The American aviation
industry has a tough road ahead of it, between heavy tax burdens, high fuel
cost, and rising global competition the industry has reached a mountain of
problems that, if not breached, could mean bad news for the aviation economy.
The
industry pays a wide variety of taxes, according to ALPA there are around 17 different
types of taxes, they estimate that around 20% of the cost of an airline ticket
goes to paying federal taxes. The taxes
on such things as tobacco and alcohol are considerably lower; ALPA goes so far
to say the same taxes put on the airlines would be enough to destroy any other
industry.
The
Aero News Network wonders how we can compete with our global competitors when
state and federal regulations are so severe that the industry can hardly grow.
Many Asiatic airlines are state-owned and have access to large amounts of capital
to lend their production.
Furthermore,
taxation is not the only cause for alarm for the industry; Chinese airlines are
growing faster and faster due to rising economies and a growing middle class.
According to USA Today, in the last decade alone, China has built 24 commercial
airports, the last airport to be built in the U.S. however was the Denver
airport almost 20 years ago now. The Boeing Outlook 2013 states that China’s
traveler traffic increased 10.6 percent in the last year; while America only
saw a 4 percent increase.
Needless to say while
China is growing rapidly, the U.S. is still growing and looking for new ways to
compete, I think that it will be necessary for the industry to review its
regulations and taxation policies and find new ways for the industry to grow
and compete on a global level. It will be next to impossible to compete with
foreign airlines that are not taxed as heavily as our own. One thing that the
airlines are doing, however, to “level the playing field” is taking advantage
of the Asian countries desire to travel. USA Today reports that United airlines
already has 56 flights a week into China, other airlines as well are working on
deals with Chinese airlines in order to reap the benefits of the rising market.
I believe that playing well others in the global industry is a good idea,
creating “friends” within growing countries such as China will allow us to have
a hand in their market and generate revenue from an otherwise untouchable
source.
ALPA. (2013, june). Leveling
the playing field for u.s. airlines and their employees. Retrieved from
http://www.alpa.org/publications/ALPA_White_Paper_Leveling_the_Playing_Field_June_2012/ALPA_White_Paper_Leveling_the_Playing_Field_June_2012.html
Alpa calls u.s. aviation policy 'misguided'. (2013, june 7). Retrieved from
http://www.aero-news.net/index.cfm?do=main.textpost&id=f2addb25-579d-4f01-928d-2d492f9f85d0
Boeing. (2013). Asia pacific. Retrieved from
http://www.boeing.com/boeing/commercial/cmo/asia-pacific.page
Jones, C. (2013, January 20). China's set to rule the
skies of air travel. Retrieved from http://www.usatoday.com/story/travel/flights/2013/01/20/china-air-travel/1846595/
It is really interesting the way air carriers are taxed is comparable to the taxes imposed on tobacco and alcohol. This alone creates a disadvantage that other country's air carriers do not cope with. Although playing nice with foreign air carriers is a good idea, it is not very likely the gesture will be returned. As air travel continues to grow globally and becomes self-sufficient, the pro-aviation stance of foreign countries that allow carriers to operate tax-free will not be as willing to share routes with U.S. carriers who will charge more for flights. This disadvantage may become overcome with redesigned Open Skies Agreements, or easing the domestic taxes, either way it will be a hard market to crack even if we play 'friendly' in these global markets. Really good idea regardless; a display of diplomacy now can only help future relationships with foreign airlines.
ReplyDeleteMike I like the point that you brought (ALPA goes so far to say the same taxes put on the airlines would be enough to destroy any other industry). I totally agree with that especially after knowing there are 17 different types of taxes that make 20 % of the airline cost ticket. I think this is a lot of taxes that affect on aviation industry.
ReplyDeleteI think that maintaining a positive relationship with the foreign air carriers is a good way to maintain strong growth throughout the global aviation industry. The high amount of taxes in the industry is alarming. It's insane that the industry is able to return a profit at all with taxes that high.
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