Possibly as early as Monday, the Federal Aviation Administration will release its cost analysis that is the basis of its budget plans to overhaul user fees in order to pay for the next generation air traffic control system. But the battle in the coming reauthorization of the Aviation Trust Fund has definitely been joined as users either condemned or praised the proposal that shifts funding for the aviation system from passengers providing the bulk to ostensibly a more evenly distributed system which raises fees for business and general aviation. The budget request includes $175 million for a 21st Century satellite navigation system and $900 million in additional air traffic control system upgrades.

It has the potential to impact regionals since smaller aircraft are said to exacerbate the mismatch between FAA workload and revenues. (Related Article) Government Accountability Office's Gerald Dillingham testified last year that costs for FAA are largely driven by workload but users are not directly charged for the costs they impose. He indicated that three 48-seat regional jet flights between LAX and San Francisco would generate three times the cost of handling a single, 132-seat, narrow-body aircraft between the two points. "Revenues from the three regional jet flights total only about $37, or three percent, more than the revenue generated by the one narrow-body jet flight," he said. This is compounded by other factors, such as similar commercial flights contributing different amounts of revenue as well as the fairness of distributing the funding burden between commercial and GA operators.
"A 767 flight contributes nearly twice as much as the 737 flight," he said. "A private Learjet flight contributes approximately $40, while the commercial flights of a 767 and a 737 contribute $1,742 and $877, respectively. Commercial aviation representatives favor assigning those costs among all system users in proportion to their use of the system. GA representatives state that the system exists at its present size to serve the needs of the commercial aviation industry, and GA should be assigned only the incremental costs that would not exist apart from the need to serve GA."
Dillingham also pointed out that current funding encourages inefficient use of the airspace. "There is little financial incentive [$37] for the airline to avoid imposing additional costs on FAA by using one flight instead of three flights," he said. "For users to make efficient decisions about their use of the NAS, their price for using the system should accurately reflect the costs their use imposes on the system. Users who pay more in taxes than the costs they impose may use the system less than is optimal, while those who pay less than the costs they impose may use the system more than is optimal."
Air carriers contribute nearly $10 billion to the fund and they want a closer relationship between taxes and the cost of air traffic control services. It is that report – the cost of providing services – expected next week that is the key to the impact this will have on users. More than half of FAA’s $14.1 billion budget will be funded by user fees charged to each flight, starting in 2009 compared to 80 percent of its budget coming from user fees and ticket taxes today.
Fuel taxes for business and general aviation uses will rise and airlines would be charged a user fee for each flight beginning in 2009, eliminating the current 7.5 percent passenger ticket tax. It is this that has the potential for changing the cost dynamics of regional airlines.
The aviation agency's budget includes a proposed 22 percent reduction in grants for airports to $2.75 billion, but face another uphill battle with Congress which has restored similar proposed cuts in the last two budget cycles. FAA said the cuts were necessary in order to fund “high-priority safety, capacity, and security programs.”
The FAA noted that business and general aviation flights account for only three percent of the revenue but represent 11 percent of traffic. GA interests roundly condemned the proposal and pointed out the ATC system was built, and is run for, commercial airlines. National Business Aviation Association (NBAA) President and CEO Ed Bolen called it a toxic mix of higher taxes, new fees and airline control. “The last FAA cost allocation study that focused on the cost each segment imposes on the system concluded that general aviation is responsible for something like eight percent of total system costs. That is roughly in the ballpark of what the GA community is paying today,” said Bolen. “For over a year, NBAA has repeatedly asked the Administrator to discuss with us any updated information the Agency may have on this issue, but those requests have been denied.” Other GA interests charge that the airlines, and the FAA, are manufacturing a crisis to force the change. Airlines claim, however, they contribute 94 percent of system costs but account for only 68 percent of use.
The next generation air traffic control system could cost as much as $69 billion to $76 billion, according to the Congressional Research Service.