US Senate plan would cut airline fuel tax, add fee

WASHINGTON Wed May 2, 2007 9:01pm BST

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WASHINGTON May 2 (Reuters) - The U.S. Senate aviation committee is weighing a plan that would phase out airline fuel taxes but require commercial and business jets to pay a departure fee to raise billions for air traffic modernization.

Draft legislation obtained by Reuters also proposes a series of requirements to improve airline customer service, an issue that received new attention from Congress after storm-related service meltdowns this past winter.

The Senate Commerce Committee proposal to overhaul funding for air traffic control and other programs run by the Federal Aviation Administration differs from a Bush administration plan that would cut other taxes and impose broad-based user fees on the industry.

The committee, headed by Sen. John Rockefeller, a West Virginia Democrat, appears to split the difference between commercial and private interests in its formula for maintaining air traffic services and underwriting a modernized system.

However, business jet owners and manufacturers will no doubt oppose plans by the committee, confirmed by sources, to recommend that Congress more than double the fuel tax on their operations to just under 50 cents per gallon. The FAA proposal would have hiked that tax to roughly 70 cents.

The panel, at the same time, wants to roll back the current 4.3 cents per gallon fuel tax on airlines and replace that with a $25 fee per departure to help pay for modernizing the aging radar-based air traffic network. Business jets would have to pay the new fee, too. Other taxes and fees on airlines would remain in place.

Final decisions on tax issues fall under the Senate Finance Committee.

The House of Representatives has yet to propose its FAA financing proposal but is expected to do so in the coming weeks.

Key lawmakers in both chambers have said they want agreement on a new FAA financing formula this summer. The FAA says the current funding blueprint, which expires on Sept. 30, will not meet the agency's future operational or modernization needs with traffic expected to increase exponentially over the next decade.

Congressional aides did not return calls seeking comment.

A spokesman for the Air Transport Association, the main trade group for major U.S. airlines, said the group had not reviewed the draft proposal and deferred comment.

On customer service, the Senate plan would require airlines to provide adequate food, water and restroom facilities to passengers stuck on planes for long delays.

For planes that have boarded but not left the gate after three hours, airlines would have to give passengers the option of leaving the aircraft as long as safety or security was not jeopardized.

The customer service proposal stems from service meltdowns this past winter at JetBlue Airways Corp. (JBLU.O) in New York and American Airlines, a unit of AMR Corp. AMR.N, in Texas, as well as unusually long delays at other carriers.

Airlines oppose any congressional intervention in their operations and have urged Senate lawmakers not to impose customer service requirements.

One aviation source also said the Senate panel would recommend that the mandatory retirement age for commercial pilots be extended from 60 to 65.

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