General aviation (GA) airports form the backbone of the U.S. aviation system. These airports support essential services such as air ambulance, flight training, aerial firefighting, and business travel in diverse communities across the country. Yet despite their critical role, most GA airports face chronic funding challenges. With limited revenue streams and increasing capital upgrades falling on local sponsors, airports must explore all available tools to achieve financial sustainability.

Challenges in Funding General Aviation Infrastructure

The FAA’s 2025–2029 National Plan of Integrated Airport Systems (NPIAS) includes 3,287 federally funded public-use airports.[i] Of these, 88% are classified as general aviation with fewer than 2,500 annual enplanements from scheduled (part 121) and non-scheduled (part 135) commercial operators. As such, these airports primarily serve light GA aircraft.

NPIAS airports are eligible to receive federal funds collected from users of the national airspace system based on the principle that those who use the system should pay for it. The Airport and Airways Trust Fund (AATF) collects revenue from passenger tickets, cargo shipments, and fuel sales which is distributed to NPIAS airports through the Airport Improvement Program (AIP). Federal fuel taxes are the sole means general aviation users contribute to the AATF. In 2024, non-commercial fuel taxes generated $166 million, just 0.9% of the $18.3 billion total in AATF excise tax revenue,[ii] while aviation gasoline taxes from light GA users accounted for only $3 million, or 0.016%.[iii] Meanwhile, general aviation airports received $841 million in FY2024 AIP grants, representing 31% of the total $2.7 billion in AIP funding.[iv]

General aviation airports are usually owned and operated by local municipalities, referred to as the sponsor. Sponsors are responsible for day-to-day operating costs but rely heavily on the AIP to fund equipment and infrastructure capital projects in exchange for following federal grant assurances. AIP funds typically cover up to 90% of eligible Airport Capital Improvement Plan (ACIP) project costs, with the sponsor responsible for the remaining 10% share. AIP funding is distributed to GA airports through Non-Primary Entitlement (NPE) grants capped at $150,000 annually that can be banked for up to four years. FAA Discretionary AIP grants may be allocated by the regional FAA Airport District Office (ADO) to supplement entitlement funds on larger projects for the FAA’s 90% match, but these are competitive and limited.

For example, the airport would need to bank three years of NPE grants for the FAA’s 90% match of a $500,000 project while also contributing $50,000 in sponsor contributions. Discretionary grants can be used to fund the FAA’s 90% match for large, irregular projects such as a $30-60 million runway reconstruction, but the 10% sponsor match becomes a significant barrier when requiring $3-6 million from the sponsoring municipality.

Due to this, many GA airport rely on general fund subsidies to meet local match requirements when large capital projects arise and are often required to cover annual operating deficits. At the same time, rising property taxes have led some residents to question why their tax dollars support the local airport. This issue is even more acute in communities where public perception focuses on aircraft noise, environmental factors, or repurposing airport real estate for affordable housing and commercial development. Thankfully, federal grant assurances require airports to be maintained and operated for 20 years after accepting funds, or in perpetuity if the funds were used for land acquisition. However, several communities have begun challenging these obligations and forgoing AIP grants with the goal of disposing airport property in 20 years. This places the capital burden further on aeronautical users and taxpayers.

In many communities, municipal general fund contributions and public bonding are politically unpopular as the benefits of airport investment are not clearly visible to the voting public. Communicating the airport’s value such as its support for emergency response, business retention, or community access is often met with skepticism or misunderstanding. Many state governments recognize the broader value GA airports offer beyond local boundaries. Financial assistance is provided to support a statewide system, often in the form of a sponsor match, but available funding is limited and varies significantly across the nation.

While federal and state grants cover most of an airport’s capital project expenses, airport sponsors are liable for 100% of the day-to-day operating expenses to keep the airport in a safe and serviceable condition required by grant assurances. The sponsor typically relies on operating revenue from aeronautical activity to offset operating expenses, primarily consisting of airport staff labor. However, the airport cost center may become more complex if the sponsor exercises its exclusive right to a fixed base operation (FBO). Airport operated FBOs act as a separate, for-profit business providing fuel and aircraft services that contribute additional revenue to the airport operating fund.

When it comes to airport operating revenue, federal law does not mandate a specific approach to airport rate setting. Airports are allowed to use any method that is reasonable, consistent, and transparent for operators and tenants. Municipal sponsors tend to operate GA airports like other public utilities with the goal of balancing the operating budget by setting market rates based on nearby similar facilities. While rates charged at nearby airports are informative, they are not universally comparable and don’t reflect the differing cost base and revenue necessary to achieve the FAA’s stated goal of self-sufficiency. Furthermore, market rates have not kept up with increases in operating expenses, let alone fund capital reserves, so regional averages used as a benchmark reinforce historically suppressed rates.

