Monthly Archives: July 2011

The “New Math”

By Jane Calderwood
When it rains it pours.  Today the Air Transport Association (ATA) ran an ad in CQ Today – a Hill staffer’s daily bible – which claims that $60.74, a “big chunk” of a $300 plane ticket from Peoria via Chicago to Raleigh/Durham, is “going to Washington.”

The $60.74 they cite is made up of charges for the federal ticket tax, the flight segment tax, the security surcharge, and the passenger facility charge (PFC).  The first thing, and this is where the new math comes in, is that 30 percent of the $60.74 is from the PFC.  And the PFC, as we all know, and as the federal government knows, is collected by the airline, which receives a fee for its’ services and before remitting it to the local airport for local projects.  It does not come to Washington, it does not visit the Treasury Department, it does not pass Go.   Oh, and just for the record, the airlines make money collecting the PFC – more than $80 million a year – but they did not deduct that from the amount they claim goes to Washington either.

The sole silver lining of the FAA shutdown is the fact we now have irrefutable proof, not that we needed it, but some in Washington did, that the PFC is not a tax.  After all, all the federal taxes the airlines had to collect from passengers expired and the PFC, a local user fee, is still being collected by the airlines, ergo it cannot be a tax. If looking at the actual taxes on the ‘ticket’ in the ad there’s the security surcharge which helps pay for the equipment and personnel needed to keep our aviation system safe $10; and the flight segment tax and the ticket tax.  The money from these latter two goes into the aviation trust fund, or at least it used to back when the authority to collect them still existed, to help pay for upkeep on the national aviation transportation system.  You know all those important things like air traffic control, navigational aids, and runways.  The airlines benefit from the system just as the passengers do.

The rest of the ad urges people to “tell Congress that new air-travel taxes will take America in the wrong direction.” You have to wonder if this is the argument the airlines will use when Congress finally puts the FAA back in business and they are required to collect these taxes again.

ACI-NA Urges Both Chambers to Pass a ‘Clean’ FAA Extension

By Morgan Dye

Airports Council International-North America (ACI-NA) President Greg Principato today again urged the congressional leadership on the transportation committee in both chambers to pass a “clean” extension of the Federal Aviation Authority’s (FAA) operating authority.

In his letters, Principato stressed that the airport industry is deeply concerned as we are now on the sixth day of the FAA shutdown and stop work orders across the country have left construction sites empty. “The longer the delay continues, the greater the number of airport construction projects delayed.  And the longer we are prevented from creating much needed jobs in our communities.”

Principato’s letter went on to emphasize that the flying public has paid into the Airport and Airway Trust Fund (AATF) to ensure the national aviation infrastructure is maintained in good condition. “This will have long-term financial implications for the airport industry and the AATF, putting future investment in our nation’s aviation infrastructure at risk.”

“We urge you to please pass a clean extension of the FAA to ensure the system keeps operating while you work out the remaining policy differences between the House and Senate versions of the FAA reauthorization bill,” Principato continued.

View Principato’s letter to the Senate Committee on Commerce, Science, and Transportation.

View Principato’s letter to the House Committee on Transportation and Infrastructure.

House Hearing Bashes EU Emissions Trading Scheme

By Diane Peterson

This morning the House Transportation and Infrastructure Committee’s Subcommittee on Aviation held a hearing entitled, The European Union’s Emissions Trading Scheme: A Violation of International Law.   The hearing follows up on the bipartisan legislation introduced last week by Committee and Aviation Subcommittee leadership directing the Secretary of Transportation to prohibit U.S. aircraft operators from participating in the EU’s Emissions Trading Scheme (ETS). The ETS will impose fees effective January 1, 2012 on civil aviation operators landing in or departing from EU airports to offset carbon emissions.

Members of the Committee maintained that the EU ETS violates international law and U.S. sovereignty and that aviation emissions should be addressed in ICAO.  Full Committee Chairman John Mica (R-FL) said that the top Committee leadership was united in moving the anti-EU scheme legislation very quickly.  He said the EU’s plan was appropriately named a “scheme.”  He wants to send the message loud and clear that the U.S. is not going to support the EU scheme.

Kris Urs, Deputy Assistant Secretary for Transportation Affairs, U.S. Department of State explained that the U.S. formally registered its objections to the inclusion of U.S. operators in the ETS on legal and policy grounds during the meeting on June 22 in Oslo.  The U.S. supports the goal of addressing aviation emissions through ICAO.  However, the EU ETS is the wrong way to pursue the right objective.

