Regional and general aviation industry executives last week appealed to Senate Finance Committee members to drop the proposed $25 air traffic control user fee, expressing fear that the fee would hurt their businesses and drive others out of private aviation. Their testimony, before the Senate Finance subcommittee on energy, national resources and infrastructure, came a week after Senate aviation subcommittee Chairman Jay Rockefeller (D-W.Va.) threatened to limit general aviation access to congested airspace if the general aviation community continued its opposition to the proposed $25 ATC charge (BA, July16/19).
Rockfeller was not present during Thursday’s hearing on aviation taxes, but his counterpart, Sen. Trent Lott (R-Miss.), the ranking Republican on the Senate aviation subcommittee who also strongly supports the fee, did attend hearing and expressed bemusement that GA has had “a nervous breakdown over a $25 fee.”
Lott reiterated his concern about the ability of Congress to reach agreement on an FAA reauthorization package before the current authorization and the aviation taxes lapse at the end of September. “We’re trying to come up with something that is fair to everybody,” he said. “There are a lot of different views but nobody wants to pay more.” He noted the general aviation community’s desire to retain the fuel tax, but questioned how much of an increase they would be willing to absorb to pay for the costs of modernization.
Two general aviation industry officials – Eclipse Aviation President and CEO Vern Raburn, and Richard Shine, chief executive of a family-owned metals recycling company in New York that operates a single turboprop for business – both expressed a willingness to pay more into the system but said that any increases must remain through the fuel tax.
“I believe we as the aviation community, both GA and air carriers, need to be paying more to make the transformation to [the Next Generation air traffic control system],” Raburn said. “I may not be completely in line with my GA colleagues on this point, but I do believe GA needs to pay more.” Raburn added, however, that general aviation should not be the only target for increased taxes. The Senate proposal, S.1300, would phase out the 4.3-cent-per-gallon fuel tax for commercial operators, double the fuel tax for business jet operators and impose a $25 per flight user fee.
“S.1300 doesn’t meet the equity test,” he said, calling the $25-per-flight fee “an extremely aggressive tax.” The tax treats all turbine aircraft the same, whether it is a six-seat Eclipse flying a short segment or a Boeing 767 on a cross-country flight, Raburn said. “Eclipse strongly opposes the $25 per flight fee as it will penalize the Eclipse 500 more than any other aircraft flying today,” he said, estimating that Eclipse 500 operators would pay between $17 million and $30 million annually in new fees by 2010. He noted that the $25 accounts for a larger portion of the operating cost than it would of larger jets.
Shine tried to dispel the perception that only large corporations or wealthy individuals use business aviation. “I hope the members of this subcommittee understand that for every Fortune 500 company that relies on turbine-powered business aviation, there are eight or nine companies like mine.” He said his company, Manitoba Recycling, operates with a narrow profit margin. “As a businessman, I’m always looking for ways to increase efficiencies, reduce red tape and decrease administrative overhead. User fees will run counter to all of that.” Shine detailed Manitoba’s experience with processing invoices for flights in Canada, and said those invoices add an administrative burden to his company.
Shine also stressed the difference between adjusting the current tax rate to generate more revenue and fundamentally changing the system to shift costs from airlines to general aviation. “Asking me to pay for modernization is one thing. Asking me to pay for a tax break for some interest group is another,” he said. “I am willing to pay for an increased fuel tax for modernization. I am not willing to foot the bill for someone else.”
General aviation airport executives also worry about the potential drop off in business and the future viability of smaller airports should Congress impose the fee and significantly raise taxes, said Robert Olislagers, executive director of the Arapahoe County Public Airport Authority and Centennial Airport in Colorado. He said his airport has seen a 10 percent decline in piston aircraft activity this year as avgas fuel costs have increased, and in 2006, piston aircraft activity was down 26 percent statewide.
“These numbers suggest extreme price sensitivity among piston aircraft users,” he said. “I know of at least one pilot who sold his aircraft and hangar because the price of fuel made it prohibitive to fly.” This price sensitivity, he said, extends to jet operators. “General aviation system users do not have the economies of scale or in some cases the ability, to diffuse expenses,” Olislagers said.
Regional aircraft operators also have their concerns about the fee, said David Hackett, president of Fort Lauderdale, Fla.-based Gulfstream International Airlines. He acknowledged that a new $25-per-flight user fee, coupled with a possible reduction in fuel excise taxes for commercial carriers, “seems to be a more sensible and logical way to ensure the proper funding and mitigates inequities inherent within the current funding structure.”
But while a $25-per-flight fee might sound modest and affordable for large commercial aircraft operators, he said, “It would have a significant and serious adverse impact on our company and other regional carriers that operate small capacity aircraft like us.” The fee could place the carrier’s future in jeopardy, he said, since it would represent millions of dollars in increased expenses. He urged an exemption for smaller regional carriers from any such fee.
FedEx Corporation Chairman, CEO and President Frederick Smith did not take a position on whether Congress should adopt a fee system or keep the current excise tax system. He asked that regardless of the mechanism, Congress treat operators equitably. “We should not be asked to accept a more unequal burden on all-cargo operators than the status quo – where we now pay more than 100 percent of our fair share.” Smith expressed concern that S.1300 placed less emphasis on the general fund contribution into the aviation trust fund and also asked the congressional panel to ensure that it maintains the general fund contribution at historic levels.
The airlines maintained their push for elimination of the current ticket tax system. The Air Transport Association last week rolled out a new proposal that would involve a passenger “tax” based on distance and flight segments. James Whitehurst, chief operating officer of Delta Air Lines who also represented ATA during last week’s hearing, said the proposal would make the funding system more fair and predictable. “It is high time to end this indefensible subsidy of corporate jets – business aviation can and should pay its fair share,” he said.