Business Jets and ATC User Fees: Taking a Closer Look

Publication Date: August 2006

Publisher: Reason Foundation

Author(s): Robert W. Jr. Poole

Research Area: Transportation

Type: Report

Abstract:

American business depends critically on air transportation, whether it involves employees and managers on commercial airlines, executives on business jets, or packages and cargo delivered via cargo plane. Yet the capacity of our aviation infrastructure is not keeping pace with the projected growth in flight activity over the next 20 years. Without fundamental change, the system will begin running out of capacity within this decade, and within 20 years untenable delays will make forced cutbacks in both airline and business jet operations inevitable.

This paper identifies what 15 different business jets currently pay in federal aviation taxes, and then estimates what each would pay, for the same annual flight activity, under several possible ATC fee regimes. This analysis led to three important findings.

The first finding is that under today's tax regime, the same business jet pays three entirely different amounts to receive exactly the same ATC services, depending on whether it is flown as a corporate-owned jet, a fractionally owned jet, or an air taxi/charter jet. Charters and fractionals pay four to five times as much as corporate-owned jets for identical services.

The second finding is that under some types of user-fee regimes (e.g., Canada's), many business jets would actually pay less than they do today in aviation taxes, especially fractionals and charters.

And the third finding is that the benefits of shifting from today's 20th-century, manual-separation form of ATC to a network-centric system with ample capacity could easily offset the increase in costs due to a switch to ATC fees. For most corporate jets, if the new system saved as little as 3 to 5 percent of annual flight time (by reducing delays in holding patterns, providing direct routings and optimal altitudes, etc.), the operating cost savings from fewer flight hours would offset the small increase in cost per flight hour.