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AOPA response to Northwest Airlines' editorial regarding general aviationAOPA response to Northwest Airlines' editorial regarding general aviation

AOPA response to Northwest Airlines' editorial regarding general aviation

April 2, 2004

Summary

The nation's robust national air transportation system includes approximately 18,000 landing facilities. Remarkably, 75% of all U.S. airline passengers travel through just 30 of our airports.

As a result, the airlines and their customers generate huge demands at these facilities for services such as terminals, parking lots, ticketing areas, gates on the ground, as well as the air traffic control system - all specifically designed around airline needs.

The airlines are charged fees and taxes for these services. Similarly, individuals using general aviation (private) aircraft are also assessed fees and taxes to cover the costs of the (relatively speaking, very modest) services that they use.

The fundamental issue is the need for all citizens to have a viable air transportation system, and the fundamental principle that is applied is that there is fair administration of fees to pay for the costs involved.

Northwest Airlines' editorial: Chances are that you will either depart from or arrive at an airport that is used by both commercial airlines like Northwest and privately owned aircraft. AOPA response/rebuttal: In fact, there are about 18,000 landing facilities, including 5,400 public-use airports, in the United States. These airports make up the national air transportation system - much like a national highway system. Northwest Airlines (NWA) and its partners serve about 300 U.S. airports, but 75% of all passengers use just 30 hub airports. Contrast that to general aviation (what the editorial calls private aircraft) and the wide range of services it provides. Examples include (1) transporting passengers to airports abandoned or never served by the airlines; (2) providing medical services to small communities; (3) transporting cargo (everything from food to appliances) to hard-to-reach places; (4) agriculture; (5) law enforcement; and (6) medevac. These services aren't just a convenience; they make life possible and economically viable to these areas as well as the many communities involved in creating the goods involved. This is a fundamental aspect of our economy and contributes significantly to its overall well being: Each year, the general aviation industry accounts for more than $100 billion in economic benefit to the U.S. economy.
NWA: Airports levy passenger facility charges (PFCs) to cover airport maintenance and improvement projects, including runway and taxiway enhancements. (Look at your travel confirmation receipt.) AOPA: This is true. These fees are used to develop airport infrastructure supportive of airline requirements such as the gates and other public facilities used exclusively by Northwest and other airlines. However, general aviation pays into the national system of airports through per-gallon fuel flowage fees (typically 5¢-20¢ a gallon), rental space for hangars/tiedowns, and landing fees, as well as a number of other charges. These fees are assessed at virtually every GA airport to support the operation of the facility. While not classified as PFCs, these fees are similar in nature in that they cover the costs of supporting services. In some cases, these GA fees would far exceed the PFC fee collected at a particular airport.
NWA: PFCs are also used for Federal Aviation Administration (FAA) approved projects that enhance safety and security. AOPA: These enhancements benefit everyone who travels by air. The many fees on general aviation aircraft that are outlined above can actually be utilized with far greater flexibility - and, therefore, with more benefit - than the limited use of PFCs. This means the benefit of the general aviation fees can be far greater than the fees collected by the airlines.
NWA: Airports can charge PFCs of up to $4.50 per flight segment, or up to $18 roundtrip. As a commercial airline, we are required to collect this fee when you purchase your ticket. AOPA: These fees are a federal requirement, not a function of an airline or a local airport. They are very similar to the highway tolls paid by trucks and cars and used to repair roads or build new ones. The level of PFC fees - which all airline passengers pay - with the maximum fee established by Congress, are approved by and funneled through the FAA back to the airport. The airline is required to collect the fee and deposit the proceeds monthly with the airport into a dedicated account, much the way a store collects state taxes on a purchase. The funds are then used for upgrades to the facilities that, for the most part, are enjoyed exclusively by the airlines' passengers.
NWA: Private aircraft operators do not pay these fees for using the airport. AOPA: General aviation operators have far fewer requirements than the airlines. For example, GA does not require boarding bridges, ticket counters and passenger waiting areas, restaurants, large terminals with baggage claim areas, multiple rest rooms, parking garages, or runways and taxiways designed to bear the weight of a 500,000-pound airplane. General aviation users pay for their use of the airport through fuel taxes, ramp and/or landing fees, hangar fees, local property taxes, and sales taxes. Since inception of the PFC program, more than $2.7 billion has been spent mitigating airport noise - something for which the airlines are principally responsible for generating. It's important to note that airlines have the ability to participate in the PFC process (FAR 158.23) and may object to levels proposed by the airport. Clearly, it's virtually impossible for general aviation aircraft owners/operators to impact tax levels on gasoline purchases.
NWA: The total taxes and fees you pay as a commercial passenger can add as much as one-fourth to the cost of a $200 domestic ticket. AOPA: The cost of travel is ultimately established by the airlines and reflects the costs of many components, including fuel, labor, the airplane, and maintenance. In fact, the airlines enjoy a broad exemption from many state and local taxes that all other businesses, including general aviation operators, pay. At NWA's Minneapolis hub, NWA pays only a $0.005/gallon state tax for aviation fuel while GA pays ten times that amount: $0.05/gallon.
NWA: For example, Northwest's base fare for a roundtrip ticket from Fargo, N.D., to Madison, Wisc., with a connection in Minneapolis/St. Paul, is about $200. AOPA: Actually NWA's own Web site prices this trip at $565.20 as its lowest fare (as of 4/1/04). This trip is a total distance of 449 miles and, at the stated fare, costs out at $1.26 per mile. On the same date, Orbitz posted a fare of $309, also on NWA, for 69¢ a mile. Many airlines today offer fares as little as 4.6¢ per mile. For instance, you can fly JetBlue from Boston, Mass., to Long Beach, Calif., (2,603 miles) for $119. This clearly underscores NWA's issue - its inability to operate competitively - and why they and other major carriers are often looking elsewhere to place the blame.
