Kevin O'Toole/LONDON

US airlines could be hit with extra taxes of almost $4 billion over the next five years under recommendations from the US Congressional committee set up to establish an alternative to the 10%federal ticket tax.

The recommendation, which is expected to become law from October, offers the industry a compromise, reducing the current flat-rate ticket tax to 7.5%, but supplementing this with a domestic-user charge and other taxes.

There had been a long-running campaign waged by the major network carriers to get rid of the ticket tax altogether in favour of a user fee, but this was strongly resisted by low-fares airlines, led by Southwest Airlines.

The new proposals, to be phased in over two years starting in October, will introduce a user fee on every domestic ticket, starting at $1 per flight segment and eventually rising to $3. The departure tax for international passengers is to be doubled to $12 and a similar arrival charge is to be levied, as well as a tax on frequent-flyer miles which are bought for promotional use by hotels, retail banks and others.

The compromise is expected to result in $3 billion of costs falling on the major carriers, with low-fares carriers shouldering another $1 billion. Southwest has swiftly attacked the resulting compromise, saying that the majors have only succeeded in hurting the whole industry.

The major US carriers, reporting another set of healthy profits for the second quarter, admit that the re-imposition of the 10%ticket tax earlier this year has put some pressure on domestic yields, but this has largely been offset by strong demand especially on key international services.

United Airlines parent UAL, reporting record revenues for the sixth consecutive quarter, was typical in seeing a 1%fall in domestic sales more than offset by a 3% climb in international routes. That was led by a 16%increase on services to Latin America, a growing battleground for all the majors.

Delta, with its restructuring now complete, is leading the profit-makers, helped by a "solid contribution" from once persistently loss-making transatlantic routes and ever-tighter cost controls on the domestic network. The airline's low-cost Delta Express operation has benefited from the domestic boom, with a 71%load factor over its first nine months.

Transpacific routes have fared less well, because of the weakness of the Japanese yen against the dollar. Northwest Airlines, which reported a dip in its net results for the quarter, points to a "soft" Pacific market, a $30 million charge taken against the falling yen and an estimated $80 million impact from the ticket tax.

The airline also saw employment costs leap by nearly 19%in the quarter, largely as a result of the "snapback" wage agreements under which unions agreed to salary cuts three years ago as part of the restructuring, but on the condition that the cuts were eventually re-instated.

Continental Airlines showed lower net profits over the previous June quarter, but only because of tax provisions. Pre-tax profits remained at record levels as the carrier's traffic soared by 13%.

Source: Flight International