Posts Tagged ‘tax’

A federal task force of aviation stakeholders is meeting to discuss ways to reduce delays in the New York area, per Transportation Secretary Mary Peters’s orders.

The talks, led by the Federal Aviation Administration, have been closed to the public, but participants report that one of the primary topics will be “congestion pricing,” a scheme to reduce delays by making airlines think twice about scheduling flights during the busiest times of the day.

Generally, the plan would implement higher fees for planes operating at the airports during the aviation rush hours, which, in New York, coincide roughly with morning and evening commutes.

Good idea.

FAA and Airlines Brainstorm on NYC Airport Gridlock [AP via Aviation.com]


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The Dutch government has decided to impose an additional tax on all passengers departing or arriving in the Netherlands (primarily affecting Amsterdam’s Schiphol Airport and the airline that hubs there, KLM). Like Britain’s Air Passenger Duty (APD), the Dutch tax differentiates between European flights (€11.45 per segment) and longer-haul flights (€45). The levy is part of what the Dutch finance ministry calls “the greening of taxation,” according to ATW Daily News. But the tax might not actually quell flying from Schiphol (ostensibly the reason for an environmentally friendly tax)–it may just push a lot of it to nearby airports in Belgium and Germany.

So how much will this set back travelers to the Netherlands? I did some research to compare flights to Amsterdam and to Brussels from the same airports on the same airlines on the same days, and here are my results. All total fares below are inclusive of taxes and fees.

  • Vienna-Brussels on Austrian Airlines
    Total: €271.96
    Tax: €90.96

    Tax breakdown:

    • Security and fuel surcharge: €44.00
    • Passenger Service Charge: €15.29
    • Passenger Security Charge: €8.00
    • Passenger Service and Security Charge: €23.67
  • Vienna-Amsterdam on Austrian Airlines
    Total: €335.29
    Tax: €95.29
    Tax breakdown:

    • Security and fuel surcharge: € 44.00
    • Passenger Service Charge: € 15.29
    • Passenger Security Charge: € 8.00
    • Passenger Service Charge: € 13.22
    • Noise Isolation Charge: € 2.00
    • Security Service Charge: € 12.78

    Total tax after “greening”: €117.79

In this case, one can save almost €30 in tax by flying to Brussels.

  • Charleroi-Madrid on Ryanair
    Tax: €16.42
    Tax breakdown:

    • Airport Taxes: €5.78
    • PSC–Non-Refundable: €4.85
    • Insurance & Wheelchair Levy: €5.79 (a Ryanair specialty)
  • Eindhoven-Madrid on Ryanair
    Tax: €27.20
    Tax breakdown:

    • Airport Taxes: €12.25
    • Government tax: €9.16
    • Insurance & Wheelchair Levy: €5.79

    Total tax after “greening”: €49.70

Again in this case, one can save more than €30 by flying from Belgium rather than Holland.

  • Brussels-JFK on Delta
    Total: €411.34
    Tax: €41.00

    No tax breakdown offered
  • Amsterdam-JFK on Delta
    Total: €478.34
    Tax: €52.61
    No tax breakdown offered
    Total tax after “greening”: €142.61

Remarkably, the Dutch tax puts a €100 transatlantic premium on this flight. If I lived in the southern part of Holland, Brussels would be sounding pretty good right now.

Britain’s APD increase has driven air traffic to continental European airports; the Netherlands now seems to want to replicate that feat. For now, KLM’s large hub operation will remain intact. Unlike APD, the proposed Dutch tax exempts passengers merely changing planes at Schiphol. But how green is that? Do planes carrying mostly transfer passengers somehow emit less carbon dioxide or nitrous oxide? Such an exemption lends credence to the Association of European Airlines’s claim that this is a revenue measure masquerading as a pro-environment measure.

Regardless of motivation, my brief analysis shows that passengers will experience dramatic increased costs. Some will simply stop flying; others will seek cheap flights from other nearby hubs. Brussels is only 130 miles from Amsterdam, a two-hour drive; Dusseldorf is only 145 miles away; and low-fare hub Charleroi is 170 miles away. There are many other airports intruding in the Dutch “catchment area” for airline passengers, and “the greening of taxation” will drive many passengers away.

The tax will be debated next month in the Dutch parliament. One can be sure that these calculations will figure into the debate.

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The House Transportation Committee’s Subcommittee on Aviation held a major hearing on airline delays and consumer issues, and your humble blogger was there to pass on the highlights. The hearing came at the heels of “the worst summer for airline delays” since the Bureau of Transportation Statistics began keeping records thirteen years ago. Only 72.2 percent of flights were on time. Why? Weather, crowded skies, airline issues, scheduling problems, congestion, everything else that regular readers of this blog will be familiar with. The first panel of the hearing featured government officials, including the acting FAA chief, and the second featured aviation stakeholders.

Readers of this blog will be familiar with the background of the current aviation “crisis.” For those who need more, a background paper is here. The hearing was held against the backdrop of the House’s FAA reauthorization bill, which rejected the airlines’ preferred user fees approach to funding air traffic control, instead pumping more money into the agency and continuing to rely on fuel taxes.

I’m not going to summarize what each person said or go over each exchange. Instead, here’s the highlights reel: (more…)

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The FAA Reauthorization Act of 2007 (HR 2881) was adopted by the House of Representatives today in a 267-151 vote. The Senate bill will be voted on soon–and will contain significant differences than the House bill, requiring a battle royal in conference.

