FAA Loses $30 Million a Day as Tax-Collecting Powers Lapse

The Federal Aviation Administration said it’s losing $30 million a day in taxes because Congress let the agency’s revenue-raising authority expire.

Airlines can’t collect excise taxes on tickets, fuel and cargo until Congress passes legislation to extend the FAA’s authority, Randy Babbitt, the agency’s administrator, said today on a conference call from Washington. The FAA operated through July 22 under a series of 20 short-term extensions, after its multiyear funding legislation expired in 2007.

Most major airlines have raised base ticket prices by at least 7.5 percent to capture the forgone federal revenue, Rick Seaney, chief executive officer of FareCompare.com, a website that tracks ticket prices, said in an e-mailed report.

“With the added ticket revenue and the reduction in sales tax on jet fuel, this could be a major boon for airline bottom lines if the issue goes unresolved for several weeks,” Seaney wrote in an e-mail.

The deadlock in Congress continued today as Senate Majority Leader Harry Reid, a Nevada Democrat, said he doesn’t plan to bring a House-approved FAA extension bill to a Senate vote.

Senate Democrats oppose the House measure to continue FAA funding through Sept. 16 because it would end taxpayer support for flights to 13 small-town airports, including one in Reid’s home state.

Reid said Senate Commerce, Science and Transportation Committee Chairman Jay Rockefeller, a West Virginia Democrat, and Senator Kay Bailey Hutchison of Texas, the panel’s ranking Republican, agreed with him.

Negotiating a Compromise

Rockefeller today called on House Transportation and Infrastructure Committee Chairman John Mica, a Florida Republican, and House Speaker John Boehner, an Ohio Republican, to begin negotiating with the Senate by July 27 on a compromise for a long-term FAA funding measure.

Rockefeller said in an e-mailed statement he hopes Mica “will finally make a good-faith effort to get going here in order to restart funding for the FAA, help thousands of workers around the country who are going without a paycheck and keep vital airport renovation projects moving forward.”

Mica responded that “to put people back to work and restart FAA programs,” the Senate needs to adopt the House’s FAA extension bill.

“If the Senate cannot agree to a simple provision, which it approved earlier this year, to eliminate excessive subsidies between $1,358 and $3,720 per ticket at three airports, then we don’t need” to meet, Mica said in an e-mailed statement.

Furlough Impact

Transportation Secretary Ray LaHood said on the call that he would meet today with White House officials to discuss renewing the agency’s authority. The taxes, which go into the airport and airway trust fund, are used for airport improvements and salaries of workers deemed non-essential, such as computer specialists and administrative assistants.

The agency furloughed about 4,000 employees in 35 states and contractors have stopped work on airport modernization projects and new air-traffic control towers. Air-traffic controllers, considered essential employees, remain on the job.

Travelers booking flights since the authority lapsed are “generally paying the same ticket prices as they did last week,” Steve Lott, a spokesman for the Air Transport Association, the airlines’ Washington-based trade association, said in an e-mail.

“This short-term additional revenue for airlines, which does not mean a fare increase for consumers, benefits all stakeholders-customers, employees and investors by temporarily improving tiny industry margins to better cover costs and enable airlines to invest in their product and service,” Lott said.

Airport Inspections

Inspections of five airports that need to be certified to handle Boeing Co. (BA)’s new 747-8 jumbo jet, the largest plane the Seattle-based company has built, are “in jeopardy” and may not be completed by a Sept. 1 deadline, Babbitt said. Certification of the jet isn’t at risk, Laura Brown, an FAA spokeswoman, said by telephone.

The agency also halted $370 million in contracts with Jacobs Engineering Group, based in Pasadena, California, for design, engineering and planning services for existing and future air-traffic facilities, according to the FAA.

To contact the reporter on this story: Lisa Caruso in Washington at lcaruso7@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

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