US Congress: Infrastructure Act – airports still barely supported

Summary

• US Infrastructure Bill passed.
• Still only USD25 billion for airports, but at least it has not been reduced.
• Legislation will be used mainly to tackle repair and maintenance backlogs and 'green' matters.
• Top 10 US airports' expenditure on infrastructure easily exceeds government commitment.
• No money specifically for air-rail projects.
• Rail is prioritised, but replacing air with rail on many truck routes unaffordable.
• Inflation and deficit fears.
• What about general aviation?
• Private sector is sidelined/overlooked.

Infrastructure expenditure on airports is not cut back - but the amount is still small

It is interesting that when US President Joe Biden, or his Transportation Secretary, Pete Buttigieg, or Press Secretary Jan Psaki or anyone else in the administration talks about the Infrastructure Investment and Jobs Act, aviation infrastructure is rarely, if ever, mentioned. Roads and bridges, yes, and frequently rail too, and sometimes ports, but not airports.

So it is of little surprise that only passing comment was made on it - again - when the USD1.2 trillion act was passed by Congress on 06-Nov-2021. It was truly 'bipartisan', as it was helped through by a surprising number of Republicans (13) breaking ranks and voting for it (counteracting the six progressive Democrats who did not, and for reasons that had nothing whatsoever to do with airports).

"Roads, bridges and clean water" (the latter being something you would not expect to be on a wish list in the US) has become the mantra of the US administration and anyone who speaks in its favour where this act is concerned; objectives like immediate and scalable 'runway' and 'terminal' improvements having been cancelled.

The bill calls for investing USD110 billion for roads, bridges and major infrastructure projects, which is significantly less than the USD159 billion that President Biden initially requested in the American Jobs Plan.

Included is AUD40 billion for bridge repair, replacement and rehabilitation, according to the bill text. The White House says it would be the single, largest dedicated bridge investment since the construction of the interstate highway system, which started in the 1950s. Some 20%, or 173,000 miles, of the nation's highways and major roads are in poor condition, as are 45,000 bridges, according to the White House.

Also in the package is USD11 billion for transportation safety, which would direct funding for safety efforts involving highways, trucks, and pipeline and hazardous materials.

No money for rail-to-air projects at major airports

The package provides USD39 billion to modernise public transit, which is less than the USD85 billion that Biden initially wanted to invest in modernising transit systems and help them expand to meet rider demand.

That will be of interest to airports because there are numerous projects across the country to connect city centres and suburbs to airports by light rail, the two best-known being the second Metro line into Los Angeles International Airport and the USD2.1 billion LaGuardia Air Train in New York, a project which was suspended in mid-Oct-2021 following the resignation of the state governor, with his successor immediately seeking alternatives to it.

But in any case, it seems like the reduced funds will go towards the repair and upgrade of existing infrastructure, making stations accessible to all users and modernising rail and bus fleets, rather than being directed nationally towards measures that would reduce the 'carbon footprint' of airports in big cities by increasing light rail access options.

Modernisation of the Northeast rail corridor, where cities are fairly close by each other, makes sense

The deal would also invest USD66 billion in passenger and freight rail. The funds would help modernise the Northeast Corridor line (which, one might argue, is preferable to flying fairly short distances) and would bring rail service to areas outside the Northeast and mid-Atlantic regions, including 'high-speed' rail.

But nationally there are many air trunk routes; the cost of replacing them with rail services is impractical

What constitutes 'high-speed' rail in the US compared to that found in numerous European countries (also Japan, China, South Korea, and many others) is still hard to determine.

For years an attempt has been made to connect San Francisco and Los Angeles by high-speed rail in as little as two hours and forty minutes for a 380-mile journey (the current one takes 10-11 hours).

That is certainly fast by any standards, but the project is not moving at the same pace; it has suffered from many 'issues', and has more than doubled in cost, to USD80 billion.

That is USD12 billion more than the total authorised sum for passenger and freight rail generically in the Act. As electric trains are, in theory at least, less polluting than the fuels that power jet aircraft, that particular project could easily be justified to receive more government support if it reduced demand significantly on one of the busiest trunk air routes in the US. A journey time of less than three hours city centre to city centre should be more than adequate in anyone's book.

But the problem is that there are many other such intercity trunk air routes across the US, short, medium and long distance.

In order to fund a high-speed rail alternative in each case the government would need to consider allocating its entire budget for the Bill. But it won't happen.

Moreover, that rail funding is also less than the USD80 billion the president originally wanted to send to Amtrak. Even so, it would be the largest federal investment in public transit in history, and in passenger rail since the creation of Amtrak 50 years ago - which shows how little investment there has been.

In comparison, ports, waterways and airports are presented almost as an afterthought, as they have been since this infrastructure expenditure was first mooted in the run-up to the Nov-2020 Presidential Election.

The airports' USD25 billion will be used mainly to tackle repair and maintenance backlogs and green matters

According to the White House, the deal would invest USD17 billion in port infrastructure (the current backlogs at ports, especially those of Los Angeles and Long Beach, are supply chain rather than infrastructure issues) and USD25 billion in airports, specifically to tackle repair and maintenance backlogs, reduce congestion and emissions near ports and airports, and promote electrification and other low-carbon technologies.

It is evident from that sentence that the administration's focus where airports are concerned will be on 'green-related' matters ("reduce congestion and emissions, promote electrification and low carbon").

If part of its raison d'être, at least, is to reduce congestion and emissions then it is surprising that more of it has not been targeted specifically at the public transport access/egress conundrum referred to earlier.