Land leases and hangar rents, typically the most significant sources of operating revenue for GA airports, are often escalated around 3% annually in line with the Consumer Price Index (CPI). However, the Engineering News-Record Construction Cost Index (ENR-CCI), which better represents capital replacement cost, has run about twice the CPI.[v] Materials such as concrete, asphalt, and steel have resulted in double-digit percentage increases in the ENR-CCI while skilled labor shortages continue to drive up bids on even routine maintenance projects.

While demand for hangar space far exceeds available supply, airports lack the funds to develop necessary infrastructure. Corporate and large aircraft operators may be better positioned to absorb rent increases for limited space at urban airports that displace light GA users to rural airports far from where they reside and work. These rural airports may have land to accommodate additional hangars but often lack capital funds for non-eligible AIP projects necessary to develop infrastructure on the property.

Public-private partnership (P3) hangar development has been held up as a model to address funding shortages, but P3 models only succeed when the airport has available land, utility access, and capital for site development. Even then, the high cost of new construction results in rents that most light GA users cannot afford, often several times higher than older hangars.

Compounding the issue, some airports fail to exercise reversion rights for expiring ground leases on private hangars developed decades prior. These hangars were built on ground leased at reduced rates to incentivize private development in exchange for the transfer of the asset at expiration of the lease. However, hangar owners often view their improvements on airport-owned land as long-term investments, without fully recognizing that the ground lease depreciates the hangar’s value down to zero at expiration. Not only do airports lose out on higher hangar rents when choosing not to revert these assets, but enterprising hangar owners may sublease space to other users at less-than-market rates. This creates competition with airport-owned or P3-developed hangars, diverting revenue into private hands that would otherwise be funding the airport. Although rent from reverted hangars can generate significantly more revenue for the airport than land leases alone, enforcing reversion rights is politically unpopular. Airport managers and elected officials of their municipal sponsors hesitate to pursue reversion due to pressure from tenants, perceived fairness concerns, or a desire to avoid confrontation, even when the original lease terms anticipated eventual public ownership.

Many policy proposals aim to solve GA airport funding challenges by raising AIP entitlement ceilings, streamlining FAA approval processes, or encouraging non-aeronautical and private-sector partnerships. While useful, these solutions may not offer a comprehensive solution to address the structural issues facing GA airports. Increasing AIP entitlements still requires matching funds. P3 models depend on demand and site readiness, which airports may lack the funding or land to pursue. Diversification through non-aeronautical revenue streams (e.g., business parks, solar farms) can be restricted by land availability, zoning constraints, or insufficient market demand. Non-aeronautical development takes years to mature and requires FAA approval following complex rules governing airport land use. Even airports with developable land face high upfront costs, long development timelines, competition from private entities, and may require above-market rents to recover inflated construction costs.

Sustainable Revenue Solutions

FAA Grant Assurances 24 and 25 require airports to maintain a rate structure that makes the facility as self-sustaining as possible, while ensuring that all airport revenues are used solely for airport-related purposes.[vi] Revenue diversion occurs when airport income is used for non-airport purposes, such as unrelated municipal programs or infrastructure projects, in violation of federal grant assurances. Revenue dilution, the failure to collect appropriate revenues or undervaluing airport assets such as ground leases, hangar rents, and land sales, also diminishes long-term self-sufficiency. The FAA and the Office of the Inspector General have cited past cases, such as the redevelopment of Denver’s Stapleton Airport, where reduced land sale values led to tens of millions in diverted or lost airport revenue.[vii] While the FAA does not require reversion, the failure of an airport to make decisions in the best interest of self-sufficiency when the airport is operating at a deficit or dependent on public subsidies is problematic.

To balance fiscal responsibility with tenant equity, some airports are exploring alternative models that extend lease terms in exchange for reinvestment. Under the “investment-for-term” model, tenants agree to make substantial capital improvements such as roof replacement, door upgrades, or code compliance in return for a defined lease extension. Another approach is to charge a deferral fee, calculated as the net present value of the hangar’s fair market rental return over the proposed term extension. This fee may be paid upfront or amortized over time as improved hangar rent, layered on top of ground rent to reflect the site’s enhanced value. These models allow airports to avoid abrupt reversion while still recovering value and ensuring that aging facilities meet current standards. When applied consistently and transparently, they can support long-term self-sufficiency while maintaining goodwill with tenants.

Municipal sponsors must also exercise caution when allocating indirect costs to the airport’s operating budget. The FAA allows sponsors to recover shared service expenses such as administrative, legal, IT, or finance functions, but only if they are equitably allocated, documented, and do not burden the airport with a disproportionate share. Enterprise funds, self-supporting government operations such as airports, are not required to be billed identically to other government departments, but the cost allocation must be justified and based on actual expenses.

