User Fee Face Off
ATA, NBAA dispute funding methodology for Airport and Airways Trust Fund
With the Airport and Airways Trust Fund set to expire at the end of September 2007, roughly one year remains before Congress reauthorizes the Federal Aviation Administration Trust Fund and lays out the framework for implementation of the next generation Air Traffic Control System.
James May and Ed Bolen concur that modernization is a critical priority, but agreement among the respective leaders of the Air Transport Association and the National Business Aviation Association essentially ends there. Both of these Washington, D.C. heavyweights and the organizations they represent beg to differ on everything from the funding structure to its governance.
ATA President and Chief Executive Officer May suggests there should be a transition to a new funding system that eliminates the current structure based on a percentage excise tax of each passenger ticket. This would be substituted with a user fee charged according to the use of the system that he likens to a utility charge.
"The simplest for instance is looking at the new air traffic control system in the same way you look at electricity," May explained. "You pay according to how much electricity you use. Under a new mechanism for the ATC system, we think the same thing ought to happen.
"We think the two metrics ought to be a fixed cost represented by a take off and a landing, and a variable cost based on how much time you spend in controlled air space with adjustments made for time of day and whether or not you come from a very small, rural community."
May said he has come to this conclusion after studying the metrics.
"The trust fund is supported 90 percent by commercial aviation taxes, yet we're only using about 70 percent of the capacity," May stated. "Currently, our friends in the corporate aviation world are paying about 4 percent of that trust fund, yet the demand they are putting on the system is somewhere north of 15 percent and is going to grow to be more than a quarter of the demand. So there has to be a way to better balance those contributions, and we think the way to do that is to have a user fees."
Not surprisingly, NBAA President and CEO Bolen rejects user fees he believes to be economically detrimental to the general aviation community.
"The premise that all airplanes are the same and should be charged the same regardless of size or purpose of flight is an idea that has been around aviation circles for decades and it has been thoroughly rejected everywhere in the world.
"There is no place in the world - whether it is public, private or some combination - that charges all airplanes the same."
Bolen said May's idea is to shift up to $2 billion in costs away from the airlines and on to business aviation.
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"What he is trying to do is ignore the fact that the cost of the system is dictated by the airlines and their hub-and-spoke operating model," Bolen said, noting that if general aviation were grounded tomorrow, the cost of the air transportation system would not go down appreciably. "If you look at the Chicago area and look at the number of TRACONs, controllers and radars, they are not there to serve general aviation. They are there because United and American have major pushes that happen there 12 times a day."
Bolen also cited Ronald Reagan Washington National Airport as a prime example.
"Although business aviation has been banned for four years, the cost of running DCA has not gone down."
Bolen said the general aviation community wants to keep fuel taxes as the sole mechanism through which to pay for system usage.
"We reject user fees because of the huge administrative burden," he said, noting the International Air Transportation Association (IATA) testified at ICAO in 2003 that it cost international airlines $85 to $125 to process each user fee invoice. "In the general aviation community where you are not in the transportation-for-hire business, that burden goes up even more. That is just a hidden tax, and we don't want a hidden tax.
"We also don't want to create a brand new government bureaucracy filled with auditors, filling agents, arbitrators and so forth. We want the FAA to be focused on safety, not bill collection."
May said an IRS branch of the FAA is the last thing they envision.
"You can collect your fees using any of a dozen innovative financing opportunities," he said, suggesting an in-plane RFID transmitter and end-of-runway reader could scan a chip upon takeoff to gather the appropriate charge based on ATA's user fee equation. "The suggestion that it would be a terribly difficult thing to do is nonsense."
In fact, May has advocated for a governance of the new system that would be less of a traditional government bureaucracy in nature.
"I think we need to set up an independent arm that is quasi-government to run this new ATC system," May said. "I think you need to create a distance between the politicians and the people who will run an ATC system like a business."
"We are proposing a quasi-government, independent board of directors to run the ATC system that has representation from all sectors of the aviation community and government to create a certain independence of action. I think you are going to need that, because otherwise you are going to be subject to extraordinary Congressional pressure opposing the elimination of a lot of these facilities locally. It is almost the same political environment that we ran into with the base closings exercise the Department of Defense went through."
Bolen is a proponent of significant Congressional oversight. "We feel that Congress does provide necessary oversight, so we want to keep Congress involved in the oversight of our nation's air transportation system."
Whatever the end result, the road to reauthorization promises to provoke an exchange.