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Tilton Urges Policy Changes For Airline Growth

December 23, 2009 By: George Dooley

Taxes on airlines and passengers have hit an all-time high, said Glenn Tilton, chairman of the Air Transport Association (ATA) and chairman, president and CEO of United Airlines, said in remarks to the Executive Club of Chicago regarding the airline industry and its role in economic recovery. 

“Taxes by airports, the Federal Aviation Administration and the Department of Homeland Security represent as much as $60, or 20 percent, of a $300 domestic roundtrip airline ticket,” Tilton said in wide ranging remarks. “America’s aviation sector and our customers shoulder a federal tax burden that is typically higher than the amount the alcohol and tobacco industries pay. The extreme and unfair tax burden on commercial aviation and our customers should be reduced.

“The essence of business is to be profitable … a goal that has systemically eluded the airline industry, with losses from U.S. airlines totaling some $27 billion since the beginning of 2008 – and losses since 2001 totaling some $60 billion," Tilton continued. "In the last 30 years, this industry has experienced 185 bankruptcies. This must change. The U.S. industry has lost 160,000 jobs since 2001. Order of magnitude, that’s roughly one out of every three jobs in the last nine years. There can be no job security without sustained profitability. The services the airline industry provides is directly linked to the economic health of our nation and to the cities and communities we serve. We enable commerce and tourism, we create jobs, connect small communities and large cities to the rest of the world. We contribute 8 percent of global GDP."

Tilton also urged action by the Federal government. “Recognizing the seriousness of the systemic failures of commercial aviation, in November Transportation Secretary LaHood convened a meeting of all stakeholders, including airlines, airports, labor leaders, consumer advocates and manufacturers, and is in the process of setting up a federal advisory committee to identify solutions and develop a road map that will address the overall viability of the industry," he said. “Unfortunately, in our industry, each stakeholder has historically advocated very different and seemingly self-serving individual agendas. There has been no consensus or support for common solutions that might address the industry’s overall profitability and long-term sustainability.

“Balancing the needs of all stakeholders is probably the biggest single issue we face in order to move forward,” Tilton continued. “Secretary LaHood is to be commended for providing the leadership and the realization that all stakeholders must participate and move beyond historic inertia. It has been 16 years since a commission established by President Clinton offered recommendations to address the ailing airline industry … recommendations that were largely ignored. Not surprisingly, most of the issues and many of the recommendations from that commission remain largely unresolved.”

Tilton urged ending government restraint on airlines. “The airline industry believes that we should be able to operate like other businesses," he said. "An extreme request, I grant you… That we not be constrained by anachronistic restrictions that still exist post deregulation, and preclude us from using business tools and options available to other industries for investment, cross-border ventures and consolidation. Air traffic control infrastructure was cited as inadequate and a priority by the commission in 1993 – and it certainly will continue to be more so in 2010 and beyond."

The government must accelerate and fund the FAA's next-generation air traffic control system. “We have the technology that will transition America from a ground-based system to a satellite-based system that will result in fewer flight delays, together with fuel and environmental benefits – by enabling airplanes to travel more safely and efficiently through the nation's airspace," Tilton said. “Maintaining the advances in capacity discipline, made across the industry in times of difficulty, will be critical to our collective profitability and our sustainability as the economy improves. This challenge is set against a backdrop of an industry has an appalling record of self-destructive actions that compound the problems of a quasi deregulated and an overtaxed industry that I spoke to previously.

“This must change," Tilton concluded. “Commercial aviation should not be taken for granted.”


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