How airports are blending federal grants, airline agreements, and private financing to fund a decade of expansion.

The Airport Infrastructure Grant (AIG) programme will end in 2026. Airports that have relied on IIJA capital to fund infrastructure investment will face a material funding shortfall from 2027 onwards. The FAA’s entire FY26 Airport Improvement Program release — $1.1 billion, spread across 382 airports — funds safety, maintenance, and airfield resilience at scale, but it was never sized for transformation.

A single financing tranche behind JFK’s $9.5 billion New Terminal One — $5.9 billion in bonds closed by a consortium led by Ferrovial and the Carlyle Group — is more than five times the FAA’s entire national grant release for the year. That gap is the story of airport capital finance in 2026. Every airport owner planning a decade of expansion is working out how to close it, and the answer that keeps recurring across the largest programmes under construction in the United States is not a single source but three, deliberately layered together.

The Federal Layer Is Dependable, but Structurally Too Small

Federal money remains the base of the stack, and it is real money. The FY26 regular Airport Improvement Program appropriation was $4.0 billion, of which the FAA has released $1.1 billion — $640.4 million in entitlement grants and $451.2 million in discretionary grants — to fund runway, taxiway, and apron work at airports of every size. The Trump administration is proposing $4 billion for traditional AIP funding in FY27, the same as the current funding level. Layered on top is the Infrastructure Investment and Jobs Act’s Airport Infrastructure Grant Program, a five-year, $15 billion commitment of which $14.45 billion has now been allocated, and the companion Airport Terminal Program, which caps competitive terminal grants at $1 billion annually through 2026, for a five-year total of $5 billion.

These are among the largest sustained federal airport investments in a generation, and they matter enormously for mid-size and small-hub airports with no realistic access to private capital markets — a point we return to below. But they are formula-driven, statutorily capped, and split across thousands of eligible airports rather than concentrated on the handful of hub terminal programmes that account for most of the sector’s capital need. The Passenger Facility Charge illustrates the constraint precisely: the cap has sat at $4.50 per enplaning passenger since 2000, and despite repeated legislative proposals to raise it to $8.50 indexed thereafter to inflation, no increase has passed. Airports have collected $79.4 billion in PFC revenue since the programme’s inception across 365 participating airports — a meaningful, bankable revenue stream, but one whose per-passenger value has eroded against construction cost inflation for over two decades. Federal and PFC funding, in short, is dependable but incapable, on its own, of financing a modern hub terminal.

Airline Agreements Have Moved From Formality to Underwriting Foundation — and the Risk Allocation Is Diverging

For most of the industry’s history, airline use-and-lease agreements were the mechanism that let an airport issue debt in the first place — a signatory airline’s commitment to pay landing fees and terminal rentals gave bondholders confidence that revenue would arrive regardless of who occupied a given gate. That function hasn’t disappeared, but the risk allocation inside it now spans a real spectrum.

At the more conservative end, Chicago O’Hare’s Airline Use and Lease Agreement, effective since May 2018 and running fifteen years, authorised roughly $8.5 billion in capital projects in 2018 dollars; the programme it underpins has since grown to nearly $12 billion, of which roughly $9 billion is bond-financed, funded entirely through airline rates, charges, and landing fees, with no state or local taxpayer dollars involved. The $2.2 billion Global Terminal component alone will double the size of Terminal 2 and add international arrivals, customs, and a new baggage system, carried on that same airline-backed revenue structure. Kansas City took the model further: seven airlines representing 95.5 percent of the airport’s traffic volume signed off on the final $1.5 billion terminal budget, down from an initial $1.65 billion ask, and the resulting agreement guarantees the airport authority roughly $104 million a year in debt service from carriers collectively — tied to traffic volume, not a fixed airline roster. That structure is what let Kansas City issue $1.5 billion in bonds, including AMT and non-AMT tranches, at a blended rate of 3.88 percent.

At the far end of the spectrum, JFK’s New Terminal One dispenses with the signatory model altogether. More than twenty international carriers — including Air France, KLM, Etihad, Korean Air, and Turkish Airlines — pay terminal fees directly to the private operator, NTO LLC, rather than to the Port Authority, while airfield charges remain a separate Port Authority fee. The private consortium — not the public landlord — bears the full weight of demand and operational risk, a structure that only becomes financeable when airline commitments are strong enough, and lease terms long enough, for lenders to underwrite the carrier relationship directly. It is also the structure most exposed if passenger demand disappoints — which is precisely the risk now being tested by NTO’s opening delay from June to November 2026.

Private Capital Needs a Long Lease and an Airline Commitment to Become Bankable

That last point is the hinge the entire blended model turns on: private capital does not arrive because federal money is scarce. It arrives because a lease term and an airline revenue commitment, taken together, are long and certain enough to make a multi-decade infrastructure investment underwritable.

