ATA Boss Slaps GA, Bizav

By Paul Lowe

November 1, 2004
Air Transport and Cargo, Financing, Insurance and Taxes

Echoing a refrain that has been sung around Washington for years, Air Transport Association president and CEO James May reiterated recently that the airlines have been subsidizing general aviation, business aviation and government users of the civil aviation system for years, and he called for a sweeping reform of tax policies.

May stopped short of calling for general aviation user fees–as several of his airline bosses have done in the past–and he acknowledged that the airlines must help themselves to achieve good health. But he argued that is not the total solution.
“That can come only from the entire aviation community recognizing the current crisis and pulling together to create a whole new political and economic environment–one that invites changes and allows all of us to move forward together,” he said.

In a talk before the Washington Aero Club, the ATA leader said, “We need to ensure that tax dollars collected from the industry are channeled into expanding our infrastructure and accommodating growth, not suppressing it or subsidizing government responsibilities or programs.” Responding to a question from Transportation Department Inspector General Kenneth Mead, May asserted that “We’re spending a billion plus on general aviation airports; it’s coming out of our pockets. GA gets the benefit of it; we don’t. I think we need to look at that kind of equation.” He called for elimination of the fuel tax and “rebalancing” of contributions to the aviation trust fund.

“Are all of the people who are benefiting from the expenditures made out of the trust fund equally contributing to that trust fund, and if not, why not?” he asked. “And how do we begin to change that?” He suggested going to “ground zero” and reviewing all of the taxes and fees.

In addition to his allegations that the air transport industry is subsidizing others, May decried that “If you accept the principle that has been preached if not practiced by Congress and the federal government–the principle that airline and airport security is, indeed, national security–then the airlines have been subsidizing national security as well.”

As a result of unfunded security mandates, he said, U.S. carriers will take a hit amounting to almost $4 billion this year. “And that’s not even the worst of it,” May continued. “Federally imposed taxes and fees now account for about $52 on a $200 domestic round-trip ticket. That’s 26 percent. It’s nearly twice the rate on commercial air travel from a decade ago and more than triple the rate of 30 years ago.”

According to May, taxes and fees now represent an annual burden of $14 billion on an industry with not much more than $100 billion in annual revenues. And while it is true that much of this money provides services the airlines depend upon, he contended that billions more “represent what we in the industry see as deadweight cost.”

The perception that the airlines are merely collecting taxes and fees from customers and are not paying them is totally untrue, he claimed. “It assumes that a tax or fee imposed by the government on the passenger will have no consequence to the revenue stream that goes to the carrier,” he explained. “That ignores the reality that low price has become the overwhelming driver in our industry as a result of extreme competitive pressures, combined with the total transparency in pricing provided by the Internet.”

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