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Federal Aviation Administration shutdown creates grey areas

25-Jul-2011

Friday was not a good day for negotiations in Washington. The House and Senate failed to agree on a compromise for the FAA funding extension and, as of midnight Friday, non-essential staff were furloughed.

Air traffic controllers remain on the job so the flying public is generally unaffected by the situation but roughly 4000 staff will not be at work in the near term. Additionally, construction and other workers involved in FAA funded airport projects will be out of work until the money once again begins to flow.

More than money at stake

Ostensibly, the sticking point is the continued funding of the Essential Air Service programme at a handful of US airports as well as labour issues on which the parties differ. But, with debt limit discussions also hitting a wall on Friday, the real culprit is not money but ideology — a far more complex problem.

While the FAA and the debt limit are theoretically independent items, the same thinking underlies both fights, and the real battle concerns the role of government in America. And though inconvenient for some, the FAA fight pales in comparison to the consequences forecast if there is a failure to reset the US debt ceiling.

Lost tax revenue

In terms of consequence, the real confusion seems to center on the suspended ability of the airlines to collect government taxes on air tickets. The taxes bring in about $200 million per week to fund FAA programs and the shutdown creates a lot of interesting conundrums. The airlines may simply temporarily raise fares to cover the amount of the taxes, providing a windfall for the carriers. Some airline pricing systems have been amended to remove the Federal tax from fare quotes.

However, not all taxes are FAA related and those will remain unchanged. There are also some unanswered questions. Will passengers previously ticketed but traveling during the shutdown be due a refund? Will travelers ticketed without the tax included be charged the supplemental amount if they travel after agreement is reached?

With no immediate settlement in sight, and the far more important debt ceiling bill being a more important challenge, guidelines are not likely to be easily or quickly established.

Knock-on effects

Boeing has announced that airport certification of the B747-8 at some US airports will be delayed until the necessary staff return to their jobs, making operation of the aircraft at those airports impossible. However, the flight certifications of aircraft like the B787 will not be affected.

Progress on the development of Net-Gen ATC will also stop until the impasse is solved. Though far less crippling than the ATC and union strikes that have appeared in Europe over the past few months, the shutdown will nonetheless have consequences, especially for those workers affected in some way.

However, the greater threat may come in the fact that the FAA extensions, generally easily approved 20 times since 2007, now appear to be fair game for the kind of paralysis that has infected many government processes and agencies of late, creating a less predictable, and perhaps more ominous, future.


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