LaGuardia’s Terminal B is the clearest illustration. The $5.1 billion public-private partnership between the Port Authority and LaGuardia Gateway Partners — a consortium of Vantage Airport Group, Skanska, and Meridiam — was structured so that for every dollar of Port Authority capital, three dollars came from private financing, itself a blend of equity, debt, PFC revenue, and retail and airline income. The lease runs to 2050. At JFK, the New Terminal One consortium’s $5.9 billion in bonds and additional equity, bringing total project financing above $6 billion against a $9.5 billion construction cost, was only bankable once the Port Authority extended the City of New York’s master lease at JFK by ten years, to 2060 — giving investors, in the Port Authority’s own framing, sufficient time to recover a multibillion-dollar investment before the lease expires. Neither deal would have cleared a credit committee on a fifteen or twenty-year lease term; both required a horizon closer to thirty-five years.

The tax architecture underneath these deals has also become more settled. Airport-related Private Activity Bonds allow private developers to borrow at municipal-bond-like rates provided the underlying project passes the 10 percent private-use test under IRC §141; miss that threshold and the economics change materially. Interest on these bonds is typically treated as a tax-preference item under the Alternative Minimum Tax (IRC §57(a)(5)), which private lenders price into the deal. The One Big Beautiful Bill Act, signed in July 2025, preserved the federal tax exemption for qualified airport exempt-facility Private Activity Bonds and made the 2017 Tax Cuts and Jobs Act’s higher AMT exemption amounts permanent — removing a live piece of legislative uncertainty that had shadowed deal pricing for several years and is arguably one of the quieter enablers behind the current pipeline of P3-financed terminal projects moving forward rather than pausing. The AMT change cuts both ways, however. From 2026 the exemption phases out from $500,000 for single filers and $1,000,000 for joint filers at double the previous rate, pulling more investors back into AMT — and since airport PAB interest is an AMT preference item, a wider AMT population thins the natural bid for airport paper. That premium is worth roughly 25 to 50 basis points of additional yield against comparable non-AMT municipal debt, which is why issuers such as Kansas City split their bonds into AMT and non-AMT tranches.

Blending Is Not Sequential — the Largest Programmes Run All Three Layers Simultaneously

The airports managing the largest capital programmes are not choosing between federal grants, airline agreements, and private capital. They are running all three at once, in defined proportions, against a single project. Salt Lake City’s $5.1 billion terminal replacement is the most transparent example in the industry: airport-generated funds cover 19.1 percent of the total, Passenger Facility Charges 7.2 percent, Customer Facility Charges 5 percent, airport revenue bonds issued between 2017 and 2018 a further 38.3 percent, federal grants 4.5 percent, and a final tranche of future bonds — including up to $700 million currently being prepared as construction nears completion — the remaining 25.9 percent. No single layer exceeds forty percent of total cost, and the airport has returned to the bond market repeatedly since 2017 ($952M in 2017, $900M in 2021, roughly $450M in 2023) to keep the programme funded as construction costs moved.

Denver International’s Great Hall renovation offers a variant on the same logic from the airport revenue side. The project’s final phase, budgeted at $1.3 billion, is being funded entirely from airport revenues rather than taxpayer dollars or new grant allocations, after the overall renovation grew to $2.1 billion — nearly three times its original $770 million budget — within a broader $13 billion DEN capital programme. Denver shows that even when an airport skips a P3 structure, the discipline of blended, revenue-anchored financing is now the default posture for managing cost growth on a multi-year programme.

Not every megaproject blends all three layers from day one, and the newest entrant illustrates why that matters. Washington Dulles International’s transformation, unveiled by MWAA, United Airlines, and the US Department of Transportation on July 29, 2026, carries a price tag of more than $20 billion — by some estimates as high as $22.5 billion, over three times the $7 billion previously allocated under the airport’s prior modernisation plan. MWAA’s chief executive, Jack Potter, has been explicit that the core programme will run on airport-generated revenue, airline contributions, and municipal bonds, which price more cheaply than private-sector debt — stating plainly that the plan involves no federal dollars. United, which operates roughly 60 percent of Dulles’s flights, has committed to shoulder part of the payment, though neither MWAA nor United had disclosed a dollar breakdown as of early August. Dulles is not evidence against blending; it is evidence that airport owners are now actively choosing which legs of the stack to lean on and which to defer, rather than defaulting to all three simply because that is how transformative capital has traditionally been raised.

