airfares. Some experts say the airline industry is smaller and more concentrated than at any time in modern history, and that the FAA, with its narrow safety mandate, is not empowered to fix it. “America’s commercial aviation system is broken, but so is the only regulatory agency allowed to oversee it,” writes Bill McGee, Senior Fellow for Aviation at the American Economic Liberties Project, a think tank which has criticized what it sees as lax airline regulation.
Other analysts say privatized airports, which are common outside the United States, would improve service and generate more income. (Just 2 percent of airports in North America are privatized, the largest being Puerto Rico’s Luis Muñoz Marín International Airport in San Juan.) Skeptics of privatization contend that increased public investment can just as easily deliver improvements, and that most airports are already financially self-sufficient. While the FAA has run a privatization pilot since 1997, few airports have applied to join it. Several factors, such as complications around airports’ tax-free status and airline opposition, have impeded U.S. airport privatization efforts.
How does aviation infrastructure stack up internationally?
Despite carrying more passengers than any other country, U.S. airports fall behind world leaders in performance. No U.S. airports rank in the top 15 by performance, according to a passenger survey by Skytrax, an air transport research firm. Experts note that this may be a matter of choice, as many top-ranked airports, especially those in Asia and the Middle East, are heavily subsidized.
“Subsidizing a race to the top is not an efficient use of public funds,” says Miller. “We have lots of other things we need to do with our tax dollars.”
Where airports are not heavily subsidized, privatized airports are growing in popularity. Around 15 percent of global airports now have some degree of private involvement; in Europe that figure reaches 43 percent, including 16 percent of airports that are completely privatized. The largest fully privatized airport is London’s Heathrow Airport, the fourth largest in the world by revenue.
Meanwhile, U.S. airlines are generally more efficient, safer, and more profitable than their peers. China carries the next most passengers after the United States, but its airlines reportedly have among the worst delays in the world. In Europe, over 35 percent of flights were delayed in 2022, compared to 19 percent of U.S. flights. U.S. airlines also record far fewer fatalities than global competitors. Only one person has died in a commercial aviation accident in the United States in the past decade, compared to dozens in Europe and China. Meanwhile, North American airlines recorded $17.4 billion [PDF] in profits in 2019, while European airlines, which are required to compensate passengers for delays and cancellations, earned $6.5 billion.
What has Biden done?
In November 2021, Biden signed the Infrastructure Investment and Jobs Act (IIJA), the largest investment in U.S. infrastructure in decades. The legislation earmarks $25 billion for aviation infrastructure, including $5 billion for air traffic control facilities and $20 billion for airports, $5 billion of which is specifically for terminals, which are usually self-funded. Analysts note that airports could use significantly more investment, and that other forms of infrastructure receive more funding from the legislation. (The IIJA set aside $102 billion for railroads and $350 billion for federal highway programs.)
Biden has also sought to make aviation more environmentally sustainable. In 2021, he announced a goal to make aviation carbon neutral by 2050, and in 2022, Congress passed tax credits that incentivize the production of lower-emissions aviation fuel as part of the Inflation Reduction Act. Most recently, Biden has sought to increase consumer protections: in 2023, he announced that he would propose legislation that requires airlines to compensate passengers for delays.
What’s next for aviation?
As U.S. demand for flights returns to prepandemic levels, the FAA is buckling up to confront a series of new challenges.
FAA NextGen. In 2007, the FAA introduced a multibillion dollar plan to modernize the U.S. aerospace system, known as the Next Generation Air Transportation System (“NextGen”). The project was designed to improve the safety and efficiency of U.S. aviation by replacing outdated infrastructure with automated and modern technology, such as satellite-based systems rather than radar. However, the program has fallen years behind schedule amid disputes between lawmakers and airlines over who should pay for it. As of 2023, the FAA estimates that core provisions will not be complete until at least 2030.
Drones. New technologies, including private drones, commercial space vehicles, and air taxis, present challenges for an increasingly crowded airspace. According to the Government Accountability Office, which acts as the federal auditor, the FAA has begun developing a framework for drone regulation, but it has yet to produce [PDF] a comprehensive strategy. Experts say that leaving drone regulation to the state or local level could create a patchwork of different criteria. There is also a challenge of scope: regulations will need to distinguish between large commercial drones that enter government airspace and smaller, personal drones.
Climate change. Policies favoring lower-emission fuels and other “green” rules could lead to higher airfares, even as an already-warming climate is becoming less hospitable to air travel. Aviation is a significant contributor to greenhouse gasses; the industry accounts for around 2.5 percent of global carbon dioxide emissions.
Passenger air travel is roughly in line with other transportation modes in terms of emissions, but short-haul flights and air freight are significantly worse for the climate than other modes. Several European countries have introduced restrictions on short-haul flights, and are considering more heavy-handed restrictions on air travel.
To meet those climate goals, the U.S. Department of Energy and the aviation industry plan to adopt sustainable aviation fuel (SAF), sourced from biomass rather than fossil fuels. Industry groups anticipate that SAF could contribute 65 percent [PDF] of the reduction in emissions needed to reach carbon neutrality, though skeptics argue that SAF remains too expensive to be a feasible alternative to existing jet fuel and that net-zero emissions by 2050 is a longshot.
This Backgrounder examines the overall state of U.S. infrastructure.
The American Society of Civil Engineers gives aviation infrastructure a “D+” in its annual report card.
Researchers at the RAND Corporation recommend changes to airport financing in this report.
The Government Accountability Office suggests ways for the FAA to integrate drones [PDF] into the Natitonal Airspace System.
Experts at the National Bureau of Economic Research study the effect of privatization [PDF] on airport efficiency.
Steven J. Markovich contributed to this report.