Last updated: 09:00 AM ET, Wed June 03 2015

US Travel Association Suggests Major Aviation Overhaul

Airlines & Airports | Rich Thomaselli | June 03, 2015

US Travel Association Suggests Major Aviation Overhaul

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The non-profit U.S. Travel Association presented a comprehensive plan to Congress for funding the Federal Aviation Administration reauthorization bill, a policy platform that includes tax cuts that could lower the average airfare and fund much-needed infrastructure improvements.

One problem – the airlines probably won’t like at least one component of the plan.

The U.S. Travel Association’s plan is centered on the elimination of five passenger aviation taxes, including the Domestic Passenger Ticket Tax. That one in particular allows the airlines to take advantage of a 2009 Internal Revenue Service tax loophole that states ancillary fees such as seat changes or baggage fees are not subject to taxation.

Eliminating the Domestic Passenger Ticket Tax, the USTA says, would remove the airlines' incentive to shelter massive amounts of revenue in fees.

That shuffling sound you just heard was the airlines’ lobbyists, already preparing to fight any such inclusion on the FAA reauthorization bill.

The tax cut presented by the U.S. Travel Association was designed to offset the proposed adjustment to the Passenger Facility Charge (PFC), a local user fee that finances airport projects.

The net effect on the average federal ticket taxes and fees would be a reduction of between $9.50 and $25.50, based on a base average round-trip airfare of $340, according to U.S. Travel's calculations.

Specifically, the plan calls for the elimination of the Domestic Passenger Ticket Tax; the tax on international arrivals and departures; the Domestic Commercial Fuel Tax; the tax on mileage rewards; and the tax on flights between the continental U.S. and Alaska or Hawaii.

The USTA plan would also provide local airports with the option to adjust their PFC from $4.50 to $8.50, permanently adjusting the cap for inflation; alter funding for air traffic control to a user fee-based model; and require that large airports not accept federal Airport Improvement Program (AIP) entitlements

According to U.S. Travel Association research, the funding change for air traffic control and the AIP give-back for larger airports adequately compensate for any revenue reduction through the tax cut and protects funding for other critical FAA programs.

"FAA reauthorization presents an amazing opportunity to address a host of issues in our air travel system, and we should not squander it by only addressing a couple of the needs of our air travel system," U.S. Travel Association President and CEO Roger Dow said in a statement. "The FAA bill should represent a comprehensive approach, and the policies it advances should be pro-competition, pro-growth and pro-traveler—I don't think there's a single individual or group out there who would say they disagree with that.”

Dow admitted the issue of infrastructure financing is particularly contentious, but said, “We continue to believe that the PFC, as a pure user fee, is the ideal means to address our severe infrastructure challenges. But finding the math to be able to include an airfare tax cut is a critical new piece, and has been expressly designed to address the concerns of some who have attacked the PFC approach. We are supremely confident that on this platform, we will be able to build strong support for modernizing our infrastructure financing model, fostering a competitive aviation marketplace that benefits travelers, and finally giving this country the air transportation system that it needs and deserves."

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