STAND. COM. REP. 889

Honolulu, Hawaii

, 2003

RE: S.B. No. 1172

S.D. 2

H.D. 1

 

 

 

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Transportation, to which was referred S.B. No. 1172, S.D. 2, entitled:

"A BILL FOR AN ACT RELATING TO AIRLINES,"

begs leave to report as follows:

The purpose of this bill, as received by your Committee, is to provide a tax credit for landing fees incurred by commercial airlines with a domicile based in Hawaii.

UAL Council 005 Air Line Pilots Association and several concerned pilots testified in support of this measure. The Airlines Committee of Hawaii and Hawaiian Airlines testified in support of the intent of this bill. The Department of Taxation testified in opposition to this bill. The Tax Foundation of Hawaii commented on this measure.

The events of September 11, 2001, had a devastating impact upon the airline industry due to decreased demands for air travel. While there have been some improvements in the number of passengers flying since that time, many airlines still find themselves facing unprecedented financial challenges arising from international events, as well as the local and national economic climate. Some airlines have even resorted to filing for bankruptcy in order to remain operational.

One means by which airlines have been able to save money, especially with regard to their Hawaii operations, is through the closure of Honolulu-based domiciles for their flight attendants and pilots since high costs are associated with maintaining such an operation. This has been seen as a money-saving alternative to decreasing large numbers of flights to Hawaii.

Your Committee notes that providing an income tax credit to commercial airlines will encourage Honolulu-based fleets to remain in Hawaii and encourage other airlines to start up Honolulu-based fleets, which will in turn bolster the State's economy. Your Committee further notes that the airline industry is a critical pillar of the State's economy and its demise will affect every facet of the State's economy. Thus, every effort to ensure the sustainability and promote the growth of Hawaii's air transportation industry should be made.

Moreover, global events, the uncertainty of armed conflict with Iraq, and preparations for war have had and will continue to have an adverse effect on an already economically weakened airline industry. Presumably, Hawaii's fragile economy will be derailed should our nation go to war with Iraq.

Air industry experts informed your Special Committee on War Preparedness that airlines would save an estimated $6,400,000 per month through the waiving of airline landing fees, joint use charge fees, and exclusive use terminal rental fees, which would, in all likelihood, lead to the promotion of flights to Hawaii. Your Special Committee on War Preparedness has provided this information to Your Committee on Transportation, which concurs that the waiving of these fees will assist the struggling airline industry and will result in increased flights to Hawaii. Nevertheless, both your Committee on Transportation and your Special Committee on War Preparedness feel that to be eligible for the benefit of having airline landing fees, joint use charge fees, and exclusive use terminal rental fees waived, air carriers should be required to maintain an in-bound passenger load of not less than 90 percent of their in-bound passenger load for the month of January, 2003.

Accordingly, your Committee has amended this measure by:

(1) Removing requirements that the principal operator of a commercial airline have a domicile based in Hawaii and be a resident taxpayer to qualify for the airport landing fee tax credit since this may violate the commerce clause and equal protection clause of the United States Constitution;

(2) Inserting language that:

(a) Authorizes the Director of Transportation to waive airport landing fees, joint use charge fees, and exclusive use terminal rental fees payable by qualifying air carries for a 30-day period;

(b) Authorizes the Director of Transportation to defer payment of airport landing fees, joint use charge fees, and exclusive use terminal rental fees payable by qualifying air carriers for two subsequent 30-day periods; and

(c) Requires that, to qualify for the waiver of these fees, an air carrier must maintain an in-bound passenger load for the applicable 30-day waiver or deferral period equal to 90 percent of the air carrier's in-bound passenger load for the month of January 2003;

and

(3) Making technical, nonsubstantive amendments for purposes of clarity, consistency, and style.

As affirmed by the record of votes of the members of your Committee on Transportation that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1172, S.D. 2, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1172, S.D. 2, H.D. 1, and be referred to the Committee on Economic Development and Business Concerns.

Respectfully submitted on behalf of the members of the Committee on Transportation,

 

____________________________

JOSEPH M. SOUKI, Chair