Counting The Costs of FAA Shutdown


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It's over! Or is it? The last-minute Senate deal to fund the Federal Aviation Administration (FAA) - at least for a few months - underscores the apparent lack of consensus about the state of the airline industry and the regulatory role of the federal government.

The FAA operates on a temporary basis and it’s reliably reported that FAA authorization has been renewed 20 times since 2007 before the current temporary authorization was approved.  The basic issues – air services to remote sites and sharp disagreements over unionization of the airlines – appear unresolved.  In fact, Congress will have to revisit the issues within two months if it wants to avoid another partial FAA shutdown.

Have the divisions over policy hurt the FAA?  Can even the best administrator cope with endless Congressional policy divisions? Can they plan, budget, staff and finance improvements in the air traffic control system? Are seemingly endless delays in the implementation of a needed Next Generation air traffic control system inevitable? Do airlines struggling for profitability in the face of soaring fuel cots deserve better?

President Obama signed legislation late Friday August 5 temporarily restoring full funding to the FAA, ending the legislative impasse. This allowed roughly 4,000 furloughed federal employees to return to work and allowed a diversity of construction projects to proceed. It also meant needed jobs on airport improvement projects that the FAA and the Department of Transportation (DOT) had championed. As many as 74,000 jobs may have been effected.

Notably, the legislation was passed in under a minute in an all but empty Senate chamber by "unanimous consent," a procedural maneuver that allows passage so long as no objections are filed. There was no debate and it's questionable that, unless massive consumer and media pressure was not put on the Democrat-controlled Senate, anything would have happened. Both the Senate and House were and are on vacation for the summer recess.

The sharp political differences that led to the funding shortfall were simply not resolved. Democrats and Republicans remain divided over continued funding of service subsidies to smaller rural airports and if airline employees should be unionized. Both are serious issues to be sure and worth debate. But the Republican House who passed a bill and the Democratic Senate who didn’t created an impasse resolved only by the last minute unanimous consent.

One hero to emerge from the debacle is the Department of Transportation Secretary Ray LaHood who fought hard for Congressional action. He appeared on a host of national news programs to plead his case and with FAA administrator Randy Babbit effectively dramatized the job loses and other negative effects of the shut down.

Closer to home, the legislative mess also generated a clash between the Airline Reporting Corporation (ARC) and the Association of Retail Travel Agents (ARTA) over refund policy and still unresolved questions about airline and IRS policies on refunds. What did it all cost? What was gained? One estimate was that the shutdown could have cost $1 billion if had last through August. An AP estimate puts the cost to the government at $400 million in uncollected airline ticket taxes.

Will we go through another bitter battle over the FAA later this year? Probably. Also probable is that the travel industry will be impacted by a host of other divisive issues in the year ahead that will effect its ability to generate jobs, opportunity and tax revenues. The issues will notably challenge the abilities of travel industry associations to cope and represent the industry effectively.



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