Strategies, Options & Perspectives: June 2005
Like the flu and other nasty bugs, the user-fee virus is making its periodic appearance as Congress considers FAA reauthorization, up for renewal in 2007. This cycle’s strain, however, appears to be particularly virulent.
Facing large deficits and promoting smaller government, the Bush Administration wants direct users of federal services to shoulder a greater percentage of agency budgets, and the FAA is no exception. Revenues flowing into the Aviation Trust Fund are down while agency costs are rising, and the quick-fix response in some quarters is to propose user fees.
Voices outside the federal government support the introduction of user fees. The airlines have often claimed that general aviation should pay more for its use of the National Airspace System (NAS). But they seem to see user fees, particularly for operators of jets and turboprops, as a way of reducing the attractiveness of company-owned aircraft, an element of our nation’s transportation system that some air carriers misconceive as major competition.
Members of the media often are tempted to echo themes that demean business aviation as they search to find the occasional abuse involving corporate jets among the blizzard of perks that some boards provide top executives. And corporate aviation traditionally is grist for the populist mill many politicians love to grind as they approach re-election. This time the fight to stamp out the user-fee virus will be fierce.
Assessing the Value of User Fees
Reducing the FAA’s burden on the Administration’s overall expenditures is an admirable objective. But imposing user fees on general aviation is not an effective solution. In fact, giving the government the ability to increase user fees for current FAA services simply institutionalizes outdated methods of conducting business and provides little or no incentive for the Administration to promote system improvements.
Before Congress addresses any form of new fees the FAA needs better cost documentation and containment. Forget about the bogus belief that privatization provides salvation. In nations where ATC is privatized, it can be shown that the cost per aircraft handled is considerably higher than in the U.S.
Empowering the FAA with the means to increase its efficiency should be the Administration’s first priority. The agency should provide controllers with more automation that transitions their job from labor-intensive technician to upscale systems manager. A government investment in an agile ATC system, such as proposed by the Joint Planning and Development Office in its Next Generation Air Transportation System Integrated Plan, would be far more beneficial to the nation than would be more taxes for general aviation users.
Air transportation is important to the nation’s economic vitality and quality of life for all citizens. By taxing only the direct users of the NAS, we risk having an infrastructure that is underused and underfunded.
Congress and the aviation community should lobby the Administration for general fund investments in meaningful improvements to the NAS infrastructure. A safe and efficient aviation system is inherently a government responsibility, and it must be a national priority. General fund contributions to the NAS are appropriate and necessary.
The airlines’ suggestions that higher taxes on general aviation would compensate for diminishing Trust Fund revenues are weak if not disingenuous. About 90 percent of the dollars flowing into the Aviation Trust Fund come from airline passengers as a percentage of the cost they pay for an airline ticket. (In fact, the airlines pay very little for the services they receive from the FAA.)
Trust Fund revenues have decreased as cutthroat competition among air carriers has reduced the price of a passenger ticket. Could the hidden motivation of some airlines be to shift the cost of providing scheduled air service from passengers to general aviation, thereby making the price of an airline ticket more attractive at the expense of general aviation?
The Effect of User Fees
If general aviation user fees were set at sufficiently high levels to have a major effect on the FAA’s budget and affect already low airline ticket prices, Congress might be surprised and hugely disappointed by the unintended consequences of its action. Research conducted several years ago, during an earlier bout of user-fee flu, indicated that higher fees would cause operators to reduce flight hours.
Also, some operators would reduce their use of FAA services, which could have a negative effect on safety. Surely Congress desires neither of these outcomes. General aviation plays a vital role within our nation’s air transportation system, bringing commerce to rural America and augmenting the output of the NAS by providing access to 10 times the number of airports served by the airlines.
Nonetheless, grounding or significantly decreasing general aviation activity would not have a profound effect on the capital requirements of the NAS, which is structured for the airline system. In addition, curtailing general aviation activity would not provide a modicum of medication for the ailing airlines.
Most corporations use general aviation aircraft for business travel to supplement airline travel. In fact, companies with corporate jets are among the airlines’ best customers, spending hundreds of millions of dollars annually on airline tickets. They use the airlines when air carriers fulfill their travel needs, and they use business aviation when a company aircraft best suits their needs.
The majority of business aviation operations are to non-hub airports and many are to airports that are not approved for scheduled airline service. Thus, making business aviation more expensive by introducing user fees wouldn’t help the airlines.
As strong as the arguments against introducing user fees are, fighting to maintain the health of corporate aviation will be tough. We need to attack the user-fee virus aggressively by inoculating our elected officials with a healthy dose of insight.