FAA Financing: Issues and Options in Deciding to Reinstate or Replace the
Airline Ticket Tax (Testimony, 02/04/97, GAO/T-RCED-97-56).

GAO discussed issues related to the financing of the Federal Aviation
Administration (FAA), focusing on the: (1) status of the Airport and
Airway Trust Fund; (2) issues raised by the coalition of the nation's
largest airlines to replace the tax on domestic airline tickets with
fees on domestic operations; (3) potential effects of the coalition's
proposal on domestic competition; and (4) potential competitive impacts
of alternative options for financing FAA.

GAO noted that: (1) based on FAA and U.S. Treasury estimates, the money
available in the Trust Fund to finance new commitments would reach zero
by July 1997, unless the taxes were reinstated or another financing
mechanism adapted; (2) while FAA and the Treasury are still trying to
determine when the Trust Fund would run out of money, based on FAA and
Treasury data, FAA may have to stop making new capital commitments as
early as March 1997 to ensure that FAA can pay its workforces through
the end of the fiscal year; (3) if Congress reinstates the taxes or some
other alternative by July, the Trust Fund should be able to fully
finance its portion of FAA's fiscal year 1997 budget; (4) to the extent
possible, commercial users of the nation's airspace should pay a fair,
cost-based share of the total costs of the nation's airport and airway
system; (5) recognizing the need for better cost data, Congress in
October 1996 directed that: (a) an independent assessment of FAA's
funding needs and the costs imposed on the system by each segment of the
aviation industry be completed by February 1997; (b) GAO assess how air
traffic control costs are allocated between FAA and the Department of
Defense; and (c) a national commission study how best to finance FAA in
light of these assessments, with a report due to the Secretary of
Transportation by August 1997; (6) while many factors drive FAA's costs,
such as the number of aircraft departures and aircraft miles flown, GAO
found that the coalition airlines' proposal only incorporates factors
that would substantially increase the taxes paid by low-fare and small
airlines and decrease the taxes paid by the seven coalition airlines;
(7) as a result, the proposal would dramatically redistribute the taxes
among airlines and could have substantial implications for domestic
competition; (8) if Congress decides to replace the ticket tax with a
different financing mechanism, numerous options exist, including a tax
on such common usage indicators as aircraft departures or passenger
enplanements; (9) such options entail tradeoffs between their ease of
administration, effect on how efficiently the nation's airports and
airways are used, and ability to produce an equitable system in which
commercial users pay their fair share of the costs; and (10) similarly,
the potential competitive impacts of these options vary widely.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-RCED-97-56
     TITLE:  FAA Financing: Issues and Options in Deciding to Reinstate 
             or Replace the Airline Ticket Tax
      DATE:  02/04/97
   SUBJECT:  Airline industry
             Excise taxes
             Competition
             Commercial aviation
             Trust funds
             User fees
             Cost analysis
             Air transportation operations
IDENTIFIER:  Airport and Airway Trust Fund
             Chicago-O'Hare International Airport (Chicago, IL)
             Orlando (FL)
             St. Louis (MO)
             
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Cover
================================================================ COVER


Before the Committee on Finance,
U.S.  Senate

For Release
on Delivery
Expected at
10:00 a.m.  EST
Tuesday,
February 4, 1997

FAA FINANCING
- ISSUES AND OPTIONS
IN DECIDING TO
REINSTATE OR REPLACE
THE AIRLINE TICKET TAX

Statement of John H.  Anderson, Jr.,
Director, Transportation Issues,
Resources, Community, and Economic
Development Division

GAO/T-RCED-97-56

GAO/RCED-97-56T


(341522)


Abbreviations
=============================================================== ABBREV


============================================================ Chapter 0

Mr.  Chairman and Members of the Committee: 

We appreciate the opportunity to testify on issues related to the
financing of the Federal Aviation Administration (FAA).  On December
31, 1996, the government's authority to collect the taxes that
finance the Airport and Airway Trust Fund, which has historically
provided about three-quarters of FAA's funding, lapsed.  In December
1996, we reported to you, Mr.  Chairman, and other members of the
Senate and House on the status of the Trust Fund and on a proposal by
a coalition of the nation's largest airlines to replace the tax on
domestic airline tickets, which has been the Trust Fund's primary
source of revenue, with fees on domestic operations.\1 The coalition
airlines\2 contend that they pay for more than their fair share of
the costs incurred by FAA in running the airport and airway system
and that competing low-fare airlines underpay. 

