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Experiences in other nations raise concerns about proposed user fee

By Charles Spence · October 17, 2012 ·

WASHINGTON, D.C. — Congress and the president have big taxation problems to resolve before the end of this year, so there will no doubt be a lot of discussion about aviation user fees. On Dec. 31, all the “Bush” tax cuts will expire, the debt limit will need to be increased, and payroll tax cuts will expire. On the next day, sequestration cuts are set to kick in.

But opposition to the proposed user fee continues, with many general aviation advocates pointing to experiences in other nations as cautionary tales of the effect of user fees. And while much of general aviation in the United States is exempt from the proposed user fees, GA advocates warn that an expansion of the fees to all flights is a possibility.

The original proposal for aviation user fees in the U.S. was made by the FAA in 2007 and included all aircraft. President Obama’s proposal in his 2013 budget omits some types of flying. The budget states: “All flights that use controlled air space require a similar level of air traffic services. However, commercial and general aviation can pay very different aviation fees for those same air traffic services. To reduce the deficit and more equitably share the cost of air traffic services across the aviation user community, the Administration proposes to create a $100 per flight fee, payable to the Federal Aviation Administration, by aviation operators who fly in controlled airspace. All piston aircraft, military aircraft, public aircraft, air ambulances, aircraft operating outside of controlled airspace, and Canada-to-Canada flight would be exempted. The fee would generate approximately $7.4 billion over 10 years.”

To some aircraft owners who fly these excluded flights, the imposition of a $100 fee may seem of little concern; but to others the experiences in other nations bring deep concerns.

In most nations where a user fee is in force, all flights — general aviation and airline — were included in the beginning, except for the United Kingdom. When the UK imposed a fee in 1994, aircraft below 19 seats were exempt. In 2011 it was determined that exemption would no longer apply after April 2013. Next year all flights will by subject to the fee.

The United Kingdom has raised the tax several times since it was imposed in 1994. The latest increase occurred in November 2010, bringing 1.9 billion British Pounds to the government. Another increase is expected by April 2013 with plans to collect 3.8 billion Pounds by 2015.

Currently, nine European nations have aviation user fees: Albania, Bosnia-Herzegovina, Croatia, France, Germany, Italy, the United Kingdom, Austria and Serbia. Total amount collected is about 4.9 billion Euros a year.

Each country handles the fees in different ways. For example, Italy exempted aircraft above 19 seats from paying the user fee when it decided in March 2012 to impose a tax on all passengers. There is no known plan at this time to extend the tax to scheduled carriers.

Germany decreased its tax by 5.5 % upon introduction of the European Union Emissions Trading System in 2012. The country still collects around 1 billion Euros a year.

Closer to the United States, Canada has user fees on both airlines and general aviation. The program is operated by a not-for-profit private organization, not the government. This organization appoints its board and sets its own fees, which are not reviewable. The board can change the fees every year. When an airline in Canada went bankrupt, fees on other users were increased to make up for the loss.

Similarly, in Australia, all flights were included when a user fee was enacted and fees on general aviation were increased after an airline in that country went bankrupt. Australia does cap the yearly increases at 7%.

Meanwhile, fuel taxes paid in Canada, Australia, and New Zealand go into the country’s general funds, not into a fund specifically designated for air traffic services. In these three nations, rates are set every year.

Methods of collecting the user fees vary among the different nations, but in all, registration of a flight is required so aircraft may be properly identified and charged.

The effect of user fees on all aviation is difficult to forecast or even to speculate after a fee is established. In the Netherlands, for instance, the fee was withdrawn one year after it was imposed. Loss of business outweighed tax revenue. Income of 261 million Euros did not make up for the economic impact of between 1.2 and 1.3 billion Euros. This economic impact resulted from traffic being down 11%, the loss of 1 million passengers, and estimated loss of 5,000 jobs if the fee was maintained.

It is not known at this time what effect user fees would have on aviation in the U.S. or how the proposed fee would be collected. Most speculate that a separate bureaucracy would have to be established to collect the fees.

There are also questions about the a line in the U.S. budget proposal that states “all flights that use controlled air space use the same level of service.” In Atlanta, the busiest airline airport in the United States, the cost of operations amount to $800 per flight. At the busiest general aviation airport, the cost is $13 per flight.

Organizations and individuals opposing the user fee in the United States generally agree that the current fuel tax — even if some increases are necessary — is favorable to the imposition of a user fee.

 Charles Spence is General Aviation News’ Washington, D.C., correspondent.

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