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JetBlue splits with peers over FAA tax proposal

JetBlue Airways Corp. on Friday split from the trade group that represents the nation's major airlines on its plan to help finance the Federal Aviation Administration.
/ Source: The Associated Press

JetBlue Airways Corp. on Friday split from the trade group that represents the nation's major airlines on its plan to help finance the Federal Aviation Administration.

The Air Transport Association prefers taxing passengers based on the distance between their origin and final destination, and ignoring actual miles flown on connecting flights. According to JetBlue, this favors the largest airlines using "hub-and-spoke" systems since they would avoid being taxed for the hundreds or thousands of miles racked up on those connections.

The passenger tax currently is based on a percentage of the ticket price, not on the mileage.

"The ATA's formula ... penalizes JetBlue's low cost business model that efficiently avoids hubs and relies primarily on nonstop, point-to-point service," according to letters sent Friday by JetBlue President and Chief Executive Dave Barger to House and Senate leaders.

Congress has until Sept. 30 to reauthorize the FAA and possibly raise taxes and fees to pay for upgrades to the nation's traffic control system and other aviation programs. Commercial airlines are battling corporate jets and small plane operators over what share of the cost they each should shoulder.

The ATA's proposal also exempts airlines from paying taxes on the first 250 miles of any domestic flight, which the group said was designed to help small communities. While JetBlue acknowledged it benefits from that proposal, the company does not endorse it since shuttles between New York City, Boston and Washington, D.C., also are exempt.

"Similarly, all flights between the large markets of Miami-Orlando, Dallas-Houston and Los Angeles-Las Vegas, despite the burden they place on the busiest air traffic control centers in the nation, would also be exempt from paying the distance-based fee under the ATA's proposal," according to Barger's letter.

A spokesman for the ATA, whose other members include Continental Airlines Inc., Delta Air Lines Inc. and Southwest Airlines Co., declined to comment Friday afternoon.

Forest Hills, N.Y.-based JetBlue said the ATA proposal will "mislead Congress into legislating which airlines using the (air traffic control) system pay their fair share and which airlines are provided statutory exemptions."

The FAA on Thursday awarded a team led by defense company ITT Corp. a contract worth up to $1.8 billion to build the first portion of a new satellite-based air traffic control system.

Upgrading the system used to manage commercial and general aviation traffic will help reduce air and runway congestion and reduce operating costs, but will take nearly 20 years to complete and cost more than $15 billion.

The Department of Transportation recently said the airline industry's on-time performance in the first half of this year was its worst since comparable data began being collected in 1995. But despite expected delays, the ATA last week said it expects 15.7 million passengers to fly on U.S. airlines over the extended Labor Day holiday.

FAA Administrator Marion Blakey on Thursday said if the agency's reauthorization does not tie its revenue to its business costs, "the improvements will sputter along, the delays will only get worse and every weekend will feel like Labor Day."