Impact of another Washington-inflicted wound on American air carriers

The US government could lose as much as US$1.2 billion in uncollected tax revenues after the US Congress’ stalemate over FAA funding in what Barack Obama called “another Washington-inflicted wound on America.”  But could air travelers also face safety and other issues?

The US President was referring to the latest failure of the US government following the debt ceiling debacle. Here are some questions and answers about the recent situation, where the US government’s failure to keep a Federal Aviation Authority (FAA) tax in place has cascaded into possible chaos.

Q: What is this fight about?

A: The stated issue is lawmakers’ partisan bickering over a paltry $16 million in subsidies for rural airports.

Q: There must be more to it, no?

A: When Congressional issues came up on funding the FAA, Winter Park Republican John Mica (chairman of the House Transportation Committee) inserted a small provision that cut federal subsidies for a small number of rural airports. Unfortunately, that included one in Nevada, home of House Majority Leader Harry Reid. Uh,oh. There went the deal.

Q: Is the issue more symbolic of government?

A: Yes, Mica says, referring to Republican efforts to reduce the national debt. "If you can't agree to these minor cuts to move forward, what can you accept?” he asks.

Q: What’s the biggest impact?

A: Money. With the government refusing to extend operations, the FAA can’t collect the $7.50 cost of each ticket purchased by passengers. That adds ups quickly to billions of dollars but now, under the current situation, many airlines simply pocket the difference.
 

Q: And other issues?

A: Mica said continuous extensions of the FAA charter each year have cost the agency tens of millions of dollars or more because the lack of a long-term plan breeds inefficiencies.

Q: Is this really a new situation?

A: Not really. Since 2007, Congress has been unable to agree on an FAA charter and instead has passed a series of extensions to keep the FAA running while lawmakers debate an overall funding plan for the agency.

Q: What about the safety issue?

A: Government officials have reassured the public that safety is not impacted. They say air traffic controllers are still on the job, for example. They work under a different budget. But about 250 ongoing projects, including some involving future safety, have been put on hold.

Q: Is anyone benefitting from this?

A:  Sure, the airlines. Many have simply pocketed the $7.50 for each ticket that normally would go to the government.

Q: Any airlines that have passed on the savings?

A: Sure. Alaska is among them. "We're holding fast to our policy of passing on the savings to our customers," said Alaska spokeswoman Marianne Lindsey. But some airlines are also using the tax in marketing. Virgin, which raised fares on many routes after dropping the taxes, is discounting fares on flights from Seattle and Mexico where it competes with Alaska.

Q: What do the airlines say about lawmakers’ efforts to urge them to skip the tax?

A: "We cannot comment on possible future pricing actions. Sorry," said Mike Trevino, a spokesman for United Airlines.

Q: When this happened before, the IRS allowed passengers to claim deductions. Will this happen again?

A: Passengers who bought tickets prior to the shutdown and then flew when the FAA didn't have the authority to collect taxes can appeal to their airlines for a refund or submit a claim to the Internal Revenue Service. Details are still murky.

Q: Where does that $1.2 billion figure come in?

A: Since the partial shutdown, the FAA has been unable to collect ticket taxes from the airlines, including a base 7.5 percent levy that has already led to a lost $200 million by the government. The government will lose around $1.2 billion in ticket taxes if the shutdown continues until the US Senate returns in September.

Q: Other personal impacts?

A: There are 4,000 furloughed airline workers and more than 70,000 construction jobs around the country on hold until the airport tax issue is resolved.
 

Q: When might things get back to normal?

A: The situation will continue at least until labor day when Congress returns from a month-long break.

Q: What do people think about the entire subject?
 

A: Public ratings for both the US President and the Congress have plummeted. People may be inclined to agree with US Transportation Secretary Ray LaHood who said: “In congress, we’ve heard many grandiose speeches about putting people to work. This isn’t the way to do it.”

By David Wilkening