(Un)Fare Wars

Should the House bill pass, prices will go up at smaller airlines while large airlines such as Northwest will shoulder a smaller tax burden.

THE IMAGES OF flight attendants, ticketing agents, and pilots marching on the Capitol last week only served to further cement the impression that Northwest has the deep pockets and the political savvy to try to quash any upstart competitors: How many other carriers, faced with an unfavorable tax bill, could afford to fly hundreds of workers to Washington to voice their support for a House bill and their disdain for a Senate proposal?

To date, the major airlines have publicized their lobbying efforts as a crusade against higher taxes for all Americans. Certainly, if a ticket tax is passed, airline passengers will eventually pay higher ticket prices. But Northwest's zeal to douse the Senate's proposal in favor of a House version raises questions about what the larger airlines have at stake--especially if you consider both bills would be equally costly for passengers.

This year, Congress wants to give families two tax credits, a general one and one for spending for higher education. But because of balanced budget rules, the cost of the credits has to be made up somewhere, and an airline ticket tax would raise $33 billion. The Senate proposal would raise it by placing a 10 percent tax on international flights. Northwest says the tax is "anti-competitive" and will make it harder for big airlines to compete on the international market; because foreign airlines won't have to pay the tax, they will therefore be able to offer lower prices, Northwest, United, and other larger airlines have squealed. The House proposal, meanwhile, would drum up more tax dollars from the fledgling carriers and discount airlines that complain they're already hard-pressed to compete with the major carriers.

And the smaller carriers have been largely unheard during all of the marching and lobbying. The so-called point-to-point airlines like Vanguard complain that they're up against a PAC that spends millions on lobbying and contributes hundreds of thousands of dollars yearly to the campaigns of federal candidates. But the smaller airlines have a lot to lose should Northwest have its way, says Vanguard Airlines Spokesperson Lynne McAdoo.

The House bill would put an unfair burden on smaller carriers because their flights make frequent stops, often at places the larger carriers don't service. Many travelers put up with the extra stops because of the low price point-to-point carriers can provide, McAdoo says. Should the House bill pass, prices will go up at smaller airlines while large airlines like Northwest will shoulder a smaller tax burden. "And there isn't a lot of room to raise prices," McAdoo says.

Also largely silent during this debate has been the ranking member of the House Committee on Transportation and Infrastructure, Rep. Jim Oberstar (DFL-Chisholm). During the past two years, Northwest's political action committee contributed $12,000 to the Friends of Jim Oberstar, nearly 10 times as much as the PAC's average contribution to House candidates during the '95-'96 election cycle. Oberstar appears to be hedging his bets, saying he's opposed to both bills and is waiting for recommendations from a commission established by the Transportation Committee last year: "It is especially disturbing that both the House and Senate bills would change the structure of the taxes, thereby changing the relative contributions made by different types of airlines," says a release from his office. "Both bills would make changes which would benefit some types of airlines and disadvantage others."

Money donated by Northwest to federal candidates and spent by company lobbyists during the first half of 1996 alone totaled $1.5 million, making the airline one of the top federal political donors, outspending even such federal defense contractors as the former McDonnell-Douglas.

The debate in Congress follows close on the heels of other charges that Northwest uses anti-competitive tactics. In June, a class-action lawsuit was filed in U.S. District Court in Minneapolis alleging that Northwest violated federal anti-trust laws when it merged with Republic Airlines in the '80s. The suit also claims the airline has since engaged in price fixing. Northwest denies the allegations, calling the suit the brainchild of greedy lawyers.

Who pays more and who pays less is what the argument all comes down to, agrees James Wilcox, press secretary for the House bill's sponsor, Rep. Bill Archer (R-Texas). He's currently working on another bill, and House and Senate leaders also say they hope to forge a compromise on this issue when they meet to discuss their prospective plans later this month.

 
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