US airlines ask Congress to roll back jet fuel tax

By John Crawley

WASHINGTON (Reuters) – U.S. airlines on Wednesday asked
Congress to rollback the tax on jet fuel to make it easier for
them to raise fares and counter sustained high fuel prices made
worse by Hurricane Katrina.

Senate Republicans at a Commerce Committee hearing said
they wanted to help the beleaguered industry, but some noted
the one-year tax holiday would require an estimated $600
million in new federal spending to offset the loss of tax
receipts.

No Democrats attended the hearing.

Jim May, the chief executive of the industry’s leading
trade group, the Air Transport Association, told the panel
soaring fuel costs, which are projected to total $30 billion in
2005, have driven up projected industry losses for 2005 to at
least $9 billion.

Prices were nearly 20 cents higher at the start of this
week — roughly $2.05 per gallon — than they were a week
before Katrina hit the Gulf Coast on August 29. May estimates
the industry will pay $9 billion more for fuel in 2005 than
airlines did last year.

“No business model at any airline can sustain such a rapid
increase in fuel prices,” May said.

U.S. airlines have long complained about taxes and
government fees that can account for a quarter of the price of
a ticket. Carriers have had mixed success in convincing
lawmakers to reduce those charges, which include the 4.3 cents
a gallon tax on jet fuel.

But with four big carriers now in bankruptcy — UAL Corp.’s
United Airlines, US Airways Group Inc., Northwest Airlines
Corp. and Delta Air Lines Inc. — and fuel costs weighing
heavily on the industry after the hurricane, Congress may act
this time.

“I don’t think we should ignore any option,” said Sen. John
McCain, an Arizona Republican.

“We need to look into the overall structural relationship
between the government and airlines,” said Sen. Ted Stevens, an
Alaska Republican.

If the government removed the jet fuel tax, airlines could
fill the gap with fare increases to boost their bottom line.
But since fuel tax receipts go into a federal trust fund to
help pay for Federal Aviation Administration air traffic
programs, Congress would have to bridge the gap by spending
$600 million to avert a large shortfall in the FAA budget.

The Bush administration has frowned on any spending that
would drive up the budget deficit, but lawmakers said they
could wrap help for the airlines into emergency Hurricane
Katrina legislation.