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American Airlines: Fuel tax break a top priority

Sales taxes on jet fuel are capped at $2.5 million. US Airways was the lone recipient of the tax break, which expires in January. Legislative analysts say the cap could cost the state $10 million this year.
Sales taxes on jet fuel are capped at $2.5 million. US Airways was the lone recipient of the tax break, which expires in January. Legislative analysts say the cap could cost the state $10 million this year.

An American Airlines lobbyist told local business and government leaders Thursday that getting a sales tax exemption on jet fuel is the airline’s top legislative priority this year.

Speaking at the Global Vision Leaders breakfast near Charlotte Douglas International Airport, Tracy Montross said American is pushing for the break so it can stay competitive. A law capping jet fuel taxes at $2.5 million a year is set to expire this year. American could see its fuel bill rise by $15.5 million in North Carolina next year, to $18 million, without legislative action, the company said.

“This is the No. 1 public policy priority for the airline this year,” said Montross, American’s local director of government affairs.

State lawmakers are weighing the proposal. Opponents of airline fuel tax breaks, led by the Unite Here union, say the move would amount to an unnecessary handout to a corporation that’s coming off a year of record profits. The price of jet fuel, like gasoline, has plummeted, amounting to a huge windfall for airlines.

Montross told the group of about 100 leaders that American’s Charlotte hub works because of the airport’s low costs. American operates about 650 daily flights from Charlotte – more than 90 percent of the city’s total – and Charlotte Douglas is the airline’s second-busiest hub behind Dallas/Fort Worth.

Right now, North Carolina refunds airlines for any fuel sales taxes they pay after the first $2.5 million. US Airways, which merged with American in 2013, was the sole recipient of the break last year, which legislative analysts say could cost the state $10 million this year. American and the other airlines are now pushing to exempt jet fuel entirely.

If the current sales tax cap expires and isn’t extended or replaced, Montross said the cost of buying jet fuel at Charlotte would rise to third among American’s hubs, behind Los Angeles International and Chicago O’Hare International airports.

“But they have the population to justify hubs in those states,” Montross said.

Montross said Charlotte has the lowest number of local passengers of any major airline hub, because most travelers connect, and the second-lowest population of a major hub, next to Salt Lake City.

“Texas has no tax on jet fuel,” Montross said. “That’s why they have three hubs.”

Aviation consultants have told the Observer that while American would certainly prefer a jet fuel sales tax exemption, Charlotte’s low-cost advantage and strategic location in the Southeast mean the hub is likely safe.

“The very advantageous low per-passenger costs at Charlotte are a much bigger factor,” New York-based aviation consultant Bob Mann said earlier this month. “Is (a jet fuel tax) the sort of thing that would deter you from operating at Charlotte? No.”

Also at the meeting, which was held at Central Piedmont Community College’s Harris Conference Center, attendees heard about upcoming visits to Charlotte by international leaders. Visits to Charlotte are planned this spring by the ambassadors of Ireland and Indonesia, as well as the president of Costa Rica, said L.J. Stambuk, CEO of the World Affairs Council of Charlotte.

Stambuk said such visits provide opportunities to connect with business leaders and draw foreign interest in Charlotte.

“We’re trying to put Charlotte on the international map,” he said. “We get the ambassadors, we get the CEOs.”

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Twitter: @ESPortillo

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