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19 March 2003 The airline industry is lobbying the federal government for $9 billion in tax breaks as a result of what it calls unfair and unnecessary surcharges placed on air travel. |
The industry is bracing itself for the impact on air travel of the impending war in Iraq whilst still reeling from the double blow of September 11 and a sluggish US and world economy. The Air Transport Association (ATA) says the industry is facing a potential $11 billion loss this year, and argues that a so-called 'tax holiday' from many of the federal levies charged to airlines and passengers would help it through a very turbulent period.
The ATA proposes that the tax holiday should start when war is declared on Iraq, and remain in place for one year afterwards. It would cover taxes such as ticket tax and jet fuel tax.
However, it seem very unlikely that lawmakers will grant such a package to the airline industry, especially given fears of a growing budget deficit and the doubts over what the war in Iraq will actually cost. According to USA Today, congressional aides say that the ATA's timing of such a request couldn't be worse.
In their defence, the airlines argue that they are over-taxed, especially when compared to other sectors of the economy. The ATA says that the tax burden on the industry is even higher than that of 'guilty pleasures' such as alcohol and cigarettes. Even without a war, the ATA revealed that airlines will lose a combined $6.7 billion this year. The industry haemorrhaged some $18 billion in the previous two years, according to reports. A significant proportion of this is as a direct consequence of September 11, with extra security measures accounting for $4.1 billion in costs. The ATA also points out that a $200 return airfare attracts about $51 in federal taxes.
Further evidence that the airlines' pleas are likely to fall on deaf ears in Washington is criticism that they have not successfully controlled their costs after receiving some $15 billion in aid post September 11 made up from $5 billion in grants and $10 billion in loans. It would appear further support on a similar scale will not be so forthcoming.
To illustrate the airlines' plight, USA Today published a schedule of the tax burden faced by the industry since 1992 in the online version of the paper. This includes a hike in departure tax, an imposition of arrival tax, introduction of passenger flight segment tax and security charge, an increase in passenger facility charge, immigration fee and customs fee, a rise in cargo waybill tax, a new frequent flier tax and a jet fuel tax at 4.3 cents per gallon.