Our testimony today discusses the (1) status of the Trust Fund, (2)
issues raised by the coalition's proposal, (3) potential effects of
the coalition's proposal on domestic competition, and (4) potential
competitive impacts of alternative options for financing FAA.  Our
main points are as follows: 

  -- On December 9, 1996, we reported that, based on estimates
     provided by FAA and the U.S.  Treasury, the money available in
     the Trust Fund to finance new commitments would reach zero by
     July 1997, unless the taxes were reinstated or another financing
     mechanism adopted.  The estimates by FAA and Treasury assumed
     that airlines would pay most of the taxes that they owed for the
     last several months of 1996 by the end of the year.  However,
     when making these estimates, FAA and the Treasury were unaware
     of a regulatory interpretation provided to the airlines by the
     Internal Revenue Service (IRS) that allowed airlines to delay
     these payments.  When the taxes are paid, they cannot be
     transferred from the General Fund to the Trust Fund because the
     authority to do so also lapsed at the end of 1996.  While FAA
     and Treasury are still trying to determine when the Trust Fund
     would run out of money, based on FAA and Treasury data, FAA may
     have to stop making new capital commitments as early as March
     1997 in order to ensure that the agency can pay its workforces
     through the end of the fiscal year.  To prevent this, the
     Congress would need to grant the authority to transfer the tax
     payments by March, which would allow FAA to fund new capital
     commitments to late July 1997.  If the Congress reinstates the
     taxes or some other alternative by July, the Trust Fund should
     be able to fully finance its portion of FAA's fiscal year 1997
     budget. 

  -- To the extent possible, commercial users of the nation's
     airspace should pay a fair, cost-based share of the total costs
     of the nation's airport and airway system.  As our December 1996
     report indicated, because the airline ticket tax is computed
     based on the fares paid and not on factors that relate to FAA's
     costs for providing service, the extent to which the tax fairly
     allocates costs among system users is open to question. 
     Recognizing the need for better cost data, the Congress in
     October 1996 directed that (1) an independent assessment of
     FAA's funding needs and the costs imposed on the system by each
     segment of the aviation industry be completed by February 1997,
     (2) we assess how air traffic control costs are allocated
     between FAA and the Department of Defense (DOD), with a report
     due to the Congress by April 1997, and (3) a national commission
     study how best to finance FAA in light of these assessments,
     with a report due to the Secretary of Transportation by August
     1997.\3 These studies will be critical pieces in determining if
     the ticket tax fairly allocates system costs among users and in
     designing a new fee system if the Congress decides to replace
     the ticket tax. 

  -- While many factors drive FAA's costs, such as the number of
     aircraft departures and aircraft miles flown, we found that the
     coalition airlines' proposal only incorporates factors that
     would substantially increase the taxes paid by low-fare and
     small airlines and decrease the taxes paid by the seven
     coalition airlines.  As a result, the proposal would
     dramatically redistribute the taxes among airlines and could
     have substantial implications for domestic competition.\4

  -- If the Congress decides to replace the ticket tax with a
     different financing mechanism, numerous options exist, including
     a tax on such common usage indicators as aircraft departures or
     passenger enplanements.  Such options entail tradeoffs between
     their ease of administration, effect on how efficiently the
     nation's airports and airways are used, and ability to produce
     an equitable system in which commercial users pay their fair
     share of the costs.  Similarly, the potential competitive
     impacts of these options vary widely.  Examining potential
     financing alternatives will require careful consideration of
     these factors to ensure that, in the long term, FAA has a secure
     funding source; the nation's airports and airspace are used as
     efficiently as possible; commercials users of the system pay
     their fair share; and a strong, competitive airline industry
     continues to exist. 


--------------------
\1 Airport and Airway Trust Fund:  Issues Raised by Proposal to
Replace the Airline Ticket Tax (GAO/RCED-97-23, Dec.  9, 1996). 

\2 The coalition comprises the seven largest airlines--American
Airlines, Continental Airlines, Delta Air Lines, Northwest Airlines,
Trans World Airlines, United Airlines, and USAir. 

\3 The Federal Aviation Reauthorization Act of 1996 (P.L.  104-264). 
On November 18, 1996, FAA contracted with Coopers & Lybrand to
conduct the independent cost assessment.  As of late January 1997,
the national commission had not yet been formed. 

\4 The extent to which airlines were able to shift some or all of the
costs associated with the ticket tax to consumers depended on
consumers' sensitivity to changes in airfares.  Prior studies have
shown that consumers' sensitivity to fare changes varies and that in
some cases small fluctuations in fares can have a large impact on an
airline's ridership.  Thus, redistributing taxes among airlines could
have substantial competitive impacts depending on the subsequent
effects on fares and ridership. 


