By B. Candace Beeke
A federal proposal to shift some tax burden from airlines onto general aviation could cost corporate and recreational fliers, as well as flight schools, thousands of dollars more.
The Bush Administration proposed in February a change in Federal Aviation Administration funding, the 10-year structure of which ends Sept. 30. Some 80 percent of the agency’s $14.1 billion budget comes from excise taxes, two-thirds of which is paid by airline carriers through taxes on tickets, fuel, cargo and more.
“In aviation, we have had excise taxes go into the Airport and Airway Trust Fund,” said Edward Bolen, president of the National Business Aviation Association in Washington, D.C. “That revenue is used to provide funding for airports and to run the Air Traffic Control system.”
The Senate in May proposed a bill that would institute user fees of $25 per flight of jets or turbine-powered aircraft, to help pay for general aviation’s use of the ATC. Such systems have been implemented in other countries such as Canada, noted Steve Gade, vice president of sales and marketing for Duncan Aviation, based in Lincoln, Neb., with a recently expanded facility in Battle Creek.
Duncan, a member of NBAA, does not support the proposition, as it could negatively affect the aircraft refurbishing-and-maintenance company.
“Any time the cost of operation for general aviation and business aircraft operation increases, it can potentially have an impact on usage of the plane, which has a related impact on maintenance, refurbishment …,” Gade said.
The airlines are arguing fairness in cost burden for the aviation system. But NBAA retorts that $25 per flight, no matter the size or purpose, is not fair.
“A 747 flying 400 people from JFK to L.A. would have a new $25 fee,” Bolen said, “as would a plane with three people flying from Grand Rapids to Lincoln, Neb.”
The House of Representatives has been debating its own version of the bill and was expected to issue one sans user fees this week, Bolen said. If both the House and the Senate pass their bills, the two groups will come together in a conference committee to negotiate a final version.
It’s the tripling of the fuel tax increase on general aviation — from 21.8 cents to 70 cents — that worries Lloyd Hargus more than the user fee, however. The head of Kellogg Co.’s travel services, Hargus spoke on behalf of the Michigan Business Aviation Association, of which he is a director.
“We burn 700,000 gallons a year,” Hargus said of Kellogg’s fuel use for the two aircraft it owns.
“That’s a big increase in my budget. My guess is I’m paying $500,000 to $750,000 more, which would be average for the flight department for a large organization.”
In western Michigan, several companies own aircraft, including Pfizer Inc. in Kalamazoo County, Whirlpool Corp. in Benton Harbor and Eaton Corp. in Galesburg.
“Grand Rapids is just full of business aircraft,” Hargus noted. “Steelcase has two. Alticor has 30 pilots. It’s going to have a huge impact on corporate aviation. I just hope it doesn’t happen.”
While flight schools likely won’t get hit with the $25 user fee, they will pay that increase in gas, said Larry Bowron, manager of the W.K. Kellogg Airport in Battle Creek.
Airport users for fiscal year 2007 purchased 256,842 gallons of fuel.
If the tax increases to 70 cents, that would add $180,000 to their costs, Bowron said.
“The lion’s share of that is (the) Western Michigan University” College of Aviation, he said. “State budgets are tight. They’re an institution of the state. I don’t know what the impact could be, but I think it could be huge.”
W.K. Kellogg is the fourth-busiest airport in the state, Bowron noted, and entirely based on general aviation, with no airline use.
“And we’re well on our way to being the third-busiest airport in the state of Michigan,” he added. “For some reason, airline carriers are the gods of aviation. People need to understand general aviation makes a huge impact on our economy.”
Source: MLIVE (MICHIGAN BUSINESS REVIEW)