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Letters 

NTU Comments on Competition in Air Transportation

by Pete Sepp January 09, 2025

122 C Street N.W., Suite 700, Washington, DC 20001

January 7, 2025

 

U.S. Department of Justice

950 Pennsylvania Avenue, NW 

Washington, DC 20530 

 

U.S. Department of Transportation

1200 New Jersey Avenue, SE 

Washington, DC 20590

 

Submitted via regulations.gov

 

Re: Response to ATR 103, Joint Request for Information (RFI) Regarding Competition in Air Transportation

On behalf of National Taxpayers Union (NTU), I am honored to submit the following comments regarding Docket No. ATR 103 (“the RFI”), in which the Department of Transportation (DOT) and Department of Justice (DOJ) are seeking “direct observations concerning the state of competition in the air transportation industry” along with identifying “activities that limit, restrict, suppress, impair, harm or otherwise impact competition in the air transportation industry.”  

I. Introduction

NTU is the nation’s oldest taxpayer advocacy organization, founded in 1969 to achieve favorable policy outcomes for taxpayers with Congress and the executive branch. Our experts and advocates engage federal policymakers on important matters affecting taxpayers in a variety of settings, including tax administration, financial services, government liabilities, product and service regulation, transportation and infrastructure, trade, telecommunications and technology, and health care. It is the first five items on this list which intersect and provide NTU with an opportunity to offer its views today.

II. NTU’s History in Air Transportation Policy

Given NTU’s longstanding participation in key aviation policy debates, a brief explanation of taxpayers’ historical interest in regulatory reform for the transportation sector is in order. 

On the 40th anniversary of the Airline Deregulation Act of 1978, NTU authored a retrospective and prospective view on the transportation policy reform efforts of the late 1970s and early 1980s.1 In this paper, we noted that the impetus for those efforts was driven by organizations and public officials across the ideological spectrum.2

However, a major catalyst for air passenger regulatory reform was the air cargo regulatory overhaul that preceded the 1978 act by nearly a year: Public Law 95-163. This law dramatically reduced government controls over the pricing and availability of freight shipped by air, including fewer restrictions on large-capacity aircraft flying routes based more firmly in markets rather than government determinations. This legislative spadework paved the way for the 1978 Airline Deregulation Act, which further liberalized cargo availability in “belly holds” of passenger aircraft. 

Citing research from transportation experts,3 the NTU paper described how the “ripple effect” of these laws inured to taxpayers:

[J]ust as impressive were the ‘second order’ impacts . . . in hastening the development of modern ‘just in time’ retailing, accurate tracking systems for goods, optimization of specialized services that short delivery times of key components can support, and, of course, e-commerce. All of these advances can translate into direct savings for taxpayers, such as online government purchasing portals, more effective management of military and civilian supply chains, and transparency in contracting, which can help to avoid unnecessary costs.

. . . [C]heaper and more convenient passenger travel likewise had a salutary impact on the federal government’s expenses for its own employees, though pinpointing the benefits is a challenge amid otherwise poor government oversight of personnel policies . . . But lower airfares have indisputably been a boon to taxpayers -- they foot the bill not only for government employees who travel through contractual deals negotiated with airlines but also for government contractors who get reimbursed for privately arranged official travel.4

DOJ and DOT should bear in mind that the 1977 and 1978 laws have had benefits not only for the travel of passengers and cargo by air, but for other modes as well. As then-President Jimmy Carter noted upon signing the 1978 Act, “I hope it’s a precursor to what the Congress can help me do next year to minimize regulation of other crucial industries, particularly in the transportation field.”5

And so it did. In relatively short order, the Motor Carrier Act of 1980, the Staggers Rail Act of 1980, and the Bus Regulatory Reform Act of 1982 all liberalized the way people and goods moved around the country by highways and railways. This contrasts with other transportation methods that remain under government micromanagement to this day, including Amtrak and maritime shipping among U.S. ports. Taxpayers have been forced to bear tens of billions in subsidy and other costs because of these regulatorily stranded, uncompetitive areas of our economy.6

This competitive contrast, between prudently regulated and over-regulated transportation, should be self-evident to policymakers. As far as air travel is concerned, NTU believes that any case DOJ and DOT could muster for further intervention today is difficult to sustain. Another commenter to this RFI, Fred Ashton, has conclusively demonstrated that whether based on number of market actors in city pairs or types of business models, competition among airlines has risen between 2000 and 2024.7

Some have termed the policy transformation of air travel and shipping as “deregulation,” often in a derisive manner. While the post-1978 commercial air  environment was certainly much less restrictive, many areas of its management and operations remain heavily regulated to this day. Furthermore, as the following comments explain, in numerous cases government policies are making the U.S. airline sector less able to competitively serve passengers and freight customers. 