   BACKGROUND
---------------------------------------------------------- Chapter 0:1

The Airport and Airway Trust Fund was established by the Airport and
Airway Revenue Act of 1970 (P.L.  91-258) to finance FAA's
investments in the airport and airway system, such as construction
and safety improvements at airports and technological upgrades to the
air traffic control system.  Historically, about 87 percent of the
tax revenues for the Trust Fund has come from a tax on domestic
airline tickets.  Before it lapsed at the end of 1996, the tax was 10
percent of the fares paid.  The remainder of the Trust Fund was
financed by a $6 per passenger charge on flights departing the United
States for international destinations, a 6.25 percent charge on the
amount paid to transport domestic cargo by air, a 15-cents-per-gallon
charge on purchases of noncommercial aviation gasoline, and a
17.5-cents-per-gallon charge on purchases of noncommercial jet fuel. 


   STATUS OF THE TRUST FUND
---------------------------------------------------------- Chapter 0:2

In fiscal year 1997, under current law, the Trust Fund is to provide
$5.3 billion (62 percent) of FAA's budget of $8.6 billion.\5

FAA and the Treasury originally estimated that if the taxes that
finance the Trust Fund lapsed on December 31, 1996, the Trust Fund
would be about $1 billion short of the funding needed to finance its
portion of FAA's budget.  However, in late January 1997, the Treasury
acknowledged that it had miscalculated the balance of the Trust Fund
because the agency incorrectly assumed that airlines would pay most
of the taxes that they owed for the last several months of 1996 by
the end of the year.  However, under a regulatory interpretation
provided to the airlines by IRS, they do not have to make most of
those payments until late February 1997, and most airlines have not
as yet paid.  When these taxes are paid, they cannot be transferred
from the General Fund to the Trust Fund because the authority to do
so lapsed at the end of 1996.  As a result, the Trust Fund may be
about $2 billion short of the funding needed to finance its portion
of FAA's fiscal year 1997 budget. 

FAA and Treasury officials are still attempting to determine the
precise amount of the shortfall.  However, based on FAA and Treasury
data, a shortfall of $2 billion would mean that in order to pay its
workforces through the end of fiscal year 1997, FAA would have to
stop making new capital commitments about March 1997.  Reinstating
the authority to move tax receipts from the General Fund to the Trust
Fund by March would provide FAA with money to fund new capital
commitments to late July 1997.  If the Congress reinstates the taxes
(or some other financing mechanism) by July, the Trust Fund should be
able to fully finance its portion of FAA's fiscal year 1997 budget. 


--------------------
\5 Department of Transportation's Appropriations Act for Fiscal Year
1997 (P.L.  104-205). 


   WHETHER TICKET TAX RESULTS IN
   USERS PAYING THEIR FAIR SHARE
   OF THE SYSTEM'S COSTS IS
   UNCERTAIN
---------------------------------------------------------- Chapter 0:3

FAA is responsible for a wide range of functions, from certifying new
aircraft to inspecting the existing fleet to providing air traffic
services, such as controlling takeoffs and landings and managing the
flow of aircraft between airports.  Over the past decade, the growth
of domestic and international air travel has greatly increased the
demand for FAA's services.  At the same time, FAA must operate in an
environment of increasingly tight federal resources.  In this
context, we have generally supported FAA's consideration of charging
commercial users for its services and believe that the various
commercial users of the nation's airspace and airports should pay
their fair share of the costs that they impose on the system.\6 In
particular, we have previously suggested that FAA examine the
feasibility of charging fees to new airlines for the agency's
certification activities and to foreign airlines for flights that
pass through our nation's airspace.  In addition, to ensure full cost
recovery, we have suggested that FAA consider raising the fees that
it charges for the certification and surveillance of foreign repair
stations. 

Because the airline ticket tax is based on the fares paid by
travellers and not on factors that relate to system costs, it may not
fairly allocate costs among the users of the airport and airway
system.  For example, two airlines flying the same number of
passengers on the same type of aircraft from Minneapolis to Des
Moines at the same time of day will impose the same costs on the
airport and air traffic control system.  However, because the ticket
tax is based on the fares paid, the airline that charges the lower
fares will pay less for the system's use.  Citing such examples, the
coalition airlines contend that they pay for more than their fair
share of the system's costs and that competing low-fare airlines
underpay. 