Similarly, enterprise funds enable airports to offer competitive, market-based wages necessary to attract and retain qualified, experienced personnel that require compensation higher than comparable positions in other municipal departments. A sustainable airport is not only financially self-sufficient, but also capable of maintaining operational continuity through an adequately staffed and empowered workforce. Sponsors have a responsibility to ensure airport budgets reflect reasonable, airport-related costs that don’t divert aeronautical revenue out of the airport system. Aeronautical users also have a responsibility to keep airport sponsors accountable through the municipality’s public budgetary process and not myopically focus on the fee schedule intended to offset budgets.

At the same time, the FAA’s 2013 revised Policy Regarding Rates and Charges clarified that accumulation of surplus revenues is permissible only for reasonable reserves or contingency funds.[viii] Investigations into fee reasonableness are rare unless there is evidence of excessive surplus beyond legitimate airport use. Establishing appropriate charges is critical when applying residual rate setting methodologies, which place the burden for cost recovery on users to offset the aeronautical rate base, or the total costs associated with providing airfield facilities.

Rate Setting and Peer Set Methodology

A hybrid compensatory-residual approach is recommended for GA airports, setting aeronautical fees based on a combination of market comparability and cost recovery. In a compensatory model, the airport assumes responsibility for any shortfall in aeronautical revenues necessary to cover the rate base but have more authority on how surpluses are allocated. In a residual model, aeronautical users, typically represented by commercial airlines, assume this responsibility through a cost recovery mechanism such as landing fees. The hybrid model common at most commercial service airports blends the benefits of both methodologies.

Market rates are first established by selecting peer airports. This peer set should identify general aviation airports with similar NPIAS roles, airfield facilities, based aircraft counts, and operational volumes using FAA data sources to avoid subjective bias. Airports with a high volume of Airplane Design Group (ADG) category CII aircraft, which is a FAA design standard requiring increased airfield safety margins, further differentiate those airports that regularly accommodate heavy general aviation traffic. Surveys of these peer set airports are conducted to collect common aeronautical rates providing insight on competitive and fair market ranges. However, the sponsor may unilaterally impose fees outside of market ranges, after consultation with users, if it is consistent with FAA policy and necessary for self-sufficiency.

Ground leases, hangar rents, and fuel flowage fees often account for nearly all aeronautical revenues at GA airports. Additional income may derive from airport-owned FBOs, aeronautical and vehicular parking, and occasionally non-aeronautical leases for facilities, ground, or natural resource extraction. Smaller ancillary fees assessed to recover the cost of providing services, such as badging and gate access, can be consolidated into lease rates or a based tenant fee to avoid resentment from GA users who feel they are being “nickeled-and-dimed” by the airport.

Airport fees may also include non-traditional charges such as:

• Bifurcated fuel flowage fees with higher rates for price inelastic, often transient jet fuel users and lower rates for avgas users that pay in through other based tenant fees.
• Commercial permit fees for aeronautical service providers and non-aeronautical ground transportation companies, such as car rental and ride share providers, to capture a percentage of gross receipts in exchange for the right to operate a for-profit business at the publicly funded facility.
• Hangar lease origination and transfer fees that allow airports to collect a percentage of the transaction value when ownership of hangars on airport-owned land passes hands.

Each fee should be reviewed for administrative feasibility and revenue potential, especially at smaller airports where staff and systems are limited. In some cases, a fixed fee under a minimum threshold may be advisable to reduce the burden on limited staff resources.

These fees allow the sponsor to capture value created by their continued investment in airport infrastructure from based tenants. However, transient aircraft account for 48% of general aviation operations at continental U.S. airports,[ix] yet their financial contribution is not proportional. Landing fees represent such a mechanism available to GA airports of all sizes for a new or increased source of sustainable, relatively inelastic revenue available immediately. Unlike hangar rent or fuel flowage fees, landing fees assess actual airport use that correlates with the operating and capital needs of the airfield.

Commercial landing fees are assessed on aircraft weight. General aviation has traditionally been subsidized by commercial operators on the justification that heavier aircraft contribute more to the deterioration of runway pavement than lighter aircraft. There is merit to this argument, as load and environment are the two primary factors of runway deterioration. The fourth power rule of pavement design refers to the principle that pavement damage increases exponentially with the axel load of a vehicle. The FAA’s FAARFIELD software applies a more refined model specific to aviation loads, but the fourth power rule offers a good heuristic for understanding how load affects pavement life.

However, load is less of a factor on runway deterioration when used primarily by aircraft within the pavement’s designed weight bearing capacity or in environments with heavy moisture, extreme temperatures, and frequent freeze-thaw cycles. The Federal Highway Administration’s report Impact of Environmental Factors on Pavement Performance in the Absence of Heavy Loads found under normal operating conditions over a 15-year period, 36% of total damage was attributed to environmental factors in flexible pavements and 24% in rigid pavements.[x] While aircraft load can be a significant factor in runway deterioration, it isn’t the only factor or even the primary factor in many cases.