Under the Aviation and Transportation Security Act, the Transportation Security Administration (TSA) imposes a security service fee on air travelers to fund civil aviation security services. Airlines are tasked with collecting this fee from passengers at the time of ticket purchase and remitting it to the TSA. In 2020, the TSA audited Frontier Airlines and found that between 2016 and 2018, the airline had collected these fees on tickets that were later cancelled. In some instances, Frontier issued travel credits that expired unused, and in others, it used the fee amount to offset cancellation charges. The airline recorded these amounts as revenue rather than remitting them to the TSA. The TSA determined Frontier owed over $5.3 million in unpaid fees and issued a final order upholding the liability. Frontier challenged the order, arguing the TSA lacked authority to collect fees from non-travelers and that its credit policies constituted valid refunds.
The court addressed three main arguments raised by Frontier. First, regarding statutory authority, the court rejected Frontier's claim that the fee applies only to passengers who physically travel. The court interpreted the statute's plain language, noting that while the fee is imposed on 'passengers,' the statutory scheme requires airlines to collect the fee upon the sale of a ticket and hold it in trust for the United States. The court found that the services funded by the fee, such as airport security personnel and research, are not specific to individual travelers and benefit the public at large. Consequently, the airline acts merely as a conduit and cannot retain fees collected from customers who do not travel. Second, the court analyzed whether Frontier's issuance of expired travel credits constituted a 'refund.' The court held that a refund requires the return of funds to the passenger. Because Frontier retained the fee amount when the credit expired and booked it as revenue, no funds were returned to the passenger. Therefore, the airline failed to remit the fee as required. Third, the court addressed the fair notice doctrine. It ruled that the doctrine does not apply because the TSA was not imposing a retroactive penalty or depriving Frontier of its own property. Instead, the airline was being required to remit fees it never legally owned, which were held in trust for the government. The court found that the statutory text and prior guidance provided sufficient notice that airlines could not keep these fees.
Frontier Airlines must satisfy the outstanding financial obligation to the federal government for the unpaid security service fees. The decision clarifies that airlines cannot retain security fees collected on cancelled tickets, even if they issue expired travel credits, and must remit those funds to the TSA. The ruling reinforces the TSA's authority to enforce fee collection based on the sale of tickets rather than the actual occurrence of travel. No remand instructions were issued as the petition for review was denied.
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