Why Big Airlines Are Starting a Fight With Business Jets
They Say the Executive Fliers Don't Pay Enough to FAA;
Lobbying Battle Heats UpThe Wall Street Journal 06/01/2006
Author: Laura Meckler(Copyright (c) 2006, Dow Jones & Company, Inc.)

Airlines normally go out of their way to foster goodrelations with well-heeled business travelers. Butthey are picking a fight with some of the most elitefliers in the sky over a significant part of the priceof air travel: air-traffic-controller fees.The fight pits the major airlines against the
thousands of business jets that ferry executives around the country in a battle over more than $10 billion a year in taxes and fees that go to support the Federal Aviation Administration.

Business jets represent more than 18% of all flights, but they pay just 5% of those FAA fees. Infuriated airlines, which represent some two-thirds of flights but pay more than 90% of the fees, have long complained they are overpaying. Now they've launched a high-stakes lobbying battle to get business jets to shoulder a bigger share of the cost of today's system and of an advanced, satellite-based system planned for the near future."We've in effect been subsidizing Lee Raymond of Exxon Mobil and all these corporate guys flying around,"says Jim May, top lobbyist for the Air Transport Association, the main airline trade group, referring to the oil giant's recently retired CEO. "I have a hard time thinking of Lee Raymond as a 'little guy'who needs and deserves subsidies from the airlines. "

The business-jet owners argue they shouldn't be hit with higher fees because they don't cost as much for the FAA to handle. The big expense in air-traffic control, they say, is squadrons of airliners arriving at major airports during rush hours. Ed Bolen, top lobbyist for the National Business Aviation Association, adds that Exxon Mobil Corp. is not typical of his group, which includes many small companies as well. He is teaming up with mechanics who work on business jets and a powerful lobby group of private pilots to make his case. An Exxon spokesman,Russ Roberts, says that if Mr. May has a problem, he should take it up with policy makers and "not single out any one corporation."The clash between the business jets and the airlines is a classic battle between moneyed interests tugging at Congress to achieve their ends.

The current system of levies is set to expire next year, giving Congressan opportunity for a broad overhaul. The outcome will affect the cost of flying, both for passengers on airliners and corporate jets. It also could help determine whether the FAA ultimately can afford a multibillion-dollar switch from today's radar system, which tracks airplanes via beacons on the ground, to a more advanced system that would pinpoint airplane locations using satellite communication. Because controllers and pilots would know with more precision where each plane is, the change is expected to allow planes to fly closer together, increasing the safe number of planes in the sky and reducing delays.The airlines argue that all jets, commercial and corporate, should pay similar fees for air-traffic-control services. After all, they say, only one plane can take off at a time and all planes take up space in the sky, no matter how many passengers are on board.

Business jets counter that they should pay less because it costs less to serve them. Typically, Mr. Bolen says, they use smaller airports and avoid the most-congested routes. The airlines' argument, he says, is like a dinner with abig group, where the people who order the most-expensive meals insist on splitting the bill equally.Mr. Bolen's board members include some of the nation's biggest and richest corporations. But in search of apolitically appealing grass roots face, he's working to line up the small businesses that make up a majority of his members and the blue-collar workers who make, fly, and maintain the jets. He also holds a potential ace: a strong alliance with the Aircraft Owners and Pilots Association, which represents 400,000 private pilots known for their devotion to weekend flying and aggressive advocacy on issues they care about. Under the airline plan, these propeller-powered planes wouldn't have to pay more.

But AOPA worries that user fees for business jets will set a bad precedent and, eventually, they will apply to everyone. Both AOPA and the business-jet group also argue that user fees would be complicated and expensive to administer.The airlines, meanwhile, are working to recruit groups associated with commercial aviation -- airplane manufacturers, airline unions, suppliers and travel and tourism professionals, plus a half million airline workers -- into a broad coalition to lobby Congress.

