Could it happen he The High Cost of Operating in Europe

Business & Commercial Aviation


Sticker Shock: The High Cost of Operating in Europe
By David Esler/Business & Commercial Aviation
June 25, 2003

Reports filtering in from business aviation operators in the last few
months warn of noticeable increases in handling charges, taxes and
fees associated with intra-European operations. These combine with
complaints of "sticker shock" from neophyte international operators
making their first forays onto the Continent in a wave of business
aviation activity driven by security concerns in the wake of the 2001
terrorist attacks. "The amount of transatlantic traffic is increasing
.. . . so more operators are using their aircraft internationally,"
David Maiden, Bombardier Skyjet-Europe's managing director, told B/CA
from his office in London.

And apparently, a lot of them are reacting to the handling bills
they're receiving after their trips. According to flight instructor
Roger Rose, president of International Pilot Services at West Palm
Beach, Fla., "Since 9/11, a lot of people who never previously
operated corporate aircraft overseas are doing so now for security
reasons, and consequently, they're questioning a lot of things we
graybeards have been contending with for years. Some of these
operators have had substantial careers in business aviation but
haven't wandered around the planet very much until now."

And in the process, they're getting a quick education on how
differently things function beyond North American FIRs -- or to put it
another way, who pays for what. To understand why operations in Europe
are so expensive to the end user relative to North America, one must
consider the vastly different philosophies of government that have
traditionally formed the two hemispheres' respective infrastructures.

Different Philosophies

Especially in the United States, aviation underpinnings -- airways,
navaids and air traffic management services; rules enforcement and
aircraft and personnel certification; and financial aid to airports --
have traditionally been paid for largely out of general tax revenues.
(Fuel taxes, Aviation Trust Fund assessments and airport passenger
facility charges -- essentially, user taxes -- contribute a portion to
funding supporting facility infrastructure and Airport Improvement
Program grants, but much of the FAA's funding is dipped out of general
tax revenues.) This "share-the-pain" philosophy -- i.e., spreading the
burden of support among the widest possible tax base, as opposed to
just the users of a specific facility or service -- owes its origins
to the American tradition of providing federal seed money for the
specific purpose of encouraging the development of certain industries
or the establishment of infrastructure to support them.

Thus, in the mid-19th century, we saw the U.S. government providing
land grants and mail contracts to the gestating railroad industry as a
wedge to open the American frontier, once again awarding air mail
contracts to the fledgling airlines in the 1920s to stimulate the
development of a transcontinental air transportation industry, and
creating NASA from the purely research-oriented NACA in the late 1950s
to develop a space capability that culminated in the government
running the United States' commercial payload launch business until
recently. Because traditions tend to linger and vested interests will
work vigorously to protect them, U.S. aircraft operators fly within a
national aviation system that is largely paid for by the general
populace, the logic being that the citizenry benefits directly (as
passengers, shippers or suppliers) or indirectly (as consumers) from
the national aviation system.

In Europe and much of the rest of the world, a user-based philosophy
of supporting much -- but not all -- of the public infrastructure
prevails. Since World War II, Western Europeans in particular tend to
view as worthy of public support those services that benefit the
widest possible portion of the population. Prominent examples include
railroads, mass transit and postal services -- the sort of
infrastructure that almost everyone relies on. While Americans may
rave about the efficiency and low cost of the European railroads,
underground systems and post, these entities rarely, if ever, show a
profit -- nor are they intended to -- existing instead on heavy
subsidies from their respective governments.

On the other hand, services and supporting infrastructure that are
seen as benefiting only a selection of the population -- particularly
those deemed luxuries -- are supported by use taxes. In other words,
if you use it, you pay a tax or fee for the privilege; if you don't
use it, you aren't dunned for its support. Aviation in Europe has
traditionally been viewed as a niche activity compared to the
railroads -- private aviation being downright elitist -- and so it has
traditionally had to pay its way.

