TABLE 25 LOCAL SERVICE AIR CARRIERS: Estimated Impact On Total Direct Subsidy Payment 1/ The method of this table assumes all the additional expense attributable to the 2-cent per gallon tax in fiscal year 1962 would be met by an increased subsidy payment, and that no part of the additional expense would be recovered by increased passenger fares, freight rates, service mail pay, etc. Data beyond fiscal year 1962 are not shown because estimates of subsidy payments are not available. 70510 0-61-pt. 1- -44 carriers received no subsidy payment in fiscal year 1960; the intraAlaska carriers received $4,610,000. It is estimated the proposed user charges would add approximately $94,000 in fiscal year 1962 and $182,000 in fiscal year 1963 to the total operating expenses of these carriers. Their operating expenses in fiscal year 1960 amounted to $28.4 million. Presently there are four all-cargo carriers certificated by the Civil Aeronautics Board for scheduled domestic cargo operations. They cannot offer scheduled passenger service and they are not legally eligible for direct subsidy payments. Measured in terms of total assets the all-cargo carriers are smaller than the local service air carriers by about 30 percent. The scheduled all-cargo service of these carriers must be regarded as still developmental; traffic has grown in good amounts during the twelve years the group has had certification, but the aggregate volume has not been sufficient to provide each of these carriers with a stable and sufficiently high level of earnings. The current financial position of this group of air carriers is decidedly weak. Slick Airways suspended its scheduled cargo service in February 1958, but continued to fly nonscheduled service. AAXICO Airlines discontinued scheduled operations in July 1959 and ceased nonscheduled operations in June 1960. Riddle Airlines and the Flying Tiger Line have continued scheduled operations since their certification, but Riddle has had frequent changes of management and has suffered substantial losses. On September 30, 1960, Riddle had a total equity capitalization of only $353,000. The Flying Tiger Line is both the largest and financially strongest of the four carriers, but in fiscal year 1960 it, too, suffered a net loss, amounting to $998,000. At the end of 1958 the Civil Aeronautics Board simultaneously denied the requests of AAXICO, Flying Tiger, Riddle and Slick to remove restrictions in their certificates which prevent them from receiving subsidy, and ordered an investigation for the purpose of evaluating the allcargo experiment. Designated the "Domestic Cargo-Mail Service Case," Docket No. 10067 et al, the investigation's formal hearing began in September 1959 to decide, among other issues, whether the all-cargo air carriers' services should be continued, whether their services should be subsidized and whether their route authorizations should be modified. The Initial Decision of the Examiner has been issued, but final decision in the case has not yet been announced by the Board. In fiscal year 1960 the domestic all-cargo carriers' total operating expenses amounted to $53.3 million; fuel consumption amounted to approximately 50.6 million gallons of aviation gasoline. If a -cent additional per gallon tax on aviation gasoline had been imposed (making a total tax of 2 cents per gallon, as is proposed in this study for fiscal year 1963), expenses would have increased by $253,000, or 0.5 percent. A tax on jet fuel would have meant no additional expense, since in fiscal year 1960 the all-cargo air carriers operated no turbine-engine equipment. (In fiscal year 1962, however, both Flying Tiger and Slick will have turbine-engine Canadair CL-44 aircraft in service.) There are 33 supplemental air carriers operating in domestic and international service under interim authorization granted by the Civil Aeronautics Board. Financial data are reported by these carriers as corporate entities only, and their profits or losses on domestic operations are not available. In both fiscal years 1960 and 1959 these 33 air carriers as a group suffered net losses on the sum total of their domestic and international operations. Passenger and cargo traffic data indicate they consumed approximately 50 million gallons of fuel in domestic operations in fiscal year 1960, and paid approximately one million dollars in fuel taxes under the 2-cent per gallon tax cn aviation gasoline. In the size of their total domestic operations they appear comparable to the domestic all-cargo air carriers. The impact of the proposed user charges in fiscal years 1962 and 1963 would be roughly comparable, also, i.e., relatively minor in terms of both aggregate dollars and percent of operating expenses. F. Proposed User Charge and General Aviation Flying As noted in an earlier portion of this section, general aviation flying is not subject to economic regulation by the Civil Aeronautics Board and does not report its operations and finances to the Federal Government. But certain activity data, such as aircraft hours and miles flown, active aircraft and fuel consumption are compiled by FAA from aircraft registration records and annual surveys. It is primarily from these data than an evaluation of the effect of the proposed user charge on general aviation flying must be made. Additional useful information for this purpose, such as the selling prices of general aviation aircraft, is available from industry sources. The great expansion, particularly since 1952, of general aviation flying independent of any direct aid by the Federal Government identifies an industry which is self-sufficient and firmly based economically. The outlook, additionally, is for further expansion of all types of general aviation flying. Business flying, which now accounts for about 46 percent of all general aviation flying, appears likely to expand the most. The economic feasibility and increasing acceptance of the small private or corporately owned aircraft as a means of business transportation is indicated by FAA statistics which show that deliveries of personal and executive aircraft have risen steadily during the past decade, reaching a new high in fiscal year 1960 when a total of 8,198 general aviation aircraft valued at $182 million were delivered to private and business owners. In addition to the economic well-being of general aviation as an industry, which may be inferred from the growth statistics in Table 19, consideration must also be given to the financial impact of the proposed user charge on the individual owners and operators of small aircraft. Table 26 makes use of available data for this purpose. It shows the extent to which fuel taxes of 2¢ and 3¢ per gallon would increase unit and annual operating expenses for average, or representative, general aviation aircraft. For this table the Federal fuel tax expense was computed from FAA reported average utilization statistics, i.e., the number of miles, hours and aircraft flown per year. G. Table 26 shows in Item 6 that the additional expense for an Comparison of Proposed Airway User Charge with Highway User Charge In contrast, 31 States and the District of Columbia, through exemption or refund provisions in their fuel tax laws, do not tax either aviation gasoline or jet fuel. In 15 of the 19 States that impose aviation fuel taxes, gasoline and jet fuel are taxed at the same rate. Only two States Alabama and Vermont tax aviation fuel at the same rate as motor fuel; the other 17 States impose Table 27 gives a State-by-State listing of motor and aviation fuel taxes. |