Air System Looks at Shifting Tax Burden

The business jet industry is gearing up for a major fight in Washington. Industry leaders are opposing a push by the airlines to have Congress impose user fees on business jet operators. Operators of general aviation aircraft now pay taxes through a fuel tax.

It may be the industry's toughest fight ever, one industry leader said.

"For us, the fuel tax works," said Ed Bolen, National Business Aviation Association's president and chief executive. "The more you fly, the more you pay.... We want to keep it."

If approved, the implementation of user fees will shift $2 billion in tax costs onto the industry, Bolen said. And that will hurt the industry and its potential growth.

"We all in general aviation have a big target on our back," said General Aviation Manufacturers Association president Pete Bunce.

How to fund air system

At issue is how to fund the multibillion-dollar Airport and Airway Trust Fund, created in 1970. The fund provides much of the money for the Federal Aviation Administration to operate the nation's air system.

The trust fund is used for airports, air traffic control, facilities and equipment, and research and development.

Currently, money for the trust fund comes from 10 aviation-related excise taxes, such as taxes on passenger tickets, fuel and cargo.

The taxes and fees supporting the trust fund are set to expire in 2007, and Congress will have to decide whether to continue or change the funding system.

It's an important issue. The nation's aging aviation infrastructure will need $32 billion for replacement costs.

Splitting the costs

Currently, operators of general aviation aircraft pay through fuel taxes, and airlines contribute through segment fees and ticket taxes.

The Air Traffic Association of America, a Washington-based trade group representing U.S. airlines, says the current structure is unfair because business jet operators are not paying their fair share of the costs.

About 65 percent of the use of the system comes from the airlines, while business aircraft operators account for 15 percent or 16 percent of the use, the Air Traffic Association said. Business jet use is expected to rise substantially.

But 96 percent of the money going into the trust fund comes from the airlines, said Air Traffic Association chief operating officer John Meenan said.

"This clearly has to change," Meenan said. Users should pay proportionately for the services they are consuming.

"It's pretty difficult to sustain a position that says airlines should be subsidizing folks flying around in private jets," he said.

Business passengers are the airlines' premium customers. They rely on them for their profits.

Imposing user fees on corporate aircraft operators would be an easy way to fix the problem, Meenan said. But if they would rather continue to pay through fuel taxes, "that might be fine, but figure out how much they're consuming a year and adjust the fuel tax."

A different perspective

The business aircraft industry sees the argument differently.

Under the airlines' plan, every plane would pay the same cost: from a single-engine turboprop to Airbus' 555-passenger A380, said Bolen, the National Business Aviation Association president.

The airlines are promoting the idea that "a blip is a blip" on a radar screen, he said. Yet it's the airlines that are driving the costs into the system, Bolen said.

Airlines are responsible for 95 percent of the air traffic control system's costs, he said.

"The reality is, it's congestion that drives costs," Bolen said.

When airlines want to place their planes at the same hubs and fly at peak times, the costs for infrastructure, controllers and radars rise.

"They're not there because of general aviation," Bolen said of FAA infrastructure. "They're there because of the airlines."

The size and scope of the current air traffic control system is dictated by the airlines' operating model, he said.

"If you grounded general aviation tomorrow, the cost of running our air transportation system in the United States would not go down appreciably," Bolen said.

Raising the cost of business aircraft travel would hurt the industry, he said.

Lynn Nichols, president of Yingling Aviation, a fixed-base operator at Wichita Mid-Continent Airport, said increasing the cost of corporate aircraft travel could make pilots or operators think twice about flying.

"It will increase the costs, and people will cut back," he said.

Wichita Eagle

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