Sharp Divisions

A decade ago, when Congress last debated FAA funding, the airlines were sharply divided. The major airlines tried to shed costs by ganging up on Southwest Airlines and other low-cost carriers, which were generating less in taxes because their ticket prices were lower. But in the end, both sides wound up with tax increases -- "a circular firing squad," in the words of airline lobbyist John Timmons. Today, airlines pay into the FAA trust fund a 7.5% ticket tax, a fee of $3.20 per passenger for each flight segment flown, a fee of $14.10 per passenger for each international departure or arrival, and a fuel tax of 4.3 cents per gallon. All those taxes and fees are passed on to passengers or absorbed by the airlines. Business jets pay only a 21.8 cent fuel tax. That means, for example, that a typical round trip commercial flight between Philadelphia and Buffalo would contribute about $900 altogether in FAA taxes and fees, according to an ATA calculation the business-jet group doesn't dispute. A typical business craft flying the same route would pay just $22. In 2004, the latest year for which FAA data are available, passenger and cargo airlines accounted for 65% of flights, but they paid 91% of the $9.6 billion in taxes collected to support the FAA. Business aviation, a category that includes all jet-powered private planes and charter flights, accounted for18.5% of flights but paid only 5% of the taxes. Armed with these numbers, the carriers are pressing for a fundamental change in financing. They want to replace existing taxes with user fees, based on how much a particular plane uses air-traffic control. They estimate their plan would shift $1.5 billion to $2 billion in charges to business jets. The airlines are happy to make life harder for private jets, which siphon off some of their best customers --those likely to pay first-class and last-minute fares. There could be even more travelers opting out of commercial flights with the coming of new ultra-lightjets, which will allow corporations to buy their ownplanes for under $2 million -- compared with $3 million or more today. The Bush administration has also signaled support for user fees in an effort to make funding for air-traffic control more predictable. As things stand now, tax collections fluctuate as fares go up and down. When Mr. May, 60 years old, joined the ATA three year sago, he knew his first task was to forge a consensus in a group that represents 19 cargo and commercial carriers. He made a crucial decision to bypass the perpetually squabbling lobbyists who represent each carrier in Washington and go directly to the airline CEOs. In late 2004, he appointed a three-man committee-- the chief executives of Southwest, Continental and AMR Corp.'s American airlines -- and asked them to come up with an FAA funding proposal.

Crunching Numbers

The three chiefs spent more than a year crunching numbers, but in the end, their proposed formula was still not acceptable to everyone in the airline group. Mr. May broke the impasse, suggesting broad principle sinstead of a precise formula. Their compromise: user fees based on the number of departures and length of time in the system, with adjustments for flights to small communities and night flights. Now he's lining up allies. On a recent day, Mr. May invited Capt. Duane Woerth, president of the Air Line Pilots Association, to his 12th floor conference room in Washington. He showed him a seven-minute video outlining the problems with the congested air-traffic-control system. Mr. Woerth's reaction: "The public just wants a solution, and they don't want to pay more money." In the end, Mr. Woerth didn't take much convincing, and the two shook hands. Mr. Bolen, meanwhile, is rallying the business-jet troops. He tried to jolt his members into action with a dark email: "You are under attack," he wrote in a message that the group said went to 10,000 people. He urged them to write to their lawmakers to protest the user-fee idea. In one of a series of recent trips, Mr. Bolen flew toMontgomery, Ala., to rally representatives of small airports against the user-fee initiative. After Mr.Bolen's talk, Wayne Cameron, a onetime flight instructor who now manages the Tuscaloosa Regional Airport, said he planned to write his representatives in Congress. The airport handles only business jets and private planes. "We just feel they're trying to dump $1.5 billion to $2 billion on us," he said of the airlines.On a recent day, Mr. Bolen, 46, lobbied Republican Rep. Robin Hayes of North Carolina, a longtime private pilot whose district is dotted with tiny airports."You know exactly where I stand," Mr. Hayes told Mr.Bolen, adding, "Are you going to instruct us as we go forward?" Mr. Bolen assured him that he would. For lawmakers who may be a harder sell, Mr. Bolenpoints out that the airlines' user-fee proposal would transfer some control of the FAA from Congress to a user-fee board that's almost certain to be dominated by the airlines. The airlines argue that eliminating Congress's role would save money by cutting pork projects and closing FAA facilities that individual Congressmen support but that aren't FAA priorities."They're talking about taking oversight away from Congress," Mr. Bolen told Republican Rep. Todd Tiahrt, whose Wichita, Kan., district includes the three big manufacturers of smaller aircraft. Rep. Tiahrt, shaking his head, responded, "I would oppose anything like that."The politically powerful AOPA, with its hundreds of thousands of small-plane owners who tend to be politically active, is staunchly siding with the business jets. Phil Boyer, the president of the private pilots' group, brags that he has worked with influential members of Congress longer than most Bush administration officials have. Both Mr. May of the airlines' group and Marion Blakey, the head of the FAA, have repeatedly told Mr. Boyer that they don't want to impose user fees on AOPA members. That's partly because these small planes put very little pressure on the government's air-traffic-control service. It's also partly because neither the FAA nor the airlines wants to tangle with the group's feisty membership. AOPA fears the fees will eventually apply to its members -- "the camel's nose under the tent," says Mr. Boyer. Even more so, he worries that under user fees,the system will be controlled by airlines, not byCongress, where AOPA has long wielded its clout.For Mr. May, it can be hard to escape AOPA's shadow. He thought he was in friendly territory in a recent meeting with Republican Rep. John Duncan Jr. of Tennessee. But an award from AOPA sat on the congressman's coffee table. And Mr. Duncan jumped up to show Mr. May a column Mr. Boyer wrote in AOPA's magazine attacking the carriers and accusing them of usurping "the authority of Congress." Mr. May didn't ask for a commitment and Mr. Duncan didn't offer one. In the end, the congressman said, he would have to work with both sides.