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Press Release


Federal Regulations Ground Air Carriers with Needless Baggage, Taxpayer Group's Study Finds

For Immediate Release July 27, 2005

(Alexandria, VA) -- Despite billions in taxpayer aid, federal meddling in the aviation industry has booked many U.S. air carriers on a flight to fiscal ruin, according to the latest study from the non-partisan National Taxpayers Union (NTU). The citizen group's "policy paper" explores how government micromanagement exacerbates industry problems to the detriment of U.S. taxpayers and airlines.

"From the perspective of taxpayers, it is essential that Congress create an environment that allows airlines to take off or be grounded on their own merits in the closest thing possible to a free marketplace," said NTU Director of Government Affairs and study author Paul Gessing. According to the study, while deregulation in 1978 was a positive step toward reducing federal interference in the aviation marketplace, the limited scope of this model and the rise of security as a major new cost component has preserved and even extended the government's role. Among the highlights:

  • Security Snafus -- A post-9/11 tax of up to $5.00 per one-way trip (and $10.00 for flights with layovers) was levied on airline passengers in order to fund screeners, equipment, and other costs for the notoriously inefficient and incompetent Transportation Security Administration. Unfortunately, yearly contributions of $300 million from the airlines and another $3 billion from the General Fund are also required. Private screeners are a proven better alternative.
  • Induced Overcapacity -- Congress has spent $9.5 billion on keeping faltering airlines aloft in the guise of grants, loan guarantees, and tax waivers since 9/11. But keeping inefficient carriers in the air has led to excess industry capacity even as federal regulators stall industry attempts to reduce this surplus and save costs (as was the fate of the pre-9/11 merger between United and US airways).
  • Out-of-Control Air Traffic Control -- In the face of an $8.2 billion budget shortfall for the nation's federally-managed air traffic control system, now is the time for the U.S. to join the 38 nations who have commercialized their operations. A 2005 Government Accountability Office report that studied commercialization efforts overseas concluded that these services have improved efficiency without compromising safety.
  • Aviation Protectionism -- Federal legislation that restricts the combined foreign ownership of any U.S. airline to 25 percent or less hinders investment in U.S. aviation as well as the influx of innovative ideas and services from other nations.
  • Federal Micromanagement -- Federal restrictions on takeoffs and landings at specific airports around the country also warp the marketplace and cost passengers time and money. For example, the so-called "Wright Amendment," which limits flights in and out of Love Field near Dallas, is one of the primary reasons residents of North Texas pay a 48 percent higher average business fare.
  • "Nearly 30 years after a growth spurt introduced innovation and competition into the industry and brought the convenience of flying to the masses, Congress refuses to release its iron grip," Gessing concluded. "Only when that happens will the creative energies of the next Howard Hughes or [Southwest Airlines founder] Herb Kelleher once again be released to the benefit of travelers and the global economy alike."

    NTU is a non-partisan citizen group founded in 1969 to work for lower taxes and smaller government. Note: NTU Policy Paper 117 Time to Re-deregulate the Airline Industry is available at www.ntu.org.

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