Several US airlines have been in the odd position of lobbying for the reimposition of a 10 per cent ticket tax, which has not been in effect since the beginning of the year and whose absence was credited for helping spur record carrier profits during the traditionally slow winter period.
Southwest Airlines supports the tax, which until the budget battles of last December had been on the books since the 1970s, and is fronting a lobbying alliance of 34 companies, including general aviation interests, other low-fare carriers like Alaska Air and manufacturer Boeing.
On the other side of what has become a high-stakes Washington battle is the 'Group of Seven': American Airlines, United Airlines, Delta Air Lines, Northwest Airlines, USAir, Continental Airlines and TWA. These carriers have put forward what they refer to as 'user fees' to replace the 10 per cent tax.
The whole debate hinges around the widely accepted notion that the Federal Aviation Administration needs its source of revenues back to provide funding for the upgrading of the US' aviation infrastructure, including the air traffic control system. When authorisation of funding for the FAA expired on 1 January, the agency lost a $5 billion annual revenue stream.
As the battle for reinstatement got into high gear during May, the 'G7' carriers barely concealed their desire to refocus the brunt of tax on what has become their bane: the low-cost, low-fare, short haul airlines that have brought US domestic yields down significantly over the past two years.
'This is a blatant attempt to shift costs to [the likes of] Southwest and ValuJet,' says a source close to Larry Pressler, the chairman of the Senate Commerce Committee, which oversees aviation issues. Pressler is supporting the 10 per cent tax.
Conversely, the G7, which coordinated both public relations and lobbying on this issue, argues the 10 per cent ticket tax was 'inequitable and inefficient,' because it is linked to the price of a ticket and takes no account of the demand airlines place on the FAA's services. The larger airlines, 'which provide 85 per cent of all revenue passenger miles,' claims they are charged disproportionately.
The G7 plan calls for the tax to be linked to demand: carriers would pay $2 for every seat flown, $4.50 for every passenger, and a half-cent for every mile flown by a passenger. The revenue stream, the seven carriers claim, would approximate the projections for the expired ticket tax.
The G7 plan has not gone down well in some influential quarters, where the 'user fees' concept is interpreted as a tax proposal. Opponents include the General Accounting Office, which deems tax initiatives designed and forwarded by business interests as 'unseemly'. Detractors say such taxes would shift the burden of FAA support on to the low-fare, short-haul and, in Southwest's case, high frequency carriers.
Based on projected 1997 operations, government sources estimate that Southwest's costs would go up $205 million and ValuJet's would rise by $6 million, while Delta' would drop $140 million, American's would fall by $125 million and UAL's would be $100 million less.
There are indications that the G7 forwarded its initial proposal simply to set the ground for changing FAA's funding stream in the long term. A compromise may yet be the final result.
Mead Jennings
Source: Airline Business
