Air Carrier Incentive Programs (ACIPs) have become increasingly important for airport sponsors.  These programs serve as valuable tools for many sponsors in attracting and promoting new air service and competition at their airports.  Currently, the FAA’s only written guidance on ACIPs comes from its Air Carrier Incentive Program Guidebook, which has not been updated since its issuance in September 2010.  Today, the FAA released a “Draft Policy Regarding Air Carrier Incentive Programs,” indicating it is planning to replace the 12-year-old Guidebook with a new policy.

In its Draft Policy, the FAA indicates that neither federal law nor policy has substantially changed since the 2010 Guidebook, but that its experience reviewing ACIPs for compliance in the time since the Guidebook’s publication warrants issuance of a formal policy. 

The FAA’s Draft Policy states that its “intention is to provide more flexibility for airport sponsors to design particular incentive programs while remaining in compliance with Federal obligations.”  Nonetheless, the proposed policy statement largely restates principles from the 2010 Guidebook and the Grant Assurances.  Notably, in some areas, the proposed policy would provide additional explicit limitations or conditions on how sponsors may conduct ACIPs – potentially narrowing the ability of sponsors to continue existing ACIPs or implementing new ones.

Highlights include the following:

• The FAA proposes revising its definition of “new service” to clarify new service must be nonstop if not by a new entrant carrier and eliminating increased frequency of flights as a permissible basis for an incentive.
• The Draft Policy would define “seasonal service” as service offered for less than six months of the calendar year and would permit sponsors to provide incentives for seasonal service for up to 3 years from the start of service.  The 2010 Guidebook does not currently recognize repeated seasonal service as new service. 
• The FAA proposes continuing the ban on incentives based on type or size of aircraft while allowing limited incentives for upgauging.  However, the Draft Policy references the FAA’s decision in 2011 to grant a petition by Clark County Department of Aviation to allow upgauging as a basis for an incentive program, with certain conditions including that the recipient carrier could not contract its schedule and upgauging could not be the only incentive in the sponsor’s ACIP.  The Draft Policy then explicitly requests comment on whether it should exclude similar conditional upgauging incentives in the revised policy statement.
• The proposed policy clarifies that incentives may be offered for new cargo service in addition to passenger service. 
• The proposed policy would include direction from the FAA that airport sponsors must make ACIPs public, including by consulting with incumbent carriers regarding the ACIP before and after implementation.  Previously, such consultation was recommended but not required. 
• Community-sponsored ACIPs that do not use airport revenue would continue to be permissible.  However, such programs previously had to be, essentially, walled off from airport sponsor staff.  The Draft Policy proposes that, with certain conditions (including a prohibition on commingling non-airport incentive funds with airport funds), airport sponsor staff may be consulted on a non-sponsor entity’s ACIP.
• Though airport sponsors may pay for marketing and advertising costs in connection with service provided under the ACIP, the 2010 Guidebook recommended the sponsor pay these costs directly to the advertising entity and not the air carrier.  The proposed policy would make clear this is not a recommendation but a requirement, and the provision of such funds directly to an air carrier would constitute revenue diversion.

Under the new policy, existing incentive programs that are inconsistent with the new guidance would be grandfathered and could continue until their planned expiration.  The FAA notes, however, that any such ACIPs would necessarily expire within two years of the issuance date of a final policy statement, and warns that new incentives under such existing ACIPs initiated during that two-year period must conform to guidance in the final policy statement. 

AAAE reports that it expects the deadline for public comments on the Draft Policy to be April 4, 2023.  Airport sponsors with existing ACIPs or considering implementing a new program to attract air service should review the Draft Policy with care.  Airport sponsors who need additional information or want to submit comments are welcome to contact Sarah Wilbanks, Dave Bannard, or Peter Kirsch.