III. Comments

A. Tax and Fee Burdens. No analysis of the competitiveness of the U.S. commercial air sector is complete without accounting for the pervasive, pernicious impact of high taxes. Few other consumer-based activities are as burdened by a plethora of taxes, fees, and government-mandated charges as air travel. Just a few examples include:

  • A 7.5% excise tax on airline tickets;

  • A $5 segment tax, which can be charged several times on a single itinerary that involves multiple takeoffs and landings;

  • Passenger Facility Charges (PFCs), levied by airports but collected by airlines, of $4.50 per enplanement up to $18 on a single itinerary;

  • A Passenger Security Fee of up to $11.20 per ticket;

  • An international departure and arrival tax of $22.10 per ticket, per entry and exit (customs, immigration and Animal and Plant Health Inspection Service fees can nearly double this amount); and

  • Cargo waybill taxes, jet fuel excises, and other fees that air carriers must somehow absorb or pass along to customers. 

Depending upon the base fare, these various levies can add up to an effective rate on a fare that ranges from 15% to 30% (and in rare cases, even higher). All told, a middle-class air traveler typically faces a tax and fee load on an airline ticket that is greater, as a percentage, than what he or she would confront on his or her 1040 federal income tax return (which, after credits and deductions, averages between 7.2% and 10.3%).8

Although these government-imposed burdens on flying afflict all types of passenger and cargo airlines, the flat fees can be especially punitive on Very Low Cost and Ultra Low Cost Carriers. Several years ago, Spirit Airlines CEO Ted Christie testified before Congress on this phenomenon, as it relates to PFCs:

Our mostly discretionary travelers have a very high demand elasticity in reaction to even modest changes in price. In other words, if travel prices rise, they will travel less, and all those new airport facilities won’t be quite so full anymore . . . Value airlines like us typically use limited airport facilities more intensively and efficiently than larger legacy airlines. We have to, in order to keep prices low, because we focus on the most price-conscious consumers. We run more passengers per day through each airport gate, and we occupy less terminal square footage for a given volume of passengers. (By the way, airports and local communities appreciate that we can deliver more passengers through limited facilities.) Yet each of our customers subsidizes the entire airport facility at the same per-person PFC rate. By comparison, the airport rates and charges that airlines pay directly – for landings, gates and terminal space – do vary according to an airline’s efficiency of use, which in our case are passed on to our customers through lower prices.9

To be clear, NTU is not arguing here for some kind of progressive tax scheme that discriminates among classes of carriers. Rather, we wish to illustrate the barrier-to-entry effect that taxes can have on all carriers, especially those seeking to establish or expand competitive market share. 

We hasten to add that this RFI should not serve as a pretext to exercise further price regulation in the industry, specifically when it comes to ancillary fees that carriers charge. Other agencies attempting to make this link have encountered serious credibility issues with the taxpaying public. The Federal Trade Commission, for example, issued a finalized rulemaking this month aimed at pricing in the hospitality industry—a rulemaking which, if its dubious provenance survives the courts, barely avoided a disaster for state and local tax administration.10

Equally relevant, last year the Consumer Financial Protection Bureau (CFPB) issued an RFI regarding fees imposed in residential mortgage transactions, employing rhetoric not dissimilar to that of so-called “passenger advocates” in air travel. Borrowing the term “junk fee” from the White House, CFPB embarked on a predetermined agenda to seek comments on various charges for services provided in the mortgage closing process. Strangely, CFPB relegated any discussion of taxes to a single, glib footnote in its RFI, leading NTU to question why—especially since, by some credible estimates, taxes comprise more than 40% of a typical homeowner’s closing expense.11

How is this obvious inconsistency allowed to perpetuate itself? Simply put, the very definition of “junk fee” is a political, rather than economic, construct. The White House itself once defined “junk fees” as “unnecessary, unavoidable, or surprise charges that inflate prices while adding little to no value.”12 By this definition, several government-administered fees that are connected to air travel would qualify as “junk.”