What This Means Below the Top Tier of Hub Airports

Nearly every case above is a large hub — JFK, LaGuardia, O’Hare, Dulles, Denver, Salt Lake City — because that is where the dollar figures and disclosure are richest. Mid-size and non-hub airports are largely absent from this financing conversation, and the gap is itself informative. Smaller airports typically lack the enplanement base to make a direct-pay P3 model like JFK’s credible to private lenders, and they don’t generate the traffic volume that let Kansas City’s seven-airline guarantee underwrite $1.5 billion at a 3.88 percent blended rate. For most mid-size airports, the federal AIP/PFC layer — modest as it is relative to hub-scale megaprojects — remains proportionally far more important, because it is one of the few funding sources that doesn’t require hub-level scale or traffic concentration to access. That asymmetry is worth watching as IIJA funding winds toward its FY26 close: hub airports have proven they can finance megaprojects without leaning on federal money at the centre — Dulles is the proof point. Non-hub airports mostly have not, and their capital plans are more exposed if federal appropriations flatten or shrink in the next reauthorisation cycle.

Asheville Regional is the clearest current illustration. The airport’s AVL Forward programme — roughly $400 million, replacing a single-storey, seven-gate terminal built in the late 1950s with a two-storey, twelve-gate facility rising from 113,000 to 275,000 square feet — is being funded without either of the two layers that define the hub deals above. There is no P3 structure and no airline guarantee. The stack is a $175 million Terminal Revenue Bond, approved by North Carolina’s Local Government Commission in April 2023; roughly $78 million in federal grants drawn from the Infrastructure Investment and Jobs Act’s terminal programmes; Passenger Facility Charge revenue collected at the same $4.50 cap that has applied since 2000; and airport operating revenue. Federal money is therefore close to a fifth of the programme proportionally — several times its weight at Salt Lake City, where grants cover 4.5 percent.

What makes Asheville financeable is traffic growth rather than a signed carrier commitment. The airport handled more than 2.2 million passengers in 2024, its second consecutive year above two million, having nearly tripled its nonstop destinations from 10 to 27 between 2013 and 2023; the new terminal is sized for an eventual four million. That is a demand bet, and the authority carries it. Where Kansas City could point lenders to seven airlines guaranteeing roughly $104 million a year in debt service, Asheville is underwriting its bonds against its own forecast. The difference is not a failure of structuring — it is the absence of the option. No carrier concentrates enough traffic at a small hub to write that guarantee, and a private consortium may not take demand risk on 2.2 million passengers.

Below the top tier: five regional airports, their demand outlook, and how each replaced the airline-guarantee and private-capital layers available to hubs.

Federal grant share ranges from roughly 2 percent at Des Moines to 23 percent at Punta Gorda — but the variation reflects what each airport found to replace it. None of the five has an airline guarantee or a private capital partner.

Open Questions Before Treating This as Settled

Two things are worth watching before either data point becomes precedent. Dulles’s financing breakdown remains undisclosed as of this writing — MWAA and United have not released dollar-specific allocations or confirmed which approvals, including any required Congressional sign-off, are still outstanding; treat “two legs, no federal dollars” as a structural claim rather than a fully verified one until that detail surfaces. And JFK’s New Terminal One has seen its opening slip from June to November 2026, with demand forecasts trimmed ahead of that date — a direct test of the direct-pay model’s central assumption, since NTO LLC and its lenders absorb that shortfall, not the Port Authority.

Avinia’s View

For airport owners and operators, the sequencing implications are concrete and, in our experience advising on capital programmes of this scale, frequently underestimated. Airline commitments need to be secured before private capital is approached, not after, because lenders underwrite the strength and duration of the carrier agreement, not the airport’s public credit rating alone. Lease and concession terms have to be long enough to make private debt serviceable — twenty-five to thirty-five years is becoming the norm for major P3 terminal deals, materially longer than the fifteen- to twenty-year terms common in the prior generation of airline use-and-lease agreements — and owners who default to shorter terms out of institutional habit will find private bidders pricing in a risk premium or declining to bid at all.

Federal and state grant funding is best positioned as the layer that de-risks enabling infrastructure — airfield pavement, utilities, ground access, environmental mitigation — freeing airline revenue and private capital to concentrate on the terminal assets that generate direct, attributable income. Owners who instead treat AIP and PFC funding as the primary financing plan, rather than the foundation beneath a larger stack, consistently find their programmes undersized against actual construction costs by the time design is complete; Denver’s growth from $770 million to $2.1 billion is not an outlier, it’s closer to the pattern. Finally, the precision with which Salt Lake City has tracked its funding mix to the tenth of a percentage point isn’t an accounting curiosity — it’s the discipline that lets an airport return to the bond market repeatedly, mid-programme, without unsettling investors who need to see exactly how much of the remaining cost is still uncommitted.