United CEO takes on Obama flight tax, EU emissions trading

President Obama's tax proposals and the European Union's emissions trading system are hampering the airline industry's ability to make money, the CEO of United and Continental airlines said Thursday.

Speaking with reporters on a conference call to discuss the merging airlines' third-quarter earnings, United CEO Jeff Smisek targeted both the president's proposal to raise taxes on airplane take-offs and the European Union's emissions-swapping proposal, which is reminiscent of cap-and-trade.

Both, he said, are "major impediments" to the financial health of airlines. About 20 percent of the average price of an airplane ticket goes to taxes, Smisek said.

"Airlines currently pays 17 different federal aviation taxes and fees in the U.S. totaling $16.5 billion in 2010," he said. "Unfortunately, Washington is attempting to make U.S. airlines its piggy bank once again."

Smisek reported Thursday that United and Continental had generated $773 million for the three-month financial period that ended in September. But he said the airlines cannot afford the types of proposals that are coming from politicians lately.

"The U.S. airlines have lost a total of $55 billion over the past 10 years," he said. "Now Washington is proposing $35 billion of additional taxes over the next 10 years.

"We are already taxed more heavily than alcohol, tobacco and firearms. We are taxed as a sin," he continued. "We are not a sin. We connect people and cultures. We transport cargo. We are drivers of the economy. We bring business and job growth to our hubs and spoke cities. We contribute $1.2 trillion to the U.S. economy each year."

As part of his suggestions to the supercommittee of lawmakers tasked with cutting a minimum of $1.2 trillion from the federal deficit, Obama has called for a per-takeoff fee on flights that could run as high as $100.

The president's proposal also includes a $7.50 increase in the security taxes passengers pay each way on trips.

Smisek said Thursday the president should look to other places than the aviation industry for revenue generators.

"If this crushing $35 billion of additional taxes becomes law, we will have no choice but to raise fares, reduce service, eliminate service to some communities and reduce the size of our workforce," he said. "Simply put, this tax proposal is a jobs killer."

Smisek was equally critical of the EU's proposed emissions trading system. Under the system, airlines from any country would have to trade credits for pollution emitted by flights to European destinations starting next year.

The House passed a bill this week to block U.S. airlines from participating in the system, which Smisek said was "an extraterritorial, unilaterally-imposed patchwork tax rather than a unified global solution for aviation emissions.
"We are committed to the environment and reducing our fuel burn benefits both our business and the environment," he said. "At the new United, we're proud of our combined track record, as we've improved aircraft fuel efficiency by 32 percent since 1994."

But quickly, he added "more than 20 countries, including the U.S., China, Russia, India and Japan, have stated their opposition to this tax and reinforced the belief that it violates international law."