In 2013, the Passenger Security Fee charged by the Transportation Security Administration began to be diverted into general revenues,13 thereby providing “little to no value” for an air traveler expecting all of the fee to be spent on services enhancing their safety. Extensions of customs fees years into the future—long a tactic for Members of Congress seeking revenue offsets for unrelated spending programs14—certainly seem “unnecessary” for the nearer-term operation of the U.S. Customs and Border Protection agency. Furthermore, a whole plethora of federal charges—e.g., for passports and animal and plant health inspections for passengers—are practically “unavoidable,” since most American citizens and businesses do not have a choice of which national government to patronize. 

One essential ingredient of competition in the marketplace is the availability of variable service and pricing options that meet the equally variable preferences of customers. For some, this means menu-based pricing, while for others, it means bundled pricing. Neither DOJ nor DOT should permit themselves to be drawn into the morass over which is morally superior.

Finally, the competitiveness of the entire American air sector (at home and abroad) is highly dependent on federal corporate tax policy, especially the provision of the Tax Cuts and Jobs Act (TCJA) of 2017 that permitted full and immediate expensing of equipment and reduced the corporate tax rate. Writing in 2018, we noted:

By the very nature of their operating models, airlines pay an effective net tax rate (excluding loss carryovers) that is closer to the actual statutory corporate tax rate than companies in most other industries. Speaking at this year’s Airline Industry Summit, Deutsche Bank analyst and CNBC reporter Michael Linenberg commented that this element of TCJA is already benefiting airlines because the rate reduction “went straight to the bottom line.” . . .

TCJA’s provisions for fuller and more immediate write-offs for capex are especially helpful to incumbent airlines replacing their aging fleets as well as low-cost carriers. Writing for the Motley Fool, Adam Levine-Weinberg identified at least four smaller airlines “set to spend a lot of money on new aircraft in the next few years” that would benefit from expensing: Alaska Air, Hawaiian Holdings, JetBlue, and Spirit . . .

Foreign carriers, often subsidized by their countries’ taxpayers, are taking note as well. Earlier this year Scope Group, a European credit rating firm, observed that “the Trump tax reforms, if not reversed by the next administration, favour US airlines over European and Middle Eastern carriers in the competitive transatlantic market in the mid-term as a result of tax savings and a potential fleet expansion/rejuvenation.”15

In a way, some of the “Trump tax reforms” were reversed, more from inaction rather than proactive repeal. The full and immediate expensing provision of TCJA expired in 2023, portending a return to cumbersome depreciation schedules for investments. This is highly uncompetitive for airlines seeking to deliver better, more frequent services to the flying public by purchasing more modern equipment. 

B. National Air System Management. Considering the aforementioned fiscal burdens they must carry, it is particularly galling to taxpayers—and highly relevant to this RFI—that inadequate value has been delivered for the billions poured into the Air Traffic Control (ATC) system of the United States. 

While the Government Accountability Office (GAO) removed federal ATC modernization efforts from its infamous “High Risk List” for waste and mismanagement in 2009, this has hardly been the end of the drama. Just last month, GAO testified before the Senate Commerce Committee’s Subcommittee on Aviation Safety, Operations, and Innovation regarding the state of NextGen, a massive National Airspace System overhaul that includes ATC upgrades. Its findings are hardly a ringing endorsement of the Federal Aviation Administration’s (FAA) uneven progress with NextGen:

  • 105 of the 138 systems FAA is operating are either “unsustainable” or “potentially unsustainable.” Over half of these “have critical operational impacts on the safety and efficiency of the national airspace.”

  • GAO examined 9 of 11 ATC modernization investments that had actually established cost baselines and determined that “nine investments plan to take on average 12 years and 8 months to complete all deployment activities—with some taking as many as 15 to 19 years.”

  • “[W]hile FAA officials noted that another key contributor to the program’s mixed progress was that NextGen had a flat budget for several years, we [GAO] found that the actual budget reported in FAA’s congressional budget justification generally aligned with the amounts in the President’s budget request.” Typically, federal managers have not been held to account for making claims about “underfunding” that are exaggerated or never existed in the first place.