However, comparing the relative share of airlines' payments under the
ticket tax to some common measures of domestic system usage does not
provide conclusive evidence that the ticket tax is unfair.  As figure
1 shows, the coalition airlines accounted for almost 80 percent of
the total payments made under the ticket tax in 1995.  Their
percentage of system use was lower than this for some common
indicators of system use such as domestic departures, passenger
enplanements, and miles flown.  However, the coalition airlines
accounted for 81 percent of the fuel consumed by commercial airlines
in domestic operations in 1995, another indicator of system usage. 
Airlines that compete with the coalition airlines, such as Southwest
Airlines and America West, accounted for about 17 percent of the
payments made under the ticket tax in 1995 but accounted for 21
percent of all domestic departures and 22 percent of enplanements. 
On the other hand, their share of miles flown and fuel used was the
same as their share of ticket tax payments.  Reaching definitive
conclusions based on these comparisons is further complicated by the
fact that most major commuter carriers are owned by or affiliated
with one of the coalition airlines. 

   Figure 1:  Comparison of the
   Relative Share Paid Under the
   Ticket Tax Compared With the
   Relative Share of Common
   Domestic System Usage
   Indicators, 1995

   (See figure in printed
   edition.)

Source:  GAO's analysis of DOT's data. 

Currently, FAA has insufficient cost information to show whether the
ticket tax or any of the system usage indicators shown in figure 1
would be good proxies for fairly allocating FAA's costs among
commercial users.  The Congress in October 1996 directed that, among
other things, an independent assessment of FAA's costs be completed
by February 1997 and that a national commission recommend to the
Secretary of Transportation by August 1997 how best to finance FAA in
light of the independent assessment.\7

Additionally, the Congress required that we assess how costs are
allocated between FAA and DOD and that we report to the Congress by
April 1997.  Because about 18 percent of DOD services are provided to
civilian users, according to DOD, information regarding DOD's costs
may also be relevant in assessing financing alternatives for FAA.  As
a result, better information should be available later this year on
FAA's costs that will allow for an evaluation of the ticket tax and
potential alternative options for financing FAA. 


--------------------
\6 Certification of New Airlines:  Department of Transportation Has
Taken Action to Improve Its Certification Process (GAO/RCED-96-8,
Jan.  11, 1996), and Management Reform:  Implementation of the
National Performance Review's Recommendations (GAO/OCG-95-1, Dec.  5,
1994). 

\7 Under the Federal Aviation Reauthorization Act of 1996, after
receiving the national commission's report, the Secretary of
Transportation is required to consult with the Secretary of Treasury
and report to the Congress by October 1997 on the administration's
recommendations on how best to finance FAA. 


   PROPOSAL BY LARGER AIRLINES
   WOULD INCREASE THE SHARE PAID
   BY OTHER AIRLINES AND COULD
   HAVE SUBSTANTIAL COMPETITIVE
   IMPACTS
---------------------------------------------------------- Chapter 0:4

Motivated by their belief that the ticket tax unfairly subsidizes
their low-fare competitors, the coalition airlines in May 1996
proposed that the ticket tax be replaced by user fees on domestic
operations.  Under the proposal, airlines would pay fees for domestic
operations according to the following three-part formula:  (1) $4.50
per originating passenger; (2) $2.00 per jet seat on aircraft with 71
or more seats and $1.00 per seat on jets and turboprop aircraft with
70 or fewer seats; and (3) $0.005 per nonstop passenger mile.\8

By using two factors in particular--originating passengers and
nonstop passenger miles--the formula tends to favor the larger
airlines, which operate hub-and-spoke systems, at the expense of the
low-fare and small airlines, which tend to operate point-to-point
systems.  This relationship can best be shown by example.  Consider
the two possible routings between St.Louis and Orlando shown in
figure 2.  The hubbing airline first takes the passenger from St. 
Louis to a hub, such as Chicago's O'Hare Airport, to connect to
another flight to Orlando.  The point-to-point carrier takes the St. 
Louis passenger nonstop to Orlando. 

   Figure 2:  Comparison of
   Potential Hubbing and
   Point-to-Point Service Options
   Between St.  Louis and Orlando

   (See figure in printed
   edition.)