NWA: That's a pretty good fare - until you realize that nearly 28 percent or $55 in taxes and fees is added to that amount. AOPA: Actually, it's not a great fare at all, as you can see above. But the fact is, all airlines today set their own fares. The taxes and fees are independent of the fare and established by the airport or level of fee set by state or federal government. A $55 tax charge on a $309 ticket is a lot easier for a consumer to swallow than a $565 fare. It's not a matter of percentages; it's a matter of money.
NWA: That's a hefty tax burden and it's not being shared by private aviation. AOPA: The burden is indeed shared. While some general aviation airplanes use the system, the primary beneficiaries of ATC and large hub airports are almost exclusively the airlines and their customers. Now consider that most of the improvements that the fees cover only benefit the airlines, and any reasonable person would agree that it's a fair arrangement. As noted above, airlines often enjoy exemptions for certain state fuel taxes while GA operators pay fees that ultimately benefit airline operators like NWA. For example, in California, airlines are exempted from any state fuel tax while GA operators pay just $0.02/gallon for turbine fuel and $0.18/gallon for avgas. The $0.18/gallon funds are deposited with the state and used to fund the state's airport noise mitigation at nine large airline hub airports. The aviation system was designed for the benefit of the airlines, and they need to pay their fair share.
NWA: Private aircraft operators also do not pay ticket taxes to fund the FAA. AOPA: Well, this one is pretty easy: Private aircraft operators do not collect ticket taxes for the simple fact that they do not sell tickets. However, to say that GA doesn't fund FAA operations is not true. Federal fuel taxes paid by GA are deposited to the same account as those fees collected from the airlines. GA aircraft pay either $0.219/gallon jet fuel tax or $0.194/gallon tax on aviation gasoline (these taxes are in addition to the fuel flowage charges listed above) at the federal level, plus any state taxes. Airlines pay only $0.043/gallon federal tax on fuel tax, and they are exempted from many other taxes levied on GA aircraft. The airlines also need to remember: GA pilots and aircraft owners often fly airlines and would indeed by paying the ticket tax at that point.
NWA: Last year the FAA spent $6 billion operating the Air Traffic Control system in the U.S. AOPA: And that covers every type of aircraft imaginable. We have a national air system that benefits all citizens - whether they use the airlines or GA. That is just one reason some of the FAA's costs are paid for by the general fund of the U.S. treasury. The entire nation benefits from a national system of airports much the same as we all benefit from the national interstate highway system, regardless of the town or state in which we live.
NWA: This service is free of charge for private aircraft operators. AOPA: Nothing is free for private aircraft operators. General aviation aircraft owners pay federal fuel taxes that are deposited into a federal account that is used to fund FAA operations - which includes the air traffic control system - at a rate five to six times higher than the rate the airlines pay. For more, see above re: taxes.
NWA: Why? Because the commercial airlines pay taxes collected from you to pay for the operation of a system that all airlines use. AOPA: Yes. The airlines only pay a $0.043/gallon fuel tax while general aviation aircraft operators pay a much higher per gallon rate. See above.
NWA: Private aviation operators do pay a fuel excise tax, as do all commercial airlines - but that is about the extent of private aviation's funding for airports. AOPA: The federal fuel tax paid by private aircraft is dramatically higher than the rate paid by airlines. Private (i.e., general) aviation also pays hangar or tiedown fees, parking fees, landing fees, state fuel taxes (where airlines, for the most part, enjoy exemptions or significantly reduced rates). See above.
NWA: At NWA, we believe an airport's operating costs should be borne by all who use them, including those who travel by private aircraft. AOPA: As stated, GA aircraft use very little of an airport. No gates. No baggage. No parking garage. And yet GA does pay for those airport facilities it uses (and then some, many would argue). This is a principle - of being self-sustaining - that is a fundamental tenet of the FAA. However, the federal government realizes and recognizes the benefits of a national air transportation system - as do many local communities that actually subsidize airports. The airlines do not pay for 100% of the system's costs. At airports, revenues are derived from many sources; airline fees are one of many - parking lots, restaurants, etc.
NWA: As the system works today, you, the commercial airline passenger, are subsidizing private aircraft ownership. This is not right. AOPA: It is not right. And it is not correct. GA pays its own way - on a per-passenger basis or any other way to look at it. On the other hand, Northwest Airlines enjoys tax-free financing on the airport facilities it uses, and in Minnesota, the state's taxpayers have over the past decade provided millions in tax incentives and other subsidies to help build NWA facilities, including hangars and maintenance facilities.
NWA: We are working with the federal government to find solutions to this and other issues that exacerbate the challenges we face as a commercial airline - serving customers like you who deserve a "fair fare." AOPA: As is GA. Which means everyone should pull their own weight. Literally. A small general aviation airplane can weigh as little as 2,000 pounds. Some of the larger ones weigh 20,000 pounds. Typical airliners weigh as much as 250,000 pounds; the largest weight three times that amount. You can imagine the stress a 700,000-pound airplane puts on a runway or taxiway compared to a 2,000-pound GA aircraft. It's the same logic that applies when a car pays a $2 toll at a bridge and a tractor-trailer pays many times that amount. It's a fair share of the cost of using the road. Congress has determined that the nation needs national transportation access. One company must not determine these issues on the basis of their self-interests. It is rather the national will of elected officials that make these determinations, generally with the welfare of the entire country in mind. This is why we have national air, road, and waterway systems. To do otherwise would put those states without certain assets at risk and at the mercy of more powerful interests.

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