Higher Fees To Go Into Effect By 2010

The Air Transport Association of America (ATA), trade organization for most US airlines, expressed its stiff opposition Monday to the United Kingdom government's decision to revise and greatly increase the amounts collected under its air passenger duty.

The airline lobbying group termed the move an "extraterritorial" decision by the UK government, adding it was "counterproductive to the airlines' environmental progress and is in conflict with established law."

Under the new law, the per-passenger duty in economy class will increase from around $60 to $90 by 2010, according to ATA. The UK government said it held back on the fees due to the global economic crisis, but ATA said the fees are still "substantial."

"The decision to revise and further increase the UK duty is a revenue raiser for the government under the guise of environmental protection," said ATA President and CEO James C. May. "The funds collected do not go to environmental projects, and yet the taxes take money from airlines that they could otherwise invest in more fuel-efficient and greenhouse gas (GHG)-efficient technologies. This is an illegal action, which we expect to be settled in the courts."

ATA asserts the revised duty is in violation of various provisions under the Convention on International Civil Aviation (commonly known as the Chicago Convention) and the relevant bilateral air services agreements that regulate extraterritorial actions and taxes and charges.

Among other things, the duty asserts regulatory jurisdiction over flights far outside UK airspace, by taxing flights according to various distance bands arbitrarily set by the UK government. And a lesser tax is imposed on those flights within the U.K. and the European Union, even though a flight from the United States is not in UK airspace for any longer (and often less) than such flights.

ATA also believes the tax increase is bad policy because it siphons funds away from aviation -- "the very funds airlines have invested into technology and fuel efficient operations."

"No other industry is more motivated by market forces to improve fuel and GHG efficiency than the airlines," May said. "Our track record proves that we do not need any further environmental incentives. Even with the recent drop in oil prices, fuel continues to be our highest cost center. With jet fuel averaging between 30 and 50 percent of total airline operating expenses and accounting for well over a third of airline ticket prices, there is no need for any further price signal to reduce fuel burn and resulting emissions."

FMI: www.airlines.org