I have paid very little attention to news coverage of FAA funding politics, mostly because the two parties annoy me. (Excursions with Edna the Class Warrior, I’m looking at you.) The media have tended to write more about the parties interested in the legislation–airlines, the ATA, general aviation pilots, AOPA–rather than the bills themselves. The debate is over who should pay how much and in what ways for air traffic control services. The FAA is currently funded by general federal funds (about 20 percent) and the Airport and Airway Trust Fund (about 80 percent), which collects revenue from a variety of taxes, fees, and charges levied on airlines and passengers. But now that the House bill has passed, I’ll hit the highlights here, after the jump. (more…)

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Climate change protesters are now putting their retro-radical tactics to use at airports. Protesters clashed with police over the weekend near London’s Heathrow airport, where a planned (and needed) third runway has raised the ire of environmental activists. Aviation, they say, contributes 2 percent of greenhouse gas emissions worldwide and therefore needs to be limited, or stopped altogether–and certainly not encouraged with airport expansion. Britain has an aggressive anti-aviation coalition, from traditional NIMBY protesters and think tanks to “plane stupid” advocates and no-fly pledgers. While the NIMBY folks have the best cases–we bought our homes here long ago; BAA said it wouldn’t expand Heathrow anymore–many members of the coalition want to end air travel altogether, grounding the British and world economies too.

The latter groups and people don’t just want airports in their backyard. They’re NIMPies–Not In My Planet. They don’t want people flying at all. They detest low-fare carriers like easyJet and Ryanair–one of the only airlines scrappy enough to fight back–for making air travel cheap. Aviation is not just an industry that pollutes; no, to fly is an act of “ecocide,” and travelers and airlines are climate criminals. The NIMPies surely realize the effects of killing aviation. They also know that no matter how drastic Britain’s actions, airplane emissions in China, India, Southeast Asia, the Middle East, and other growing economies would offset any reductions. The NIMPies would sacrifice modern standards of living for . . . nothing.

So a complete ban on flying or new airport construction won’t work. What else is on the table?

  • David Cameron’s silly idea of an annual flying allowance above which travel would be taxed, based on misapprehension of how Britain’s working class travels today.
  • A “FLYING KILLS” warning on airline ads. (In Britain, cigarette packs are labeled with a giant message like “SMOKING KILLS.”) This would be about as effective as the surgeon general’s warning.
  • The preferred plan seems to be including aviation in Europe’s emissions trading scheme. But cap-and-trade has been rightly criticized elsewhere as promoting rent-seeking and stifling competition. Imagine: currently operating airlines get allowances based on their current flying. Any new entrants would have to buy allowances, often at prohibitive cost. Airlines can sit on their allowances free of competition. This sort of system governs airport slots at places like Heathrow, with similar effects on competition. If any airline wants to enter Heathrow, it has to acquire slots from an incumbent. Such policies keep inefficient and costly airlines in the business longer than otherwise, inhibiting competition that drives down fares and improves service expectations. But then the climate change activists would prefer high fares and bad service, if only to get people off planes.

If the British government deems it necessary to curtail carbon emissions, the best way is through a tax, such as its Air Passenger Duty. Its climate change related increase has already had an effect of cutting travel. Whether an increase is a good policy or not is a separate question, but increased taxes are the fairest way to cut down on air travel.

The other development is cleaner, greener, better airplanes. The Boeing 787 is a good example. But these airplanes are very expensive to develop and require healthy airlines to buy them. Without airlines lined up with cash, no one will engage in the costly R&D that will yield real improvement in aerospace technology. To get better airplanes tomorrow, we need profitable and growing airlines today.

You tell me who’s “plane stupid” now.

Heathrow protest reaches its climax as peaceful protest turns to clashes with riot police [Independent]
Air travel latest target in climate change fight [Christian Science Monitor]

See also: Hapless over Heathrow

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The City–shorthand for Britain’s financial sector–is trying to flex its muscles with the British government over Heathrow Airport. Considered (inexplicably, to me) one of the world’s most desirable airports to fly in and out of due to its relative proximity to central London, Heathrow is losing its competitive edge to airports like Amsterdam’s, Frankfurt’s, and even Paris’s Charles de Gaulle. Business leaders are concerned that elite travelers’ distaste for Heathrow will affect financial activity in Britain. What’s wrong with Heathrow?

  • Many terminals are falling into disrepair. They are poorly laid out and connections are difficult. Heathrow is in the early stages of a decades-long renovation process.
  • Long lines, for tickets, security, customs, and immigration.
  • Baggage-handling is troubled.

I’ve only flown through Heathrow once. It was neither particularly pleasant or unpleasant, but it was more crowded and congested than Gatwick, which is only a bit further from central London by fast train. I don’t see why Gatwick isn’t more popular with travelers and airlines than it is. But Heathrow’s not all that bad.

Perhaps the real problems with Heathrow, then, lie not with its management BAA or with the airport itself but with British aviation policy. In February, Britain’s Air Passenger Duty (APD) was doubled, ostensibly to suppress demand for air travel in order to cut back on emissions (not likely, but that’s for another post). The cost of a round trip jumped by as much as £160, making an international hub like Heathrow a less competitive place financially. London used to be one of the cheaper European gateways. And what has the effect been on traffic at Heathrow?

The latest passenger figures show the airport is losing travellers to other leading European hubs. There was a 1.8 per cent year-on-year fall in passenger traffic at Heathrow in June and a 1.2 per cent fall in the first half of this year, according to BAA.

Britain’s steep APD is hurting Heathrow, and to judge from the City’s concern, it’s hurting the British economy too. The City minister said that “the government was determined to prevent London’s competitiveness being eroded.” Heathrow is suffering the effects of the government’s policy. A competitive air travel fee structure would be a good way to fix the problem.

‘Hassle of Heathrow’ takes toll on City [Financial Times]

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