The FAA can issue a Letter of Intent (LOI) for certain airport development projects when available funding will not meet the airport sponsor's timing for a particular project. Under this provision, the sponsor of a primary or reliever airport may ask the FAA to consider issuing an LOI. The authorizing statute limits the amount we can commit in LOIs and limits LOIs to projects that will preserve or enhance capacity. For large airports, the legislation also requires that projects supported with LOIs significantly enhance system-wide airport capacity.
If we approve an LOI proposal, we issue a letter stating the reimbursement will be made according to a given schedule as funds become available. The LOI indicates Federal approval to an airport sponsor of a proposed project’s scope and the timing for its accomplishment. It also indicates Federal intent to fund the project in subsequent years, subject to the future availability of AIP funds.
Before an airport sponsor begins construction, we must approve the scope of work and the proposed funding plan. In addition to standard project criteria, we require that a Benefit-Cost Analysis accompany any LOI request. We also consider the airport sponsor’s financial commitment to the project. For large and medium hub airports, the authorizing statute requires a review of the project’s effect on the capacity of the national air transportation system.
Once we reach an agreement with the airport sponsor on the scope of the project and the proposed payment stream, we prepare the LOI indicating our intent to provide future funding for the agreed-upon project. This expression of intent is sufficient to reduce the risk associated with making improvements now and not receiving reimbursement until future years. Most airports finance large development projects with revenue bonds, passenger facility charges, and other airport funds in addition to LOI funding. Federal financial support for the project through an LOI helps the sponsor to receive favorable bond rates and thus lowers financing costs.
An airport sponsor that receives an LOI may proceed with the project without waiting for future AIP grants, and all allowable costs in the LOI related to the airport development remain eligible for reimbursement. However, an LOI is not an obligation of Federal funds and is subject to availability of AIP funding. Additionally, an LOI recipient is subject to follow all Federal contracting provisions including disadvantaged business enterprise (DBE) requirements.