Isle senators
By Russ Lynch
fight new airfare tax
Star-BulletinHawaii's U.S. Senate delegation is joining with their Alaskan counterparts to get their states exempted from a new federal tax on airline tickets that is predicted to cost isle travelers up to $50 million a year. Both states rely heavily on those airlines for intrastate transportation and both have the type of short-haul, competitively priced airlines that will be hardest hit by the new tax.
The tax, part of the federal balanced-budget law signed by President Clinton yesterday, will add as much as 20 percent to the price of interisland tickets by 2003, opponents say.
Sen. Daniel K. Inouye is working with fellow isle Democrat Sen. Daniel K. Akaka and Alaska's two Republican senators, Frank Murkowski and Ted Stevens to trade information and prepare to seek exemptions, Inouye aide Jennifer Sabas said yesterday.
They don't want to raise the issue yet or challenge the hard-won budget bill but they are gearing up for action, she said.
Meanwhile, Rep. Neil Abercrombie has submitted a bill in the House seeking to repeal the tax.
"Any of the short-haul carriers have been much harder hit than the long-haul carriers simply because of the segment fee," said Paul Casey, president and chief executive of Hawaiian Airlines Inc.
Casey was referring to the fee of $1 per flight segment that is a part of the new tax structure. That will rise to $2 on Oct. 1, 1998 and go up by 25-cent increments until it reaches $3 in October 2003. After that, it will be tied to the Consumer Price Index. The lower the fare is, the higher the percentage add-on represented by the $1 fee.
Aloha Airlines spokeswoman Stephanie Ackerman said that with the average interisland ticket costing $45, by the time it gets to $3, the segment fee would be 6.7 percent. But that's only if the flight consists of only one segment.
If a passenger with a $45 ticket flies Honolulu to Hilo and the aircraft touches down on Maui on the way, it's a two-segment trip. That would mean $2 in segment fees this year and $6 in the third year.
The new tax lowers the separate 10 percent federal excise tax on airline tickets to 9 percent on Oct. 1 and scales it down to 7.5 percent in 1999. That may be good for the big airlines with high fares on long hauls but it doesn't help much in the islands, Hawaii airline executives said.
At 9 percent, the tax adds $4.05 to the $45 average interisland ticket. But add $1 for the segment tax and the total works out at 11.2 percent. If there's a stop, add another dollar and the tax rises to almost 13.4 percent.
"The cost of the tax will be passed on to the consumer," Casey said. That means higher fares.
"It's a shift of the burden (to the lower-fare carriers)," Ackerman said. On any fare below $100, the percentage is high, she said.
"In time you'll see how we end up contributing more to support the system than the high-end carriers," Ackerman said.
The tax money is earmarked for the Aviation Trust Fund, which supports Federal Aviation Administration activities.
"As time goes on, the head tax is indexed to the CPI so it could get higher," Ackerman said.
At its highest before the CPI kicks in, for a one-stop flight in 2003, the total tax would be $9.38 on a $45 ticket, or 20.8 percent on top of the ticket price.
State figures show there were 10.6 million interisland passenger boardings last year. At $1 per head, that's $10.6 million in segment taxes; at $3 a head it works out to $31.8 million.
The 9 percent excise tax would add about $43 million to the interisland bill in the first year and even though it would be down to 7.5 percent by 2003, that year it would add $36.8 million, assuming fares don't change.
That would bring the total tax on interisland tickets to nearly $69 million.
