CHARLOTTE, N.C. -- More than two years into its latest effort to convince Congress to reform an outdated system for funding the nation's aviation infrastructure, the airline industry has gotten nowhere.
One might think this summer's frequent delays that inconvenienced millions of travelers would have underscored the need for long-term change. After all, Congress has its first chance in 10 years to write a reauthorization bill for the Federal Aviation Administration.
The bill approved by the House last week finds new ways to extract money from airline passengers for improvements including airport bicycle racks. But as far as developing a formula to fairly distribute the cost of a much-needed $15 billion to $20 billion modernization of the air traffic control system, you won't find any change.
Airlines had hoped to shift part of this burden to users of corporate jets, who have long managed to avoid paying an equitable share for air traffic control. Instead, Congress stayed with a tried and true formula -- charge airline passengers a 7.5% ticket tax, and then add fees.
"Change is hard for a lot of people," says John Meenan, executive vice president of the Air Transport Association, an industry group that represents the airlines. "It's a lot easier to tweak a couple of numbers and move on."
It's no wonder that many investors shun the airline sector, a historically profitless venture where even the biggest companies, like
, have almost no say over their operating environment.
Instead, the FAA manages the air space with an outdated air traffic control system, causing delays that cost airlines about $6 billion annually. Airlines don't control the airspace, they barely control ticket pricing and they have no influence on the cost of jet fuel, their biggest expense. Only through recent bankruptcies did they regain a tenuous handle on labor costs.
Viewed in that context, the corporate jet issue is particularly galling. Not only does it involve fiscal policy that unfairly shifts costs, it penalizes a financially challenged industry.
Commercial aviation accounts for 53% of the travel through New York's congested airspace, said Joe Kolshak, executive vice president of
, at a Senate aviation subcommittee hearing on congestion. The rest is by business jets and general aviation.
"Unfortunately, the current FAA funding system places the bulk of the costs on commercial airline passengers, which is unfair," Kolshak said.
Nationally, commercial aviation uses about two-thirds of the system's capacity, but pays 92% of the cost, ATA says. Corporate aviation uses about 17% of the system and pays 7%. Military use accounts for the rest. Subsidizing corporate jets costs commercial airlines about $1 billion a year.
While it fails to address the inequality, the House bill does find new ways to raise ticket prices. In particular, it lets airports increase fees, known as passenger facilities charges, by up to $2.2 billion annually. PFCs, as they're known, already provide airports with $13 billion annually. The bill would raise the maximum PFC from $4.50 to $7, adding as much as $28 to a round-trip ticket's cost. It stipulates that bicycle rack construction is eligible for funding.
Meanwhile, the airline industry still has a chance to get something better. The White House has indicated the House bill would likely be vetoed. Both Democratic and Republican leaders of the Senate aviation subcommittee oppose it.
At Thursday's hearing, ranking minority member Sen. Trent Lott (R., Miss.), said modernization is needed but, "unfortunately the wheels have come off. Business and corporate and small aviation have got to do their part. Everybody says we need modernization. But everybody says 'We ain't going to pay for it.'"