Airline chiefs lobby for repeal of fuel tax

June 09, 1995|By Suzanne Wooton | Suzanne Wooton,Sun Staff Writer

In a rare show of unity, the nation's top airline executives converged on Capitol Hill yesterday, lobbying lawmakers to repeal a fuel tax they say will cost the beleaguered industry $527 million a year.

The 4.3-cents-a-gallon tax was enacted in 1993 as part of the sweeping deficit reduction package. At that time, however, Congress granted the airline industry a two-year waiver, which is scheduled to expire Oct. 1.

Airline officials say the tax comes just as carriers are beginning to recover from the worst financial period in the industry's history. Since 1990, U.S. airlines have lost $13 billion, including $279 million last year.

"It couldn't come at a worse time," said Richard Weintraub, a spokesman for USAir.

"Just at a time when the industry as a whole is barely getting back to a level of limited profitability, you're now facing the possibility of a tax that will wipe out gains you made," he said.

Unlike trucking and rail companies, the airlines have never paid a fuel tax, largely because they charge passengers a 10 percent federal excise tax on tickets and a 6.25 percent excise tax on cargo shipments.

Those federal taxes amounted to $6 billion last year, according to the Air Transport Association in Washington, which represents 20 domestic airlines.

"We're paying our fair share of taxes," said Chris Chiames, a spokesman for the association.

The airline fuel tax, however, is backed by the Clinton administration.

And while the rail and trucking industries do not oppose repeal of the fuel tax for airlines, they are insisting that they be included in any such exemption. That proposition would have huge budgetary implications.

Fuel oil is the airline industry's second-highest cost, accounting for roughly 15 percent of total operating expenses. Currently, prices are the lowest in a decade. But a recent $2-per-barrel price increase in crude oil is expected to boost costs an additional $1 billion this year, even without a fuel tax.

In recent years, airlines have been sharply cutting costs. USAir, which lost far more money last year than any other airline, is seeking $2.5 billion from its employees over the next five years and has reached a tentative, cost-cutting agreement with three of four unions. Those deals include provisions to furlough some workers.

But airline officials say the higher operating costs resulting from a fuel tax would force even more layoffs in an industry that has already seen the loss of 120,000 jobs since 1990.

While airline officials and employee groups have been lobbying members of Congress for months, yesterday and Wednesday marked the first time that the top executives have collectively visited House and Senate leaders and members of the tax committees.

Among them was USAir's chairman, Seth E. Schofield, and Southwest Airlines Chairman Herb Kelleher, who head two of the leading airlines at Baltimore-Washington International Airport.

"You haven't ever seen an airline industry invasion of Capitol Hill in force like you've seen in the last couple days," said Mr. Chiames, who said the top executives from 17 of the 20 airlines were there.

Two House committees already have held hearings on a measure to permanently exempt the airline industry. If it passes the House Ways and Means Committee, the measure would likely be incorporated into a larger tax bill that could be acted on later this summer or early fall.

A majority of the committee's members, including Maryland Democrat Benjamin L. Cardin, support the bill. It is co-sponsored by 102 House and Senate members.

"There's no justification for this tax now," Mr. Cardin said yesterday. "The financial circumstances of the airlines certainly haven't improved that much."

Mr. Cardin said the bill has a good chance of passing if money can be found in the budget to cover the anticipated losses in tax revenue.

During a ceremony yesterday on Capitol Hill celebrating the industry's 10 billionth passenger, House Speaker Newt Gingrich announced his support for the measure.

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