Out of Control Policy Blog

President Obama Should Stick to Guns on User Fees for Business Jets

Private plane trade association AOPA flipped out over the proposed air traffic control user fees in President Obama’s budget for the FAA over the next 10 years. While the budget language provided no details, the move reflects the long-standing support of OMB, FAA, and numerous aviation researchers for replacing most or all of the current aviation excise taxes (ticket tax on airline passenger tickets and fuel tax on private planes) with fees that reflect the cost and value of the services provided to aviation. The current taxes are the funding source for the Aviation Trust Fund, out of which Congress appropriates funds for a $3 billion per year airports grant program and most of the capital and operating budget of the FAA’s air traffic control (ATC) system.

It costs the ATC system just as much to safely route a Gulfstream business jet from City A to City B as it costs to route a 767 airliner. Yet the bizjet pays only a tiny fraction of that cost via its fuel tax, whereas every serious study shows that airline passengers pay well over the cost of guiding the 767. Nearly every other civilized country pays for ATC via direct user charges, and bizjets are thriving in Canada, Europe, the Middle East, and Australia despite user charges (which still amount to only a few percent of the total cost of owning and operating a bizjet).

But the name of the game is for the well-heeled bizjet community (represented by NBAA) to hide beneath the skirts of the vastly larger (and much less affluent) private plane community (represented by AOPA). Nobody is proposing user fees for individuals’ piston planes, but AOPA has learned over the years that raising this specter is a great fund-raising and membership-renewal tool. And NBAA is only too happy to go along, hoping nobody notices the very different nature of flying done by the two different groups subsumed under the fuzzy term “general aviation.”

I hope the new administration sticks to its guns on this issue.

Robert Poole is Searle Freedom Trust Transportation Fellow and Director of Transportation Policy

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Comments to "President Obama Should Stick to Guns on User Fees for Business Jets":

Josh H | March 17, 2009, 4:46pm | #

Mr. Poole,

Although I appreciate your point of view on user fees I do disagree. Allow me to put out some food for thought.

It is true that ATC expends the same effort routing a Gulfstream as a 767, but the similarity ends there. First, the average business jet operates between 300 and 400 hours anually while the average airliner flies 1200 to 1500 hours. Multiply this usage by the number of business jets and the number of airliners that operate within the US system and you will find that while business jets may pay a fraction of the cost directly to the system, they are a fraction of the systems usage. Second, an airliners role in a business model is to be a profitable asset. The airplane itself is meant to generate revenue directly for its owners (airlines) through ticket sales. That being said, where is the problem with the airlines paying for the ATC system that was designed FOR them in the first place. Furthermore, it can only be expected that the fee would be built into a ticket price structure. By contrast, a business jet is not a direct revenue generator for a company but it does allow for a greater degree of flexibility and much greater access to the nations airport system. That translates into better access to plants, foundries, customers, and countless hours of time saved. All of which results in greater profit, which means more tax dollars paid. My point here is that business already pays taxes on its profits, and all indications are that those taxes will only increase. Therefore, the owners of business jets are, in fact, already paying their fair share. In addition, business aviation does not flourish in other countries as it does here. In 2008 65% of total jet sales was to US customers. That other 45% stretches pretty thin over the remaining territory. With all do respect, President Obama should not be sticking to any guns on the subject of business aviation. He needs to be enlightened on the true nature of the industry, especially in the wake of the "Big 3 Debacle" where, in my opinion, those executives acted with abject cowardice in the face of questions that could have been answered honestly and objectively.

Josh H

P.S. Pardon my spelling and grammatical errors

Scott M | March 18, 2009, 9:35pm | #

Totally agree Josh. As a former corporate pilot with ratings on several bizjets I'm frankly shocked at the abject level of just bad data that's being floated around the industry on this topic.

Your numbers are right on the money...in fact I'd put the total raw sales numbers in the US at closer to 70%...and of that number, one of the larger consumers of private turbine and jet business hulls is the US Government/Military!

This proposal is short sighted and will do little to prop up the aging ATC system...the numbers just don't add up. I also disagree that single engine pistons aren't part of the equation...they indeed are being consider per the FAA.gov website.

This will serve to drive the average sport flier out of the fly for pleasure category due to elevated costs.

Robert Poole | March 19, 2009, 5:11pm | #

Josh and Scott,

According to a March 3, 2008 report by the DOT Inspector General’s office, business jets constitute 12% of all tower services provided to aircraft, 13% of all TRACON services, and 11% of en-route operations. Remember, that’s just business jets. The figures for all of “general aviation” are much higher: 59% of tower ops, 49% of TRACON ops, and 17% of en-route miles flown. And business jets definitely contribute to congestion in busy portions of the airspace. That same report found that non-air-carriers accounted for 20% to 30% of instrument approach operations handled by the New York TRACON during peak periods. (Regardless of the fact that bizjets tend to use reliever airports like Teterboro, controlling their flights consumes a significant portion of TRACON controller workload, regardless of which of the NY-area airports those jets use.)

As for bizjet use in countries with ATC user fees (i.e., just about everywhere in the world except the USA), in recent years 45% of sales have been in non-North American markets. The fractional-ownership business has been booming in Europe. Air traffic control user fees are a trivial part of the cost of owning and operating a business jet.

In “Business Jets and ATC User Fees," (online here - http://www.reason.org/news/show/127368.html) I calculated hypothetical user-fee costs for 15 different bizjets. A Nav Canada type user fee would cost a Learjet 60 about $115/hour, about 3% of the total cost of owning and operating that plane ($3,639/hr, based on Conklin & deDecker data).

I think there would be fewer populist attacks on business aviation if this segment of aviation began paying its way for using the ATC system.

Thomas | May 6, 2009, 6:48pm | #

ATC exists to prevent accidents involving airliners. For most of GA, the "big sky" and looking out the window are enough to provide separation. For the pricey bizjets, who would prefer more than that, the technology already exists to allow aircraft to self-separate (Google "Flarm" for an example from the European glider community, where the gliders get no help from ATC and are providing their own electronic separation in the high-density traffic near gliderports) and would be more than adequate for almost all GA operations. Airliners want costly high-end ATC because the cost of a collision involving an airliner is extreme; it's overkill for the GA community, who shouldn't be required to use and expected to pay for that level of service. (While it is possible to avoid using ATC, it's often woefully impractical because of the airspace rules.)

Robert Poole has long advocated privatizing the sky and handing control over to a co-op controlled by... the airlines. The trouble is that the airline executives on the board would be driven, by human nature and their duty to their airline shareholders, to operate the sky in favor of their own airline. They would, of course, disadvantage everyone else, bizjets and startup airlines alike. It's about as anti-competitive, pro-incumbent-big-business an idea as I've ever seen from Reason. Let's advance the self-separation technology (FAA is dragging its heels, while it figures out how to combine inherently decentralized technology with centralized control) and move toward having GA (and even the airlines) escape the demand to participate in inefficient monopoly ATC (whether government-supplied or government-mandated but privately-supplied) altogether. Let GA (and even the airlines) buy the services they need from competitive vendors. Self-separation technology is easy; commercial real-time weather services already exist. Routing/sequencing services are needed only at major airports in the terminal phase; let that vestige of ATC remain. That's what I expect to see from Reason, not a demand for handing the sky over to the major airlines to use for their own anti-competitive purposes, nor a demand to turn ATC into the 21st-Century Postal Service (a fee-for-service Government-run protected monopoly).

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