NBAA Convention News

User fees: Even Washington can’t decide whether user fees make sense

 - November 13, 2006, 11:18 AM

After promising that a new system for funding the FAA would be announced by late last spring, the White House admitted this summer that internal disagreements within the Bush Administration had pushed the project to a back burner.

Former Transportation Secretary Norman Mineta acknowledged in early July that there were deep divisions within the Administration about how best to fund the FAA. He told reporters that there was much “arm wrestling” over the question of user fees and to what extent they would apply to general aviation.

The FAA proposal got as far as the Office of Management and Budget, where it was returned to the Administration with more than 60 pages of questions. Some observers believe that disagreements within the Administration may have hastened Mineta’s June resignation. The Democrat former congressman had long opposed user fees levied on general aviation.

The public debate on user fees began in earnest in March when the 19 airline members of the Air Transport Association (ATA) announced their plan for funding the FAA into the future. Their “Smart Skies” campaign would place a tax on the number of “departures” and “time in system” and give the airlines the most influence among ATC system stakeholders.

The airlines contend that they are paying 90 percent of the FAA’s costs while using airspace less than 70 percent of the time. They want to shift about $2 billion of the costs onto general aviation through user fees, specifically arguing that business aviation does not pay its fair share.

Although the FAA and some high-ranking members of Congress have been talking about new methods of funding the FAA for some time, it was not until the ATA announced its plan that the GA lobbying groups launched a united counterattack.

Within hours of the ATA media briefing in March, the leaders of NBAA, the National Air Transportation Association and the General Aviation Manufacturers Association held a telephone press conference in which they called for GA to continue to pay for FAA services through the current tax on fuel.

Last year, about $7.1 billion of the $10.4 billion paid into the Airport and Airway Trust Fund came from the 7.5-percent passenger ticket tax, which the passenger–and not the airline–pays. The airlines pay less in aviation fuel taxes (3 percent) than does general aviation (5 percent).

At issue is the fact that the taxes that replenish the aviation trust fund are set to expire on September 30 next year along with Vision 100, the current round of FAA reauthorization legislation. Congress will consider a new funding package next year when it passes an FAA reauthorization bill. The ATA is looking to this reauthorization process as an opportunity to shift from the traditional way the FAA has been funded to one based on user fees.

In addition to the 7.5-percent ticket tax paid by domestic airline passengers, the trust fund is fed by a domestic flight segment of $3.20 per segment per passenger, an international departure/arrival tax of $14.20 per international passenger, a 6.25-percent waybill tax on domestic cargo and mail, a general aviation jet fuel tax of 21.8 cents per gallon, a GA gasoline tax of 19.3 cents per gallon and a commercial fuel tax of 4.4 cents per gallon.

The segment fee and international departure/arrival tax rates have increased each year, but the airline ticket tax is a fixed percentage of the ticket price, so it fluctuates with changes in the price of airline fares and the overall health of the airline industry.

GA Fights To Keep Fuel Tax

According to the Congressional Budget Office, the vast majority of the trust fund revenue (66 percent) comes from ticket taxes on domestic airline passengers. The rest comes from international departure/arrival fees (18 percent), commercial fuel taxes (3 percent), cargo waybill taxes (4 percent), general aviation fuel taxes (5 percent), and interest (4 percent).

General aviation interests say that if they must pay a larger proportion of the cost of operating, maintaining and modernizing the National Airspace System, it should be through an increase in fuel taxes and not user fees.

At this year’s Experimental Aircraft Association (EAA) AirVenture in Oshkosh, Wis., a panel of GA groups discussed the ATA’s plans to shift $2 billion of its trust fund contribution to the general aviation segment through the implementation of user fees.

“Here’s the bottom line: user fees are a form of tax, and if we’re not vigilant, the ATA will tax users out of the system,” warned NBAA president and CEO Ed Bolen. “They will also do everything possible to take Congress out of the equation when it comes to managing the air traffic control system.”

Clearly the ATA is attempting to weaken or destroy the united front that general aviation has displayed. At the Florida Airports Council annual conference in Fort Myers in late July, ATA president Jim May and AOPA president Phil Boyer argued their organizations’ positions on user fees.

“I’m here to declare victory to Phil,” May told the audience of airport managers and executives. “The airlines don’t support user fees…for general aviation piston-engine aircraft.”

Boyer countered with the “camel’s nose under the tent” argument, saying that user fees for some will inevitably lead to user fees for all. “It’s happened everywhere else in the world,” he said.

Boyer also pointed out that GA propulsion is changing. “In the future, a user-fee exemption for piston-engine aircraft may be meaningless,” he said. “As we’ve seen with the very light jets, turbines are becoming smaller and more adaptable.”

At the EAA forum, it was pointed out that respected figures in government and industry have repeatedly concluded that it is the airlines with their hub-and-spoke networks that account for most of the costs of the aviation system.

“The airlines’ hub-and-spoke operations have driven the design of the system that was built solely to meet their needs,” GAMA president and CEO Pete Bunce told the large audience at Oshkosh. “It is only fair that they pay for the system built for them.”

With the ATA mainly targeting business jets, GAMA chairman and head of Cessna Jack Pelton said the fight goes beyond financing the system. “Now more than ever, the airlines are viewing GA as a threat and we believe this is one of the very reasons for their push toward imposing user fees.”