The one positive aspect of the airport commitment is that it has not been reduced since the initial proposal was made; it has stayed at USD25 billion.

But that is over eight years, so approximately USD3 billion a year, yet Airports Council International North America (ACI-NA) frequently makes the case for an injection of USD100 million immediately in order to provide for the replacement or refurbishment of infrastructure that is needed now.

How can printing money not lead to inflation?

The administration claims that "the legislation will help ease inflationary pressures and strengthen supply chains by making long overdue improvements for our nation's ports, airports, rail, and roads".

It will certainly help. But airport improvements will remain "long overdue" in many cases while assistance is at this level.

And it is not clear exactly how providing in excess of US1 trillion of extra public money, effectively just printing it ('quantitative easing' as it is sometimes called), will help ease inflationary pressures. If too much money is chasing too few goods (output has been generally up but was down in Aug- and Sep-2021), then the inevitable result in most economic models is inflation.

And inflation is up right now, for sure, at 5.4% in Sep-2021, which is more than four times what is was in the same month of 2020 and it is impacting every aspect of the economy.

The price of gasoline has risen from USD2 per gallon to USD3.3 in the last year to 08-Nov-2021, and the impact on jet aircraft fuel prices is similar. Discretionary spending by the public will rapidly be re-evaluated in these scenarios, including leisure air travel. An acid test will be the forthcoming Thanksgiving Holiday.

At least some specific comments on the airport sector were made by the administration. For example, "The United States built modern aviation, but our airports lag far behind our competitors. According to some rankings, no US airports rank in the top 25 of airports worldwide" (presumably referring to quality standards surveys).

ACI-NA welcomes the commitment, but the largesse will be spread thinly

Airports Council International-North America (ACI-NA) welcomed the passage of the act, saying: "With air travel on the rise, America's airports look forward to getting to work on hundreds of essential improvement projects that will expand the capacity of our terminals and runways, increase the resiliency of our infrastructure and improve the overall passenger experience... These new investments will help address critical infrastructure needs at our airports, which have become even more pronounced during the COVID-19 pandemic."

Top 10 US airports expenditure on infrastructure tops USD63 billion

That must count as an endorsement, but the largesse is going to be spread thinly if it will be on "hundreds of projects."

It is interesting perhaps to see what amounts are being spent now and into the future by the top 10 largest US airports in 2019 (source CAPA Airport Construction Database).

Expenditure (current) by top ten largest US airports

Airport	Expenditure USD billion	Period (actual or estimated)
Atlanta	10.0	To Jun-2025
Los Angeles LAX	17.6	To Jun-2028
Chicago O'Hare	15.0	To Dec-2026
Dallas-Fort Worth	5.3	To Dec-2026
Denver	1.8	To Jun-2024
New York JFK	4.0	To Dec-2025
San Francisco	4.4	To Dec-2024
Seattle-Tacoma	2.7	To Dec-2033
Las Vegas McCarran	0.013	Completion now
Orlando Int	2.9	Feb-2022
Total	63.71	-

Source: CAPA Airport Construction Database.

It will not be lost on the reader that Atlanta and Los Angeles LAX alone are jointly committed to infrastructure investment amounting to more than USD27 billion, USD2 billion more than the bill provides for, and over a similar period of time, i.e. within eight years.

The top 10 airports are spending USD64 billion between them. There are more than 400 commercial scheduled service airports in the US, although most of them are much smaller than the ones in this table.

General aviation needs to be counted in

And what about general aviation airfields? They may not be so acceptable these days in that the carbon generation per person of the private jets that use them is greater than by travelling in a commercial jet, but private jet flight is more popular than ever right now.

Moreover, these facilities - especially where they are located close to city centres or to large commercial conglomerations - will likely count among the main locations for the 'Vertiports' that are being developed to handle eco-friendly vertical take-off and landing aircraft ('flying taxis') and attendant unmanned aerial vehicles, such as delivery drones.

Importance of the private sector overlooked - again

Another trick the administration seems to have missed is not recognising the importance of the private sector. Not in the wholesale administration of airports by way of leasing them, which has not been a success, but in collaboration with airports to build and manage specific infrastructure such as a new passenger or cargo terminals, or a people mover, or a centralised facility (for example, for car rental).

Two of the 10 airports in the table above (Los Angeles and New York JFK) have significant public-private schemes in place to provide such infrastructure, and Denver did have.

Likely to add billions to the deficit

Finally, there is the cost of this bill to take into account, in ways other than the inflation.

The bill includes a multitude of measures to pay for the proposal, but the Congressional Budget Office (CBO) found that it would instead add billions of dollars to the deficit over 10 years, and that many of the pay-for provisions would not raise as much money as Democrats said they would.

When taking into account USD90 billion of spending in new contract authority, according to the Committee for a Responsible Federal Budget, a nonpartisan group that tracks federal spending, the bottom line is that the legislation would directly add approximately USD350 billion to the deficit.

According to the bill text and a 57-page summary of the bill, lawmakers leaned heavily on repurposing unused COVID-19 relief funds to pay for the legislation. The CBO found these measures would provide approximately USD22 billion in savings, rather than the USD263 billion claimed by lawmakers.

All of which continues to make a case for much greater participation by the domestic (and mainly international) infrastructure and M&A community to modernise the US airport infrastructure rather than handouts.

It isn't as if there is little or no interest: when St Louis Lambert Airport was briefly on the market a couple of years ago a Who's Who of foreign firms lined up to make a bid for the lease.