Some Subcommittee members urged the administration to move quickly to file complaints with ICAO or with the World Trade Organization or to levy countervailing charges in response to the EU ETS.

Susan Kurland, Assistant Secretary for Aviation and International Affairs, U.S. Department of Transportation indicated that DOT is considering a wide range of options in consultation with other Departments.  She, however, could not comment in public on the strategy.  Ms. Kurland explained that DOT does have authority to institute counter measures at the appropriate time.

The administration indicated that there are no additional meetings scheduled with the EU at this time to address the ETS.  The U.S. and EU do have regular meetings to discuss aviation relations.  ACI-NA participates on U.S. delegations representing U.S. airports during the U.S./EU meetings.


Do As I Say…

By Jane Calderwood

On July 14 the Air Transport Association issued a statement opposing any increase in aviation passenger taxes.  According to ATA President and CEO Nick Calio, “The industry already pays more than its fair share of taxes…” He did, to his credit, go on to point out that it is the passenger who pays the taxes, not the airline.

And the airlines have never been shy about opposing any change in the Passenger Facility Charge – again a fee paid by the passenger – even though the airlines make money off the collection of the PFC – claiming the price of tickets is so inelastic that any increase, no matter how small, would hurt the industry.  This opposition comes despite the fact the PFC is used for projects like rehabbing or building new terminals and expanding or building new runways, taxiways and ramps -all of which benefit the airlines.

This just makes it all the more perplexing that many airlines increased their fares, as of midnight Friday, to make up for the drop in cost that was coming due to the fact that the ticket taxes were no longer going to be charged because Congress failed to pass the needed 21st extension of the FAA’s operating authority.  JP Morgan analysts are predicting that the airlines could take in as much as $25 million A DAY during the shutdown from their fare increases while the Aviation Trust Fund, which pays for the upkeep of the entire system, will lose $200 million a week according to the FAA.

Anyone willing to make a bet on whether the fares drop once Congress reinstates the ticket taxes?

The Countdown is Over & the Shutdown is On

By Jane Calderwood

Congress failed today in its efforts to reach agreement on an extension of FAA’s operating authority, therefore the FAA will begin shutdown procedures at midnight.  Earlier this afternoon, Kate Lang, Deputy Associate Administrator, Federal Aviation Administration (FAA) Office of Airports held a conference call to update airports on the shutdown of “non-essential” FAA operations starting at midnight.

FAA Staffing:

  • Managers in ADO’s and some Washington, DC based staff will be available for four hours on Monday, July 25th to help facilitate the shutdown.  After that time, they will not be available and all ADOs will be shut down.
  • Safety inspectors in the regional offices responsible for Part 139 certification are considered essential personnel and will remain on the job during the shutdown for Part 139 obligations only.
  • Only three staff members: Associate Administrator Christa Fornarotto, Deputy Associate Administrator Kate Lang, and Manager of the Airport Improvement Program Matt Thys will be working in the Washington, DC FAA Office of Airports.  They are only permitted to work on matters related to restarting the work of the FAA Office of Airports after a new FAA extension is signed into law and to respond to any safety emergencies.

Impacts on AIP:

  • The FAA has now stopped all actions related to AIP grants, leaving $1.7 billion unobligated.
  • Existing AIP payments made through FAA’s automatic ECHO payment system will continue to be dispersed, although FAA cannot say with certainly how long this will continue.  However, manual payments will no longer be made.  FAA estimates that about 50 percent of airports receive AIP payments through the ECHO system.  FAA promised to alert ACI-NA if there are any changes to this process.
  • No new projects will be approved for funding.  The FAA has promised to reestablish the approval system as soon as possible after the shutdown; however the length of time it will take to get the system up and running depends on the length of the shutdown.
  • FAA also said that a Federal Register notice will be issued on July 26 or July 27 alerting airports that they must inform FAA whether they will use their entitlements (those authorized to date AND any possible additional money) or carry the funds over to FY 2012.  These decisions will have to be made by August 12.

Collection of PFCs and airline taxes:

  • ACI-NA has confirmed that the airlines will continue to collect Passenger Facility Charges (PFCs) and make PFC payments even though they will not be collecting taxes on tickets sold.

Airlines will not collect ticket taxes or segment fees on tickets purchased after midnight on July 22.  Passengers that purchased their tickets prior to that time but who travel during the shutdown period are entitled to a refund of the taxes and segment fee. Passengers should contact their airline for specific information as to whether the carrier will provide the refund or if the passenger must obtain the funds from the Internal Revenue Service.

When Congress will get the FAA back on its feet at this point is anybody’s guess.