Tags: US | airlines | security | fees | deficit

Airlines Fight Prospect of Higher Security Fees

Sunday, 24 Jul 2011 02:26 PM

 

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WASHINGTON — U.S. airlines are fighting the prospect of sharply higher passenger security fees that could be part of any deficit-reduction plan.

The approach is among a handful involving aviation that have swirled around the ever-changing complexion of efforts of Congress and the White House to avert a debt default.

While those proposals would cover only a fraction of any deficit remedy, they represent flashpoints in relations between industry and government over aviation policy.

Business aircraft manufacturers, the powerful private pilot and aircraft owners association and, now, the biggest commercial airlines have in recent days aggressively lobbied issues around the debt talks that would affect their members.

According to sources with knowledge of the talks and documents circulating on Capitol Hill, a proposal would double the security fee paid by airline passengers to raise at least $15 billion over 10 years. The current maximum fee imposed on commercial flights is $10 per round-trip ticket.

Nicholas Calio, who as president of the Air Transport Association is the top lobbyist for commercial carriers, said any increase in security fees that would bump up ticket prices would be unacceptable.

"We should advance a tax policy that encourages air service to grow, not contract. Airlines are critical to the nation's economic health," he said.

U.S. homeland security officials said they would not speculate on the composition of debt negotiations.

Other proposals that have been discussed would impose a $25 fee for each commercial and private aircraft departure.

Negotiators have also floated the possibility of matching the depreciation schedule of corporate jets to the longer schedule that commercial airlines use. This may become one avenue for closing tax loopholes where Democrats and Republicans could find common ground.

Previous proposals by President Barack Obama and former President George W. Bush to increase air security fees paid by passengers were not embraced by lawmakers, who would have to approve such a change.

Those fees, which have never gone up, were imposed at the creation of government-run airport passenger and bag screening following the Sept. 11, 2001 hijack attacks.

They currently cover less than 40 percent, or roughly $1.8 billion, of Homeland Security Department costs for aviation security operations, including screening passengers and bags for weapons and bombs at U.S. airports. The remaining amount comes from a general congressional appropriation.

Sources assume the amount of security spending would not change under a fee-increase scheme. Any additional fees paid by passengers would supplant the percentage of general tax receipts now devoted annually to aviation security. That appropriation would then go toward deficit reduction.

Industry believes airport security charges are part of what it calls an excessive menu of taxes and fees that eat into profits. Those total about 20 percent of a typical $300 round-trip ticket.

Robert Mann of R.W. Mann & Co, a former airline executive and now a consultant, said a security-fee increase could sap travel demand and impact all carriers. The change would be felt most by low-fare airlines which mainly serve leisure customers especially sensitive to increases in the cost of travel.

Airlines argue that aviation security costs are a national security interest that should be borne by government. They are also urging lawmakers in their lobbying to consider the impact higher fees could have on the industry's fragile recovery.

United Continental Holdings Inc and US Airways Group Inc posted weaker profits last week, hit by skyrocketing fuel costs amid a murky outlook for demand. The parent of American Airlines, AMR Corp, reported a larger-than-expected loss.

The ARCA Airline Index traded at $38.43 on Friday, near its year low last August of $36.84.

© 2014 Thomson/Reuters. All rights reserved.

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