  • “Without near-term modernization plans for these systems, critical ATC operations that these systems [funded by investments] support may continue to be at-risk for over a decade before being modernized or replaced. Specifically, FAA can take well over a decade to implement modernization investments once initiated.16

It never had to be this way. A proven, viable option, in the form of vesting ATC system operation in a user-funded entity (e.g., a public utility) and safety regulation in the government, has been practiced worldwide for more than 35 years. This model makes the provision of modern ATC services directly accountable to those funding it, while allowing numerous voices (airlines, consumers, labor unions, and cargo carriers) to have a structured role in setting fees that is removed from the political process. As transportation policy expert Marc Scribner recently testified before the same Senate Subcommittee, at the same hearing as GAO:

Separating the provision of air navigation services from the civil aviation authority and putting the ANSP [Air Navigation Service Provider] at arm’s length from its safety regulator, like all the other key players in aviation—airlines, business aviation, general aviation, airframe manufacturers, engine producers, pilots, mechanics, and so forth—is now the globally recognized best practice. For more than two decades, this has been International Civil Aviation Organization (ICAO) policy. The United States is among the last industrialized countries that have not taken this step to eliminate the fundamental conflict of interest of having an aviation regulator also operate a service it is tasked with regulating.17

Scribner also points out that user fees, established “in accordance with the airport and air traffic control charging principles promulgated by ICAO,” also offer a financing advantage: a bondable revenue stream, which allows ANSPs abroad to “successfully finance large-scale capital modernization efforts.”

Officials from past presidential administrations, both Democratic and Republican, have embraced the nonprofit ATC model for the U.S.18 Nonetheless, DOT will be tempted to lay the blame for this failure to capitalize on worldwide ATC reform at the feet of Congress. While the legislative branch certainly has exhibited a major deficit of leadership on this issue, why hasn’t DOT been more rigorous in exerting its influence on behalf of what would obviously be a better, well-paved policy path?

The problems with government mismanagement of the existing resources it collects is not limited to FAA. One area that remains on GAO’s High-Risk List is “Strengthening Department of Homeland [DHS] Security IT and Financial Management Functions.” As you know, the Department of Homeland Security is the parent to several functions that touch upon aviation, including U.S. Customs and Border Protection and the Transportation Security Administration (both funded by general appropriations and levies on traveling taxpayers.) In the latest High Risk report, GAO observed that by far the least progress DHS made in areas of concern was financial management, with only 2 out of 8 major problems GAO identified as having received the proper level of attention.19 This, too, presents a competitiveness problem for the air travel sector, as millions of taxpayers—whether they utilize air travel or not—are deprived of vital productive resources with no assurance those resources are being effectively spent. 

The Air Traffic Collegiate Training Initiative, a public-private partnership to provide qualified talent for the ATC system, is precisely the kind of innovative solution to identified needs that should have been in place for decades. Instead, it was launched with the first two participating schools in October of this year.20 Taxpayers still hope that this success story will spread. 

The lack of a modern, properly functioning ATC system in the United States places our nation at a severe competitive disadvantage to virtually every other industrialized country. The efficient movement of passengers and cargo is hampered by the federal government’s chronic failure to modernize this antiquated arrangement. 

C. Government Antitrust Enforcement. Perhaps the most ironic aspect of ATR-103 has to do with its basic premise: that DOJ and DOT are concerned about “practices by dominant firms that abuse their size and power to deprive rivals of scale, agreements not to compete (e.g., agreements to fix prices or allocate markets), information sharing schemes, practices that abuse a dominant position in the air travel industry, or policies that tend to entrench dominant firms or harm their competitors.” 

As Ashton’s comments referenced above, along with NTU’s own observations in Section II elucidate, consumer rather than competitor interests should always guide competition policy. Furthermore, government’s own antitrust authorities have even helped to “entrench dominant firms or harm their competitors.”

A recent instance of this unfortunate tendency surfaced with DOJ’s successful suit to block a merger between Spirit Airlines and Jet Blue, which a U.S. District court affirmed at the beginning of 2024. After a few months of attempting to pick up the pieces from this court decision, Spirit Airlines filed for Chapter 11 bankruptcy.

While the judge deciding in favor of government regulators acknowledged that a “post-merger, combined firm of JetBlue and Spirit would likely place stronger competitive pressure on the larger airlines in the country,” he nonetheless believed that consumers who “rely on Spirit’s unique, low-price model would likely be harmed.”21 NTU believes that the consumer welfare standard should be the single most important principle in guiding antitrust law. It is incongruous to us, however, that “consumer welfare” could be served by an airline in Chapter 11 bankruptcy. 

