Congressional snafu creates airline tax holiday

Alaska Air says Senate's inaction will cut costs by $44 per ticket

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Updated: July 22, 2011, 4:51 PM

 

WASHINGTON (AP) — Efforts to avert a shutdown of the Federal Aviation Administration failed Friday amid a disagreement over a $16.5 million cut in subsidies to 13 rural communities, ensuring that at midnight nearly 4,000 people will be temporarily out of work and federal airline ticket taxes will be suspended.

Seattle-based Alaska Airlines said in a statement that the tax holiday, which begins at midnight, could reduce the cost of a $300 ticket by $44, or 14 percent.

Lawmakers were unable to resolve a partisan dispute over an extension of the agency's operating authority, which was to expire at midnight Friday.

The subsidy cut was included by Republicans in a House bill extending operating authority for the FAA, which has a $16 billion budget. Senate Democrats refused to accept the House bill with the cuts, and Republican senators refused to accept a Democratic bill without it. Lawmakers then adjourned for the weekend.

But underlying the dispute on rural air service subsidies was a standoff between the GOP-controlled House and the Democratic-controlled Senate over a provision in long-term funding legislation for the FAA that would make it more difficult for airline and railroad workers to unionize.

Obama administration officials have said the shutdown will not affect air safety. Air traffic controllers will remain on the job. But airlines will lose the authority to collect about $200 million a week in ticket taxes that go into a trust fund that pays for FAA programs.

FAA employees whose jobs are paid for with trust fund money will be furloughed, including nearly 1,000 workers at the agency's headquarters in Washington, 647 workers at FAA's technology and research center in Atlantic City, N.J., and 124 workers at the agency's training center in Oklahoma City.

"These are real people with families who do not deserve to be put out of work during these tough economic times," FAA Administrator Randy Babbitt said in a statement.

Airline passengers could see a big savings on their airfares, but the situation is complicated. Federal taxes on a $300 round-trip airfare are about $61, but about half that are airport and security fees that will continue to be collected, according to the Air Transport Association.

Airlines, alerted earlier this week that FAA authority could expire, have been making adjustments to their computer systems and websites so that at midnight, taxes will no longer be added to airfares, the association said.

One airline, U.S. Airways, was already raising its fares. Other airlines may try to reap a windfall profit from the tax holiday.