American Airlines Said to be Pressing NC Lawmakers for Tax Relief

American Airlines officials are urging the North Carolina State Legislature to extend a cap on state fuel taxes. 

The Charlotte Observer is reporting that officials at American Airlines are urging lawmakers to extend a cap limiting state sales taxes on fuel purchases or pass an airline exemption to the fuel taxes altogether. North Carolina currently limits fuel taxes paid by airlines to $2.5 million while any sales taxes collected beyond the cap are refunded to the air carriers.

The existing fuel tax cap does not expire until 2016, but American management is not waiting to press the issue.

“The industry is already overtaxed,” Tracy Montross, American’s Director of Government Affairs told the Observer, noting that 21 percent of the average plane ticket goes to federal taxes. “North Carolina needs to be competitive for air service and airline investment,” Montross added.

Montross’ comments came after Mecklenburg County, N.C. proposed a half-cent sales tax increase to fund local schools and libraries. This wouldn’t be a huge issue for the airline but for the fact that Charlotte Douglass International Airport (CLT) happens to be in Mecklenburg County. CLT is American’s second largest hub. Montross used the proposed local tax increase to make the point that although the county tax increase could cost the airline more than a half-million dollars annually, it would be a moot point if only the state legislature was to extend the fuel tax cap.

American spokesperson Michelle Mohr upped the ante in a written statement to the Charlotte Business Journal, saying, “We are concerned about any tax increase that will affect our customers and business operations. Our customers already pay $60 — or 20 percent — in taxes on a typical $300 round-trip ticket.”

A local government proposing a modest increase in sales tax to pay for education may not be on the front lines of American’s long term goals for profitability, but a perception that the airlines face an unfair tax burden is increasingly becoming a hot button political issue in the industry.

The American Aviation Institute (AAI), an airline industry research and lobbying group, estimates that the annual tax bill for airlines from state, local and federal authorities amounts to $59 for each round-trip passenger carried. Further illustrating the perceived tax burden the industry is feeling, the AAI reports, “In 2011, airline tickets for domestic itineraries are taxed at a higher rate than taxes levied for alcohol, tobacco and firearms.”

As for American’s struggles with state and local taxes in North Carolina, the airline is not without leverage. American is responsible for nearly 90 percent of CLT’s air traffic. Asked by the Charlotte Observer whether the airline would consider abandoning the airport, Montross was non-committal, but not reassuring, saying, “My job is to make sure this community knows just how important the American Airlines hub is at the airport and how taxation on our industry can impact the status of air service in the state.”

[Photo: Ken Lund / Foter / Creative Commons Attribution-ShareAlike 2.0 Generic (CC BY-SA 2.0)]