Some might argue that correlation is not causality, and the troubled Spirit Airlines might not have escaped bankruptcy in any event. This is, at best, deflection and at worst, sophistry. While industry analysts had varying opinions on Spirit’s financial viability, most have noted in some fashion or another that DOJ’s success in blocking its proposed merger with JetBlue ended one of the last hopes for its competitive future.22 Former U.S. Senator and Ambassador Scott Brown, who chairs an NTU-formed consortium of more than a dozen organizations comprising the Competitiveness Coalition,23 aptly commented:

It should outrage every American that Spirit Airlines saw no other option than to declare bankruptcy, especially after their efforts to streamline and improve their operations were blocked by left-wing zealots in the Biden Administration. Make no mistake, the Department of Justice Antitrust Division’s misguided crusade to quash Spirit’s last lifeline, a merger with JetBlue, is directly to blame for this fiasco . . . [C]onsumers bear the brunt of decreased competition and choices.24

Certainly, many employees and passengers with Spirit agreed with this assessment; what of their well-being?

D. Other Government-Built Obstructions to Competition, Including Credit Card Price Controls. ATR 103 admirably explains that “Anticompetitive conduct deprives American consumers, taxpayers, and workers of the benefits of competition.” Yet, nowhere does the RFI seek input on how the conduct of governments may actually enable such deprivation. This is a particularly acute problem with the construction, expansion, and maintenance of airports, one area for which the RFI encourages comments. The following are just a few examples that NTU has observed over the years:

  • Permit-Related Red Tape. Last year, during the height of tensions between labor and management over East Coast U.S. maritime port operations, Clifford Winston of the Brookings Institution offered a cogent observation regarding U.S. aviation:

New ports are not being built for the same reasons the United States has built only one major airport since 1973: There is little economic incentive, and the regulatory and other governmental constraints are formidable. As a result, congestion is increased, shipments are delayed, and carrier operating costs and consumer prices are increased.25

Winston’s observation is also directly translatable to the purposes of this RFI. Without regulatory processes that facilitate responsible airport infrastructure where demands dictate, a pro-consumer, pro-labor, pro-growth environment is harmed. DOJ and DOT cannot brush aside dire concerns that these processes currently cannot support aviation competition. Indeed, various government restrictions on air travel competition that remained after the 1978 law have been known for some 30 years. These include poor gate capacity at airports, restrictive landing rights, and “perimeter rules” barring some facilities from receiving long-haul flights.26 

  • Labor Laws. It is ironic, but nonetheless difficult to deny, that outdated restrictions on how and where labor is deployed for infrastructure work at cross purposes of the competition the RFI espouses. For instance, Airport Improvement Program (AIP) grant rules and Passenger Facility Charge grant rules have different things to say on how cost-inflating labor restrictions under the Davis-Bacon Act and other prevailing wage laws apply. This makes little sense. Unlike AIP grants, PFC-connected projects are not subject to oppressive Davis-Bacon rules that artificially inflate labor costs. Unfortunately, 27 states plus the District of Columbia have prevailing wage laws of their own that could, in many instances, apply to ventures underwritten with the help of PFC revenues. This is certainly not a design flaw of the PFC. Rather, it is an acknowledgment of reality: government mandates that drive up the taxpayer costs of infrastructure are pervasive at every level, and PFC-funded projects are not necessarily the exception. In any case, projects where PFC and AIP funds are combined would fall under Davis-Bacon. These rules should be harmonized so that taxpaying travelers benefit the most from grant dollars. 

  • Private Investment Restrictions. Outside of maritime ports, few other areas of infrastructure policy present as many obstacles to private investment or public-private partnerships as airports. One problem that NTU identified nearly 10 years ago was: “Tax-advantaged private activity bonds, a staple in many transportation projects, could provide airports with more capital if federal laws were revised to ensure that some of these transactions aren’t hit with Alternative Minimum Tax (AMT) liabilities.”27 This can, and should, be a major topic of discussion in 2025’s activity over renewing and expanding key parts of TCJA. Also of continuing interest to NTU is “[h]astening the expansion of private screening contracts at airports, which can often provide more efficient and effective security than the government-directed Transportation Security Administration.”28

As the second point above indicates, state and local laws can also impede competition in the transportation space. While DOJ and DOT must respect the prerogatives and powers of the governments behind those laws, there is no reason federal policymakers cannot catalog anti-competitive state and local restrictions and provide illustrations for reform that some governments have implemented. In NTU’s comments to CFPB on mortgage closing, we noted that Fannie Mae had conducted a study recommending “jurisdictions could explore ways to expand existing programs that waive or reduce one-time taxes and government fees borne by first-time and low-income homebuyers.”29 DOT and DOJ could provide a similar service.

