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Thursday, March 16, 2000

Aloha Air settles
on aircraft-lease taxes

By Ben DiPietro
Associated Press


The state and Aloha Airlines have reached agreement on taxes the state says the interisland carrier owes on its aircraft leases.

Aloha sent a letter Tuesday to the House Transportation Committee disclosing the settlement but didn't disclose details. Committee Chairman Kenneth Hiraki released the letter to reporters yesterday.

The state is continuing negotiations with Hawaiian Airlines on its back taxes, Gov. Ben Cayetano said yesterday. He wouldn't confirm any deal with Aloha, but said the state and the carrier were close to finalizing a deal.

The two interisland carriers owe the state a combined $20.5 million in back taxes for aircraft leases, said Ray Kamikawa, state tax director.

Two bills pending in the Legislature would exempt Aloha and Hawaiian from paying the tax. The House bill only applies to future payments, while the Senate bill would exempt past and future aircraft leases from the 4 percent general excise tax.

The state would lose $1.4 million a year if future leases are exempted from the tax, Kamikawa said. When Hawaiian completes its lease agreement for a new fleet of 717 aircraft, the airlines said the exemptions would total $2.2 million a year.

The tax on the aircraft leases technically is the responsibility of the mainland companies that lease the aircraft, but those lease agreements contain clauses that Aloha and Hawaiian are responsible for all local taxes.

"As part of that settlement, Aloha has agreed to withdraw its support of legislative action that would preempt the taxing of aircraft used in interisland air transportation," Aloha Vice President Stephanie Ackerman wrote in the letter.

Lawmakers will have to be told at some point the terms of the deal, as the amount of the settlement needs to be calculated in any budget projections, said Hiraki, (D, Downtown-Kakaako).

He also was concerned that Kamikawa couldn't say whether the same terms would be offered to Hawaiian.

"I don't know if two similarly situated companies can be treated differently," Hiraki said.

The governor has said he's opposed to any exemptions on the tax, but lawmakers who support the bills feel the tax only adds to the cost of interisland travel.

"Who's going to pay for this? It's going to be consumers," Hiraki said, adding it's also a matter of fairness to the interisland carriers, who he said pay their fair share of taxes.

"It's a pretty compelling case that maybe it's an unfair tax. Aloha and Hawaiian pay the most in terms of landing fees," he said. "Do we think they're not paying their fair share? We kind of felt this particular industry is paying its fair share."

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