Airline CEOs Call For User Fees Instead Of Taxes
<H1>Airline CEOs Call For User Fees Instead Of Taxes</H1><H3>By Barbara Cook</H3><I>Washington, D.C</I> . - The chief executive officers of seven major airlines-American, Continental, Delta, Northwest, TWA, United and USAir-are calling for Congress to replace the old aviation excise tax system with a user fee formula based on the number of seats on planes, the number of passengers and the per-passenger miles traveled.
The proposal, outlined in a letter to Senate Finance Committee chairman William Roth (R-Del.) would raise $5 billion annually, about the same amount of money that would have been raised by the 10 percent passenger ticket tax. Through that tax, which expired at the end of 1995, the users of the aviation system-passengers and shippers-paid for most FAA functions, including the federal share of airport capacity and safety improvements.
The airline executives' proposal calls for airlines (and, ultimately, the passengers) to pay $2 per airplane seat ($1 for commuter planes) for each one-way domestic flight, plus $4.50 per passenger and $.005 per passenger per non-stop origin and destination mile.
Subsidizing Low-Cost Carriers?
"The 10 percent ticket tax forces passengers to subsidize the low-cost airlines," AMR chairman Robert Crandall told reporters last week. "We should be paying based on actual costs."
Low-cost carriers disagreed. Southwest CEO Herb Kelleher called the user fee system "discriminatory to short-haul, low-fare passengers" and described it as an effort to redistribute as much as $600 million in costs from hub-and-spoke airlines to point-to-point specialists.
The hub-and-spoke airline chiefs argued that the system would be fair to passengers because the old system required passengers in thin, rural markets to pay far more than their fair share (for further debate, see Forum, Page 10).
Under the proposal, a passenger flying from Fargo, N.D., to New York City, for instance, would pay $16.71 in FAA user fees instead of a $21.52 ticket tax, a savings of 22 percent. From Winston-Salem, N.C., to Dallas, a passenger would save 45 percent by paying $14.50 in FAA fees instead of a $26.49 ticket tax.
Politicians Disagree
The CEOs proposed that their plan be used as an interim financing vehicle while a comprehensive study is conducted of FAA's actual costs. But that idea didn't fly with Senate Commerce Committee chairman Larry Pressler (R-S.D.), who has jurisdiction over the Senate Aviation Subcommittee. Pressler sent a letter to Transportation Secretary Federico Peña, asking his support for efforts within Congress to reinstate the expired passenger ticket and cargo excise taxes on a short-term basis. To maintain public confidence in the safety of air travel in the United States, it is critical that "proven" taxes be reinstated to ensure that the FAA has adequate funding, Pressler said.
In the House, Rep. James Oberstar (D-Minn.) has actively supported efforts to raise the $3 cap on per-segment passenger facility charges to $4 as a way to funnel money to airports for noise and safety improvements. He noted that in an era of shrinking federal dollars for the FAA, communities need a way to finance their own improvements. But during an aviation subcommittee markup session, Oberstar responded to concerns that this increase would be viewed as a new tax. "It is not a tax, as some people insist," he said. "This is power to local governments to make decisions about investment and capacity in their airport."
Sen. Mark Hatfield (R-Ore.), chairman of the Senate Appropriations Committee, predicted a shortfall in FAA funding even as the number of passengers traveling on U.S. major and commuter carriers is expected to nearly double within the next 20 years. In a letter to Sen. John McCain (R-Ariz.), chairman of the Senate Aviation Subcommittee, Hatfield-whose committee controls the Senate purse strings-called for support for the FAA funding reform proposals pending in the Senate. He also urged McCain to support a short-term reauthorization of the lapsed aviation excise taxes.