Even though Europeans built their air transport systems via
nationalized airlines, the carriers still had to bear the burden of
the aviation infrastructure through fees passed on to their
passengers. Nearly all the nationalized European flag carriers have
been spun into the private sector by their respective governments,
bearing the costs of the airways and ATC systems just like general
aviation operators.

Private aviation, what would be considered FAR Part 91 or CAR 604
activity in North America, is structured differently as well --
general aviation ground services are supported by individual fees,
some of them burdensome, rather than through fuel purchases. To put it
another way, at European airports, private operators pay for
everything, even ramp transportation.

"The charges you'll receive for a typical European trip today can be
as much as $8,000, especially if you're moving around," said one
Atlanta-based flight operations manager. And that doesn't include
fuel, food and lodging costs for passengers and crew, ground
transportation or incidentals, like hiring local security. "We don't
mind paying a reasonable fee for handling at airports in the United
States where we aren't purchasing fuel," he said, "but overseas it's
exponentially higher."

FBOs Don't Sell Fuel

But don't European FBOs rake it in on fuel sales and then tack on a
big handling fee to boot? Well, no. First-time operators in Europe
will be surprised to learn that, in most cases, the FBOs, executive
terminals or airline handling services ...

Mo

http://www.aviationnow.com/avnow/new.../europe073.xml

Actually, since 11% of the people are paying over 65% of the taxes, the
"general populace" isn's paying for the aviation infrastructure, they aren't
paying for much of anything. I don't object to user fees on principal, I
object to user fees AND high income taxes. I agree with the article that we
could very well have additionaly fees in the US.

Mike
MU-2


"Larry Dighera" wrote in message
news

Business & Commercial Aviation

.. Because traditions tend to linger and vested interests will
work vigorously to protect them, U.S. aircraft operators fly within a
national aviation system that is largely paid for by the general
populace, the logic being that the citizenry benefits directly (as
passengers, shippers or suppliers) or indirectly (as consumers) from
the national aviation system.

It's the user fee infrastucture that's nuts
I once landed in Ohio; I bought $178 in gas.
Two months later I got a landing bill for $3.78.
Idiotic barely begins...........
H.
N502TB


"Mike Rapoport" wrote in message
...
Actually, since 11% of the people are paying over 65% of the taxes, the
"general populace" isn's paying for the aviation infrastructure, they
aren't
paying for much of anything. I don't object to user fees on principal, I
object to user fees AND high income taxes. I agree with the article that
we
could very well have additionaly fees in the US.

Mike
MU-2


"Larry Dighera" wrote in message
news

Business & Commercial Aviation

. Because traditions tend to linger and vested interests will
work vigorously to protect them, U.S. aircraft operators fly within a
national aviation system that is largely paid for by the general
populace, the logic being that the citizenry benefits directly (as
passengers, shippers or suppliers) or indirectly (as consumers) from
the national aviation system.

"Larry Dighera" wrote in message
news

Business & Commercial Aviation

. Because traditions tend to linger and vested interests will
work vigorously to protect them, U.S. aircraft operators fly within a
national aviation system that is largely paid for by the general
populace, the logic being that the citizenry benefits directly (as
passengers, shippers or suppliers) or indirectly (as consumers) from
the national aviation system.


On Thu, 10 Jul 2003 20:00:27 -0700, "Mike Rapoport"
wrote in Message-Id:
:

Actually, since 11% of the people are paying over 65% of the taxes,

That statistic seems to overlook income taxes paid by US corporations
(or don't they do that any more). :-(

the "general populace" isn's paying for the aviation infrastructure, they aren't
paying for much of anything.

The article mentions both aviation related taxes and general tax
revenues as sources for US aviation infrastructure funding.
Unfortunately it fails to provide any idea of the proportion
contributed by each.