The airline that picks up a passenger in St.  Louis and then lands at
O'Hare to transfer the passenger to another flight to Orlando has
twice as many takeoffs and landings as the airline that flies nonstop
between St.  Louis and Orlando.  As a result, the costs imposed by
the hubbing airline on the air traffic control system are greater. 
However, by charging $4.50 per "originating" passenger the airline
that flies the passenger from St.  Louis to Orlando via Chicago
O'Hare would pay the same amount as an airline that flies the
passenger nonstop between St.  Louis and Orlando, even though the
hubbing carrier puts a greater burden on the system. 

In addition, by charging $0.005 per "nonstop passenger mile"--or the
straight-line distance between the points of origin and
destination--the formula does not charge the hubbing airlines for the
circuitous routings that are common to their hub-and-spoke
operations.  As a result, the airline transporting a passenger 297
miles from St.  Louis to O'Hare and then flying that passenger 1,157
miles to Orlando would be charged the same as an airline flying a
passenger nonstop from St.  Louis to Orlando, even though the hubbing
carrier placed a greater burden on the air traffic control system. 

Because the seven largest airlines operate hub-and-spoke systems and
most low-fare and small airlines operate point-to-point systems, the
proposed user fee would shift the fees for using the system away from
the larger airlines and onto their competitors.  As shown in appendix
I, for example, if this proposal had been in place in 1995 instead of
the ticket tax, the cost to the nation's seven largest airlines would
have been nearly $550 million less while the cost to Southwest
Airlines, America West, and other low-fare and small airlines would
have been about $500 million more.  In addition, the coalition's
proposal would charge commuter carriers $1.00 per seat while charging
airlines $2.00 per seat.  Because most major commuter carriers are
owned by or affiliated with one of the coalition airlines, the
proposal would thereby provide an additional benefit to the coalition
airlines by charging commuter carriers less per seat. 

Implementing a proposal that would shift about $500 million in costs
from one segment of the industry to another could have substantial
competitive impacts.  For Southwest Airlines, for example, the
increased amount paid would represent about 7 percent of the
airline's total passenger revenue.  According to the Department of
Transportation (DOT), competition from low-fare airlines such as
Southwest influences airfares in markets that account for about 40
percent of domestic passengers.  In addition, according to DOT, these
passengers tend to be the most price sensitive.  As a result, such a
substantial increase in costs would likely force Southwest and the
other low-fare and smaller airlines to raise their fares and could
result in a reduction in passenger demand in those markets, which
tend to be in the West and Southwest.  To the extent that these
airlines stopped serving markets that were no longer profitable,
competition would be reduced.  On the other hand, consumers in the
East and upper Midwest, who have not experienced the entry of
low-fare airlines to the same extent, could pay relatively less than
they did under the ticket tax and may benefit from an increase in
airline competition that may result from any increase in passenger
demand, if the larger airlines passed their reduced tax payments onto
consumers by reducing ticket prices. 

While the ticket tax might provide a competitive advantage for
low-fare airlines, other public policies favor some large carriers. 
For example, a few large airlines control nearly all the takeoff and
landing slots at the four slot-controlled airports\9 , which give
them an advantage over their competitors.  Simply eliminating the
potential "subsidy" to low-fare airlines created by the ticket tax,
while leaving the other policies in place that provide a competitive
advantage to some large airlines, might result in higher fares and a
reduction in service options for consumers. 


--------------------
\8 Air Traffic Control User Fees:  A Proposal by the Coalition for
Fair FAA Funding, revised June 7, 1996.  The proposal defines
originating passenger based on the beginning point of the trip,
irrespective of the number of take offs and landings made during the
journey. 

\9 To minimize flight delays, FAA limits the number of operations
(takeoffs and landings) that can occur during certain periods of the
day at four key congested airports--Chicago O'Hare, Washington
National, New York Kennedy, and LaGuardia.  The authority to conduct
a single operation during these periods is commonly referred to as a
"slot."


   IMPACTS AND TRADEOFFS
   ASSOCIATED WITH THE NUMEROUS
   ALTERNATIVE OPTIONS AVAILABLE
   FOR FINANCING FAA VARY
---------------------------------------------------------- Chapter 0:5

Determining how best to finance FAA is a complex problem that
requires careful study and good cost data.  FAA's costs vary
depending on the amount, type, and timing of various airline
operations.\10 For example, hubbing operations at congested airports
increase the peak service demands on the system and increase FAA's
costs.  However, this cost has not yet been quantified and neither
the 10-percent ticket tax nor the large airlines' proposal accounts
for these costs.  A financing system that doesn't take such factors
into consideration could result in costs not being fairly allocated
among system users.  As a result, any potential financing mechanism
for FAA should be assessed from the standpoint of the data currently
being developed on FAA's actual costs. 

