Passenger Facility Charge Versus Grants

American airports’ capital improvements are funded predominantly through grants (Airport Improvement Program) and user fees (Passenger Facility Charge). Using data collected from the Federal Aviation Administration, FlightGlobal, and J.D. Power, this paper conducts a multiple regression model in an attempt to find the effect an increase in the percent that grants make up non-operating revenue has on operational efficiency. On-time departure percentage is used to evaluate operational efficiency. The model finds, with statistical significance, that for every one percent increase in grant percentage of non-operating revenue, there is a 6.41 percent decrease in on-time departures. This paper finds valuable information for policy makers as there is a growing need for funding in our nation’s airports. Finally, this paper fills a gap in research regarding the effect of revenue policy on operational efficiency at our airports.