"Especially in the United States, aviation underpinnings --
airways, navaids and air traffic management services; rules
enforcement and aircraft and personnel certification; and
financial aid to airports -- have traditionally been paid for
largely out of general tax revenues. (Fuel taxes, Aviation Trust
Fund assessments and airport passenger facility charges --
essentially, user taxes -- contribute a portion to funding
supporting facility infrastructure and Airport Improvement
Program grants, but much of the FAA's funding is dipped out of
general tax revenues.) This "share-the-pain" philosophy -- i.e.,
spreading the burden of support among the widest possible tax
base, as opposed to just the users of a specific facility or
service -- owes its origins to the American tradition of providing
federal seed money for the specific purpose of encouraging the
development of certain industries or the establishment of
infrastructure to support them."


I don't object to user fees on principal,

It would depend how user fees were structured. If they were
implemented in a way that placed a price on safety related services,
that would be a mistake. Then there's the issue of the cost of
equitably collecting them ...

I object to user fees AND high income taxes.

You must be among the 11% who (you contend) pay 65% of US taxes. :-)

Seriously, the equitable distribution of aviation infrastructure costs
should be paid by those who benefit from the fruits of aviation
activity, both directly and indirectly, which includes most everyone
in today's modern world. But, if European governments traditionally
subsidizes aviation infrastructure, doesn't that reasonably obligate
the US do the same, or face a relative decline in US aviation
viability?

I agree with the article that we could very well have additionaly
fees in the US.

Mike
MU-2


It's seldom indeed, that expenses diminish over time. But, I fear the
consequences of privatizing ATC will mirror the massive damage caused
by deregulating electricity in California. There would likely be too
grand an opportunity for big business to price gouge the public; one
would expect the government to lack such avaricious motives.

"Larry Dighera" wrote in message
...

"Larry Dighera" wrote in message
news


Seriously, the equitable distribution of aviation infrastructure costs
should be paid by those who benefit from the fruits of aviation
activity, both directly and indirectly, which includes most everyone
in today's modern world. But, if European governments traditionally
subsidizes aviation infrastructure, doesn't that reasonably obligate
the US do the same, or face a relative decline in US aviation
viability?

I agree with the article that we could very well have additionaly
fees in the US.

Mike
MU-2


It's seldom indeed, that expenses diminish over time. But, I fear the
consequences of privatizing ATC will mirror the massive damage caused
by deregulating electricity in California. There would likely be too
grand an opportunity for big business to price gouge the public; one
would expect the government to lack such avaricious motives.




It is always difficult to come up with a "fair" system. What is fair?
Equal pay for equal service? Taxation that produces equal pain? Everybody
paying an equal percentage? All are fair. All are unfair.

If we go to a user fee system, how will we price it? Should the same flight
by a 172 and a 747 be charged the same? It costs the same to separate each
blip.

I disagree with the notion that people shouldn't have to pay for services
that add safety. Why not? Should everyone venturing into the woods be
provided with a satellite phone and locator beacon at government expense?

My personal philosophy on whether I should pay user fees is that I am
already paying $10K/week in taxes and that should cover all the services
that I recieve, particularly since they don't even deliver the mail to my
house.

Unfortunately, if we go to a user fee system, it will probably be written
mostly by/for the airlines who pay no taxes and are bailed out on a regular
basis at taxpayer expense.

Mike
MU-2

Larry Dighera wrote:

The article mentions both aviation related taxes and general tax
revenues as sources for US aviation infrastructure funding.
Unfortunately it fails to provide any idea of the proportion
contributed by each.

Years ago, the majority of this came from the general fund. This was because
the politicos felt that it was advantageous to keep a large aviation "Trust
Fund" surplus on the books. It made to budget deficits look better. The trust
fund was taken off line during the Clinton administration. Although groups
like AOPA had pushed for it to be taken off the books to allow some of it to
be spent for airport improvements (arguably its intended purpose), the
politicos started fundind the FAA primarily from this source, and the fund
has been seriously depleted. I believe that C.J. Campbell quoted the balance
as being 80% from the fuel and ticket taxes.

The lesson is that it is VERY important for you to find out when one of these
articles was written. If it was written more than about 10 years ago, it will
no longer be factual (if it ever was).

George Patterson
The optimist feels that we live in the best of all possible worlds. The
pessimist is afraid that he's correct.
James Branch Cavel