POSITION & HOLD
an editorial opinion

Defending business aviation requires more than rhetoric

By Robert Poole
Dir of Transportation Studies, Reason Foundation


Crowded ramp at ORL (Exec, Orlando FL) illustrates a range of business aircraft that provide vital business connectivity-hardly a "marginal" part of US aviation, as demonstrated in recent FAA and DOT Inspector General studies.

In the past few months we have seen an outpouring of populist attacks on business aviation, especially the use of business jets. The anti-bizjet rhetoric started right at the top, with President Barack Obama castigating CEOs and their corporate jets.

Congressional leaders joined the chorus with eagerness, along with various pundits. "We have an unprecedented situation where there is a stigma attached to flying a corporate jet," Credit Suisse analyst Robert Spingarn told Aviation Week & Space Technology.

This rhetoric comes at a time when aircraft firms are cutting production and laying off people, and when the number of used business jets for sale is up 69% compared with a year ago. As a long-time researcher on aviation policy, my only surprise is that it has taken so long for these kinds of attacks to materialize.

A year ago, such rhetoric was confined to the far left, such as in a Jun 2008 report by Essential Action and the Institute for Policy Studies. The title of their report, "High Flyers: How private jet travel is straining the system, warming the planet, and costing you money," conveys its essential message, which is a preview of the current attacks on business aviation.

Business aviation leaders, including Cessna Aircraft and NBAA, are fighting back, running ads and issuing statements rightly defending business aviation as a vital business tool. NATA Pres Jim Coyne sent an eloquent open letter to President Obama on Mar 4, 2009 making many of these points.

Yet these defenses ring somewhat hollow, in that they embody a contradiction. On the one hand, we are told how vitally important business aviation is to US business. At the same time, whenever the issue of paying for aviation infrastructure comes up, the same organizations maintain that business aviation is a "marginal" user of our system of airways and airports, and that it is already "paying its way" by means of a modest fuel tax.

In fact, nobody except the small community of corporate aviation people takes such claims seriously. By refusing even to consider actually paying its way, business aviation is inviting attacks that characterize it as a bunch of fat cats being cross-subsidized by airline passengers.

Those may sound like fighting words, but let me introduce you to some very solid research on this question. In 2007, when the airlines proposed a shift from the current aviation excise taxes (on tickets and fuel, primarily) to transaction-based user fees for all airspace users (except GA piston), NBAA made the usual claims about its members being "marginal users" of the system and defended existing fuel taxes as paying their way.

That led several members of Congress to ask the Transportation Dept's Office of the Inspector General (OIG) to research the issue. What follows comes from OIG report CR-2008-028, dated Mar 3, 2008.

This report found that business jets alone account for 12% of all FAA tower services, 13% of Tracon services, and 11% of enroute operations. It also found that non-air-carriers (including bizjets) contribute to airspace congestion.

For example, such flights accounted for 20-30% of IFR operations handled by the New York Tracon during peak periods, and non-air-carrier ops tend to peak during the same times as airline ops.

And the same was found to be the case for enroute operations. For example, the busy Cleveland Center averages 17% non-air-carrier ops, but these increase to 18-23% during peaks. Given these figures, I don't see how anyone could maintain, with a straight face, that business aviation is a "marginal user" of the system.

That was the same conclusion FAA reached in its well-respected Jan 2007 ATC cost allocation study (based on FY 2005 data). After making assumptions favorable to non-airline segments (eg, allocating all fixed costs to airlines and only allocating variable costs to all users in proportion to use), that study found that business jets and turboprops (classed as "GA-turbine" in the study) used 9.7% of all ATC services but provided only 2.9% of the revenues.

If you add in air taxi and fractional users, who pay the ticket tax, the combined numbers for business aviation/turbine come to 16.9% of all ATC services but only 8.2% of the revenues.

One other point: Both of these studies allocate to ATC all aviation tax monies paid by GA-turbine users. That ignores more than $3 billion a year in money provided in grants to airports under the Airport Improvement Program, whose source is also these same aviation taxes.

When NBAA defends its members' fuel tax payments as "paying their way," it is implicitly saying that business aviation covers its share of both ATC and airport costs.

But if all that fuel tax revenue comes up far short of covering the industry's share of ATC costs, that leaves zero contribution toward the airport grants that are vital to the budgets of numerous non-air-carrier airports used by business aviation. This makes the "paying our way" claim even more ludicrous.

What is to be done?

The old cliché that actions speak louder than words is relevant to this situation. For business aviation to alter its current "fat cat" image will take more than rhetoric.

One very positive gesture this industry could make would be to help address the impending budget crunch that threatens timely implementation of NextGen (the transformed ATC system that, by doubling or tripling capacity, will reduce delays dramatically and make all of aviation more effective).

Business aviation could do so by supporting a modest extra charge whose proceeds would be dedicated entirely to NextGen investment. Supplemental funding for NextGen is critically important, because FAA capital spending (termed "Facilities & Equipment" in budget language) is in trouble.

Transportation Secretary Ray LaHood has stated that his number one priority for FAA is to find the money to reach a new contract agreement with controllers' union NATCA. That means the payroll portion of FAA's budget will increase.

But all recent projections of aviation excise tax revenue show that revenue for the Aviation Trust Fund (the source of all Facilities & Equipment spending) will be significantly lower than projected a year ago.

That's because the recession has led to a sharp decline in air travel, especially on airlines, and to airline fare-cutting. The ticket tax-the largest source of Aviation Trust Fund revenue-is a percentage of the ticket price. So the combination of lower fares and fewer passengers means significant decreases in ticket tax revenue.

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