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Missoula airport pushes back on proposed jet fuel tax; cites potential loss of air service

Posted: 10:08 AM, Mar 27, 2019
Updated: 2019-03-27 12:10:55-04
Missoula Airport Security
The security checkpoint at the Missoula International Airport (MTN News photo)

-Martin Kidston reporting for the Missoula Current

MISSOULA – Legislation proposed by a Forsyth lawmaker could have a crippling effect on the state’s commercial airports and their ability to compete for flights on a national scale, Missoula International Airport officials said Tuesday.

Joined by businesses that rely on expanded air service and the state’s tourism industry, commercial airports in Missoula and elsewhere are lobbying against two pieces of legislation currently before the Montana House Transportation Committee.

One bill would remove the 2¢ rebate on the fuel taxes airlines can receive, while the other would levy an additional tax of 10¢ per gallon on aviation fuel. Both could prompt airlines to leave the market or drastically raise ticket prices.

“Our fear is that it’s the long haul, price-sensitive markets that will suffer, short term and long term,” Brian Ellestad, deputy director of the Missoula airport, said Tuesday. “It takes away another tool in our tool box when we try to recruit new air service. We saved $2.8 million with getting American Airlines in here and now all that work might be taken away from us.”

Backed by the tourism and business lobby, airports in Missoula, Bozeman and Billings have made progress in bringing new air service to their communities in recent years. That’s been achieved by presenting a revenue guarantee to cover the cost of any empty seats.

The distance from Montana’s major airports to regional destinations is farther than most cities, and those routes consume a lot of fuel. Given the competition, adding to that cost could prompt airlines to leave, placing Montana at an air service disadvantage.

“You have to look at it as a market versus an overall segment,” Ellestad said. “If you compare us to the flight from Madison to Chicago, it’s 1,200 miles versus 200 miles. There’s a lot more fuel that comes out of Montana.”

Chris Jensen, director of the Missoula airport, said fuel prices remain volatile as it is. Cutting airline incentives and raising fuel taxes won’t help Montana’s cause. Other states are moving in the opposite direction by eliminating their aviation fuel taxes, he added.

“There are actually states in the nation right now that are eliminating their fuel tax in an effort to attract airlines,” Jensen said. “We’re going in the wrong direction. Those other states recognize the benefit of that cost savings through competition in air service. We see that we’ll become less and less competitive if we increase that fuel tax.”

Businesses across Missoula helped front the revenue guarantee that brought American Airlines to the market. For the past six years, those businesses have lobbied for expanded service, saying it was essential for them to compete on a national level.

In recent years, the price of local tickets has fallen due to increased service, though they still stand 20% higher than the national average. Still, fares from Missoula are down roughly 10% over the last five years, serving as a boon to both business and leisure travelers, as well as western Montana’s tourism industry.

“Great progress has been made over the last few years attracting more airlines and routes,” said David Bell, president and CEO of ALPS in Missoula. “Driving up commercial fuel taxes, in what can only be described as an astonishing amount, will raise the cost of commercial airfares in Montana.”

The bill, proposed by Geraldine Custer (R-Forsyth) looks to apply the revenue gained through higher aviation fuel taxes to improve the infrastructure at small, non-commercial airports.

While airport leaders across the state agree that infrastructure is important, even at small airfields, undermining the state’s commercial air service and those who rely on it isn’t the way to go about it.

“To gouge commercial airlines to fund these needs is not the right approach, and in fact will hurt far more Montanans and Montana businesses than it will help,” Bell wrote in a letter to the transportation committee. “Demand for aircraft outpaces supply, and when other communities embrace it and we don’t, we lose. We’ve seen this play out many times.”

Jeff Roth, chairman of the Missoula Airport Authority, said the Legislature may not realize how closely airlines watch their fuel costs. The former United Airlines employee knows otherwise.

“There’s a whole department in United Airlines that all they did was work the fuel models,” he said. “It’s their second biggest cost. All they did is try to hedge fuel.”