US Airways is likely to save several million dollars a year in state jet-fuel taxes, thanks to a new tax break approved Wednesday by the General Assembly.
Under the bill, which heads to Gov. Mike Easley for his signature, airlines can seek rebates of fuel taxes paid in excess of $2.5 million a year. It is unclear precisely how much individual carriers have paid in N.C. fuel taxes, but legislators believe the threshold is high enough that the change will benefit only US Airways.
A separate provision of the measure allows racing teams and any "motorsports sanctioning body" to avoid paying taxes on fuel for corporate-jet travel to any race or sponsor event -- a provision that will benefit the cluster of race teams headquartered north and east of Charlotte.
To battle surging oil prices, U.S. airlines have been taking measures to conserve fuel, but they're also turning to states for tax relief. Oil prices closed at a new high Wednesday of $67.32 a barrel on the New York Mercantile Exchange, surpassing a record from nearly two weeks ago.
Sen. David Hoyle, a Gaston County Democrat, said a US Airways official approached him and Sen. Daniel Clodfelter, D-Mecklenburg, a few months ago and said the airline would begin trucking fuel into North Carolina instead of buying it here -- unless the state agreed to cap fuel taxes.
"That ain't bull," Hoyle said. "That's fact."
However, Charlotte/Douglas International Airport does not allow fuel trucks, and ferrying fuel aboard aircraft tends to be more expensive than the typical practice of buying it direct from a pipeline.
A US Airways spokesman declined to discuss conversations with legislators, saying in a statement: "This legislation is consistent with that passed in other states for their hub carriers to limit the tax exposure on jet fuel."
Charlotte is US Airways' largest hub and home to about 5,300 of the airline's 23,000 workers. The carrier is in the final stages of completing a merger with America West Airlines, which will shift the company headquarters to Arizona from suburban Washington but leave Charlotte operations mostly intact.
A report by the General Assembly's financial analysts estimates the legislation will cost the state about $5 million a year in lost revenue.
But Hoyle says that analysis wrongly assumes US Airways would have continued buying fuel in North Carolina. He said he believes the bill saves $2.5 million in revenue for the state.
In addition, US Airways is a major employer in the state, and the airline is a vital economic development engine in Charlotte and other communities, he said.
In the budgets of US Airways and the state, a few million here or there has no large financial effect. US Airways' 2004 revenues were $7.1 billion. The state's budget is $17.2 billion.
Other airlines have benefited from helpful tax policies.
In March, the Georgia legislature approved a $15 million cap on fuel taxes, a move estimated to save Atlanta-based Delta Air Lines about $12 million a year.
Texas, home to major hubs of Continental Airlines, Southwest Airlines and American Airlines, does not tax jet fuel.
In North Carolina, the state already offers fuel-tax rebates to airlines for fuel bought here but consumed while flying outside the state's borders.
Allen said he is unsure how much the airline will save from North Carolina's change, as the figure depends on future oil prices. In July, US Airways said it paid an average of $1.68 per gallon of jet fuel in the second quarter, 57 percent more than in the same period a year earlier.
On the exemption for racing teams, Sen. Tony Rand, D-Cumberland, said he championed the incentive after meeting at Lowe's Motor Speedway with the N.C. Motorsports Association.
Although other companies are paying higher fuel-tax bills for their aircraft, racing teams are under increasing pressure to move to other states, Rand said.
"We thank the Lord it's a North Carolina sport," he said. "We just need to let them know how much we appreciate their making North Carolina home."
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