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National Air Transportation Association
4226 King Street
Alexandria, Virginia 22302
National Civil Aviation Review Commission
Washington, D. C.
May 28, 1997
The National Air Transportation Association (NATA) represents the interest of aviation businesses nationwide. The Associations nearly 2,000 member companies provide important aviation services to the airlines, military and business/corporate/ individual aircraft owners and operators. These include fueling, maintenance, aircraft storage, part and equipment sales, and flight instruction. In addition, many NATA members provide on-demand air charter and scheduled services under FAR Part 135.
Throughout the past 57 years, NATA has represented an industry that has grown to become a vital part of the American air transportation system. These small businesses employ over 35,000 individuals providing quality jobs and a safe workplace.
The following summary of the Associations position was developed in conjunction with the members of NATA. It reflects the views of the Nations aviation businesses on the FAA, its funding sources, and associated safety and capital improvement programs.
At the forefront of our concerns is the need for real FAA reform. As operators of small businesses, NATA members strongly believe that the FAA can do its job more efficiently and that no additional tax revenues from the industry should be considered without a true commitment from the Agency to evaluate its costs and methods of operation, including a plan to modernize the air traffic control system.
The importance of technology for the overall advancement of the FAA must be addressed. Over the past decade, telecommunications and computer capabilities have become vital tools in increasing productivity and efficiency at aviation businesses. As the Commission members have already heard, the FAA relies heavily on these technologies in ensuring safety and operating our Nations air transportation system yet continues to use grossly outdated and inefficient equipment and labor-dependent systems in its operations.
The Coopers and Lybrand study correctly identifies the financial difficulty the FAA will encounter if current spending allocations remain. The largest growth area in the next five years is controller salaries, accounting for approximately 60-70% of the FAA budget increases. As the Coopers study suggests, the FAA must implement cost-effective technologies throughout the Administration in order to reduce overall labor costs and increase efficiency.
Aviation businesses are diligent taxpayers that help provide the funds to fuel the FAAs massive budget. We suggest to this Commission that they challenge the FAA to script its plan for these improvements. A formula for the future must be carved out to insure that the Agency does react and work with all aviation industry participants to better our air transportation system. Without this formula, aviation businesses rightly assume the status quo, technological advancements, and operational reforms will go by the wayside, and spending will continue to grow. In the view of aviation businesses, the FAA should, like a company, focus on cutting costs and providing high quality services rather than raise prices to the users.
Excise Taxes Work
Currently, the Federal Aviation Excise taxes assessed on aviation users through fuel and transportation taxes are the most efficient and effective method for collecting revenues. Aviation businesses are opposed to the idea of allowing the FAA to impose user fees because it is harmful to safety, inefficient, and hampers the ability of Congress to maintain its necessary oversight of the Agency.
The fuel tax is an accurate scientific mechanism for charging the user to the system. The tax is an effective tool for the practical, commonsense weight and distance formula that is used to fairly assess users. The tax offers a proven, efficient means of collection, because the collection is only at one source, the fuel supplier.
The fuel tax could be expanded to better approximate use to those operating under FAR Part 121. The fuel tax, coupled with a much reduced ticket tax and a reduced cargo-waybill tax, will increase revenues to the aviation trust fund and eliminate the subsidy for international travel while more accurately assessing costs to users. The fuel tax is also a positive incentive for the use of more efficient and environmentally friendly aircraft. Promoting the preservation of precious fossil fuels is a positive step forward.
Simplify Part 135 Taxes and Increase Safety
The current law contains a dangerous incentive for aircraft operators to circumvent safe operation under Part 135 to simply avoid the significantly higher taxes and mountains of paperwork. Changing the law promotes safety, because on-demand air charter operators employ the most qualified and experienced pilots and operate the safest, technologically-advanced aircraft. Current tax codes confuse the standard between legal on-demand charters and the operations of non-commercial operators that often use identical aircraft yet are not subject to the same rigorous training, high maintenance standards, aircraft equipment, and FAA inspector oversight to ensure safety.
The transportation tax as assessed to the large airline operators should no longer apply to the operators of Part 135 on-demand air charter. The elimination of this tax simplifies the collection of taxes from corporate and aviation business operations, more fairly distributes the tax burden, and will save the U.S. government in unnecessary oversight and audits along with eliminating confusion associated with the application of the transportation taxes to on-demand (non-scheduled) operations conducted under FAR Part 135. To preserve tax revenue collections and make up for any revenue shortfall, the tax on jet fuel will need to be assessed at 24-cents per gallon.
Today the Internal Revenue Service (IRS) has agents combing through the records of nearly 8,000 air charter operators and corporate flight departments. Moving on-demand operators away from this obtrusive, labor-intensive ticket tax to a simple fuel tax saves unnecessary government paperwork and oversight. Again, the fuel tax encourages operators to utilize more fuel-efficient aircraft, helping to reduce the amount of fuel burned, reducing air emissions, and protecting the overall health of the environment.