Another instance of counterproductive behavior toward the commercial air sector that NTU must regrettably raise is DOT’s recent investigation of interchange transaction prices on popular frequent flyer reward credit cards.30 One of the largest trends in the consumer space are rewards programs that offer consumers travel benefits for a low out-of-pocket cost. These programs have also proven to be an important financial lifeline to the airline industry. 

Meanwhile, for more than 15 years, the credit card payments industry has been under pressure from several elected officials who have been seeking price controls on interchange fees—sometimes derisively called “swipe fees”—as well as network routing mandates. And airlines have found themselves under collateral pressure as a result.

All sorts of claims have been made—that lower interchange fees will lead to lower prices in stores and that credit card network providers earn “too high” a profit. However, the fallout from interchange fee caps in Europe, Australia, and the United States is readily apparent.31 After the Durbin Amendment, debit cards in the United States earn virtually no rewards. 

If attempts to extend debit interchange fee caps to credit cards are successful, the costs to both consumers and airlines would be quite high. According to Delta Airlines, their partnership with American Express provided them with $6.8 billion in 2023.32 Delta’s entire operating income for 2023 was $6.3 billion, implying that their partnership with American Express is keeping them profitable. Comparable results can be found across the industry.33

The airline industry spent decades attempting to establish a consistently profitable footing.34 After the financial crisis, the industry finally achieved a decade of  profits only to be challenged by COVID.35 Reducing a source of revenue that keeps airlines profitable (and thereby competitive) as well as provides consumers with free and subsidized travel seems shortsighted. At the least it will give consumers fewer travel options. Worse, it could force carriers to scramble for other fees that consumers find unwelcome or force further consolidation, which this RFI apparently also finds unwelcome. 

It should also be noted that airlines borrowed against their frequent flier programs during the pandemic to help stay afloat. Without that line of credit, it seems likely that they would have been forced to ask the federal government for additional COVID assistance. Taxpayers would have been burdened as a result.

This war escalated to a new front in 2023, when Senators Dick Durbin (D-IL) and Roger Marshall (R-KS) sent a letter to Transportation Secretary Pete Buttigieg and CFPB Chair Rohit Chopra calling on them to investigate airlines’ changes to their frequent flier programs—effectively accusing air carriers of baiting and switching consumers. 

Attempting to enlist executive branch agencies in the silencing of a voice in a legislative battle is unacceptable to taxpayers, who have a major interest in avoiding price controls on transaction fees. Members of Congress should be concerned as well, assuming they value the constitutional separation of powers that invest lawmaking authority in their branch of government. Taxpayers deserve more thorough consideration of the drawbacks of interchange price controls and routing mandates,36 without the appearance of intimidation. 

Before any serious examination of the issues raised through ATR 103 can take place, DOJ, DOT, and numerous other government entities should conduct a serious self-examination of their role in not only facilitating competition for the commercial air sector, but also in hindering such competition. Examples of the latter are, sadly, legion.

IV. Conclusion

It is healthy for policymakers to periodically evaluate the reasons behind, and results of, regulatory reforms. So it is with the commercial air sector, and the underlying purposes of this RFI. Nonetheless, it remains important to remember those “reasons behind” so that policymakers avoid a return to a much less competitive and less prosperous past. As we wrote in 2018, the 1978 law:

represents one of the most remarkable intersections of economic and political history, in that regulators themselves became advocates for change even as public officials across the political spectrum saw the wisdom of such a move. At CAB, Assistant Director of the Bureau of Operating Rights Roy Pulsifer ‘had become radical libertarian’ on the matter after being steeped in economic literature about the costs to society of bureaucratic aviation oversight. CAB Attorney Michael Roach came to a similar realization when he wrote one opinion for a route approval knowing just the name of the winning airline and no other pertinent information, only to see his text adopted verbatim. And of course, CAB Chairman Alfred Kahn, appointed by President Carter, encouraged members of his staff to follow their instincts, which would lead to one of the few examples of an agency advocating for its own abolishment.37

Considering the time, energy, and taxpayer costs that have been spent on recent re-regulatory exercises in the aviation space, devoting an equal or greater share to tearing down the barriers to competition that government created in the first place would leave our economy far better off in the future. This effort should include:

  • Advocating for simplified, streamlined, and rightsized tax and fee burdens on the traveling public;

  • Reforming managerial and administrative practices at the government agencies serving that traveling public, including DOT, FAA, TSA, and CPB;

  • Engaging in tax and regulatory reforms that will make airline formation, expansion, and competition less burdensome, along with supporting reforms to enable other elements of the air travel system, such as airports and aircraft construction, more flexible and tenable.

