Charlotte business leaders met in Ballantyne Friday to discuss transportation issues, including failing infrastructure and funding shortfalls. But the number one topic of conversation was a specific tax carve-out for American Airlines.
Airlines in North Carolina don’t have to pay taxes on jet fuel over $2.5 million. It’s an exemption that’s set to expire at the end of the year. State Senator Joel Ford was one of several panelists at a Charlotte Chamber of Commerce transportation summit who said "extend it."
"We need to figure out the aviation fuel tax credit issue. One of the last things we need to do is lose a major airline as a hub in this city," Ford says.
Charlotte Douglas airport punches far above its weight as a market. That’s because costs for airlines are far lower than at any other major airport.
"The way that Charlotte maintains its size and its hub status is by keeping the costs low and fuel is obviously a huge piece of that," says American Airlines VP Mike Minerva.
Minerva says it's a competitive issue for Charlotte and for North Carolina. He says American’s not threatening to leave, but proponents of extending the cap warn that it would jeopardize Charlotte’s hub status. US Airways saved about $25 million in the 2012 and ’13 fiscal years, according to the state’s most recent data.
Governor Pat McCrory and the state House of Representatives have pushed to extend the cap through 2020. The Senate hasn’t. Senator Bob Rucho of Mecklenburg County says it’s an issue of fairness.
"We believe it’s not fair that someone should get a special tax preference loophole at the expense of every other business and at the expense of every other taxpayer who subsidizes that," Rucho says.
Furthermore, Rucho says the cap, enacted in 2005, had a very specific context—US Airways faced bankruptcy. After the merger, American reported a $3 billion profit last year. Rucho says the state has to figure out if lifting the fuel tax cap would increase costs at Charlotte Douglas to the point where the airport would lose business, but so far, he’s skeptical.