Finally, moving Part 135 operators from the ticket tax to the fuel tax will maintain the current revenue stream necessary to fund the aviation trust fund. General aviation turbine aircraft, including those currently operating under Part 135, would pay its fair share of the FAAs cost through a 24-cent fuel tax, and piston-engine aircraft would remain at the current 15-cent rate.
Public Benefits from the Air Transportation System
NATA believes that there is a justifiable amount of general fund support for the FAA recognizing contributions that a safe and efficient aviation system makes to the economy and to the Nation as a whole. Aviation provides millions of jobs and facilitates economic growth through the safe and efficient transportation of people and goods throughout the United States and the world. Aviation is a key element in travel and tourism, which accounts for more than $350 billion in economic activity annually and provides a positive and significant contribution to the countrys balance of trade.
Civil aviation contributes $30 billion annually directly and indirectly, providing a return on its $2 billion annual investment. As the Commissioners have heard, economists agree that transportation infrastructure funded solely by direct users will be under-capitalized and under-utilized. There is a compelling overall benefit as the military and general public use public aircraft that operate in the air transportation system. We believe it is in the best interest of all Americans to help fund and maintain the worlds safest system.
In addition, the current 4.3-cents per gallon deficit reduction tax paid by all aviation users should be deposited into the Aviation Trust Fund. According to a report published by the Joint Committee on Taxation in November 1996, this tax generates approximately $600 million per year for the general fund. The net effect would be an increase in the amount of money flowing into the Trust Fund, without raising taxes to users or negative implications in the budget. It would be a show of good faith that Congress understands the importance that taxes paid by users should support the aviation infrastructure.
The Effects of User Fees
The introduction of a user fee system to fund the FAA will have devastating effects on aviation businesses. These companies, mostly small businesses, operate in an extremely fragile financial environment. According to surveys done by the Association, the slightest shifts and decreases in the use of business aircraft are felt by the aviation service industry. A 20% reduction in business aircraft use would create a 20% reduction in services, fueling, repairs, and so forth. The average rate of return for aviation businesses is only 2.5%. Therefore, increases in costs to users through fees that discourage flying would simply force many aviation businesses to close operations, unable to meet rising costs.
The precedent has been set that user fees destroy general aviation. The Eurocontrol system in Europe imposes a comprehensive system of user fees on everything from landing, approach, lighting, noise, en route air traffic control use, fuel, parts, weather briefings, and certification. American aviation businesses, especially flight schools that often train prospective European pilots, have heard the horror stories: the huge bureaucracy that has grown around the user fee system, the pilots avoiding the use of safety measures, tracks of prohibited airspace, lack of sufficient, safe airport infrastructure, and the lack of choices in air travel from on-demand air charter to low-fare airlines.
A user fees system comparable to those constructed in Europe and Canada would destroy aviation businesses and seriously compromise safe operations in American skies. Fees for common services such as landings, approaches, weather reports, flight plans, and certification, would provide a dangerous disincentive not to utilize those measures to ensure safe operations.
NATA recognizes the enormous financial burden user fees will have not only on aviation businesses but also on the Federal government. Consider, simply the administration costs of a proposed user fee, there is the potential for new bureaucracies to be created at the FAA or IRS. This includes mechanisms for collection and enforcement. The cost of administering such a new, bloated fee structure would be dramatically high.
If there is any doubt, the FAAs own user fee precedent has been a complete failure. Congress has questioned its application to general aviation. The International Overflight Fees set forth by the Agency on May 19 have created a mountain of litigation paid for by American taxpayers. Canadian and other international organizations initial complaints concerning the fees stem from the FAAs lack of a methodology to determine the fees, the exorbitant costs of the fees, and the expedited and discriminatory process of which the fees were established. In the minds of aviation businesses that have been all but left out of this Commission, this sounds all too familiar.
The excise taxes should be extended for a minimum of five years to assure a consistent funding source for the FAA and its capital improvement programs. This is a commitment to funding that will prevent the artificial crisis that occurred when the taxes lapsed this year.
Save Americas Small Airports
NATA strongly recommends that the Commission recognize the importance of continued Federal funding for airport development. The support of general aviation and smaller air carrier airports to meet the needs for safety and capacity improvements should be the backbone on which to develop our Nations air transportation system. Smaller airports provide the necessary transportation link for small communities to larger markets. The Commission must keep in mind that access to the national system is the centerpiece for local economic development and a key factor in business location. For the sake of Americas economic health and growth, these projects should not go unfunded.
The members of this Commission must recognize that the Washington insider-type briefings and discussions are only part of the story, the aviation industry exists beyond the beltway. Their concerns must be heard, because they are directly affected by your actions. Aviation businesses are frustrated by the Administrations efforts to implement a user fee-funded FAA. In their view, it is ridiculous that the Federal government is seeking additional money from the users of the aviation system based on some form of logic that is beyond the comprehension of managers from the private industry. Perhaps it sounds simplistic, but if the current system of Aviation Excise Taxes works, as it has for over 25 years, why change it?