NTU is grateful for your consideration, and I am hopeful that the fiscally-based framing we have provided in these comments is useful to you. If you have any questions or concerns, please do not hesitate to contact us. 

Sincerely,

A picture containing text, antennaDescription automatically generated

Pete Sepp

President

1. See the NTU Policy Paper, “Airline Deregulation at 40,” at https://www.ntu.org/publications/detail/airline-deregulation-at-40.

2. A 1985 review of the Act noted that “When [airline regulatory reform] was being debated in Congress, support came from an unlikely coalition which brought together such strange bedfellows as Ralph Nader’s Aviation Consumer Action Project and the American Conservative Union, Common Cause and the National Taxpayers Union, as well as such groups as the National Association of Manufacturers, the American Association of Retired Persons, and Sears Roebuck.” See Bailey, Elizabeth, et al., Deregulating the Airlines. (Cambridge, MA: MIT Press, 1985), p. 225.

3. The NTU Paper cited Button, Kenneth, “Unleashing Innovation: The Deregulation of Air Cargo Transportation.” The Mercatus Center at George Mason University, December 2014. See https://www.mercatus.org/publication/unleashing-innovation-deregulation-air-cargo-transportation.

4. See the NTU Paper, “Airline Deregulation at 40,” at https://www.ntu.org/publications/detail/airline-deregulation-at-40.

5. See Statement by President Carter on the Signing of S. 2493, the Airline Deregulation Act. Retrieved from: https://www.presidency.ucsb.edu/ws/?pid=30038.

6. See, for example, https://railroads.dot.gov/grants-loans/directed-grant-programs/federal-grants-amtrak; https://www.ntu.org/publications/detail/amtrak-of-the-skies-officials-must-take-care-to-avoid-cares-act-misstep; https://www.ntu.org/foundation/detail/navigating-the-waters-the-jones-act-drives-energy-prices-up; and https://www.ntu.org/foundation/detail/the-jones-act-paradox-why-is-a-law-that-is-deemed-essential-so-frequently-waived.

7. See Ashton’s persuasive, evidence-based comments at https://www.americanactionforum.org/comments-for-record/comments-for-the-record-competition-in-air-transportation/.

8. See, for example, Tax Foundation’s presentation of Internal Revenue Service Statistics of Income data, which examines average effective federal tax rates for filers in the top 50-25% and the top 25-10% ranges. https://taxfoundation.org/data/all/federal/latest-federal-income-tax-data-2024/.

9. See https://www.ntu.org/publications/detail/passenger-facility-charge-debate-more-voices-must-be-heard.

10. See the analysis and commentary from NTU’s research affiliate here: https://www.ntu.org/foundation/detail/ntuf-helps-protect-taxpayers-in-ftcs-final-deceptive-fees-rule. The commentary noted, “We also raised alarms as to the FTC’s proposed definition of ‘Government Charges.’ As we explained, the ‘FTC divides government charges into two groups: (1) charges imposed on a business, and (2) charges imposed on a taxpayer. However, this division misses two other common types of taxes: (3) taxes imposed on a business by law and may, or must, be passed onto the taxpayer, and (4) taxes imposed on a business by law and may not be passed onto the taxpayer.’ In the Final Rule, the FTC cited us four times and agreed to modify the definition of ‘Government Charges’ to mean fees or charges which are imposed on the transaction. Although this new definition is not perfect, it represents a better definition overall.”

11. See NTU’s comments on CFPB’s RFI here: https://www.ntu.org/publications/detail/ntu-submitted-comments-to-cfpb-on-junk-fees-in-mortgage-lending.

12. See https://www.ntu.org/publications/detail/biden-touts-junk-policy-towards-junk-fees.

13. See a concise explanation here: https://www.meritalk.com/articles/tsa-officials-recapturing-security-fees-would-help-boost-tech-adoption/.

14. See a concise explanation here: One Weird Trick Congress Uses to Game Budget Numbers - Foundation - National Taxpayers Union (ntu.org).

