OPINION: Aviation woes

Cap-and-trade bill will harm industry

By James C. May | Thursday, June 5, 2008

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The U.S. airline industry is undergoing a fuel crisis of epic proportions. The cost of crude oil is hitting all-time highs and increased refining costs are adding to expenses incurred. As a result, jet fuel firmly constitutes the industry's largest expense - accounting for 30 percent to 50 percent of costs, depending on the carrier. This year, U.S. airlines are projected to spend $61.2 billion on fuel, $20 billion more than in 2007 - an increase equivalent to the compensation and benefits of 267,000 airline workers or the acquisition of 286 new, more fuel-efficient jets. Ticket prices and other travel costs continue to rise. Simultaneously, routes are being cancelled.

Just when we thought things could not get worse, along comes the climate change cap-and-trade legislation sponsored by Sens. Joseph I. Lieberman , Connecticut independent Democrat, and John W. Warner, Virginia Republican. The bill, if enacted, would impose a carbon tax on the airline and other transportation industries. This would throw a cold, wet blanket on a U.S. economy that is already hamstrung by soaring food and energy costs. Compounding injury with irony, the Lieberman-Warner bill would require cash-strapped airlines to remit their carbon taxes to cash-rich oil companies.

The airline industry does not require climate-change legislation in order to fly green. Since the cost of jet fuel is the industry's largest cost center, no industry in America is more motivated to limit energy consumption and resulting emissions than commercial aviation. Between 1978 and 2007, U.S. airlines improved their fuel efficiency by 110 percent. Also, between 2000 and 2006, the airlines reduced fuel burn and greenhouse gas (GHG) emissions by 4 percent - while moving 12 percent more passenger traffic and 22 percent more cargo traffic. In fact, U.S. airlines account for only 2 percent of this nation's GHG emissions. Yet they drive three times more economic activity. No other industry is more economical and carbon-efficient in moving people and critical goods.

Further taxing this already over-taxed industry will hinder significantly the airlines' ability to invest in the innovations that have driven its exceptional environmental track record. It is indisputable that the Lieberman-Warner bill would significantly increase the cost of transportation fuel. Let us assume that emissions allowances are modestly priced at $25/metric ton of carbon-dioxide equivalent (CO2e) in 2012 when the bill would go into effect: In this scenario, this legislation would add another $5 billion to the airlines' fuel costs. These costs would escalate each year thereafter. Such costs would result in further job losses, higher ticket prices, elimination of services and a negative economic ripple effect beyond what we are experiencing today.

Instead of piling on additional punitive measures to the airlines, the federal government should focus on measures that complement the airlines' initiatives and enhance our nation's transportation infrastructure. For example, modernizing the nation's aging air traffic control (ATC) system would enable more efficient flying routes and decrease emissions by an additional 10 to 15 percent. The airlines want Congress to give them credit for their exceptional environmental record, fuel-efficiency achievements and history of investing in new technologies and innovations that benefit our economy. If a cap-and-trade system is applied to aviation, why doesn't Congress reinvest proceeds into aviation, allowing for additional funding of programs and technologies (ATC modernization, environmentally-friendly synthetic jet fuels, etc.) that promise to further reduce aviation's GHG emissions? Congress should work with the airlines so as not to counter the industry's investments.

For generations, flying has contributed to a better quality of life for Americans. Commercial aviation has been an engine of growth for our economy, yielded breakthrough technologies, brought people together, and transported critical cargo - while achieving a stellar environmental track record. As Congress debates the Lieberman-Warner bill and the significant additional fuel tax it proposes to levy on aviation, we urge lawmakers to consider commercial aviation's environmental efforts to date and how dependent our economy is on the growth of air transportation in the United States.

James C. May is president and CEO of the Air Transport Association.

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