The U.S. government should review the feasibility of current taxes and fees on airlines and support "responsible" regulatory intervention to reduce fuel price volatility if necessary, a special committee on industry competitiveness said Wednesday.
The Transportation Department Future of Aviation Advisory Committee recommendations, obtained by Reuters, sought to highlight aviation's impact on the overall U.S. economy and place issues that can affect profitability of related industries squarely before policymakers and Congress.
"I think there's a growing appreciation for the importance of this industry — the aviation sector's role in travel and tourism and business and productivity," Glenn Tilton, chairman of Continental Holdings Inc and a committee member, said in an interview with reporters.
Still, smoothing out a bumpy relationship with government and coordinating policy goals of airlines, airports, manufacturers and other powerful aviation interests with Congress and transportation planners has proven difficult.
For instance, airlines have long complained about the tax and fee structure covering fuel, cargo, airports and security that can add significantly to a price of a ticket. Taxes and fees can total up to 20 percent of the final cost of a ticket carrying a base fare of $300, industry figures show.
"The committee recommended that the federal government and the secretary (Transport Secretary Ray LaHood) take a hard look at the level of taxation associated with the industry to understand the consequences and make sure they are not unintended," Tilton said.
On oil price increases, the committee could not agree whether commodities market speculation was behind sharp increases in jet fuel costs in 2008, as airlines contend.
Still, the panel of industry, government and outside aviation experts asked LaHood to work closely with the Commodity Futures Trading Commission to dampen volatility and "support responsible regulatory intervention" should regulators determine that speculative trading is to blame.
Airlines suffered huge losses in 2008 when jet fuel prices surged to record highs on sharp crude oil cost increases. They are now profitable again, but are more wary than ever of fuel price shifts.
"It's a huge tax on the economy, and if it’s speculative, it's unnecessary," said Tilton, a former oil industry chief executive.
The CFTC is expected this week to issue a broad framework for controlling speculation.
The committee also highlighted the need for government to study the limited and aging fuel storage and delivery infrastructure feeding airports.
© 2023 Thomson/Reuters. All rights reserved.