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Wed, Dec 01, 2004

Aero-Views: Congress, Administration Fiddle While the Airlines Burn

By Captain John S. Blonsick

Ironic that in the summer of 2001, the Bush Administration declared that the airlines were too vital to the national economy to allow even one major airline to engage in a strike under the Railway Labor Act. But now two major carriers are in bankruptcy facing possible Chapter 7 liquidation, two others are hovering on the brink of Chapter 11 and there is almost no governmental action to troubleshoot this vital national economic engine. Ticket prices are being set by start-up carriers with little or no investment or overhead in the aviation infrastructure while the majors with 70 years of investment and overhead of mature companies are being left to the cut themselves to the bone. Meanwhile, Federal taxes and skyrocketing fuel prices are destroying any economic lift generated by passenger-filled airplanes.  

"What about the tax policy imposed on airlines? We pay more taxes than the so called "sin" industries; liquor and tobacco. In the 3rd quarter we paid between $800 million and $900 million in taxes and lost $646 million. A 4.6% tax is imposed on the fuel we buy. This tax originated to pay for building the national highway system. Railways and steamship companies are exempt from this tax, but not airlines." - Gerald Grinstein, CEO Delta Air Lines.

"Were it not for Exxon getting most of our money this year, we would have been able to make some progress," – American Airlines chief executive Gerard Arpey.

As ticket prices have dropped, taxes have increased over 100% from 1997 through 2004 to almost half the cost of an airline ticket. That's understandable in a sense, as revenues had been increasing during the first half of that time period. But with billions upon billions of dollars in losses after 9/11 has Congress cut taxes on airline tickets? No. As the airlines hemorrhage billions of dollars, the Republican Congress and White House continue to suck the marrow out of their revenue stream with taxes and fees. Burdens on the financial weight and balance sheet that airlines cannot pass along to their customers at a profit because of the limited pricing control in the industry. That 45-percent drag results in an industrial stall. Combined with $50-a-barrel fuel prices there is no extra thrust left to fly out of it and avoid ground impact.

Has Congress or the President declared a tax holiday for the airlines? No. Have they imposed a $20/ticket fuel surcharge since the airline cannot do it themselves? $10? $5? No. Or a break on the 4.6% fuel tax? No. Has the ATSB been made fully available to failing airlines? No. The first victims on the morning of Sept. 11, 2001 were the pilots and flight attendants - now the rest of flight crews are being victimized by the US government in support of cheap airfares, unsustainable fuel costs and continued taxation to fund pork barrel projects and tax cuts. I am certainly willing to contribute to my company's well-being but not to subsidize artificially cheap airfares, pork-barrel politics and a trillion dollar tax break deficit.

Congress just passed a $388 billion government-wide spending bill laden with what Sen. John McCain touted as "one big fat turkey." Local pork-barrel projects abound:

  • $3.5 million for bus acquisition in Atlanta, GA
  • $2 million for kitchen relocation in Fairbanks North Star Borough in Fairbanks, AK
  • $2 million to buy a former presidential yacht for a Navy museum
  • $1.5 million for a demonstration project to transport naturally chilled water from Lake Ontario to Lake Onondaga
  • $500,000 for the Kincaid Park Soccer and Nordic Ski Center in Anchorage, AK
  • $250,000 for the Country Music Hall of Fame in Nashville, TN
  • $200,000 for Fenton Street Village pedestrian linkages in Montgomery Co., MD
  • $100,000 for a municipal swimming pool in Ottawa, KS
  • $100,000 for the Punxsutawney Weather Museum in Pennsylvania
  • $80,000 for the San Diego Gay, Lesbian, Bisexual, and Transgender Community Center
  • $75,000 for the Paper Industry International Hall of Fame in Appleton, WI
  • $35,000 for the Alabama Sports Hall of Fame
  • $25,000 for fitness equipment for the YMCA in Bradford County, PA

Whatever happened to local funding for local initiatives? Citizens voting for bond initiatives and civic funding efforts for such localized specific projects? Quoted in the Arizona Republic, "I feel like Bill Murray in Groundhog Day," [Rep. Jeff Flake, R-AZ] said of his opposition [to the bill]. "Every year, it's the same thing -- Congress passing spending bills loaded with pork projects. In fact, this year, and I'm not joking here, Congress spent $100,000 for the Punxsutawney Weather Museum in Pennsylvania."

Is that what airline employees’ pay cuts are indirectly subsidizing through the 45% tax on airline tickets? The Punxsutawney Weather Museum in Pennsylvania or one of the other pork barrel projects stuffed into the budgetary turkey?

As the $800 billion deficit mounts in the face of Republican bread and butter issues like tax cuts, the Republican-controlled House passed the budgetary measure on a 344-51 vote; the Republican-controlled Senate 65 to 30. "The cost of making the cuts permanent is more than $1 trillion, a daunting figure in an age of record budget deficits. But Bush is likely to get much of what he wants with larger Republican majorities in both the House and the Senate," according to an AP wire service story. If Congressional Republicans can find the time to fund their own local pork-barrel projects, why can’t they find time to prevent the collapse of the nation’s airline industry?

Does the blame lie solely with Republicans? No. But they are the majority party in Congress and the White House so they also must shoulder the majority of the responsibility for governmental inaction. As airline employees watch their pay cuts spent on the Punxsutawney Weather Museum in Pennsylvania and numerous other pork barrel projects, Congress and the White House allow the 45% airline ticket tax burden and $50-a-barrel fuel prices to destroy the airline industry without lifting a finger to help. If indeed Bush is likely to get much of what he wants with larger majorities in both the House and Senate, then why couldn't he and they alleviate the red ink within the airline industry with some simple tax and fuel surcharge relief to the airlines? Maybe because it would make that trillion dollar national debt even larger? Better to hammer down union airline employees contracts instead.

Captain John S. Blonsick, former naval aviator, currently an international-category pilot with a major airline, also served three years as an elected representative with the Air Line Pilots' Association.

FMI: www.alpa.org

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