Airline groups oppose fees in Obama’s deficit plan
Wednesday, September 21, 2011
DALLAS (AP) — Airline trade groups are fighting President Barack Obama’s plan to raise fees on airlines and passengers to pay for aviation security and air-traffic control.
The airlines say security is a national-defense function and they pay an unfair share. The administration argues that those who use the air-travel system — airlines and passengers — should pay for it.
The aviation fees are part of Obama’s deficit-cutting plan that was released Tuesday. The plan would:
— raise the passenger security fee — now $5 to $10 per round trip — to $15 by 2017 and give the Homeland Security Department the power to push it higher.
— impose a surcharge of $100 per flight to help pay for air traffic control.
The administration portrayed the $100 surcharge as a tax on corporate jets, whose owners pay fuel taxes but not ticket taxes and other fees already paid by airlines and their passengers. However the surcharge would also apply to regular airline flights — providing most of the $11 billion that the surcharge would raise over 10 years.
The Air Transport Association, which represents large airlines, said it’s unfair for airlines and passengers to pay for security against terror attacks that target the U.S. and not the airlines themselves. The trade group says a typical $300 round-trip ticket already includes $60 in taxes and fees.
The Regional Airline Association, a group of smaller carriers, said the fees could lead to a loss of flights to smaller cities. The group’s president, Roger Cohen, said the $100 surcharge would cost more than regional airlines earned last year, threatening service to smaller cities.
The groups also complained that some of the money raised from airlines and passengers would be used to pay down the federal budget deficit and not to improve the air-travel system.
The administration estimated that boosting passenger security fees will raise $24.9 billion over 10 years. It proposed to spend $15 billion of that to reduce federal debt.
The airline groups argue that raising taxes will hurt demand for travel.
“The airline industry is not a cash cow,” said Steve Lott, a spokesman for the Air Transport Association. “During the best of times, the airlines have razor-thin profit margins.”
Lott said if taxes are raised, airlines will have to increase fares or cut service.
Robert Mann, an aviation consultant in Port Washington, N.Y., said the airlines undercut their own case against taxes this summer, when Congress let some federal aviation taxes expire briefly. Rather than passing the tax savings to consumers, most airlines kept the money by raising fares an equal amount.
“It’s simply Economics 101 that taxes, fees or any higher out-of-pocket costs ... depress demand, especially price-seeking leisure demand,” Mann said, “but you could never tell it by the recent behavior” of most airlines.
The airlines have also boosted their own fees on passengers for checking baggage and changing reservations. The largest U.S. airlines collected $1.4 billion from those fees in the first three months of this year, up 4.5 percent from a year earlier, according to government figures.
The nation’s largest airlines earned an operating profit of $5.9 billion last year but had a loss of $285 million, or 1.1 percent, in the first quarter of 2011, the Transportation Department said.
The prospects for the aviation fees are uncertain. Obama’s deficit plan is given little chance of passing Congress, but parts of it could resurface in a plan to be written this fall by a so-called supercommittee of Congress charged with cutting government spending. And that has the airline industry worried.
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