If the Congress ultimately decides to replace the ticket tax with a
different fee system, numerous financing options are available for it
to consider.  Possible options include taxing one or more of the
common indicators of system use, such as departures, passenger
enplanements, seats flown, fuel consumed, or a combination of these
indicators.  However, the potential competitive impact of using these
indicators as a basis for allocating FAA's costs varies greatly
depending on which indicator is used.  For example, if a tax on
passenger enplanements were adopted and designed to generate about
the same amount of revenue as the ticket tax, the amount paid by the
coalition airlines would decline by about $251 million while the
amount paid by the competing airlines would increase by $269 million
and commuter carriers by $61 million.\11 (See app.  II.) In contrast,
a fuel tax would keep the amount paid by each airline group about the
same as each paid under the ticket tax.  (See app.  III.)

The impact of the financing options also varies among airlines within
the coalition and competing airline groupings.  For example, under a
system that taxed both fuel use and passenger enplanements, the
amount paid by four coalition airlines would decrease but would
increase for the other three coalition members.  Similarly, under a
financing system that taxed departures and aircraft miles, the amount
paid by Southwest Airlines would increase by about $135 million but
would decrease by about $7 million for the other airlines in the
competing airlines grouping.  In general, such variances result from
differences between airlines in operating factors, such as type of
operation, average age of their aircraft fleet, and average distance
of their flights. 

The various financing options for FAA also present tradeoffs between
their ease of administration, impact on how efficiently the airport
and airway system is used, and ability to produce an equitable system
in which users pay their fair share.  For example, a formula that
combines several of the common system usage indicators might provide
the most exact method to ensure that all users pay their fair share
of system costs.  However, such a formula may also be so complex that
it would be difficult to administer.  Similarly, taxing airlines for
their use of the most congested airports may result in a more
efficient use of the nation's airspace.  However, because the
coalition airlines are the primary users of these airports, this
approach may not produce the most equitable result from their point
of view. 

Such tradeoffs and the potential competitive impacts of a new fee
system will need to be carefully studied over the next year by the
national commission and the Secretary of Transportation.  The
financing alternative that is finally selected should be relatively
easy to administer and help ensure that, in the long term, FAA has a
secure funding source, the nation's airports and airways are used as
efficiently as possible, commercial users of the system pay their
fair share, and a strong, competitive airline industry continues to
exist.  Ultimately, it will be a policy call for the Congress to
decide on how to achieve these goals. 


--------------------
\10 The issue of how various users of air traffic and other FAA
services impose costs on the system is complex.  Past studies of
FAA's costs have found that the nature of how air traffic and
associated services are produced entails many costs that are
"common"--that is they cannot be allocated to any one type of user. 
As a result, a full allocation of system costs may require a
mechanism for assigning these common costs. 

\11 A tax of $10 per enplanement would generate about $79 million
more than was generated under the ticket tax in 1995. 


-------------------------------------------------------- Chapter 0:5.1

Mr.  Chairman, this concludes our prepared statement.  We would be
glad to respond to any questions that you or any member of the
Committee may have. 


CHANGE IN THE AMOUNT PAID BY
GROUPING UNDER THE COALITION'S
PROPOSAL COMPARED WITH THE TICKET
TAX, 1995
=========================================================== Appendix I



   (See figure in printed
   edition.)

Notes:  Charge is $4.50 per embarkment, $2 per jet seat, $1 per
turboprop seat, and $0.005 per nonstop passenger mile. 

Proposal would generate about $128.6 million less than was generated
by the ticket tax in 1995. 


CHANGE IN THE AMOUNT PAID BY
GROUPING UNDER A $10 TAX PER
ENPLANEMENT COMPARED WITH THE
TICKET TAX, 1995
========================================================== Appendix II



   (See figure in printed
   edition.)

Notes:  Charge is $10 per enplanement. 

Option #1 would generate about $79 million more than was generated by
the ticket tax in 1995. 

Data based on total domestic enplanements by each grouping in
calendar year 1995. 


CHANGE IN THE AMOUNT PAID BY
GROUPING UNDER A $0.42 TAX PER
GALLON COMPARED WITH THE TICKET
TAX, 1995
========================================================= Appendix III



   (See figure in printed
   edition.)

Notes:  Charge is 42 cents per gallon. 

Option #2 would generate about $1 million less than was generated by
the ticket tax in 1995. 

Data based on total gallons consumed by each grouping in domestic
operations in calendar year 1995. 

*** End of document. ***