Officials of Colorado’s top airlines told a state legislative committee Tuesday they may seek relief from a sales tax on aviation fuel that has dramatically increased Colorado’s tax collections in a time of soaring jet-fuel prices.
Unlike Colorado’s tax on gasoline, which is a flat 22 cents a gallon, the state’s tax on aviation fuel used by commercial carriers is 2.9 percent.
The rising price of jet fuel in recent years, combined with growth in the number of flights especially at Denver International Airport, has led to an increase in state aviation fuel-tax collections from $12.1 million in 2003 to $29 million in fiscal 2008, which ended June 30.
At a meeting of the Transportation Legislation Review Committee, United Airlines executive Lori Fox told lawmakers carriers like United that have been socked by the recent rise in fuel prices would be helped if the state changed its aviation fuel-tax formula from the 2.9 percent to cents-per-gallon or considered capping the amount airlines would pay.
“The fuel tax, it’s a windfall,” said Frontier Airlines chief executive Sean Menke, who also addressed the committee. “So if there’s speculation in the marketplace — and I believe there’s big speculation in the market — there’s a state windfall of the past three months taking place. … We’re asking for that stability to come back to us.”
Fox said her industry has not yet crafted a measure to bring before the 2009 session of the General Assembly that might address the fuel-tax issue.
John Heimlich, vice president and chief economist for the Air Transport Association, explained that despite crude-oil prices declining from recent highs, jet fuel is still expensive, as only a percentage of each barrel is refined for jet fuel. He added that airlines have been unable to raise fares at rates that could keep pace with rising fuel prices.
“It’s a race between fares and fuel, and fuel is winning,” Heimlich said. “Don’t think that seeing the crude price is what airlines have been paying.”
The committee asked the panel for more information but didn’t say whether it was likely to take up a bill that would ease the tax burden.
“I think it will probably be looked at, but it’s a much larger issue of contention than was displayed in the committee,” said committee chairwoman Rep. Buffie McFadyen, D-Pueblo West. “Airports depend on those fuel taxes, not just Denver International but also your smaller airports.”
State aviation officials note that 65 percent of aviation fuel taxes collected at each airport is returned by the state to that airport while 35 percent goes to a fund that makes aviation improvements throughout the state.
The Colorado Aeronautical Board has used the fund to improve radar surveillance for air service to communities such as Hayden, Steamboat Springs, Craig and Rifle, said Travis Vallin, director of the state’s division of aeronautics.