15. Cited in the NTU Policy Paper “Airline Deregulation at 40” from the following sources: Zhang, Benjamin, “Trump’s Tax Reform Is Giving US Airlines an Incredible Boost - at Least for Now.” Business Insider, 25 Jan. 2018, www.businessinsider.com/us-airlines-are-saving-billions-of-dollars-from-tax-reform-employees-get-bonuses-2018-1; Levine-Weinberg, Adam, “The 4 Best Airline Stocks Would Be Huge Tax-Reform Winners.” The Motley Fool, 28 Nov. 2017. www.fool.com/investing/2017/11/28/the-4-best-airline-stocks-huge-tax-reform-winners.aspx; and Zank, Sebastian, et al., “Airlines: Trump Tax Reform to Spur Competition on Transatlantic Routes.” Scope Ratings, 19 Feb. 2018. https://www.scoperatings.com/ScopeRatingsApi/api/downloadstudy?id=fe7ac296-ce5b-4d8c-a343-c911ab0493f2.

16. See https://files.gao.gov/reports/%C2%A0/index.html; https://www.gao.gov/products/gao-24-105254.

17. See Scribner’s excellent testimony at https://reason.org/testimony/modernizing-air-traffic-control-infrastructure-requires-institutional-modernization/.

18. See, for example, https://aviationweek.com/air-transport/airports-routes/three-former-us-transportation-secretaries-call-atc-reform; https://enotrans.org/article/hearing-air-traffic-control-still-needs-significant-improvement/; and https://www.realclearpolicy.com/blog/2016/02/09/corporatize_air_traffic_control_a_democrats_case_1549.html.

19. https://files.gao.gov/reports/GAO-23-106203/index.html?_gl=1*1lsrvkr*_ga*OTIxNjI0MjMwLjE3MzA2NjEzMjE.*_ga_V393SNS3SR*MTczNTU3OTc5MS42LjEuMTczNTU3OTg4NC4wLjAuMA..#appendix23.

20. For further details, see https://www.atca.org/detail-pages/news/2024/10/03/atca-applauds-faa-announcement-of-first-two-schools-for-enhanced-at-cti-program.

21. See, among many examples of media coverage, https://www.reuters.com/markets/deals/us-judge-blocks-jetblue-acquiring-spirit-airlines-2024-01-16/.

22. See, among many examples, https://www.bloomberg.com/news/articles/2024-11-18/spirit-airlines-files-bankruptcy-following-failed-jetblue-tie-up?embedded-checkout=true; and https://www.bloomberg.com/news/articles/2024-11-18/spirit-airlines-files-bankruptcy-following-failed-jetblue-tie-up?embedded-checkout=true;.

23. For further details, see www.competitivenesscoalition.com.

24. See https://competitivenesscoalition.com/chair-brown-sounds-off-on-spirit-airlines-bankruptcy-filing-after-doj-blocked-its-merger-with-jetblue/.

25. See Winston’s piece at: https://www.nytimes.com/2024/10/01/opinion/port-strike-shipping-union-inflation-prices.html.

26. See, for example, https://www.gao.gov/assets/110/107244.pdf.

27. For further details, see Governing, Obama Proposes P3 Tool to Help States Finance Infrastructure.

28. For further details, see Reason Foundation, Overhauling U.S. Airport Security Screening.

29. For further details, see Barriers to Entry: Closing Costs for First-Time and Low-Income Homebuyers | Fannie Mae.

30. The author gratefully acknowledges the research and analysis of NTU Vice President of Strategic Partnerships Al Canata in the paragraphs that follow pertaining to rewards programs. 

31. See, for example, the analysis here: https://viewfromthewing.com/how-much-money-the-qantas-frequent-flyer-program-makes-and-what-that-tells-us-about-us-airlines/.

32. See Delta Air Lines, Inc. - Delta Air Lines Announces December Quarter and Full Year 2023 Financial Results.

33. See, for example, Frequent flyer programs: The most profitable part of the airline industry | CNN Business.

34. See, for example, ASPL614_Industry_PostDeregulation-Houston.pdf.

35. See US Airlines Report A 5% Rise In Year On Year Revenues For The 1st Half Of 2024.

36. See, for example, NTU’s analysis here: https://www.ntu.org/publications/detail/13-years-after-feds-debit-card-policy-blunders-consumers-taxpayers-deserve-better-luck.

37. Cited in the NTU Policy Paper “Airline Deregulation at 40” from the following sources: Henderson, David R., “A More Optimistic View.” Cato Institute, Regulation, Spring 2017. https://object.cato.org/sites/cato.org/files/serials/files/regulation/2017/3/regulation-v40n1-2.pdf; and Kahn, Alfred, “Airline Deregulation.” The Concise Encyclopedia of Economics | Library of Economics and Liberty. www.econlib.org/library/Enc1/AirlineDeregulation.html.