Continental and Rivals Chafe at Tab for Transportation Security

Carriers balk at government move to collected hundreds of millions in 2005 security fees


Jan. 21--Just when the battered airline industry thought it could see brighter skies on the horizon, the fasten seat belt light has come on.

Houston-based Continental Airlines and other carriers are balking at a move by the federal government to collect hundreds of millions of dollars more in 2005 security fees.

The Transportation Security Administration, which says it has the blessing of Congress, is seeking the payments.

The airlines were contacted earlier this month, when most were still tallying their quarterly and annual losses. Continental, along with most other airlines, is looking at options on how to best oppose the agency's effort.

"We don't believe that TSA is correct in their assessment," Continental spokesman Dave Messing said. "We are in discussion with TSA about it, and we're going to start by asking for a review."

The trade group representing the nation's airlines is taking a similar stance.

Continental is being asked to pay almost $7 million more for 2005, which is considerably less than many other airlines. Dallas-based Southwest, for example, has been billed $24 million.

Southwest spokesman Ed Stewart said the low-fare leader disagrees with the agency's calculations.

"We are not happy about it, I am here to tell you," Stewart said. "It just came out of the clear blue sky. Right after the holidays, a $24 million bill shows up on our doorstep."

Continental and many other airlines already are on record as repeatedly complaining about the fees set by the federal government on everything from fuel to passenger facilities.

Earlier this week, when Continental announced losses for the fourth quarter and year, company President Jeff Smisek described the amount of fees paid by airlines as "bordering on the absurd."

Continental reported it paid more than $1.1 billion in fees and taxes last year.

Some airline analysts agree with Smisek's assessment.

Ray Neidl of Calyon Securities said research shows that fees and taxes have grown considerably in recent years.

"I think it is getting totally out of hand," Neidl said.

Transportation Security Administration spokeswoman Andrea McCauley on Friday said the agency -- with its most recent billing -- simply is following the mandates that the Government Accountability Office set out in conjunction with Congress. Those were done when the Aviation and Transportation Security Act of 2001 was enacted shortly after the 2001 terrorist attacks, she said.

"Essentially, Congress directed airlines to pay TSA what they previously spent on screening of passengers and baggage," McCauley said. "And those payments were based on a GAO analysis."

The security fees have been collected since February 2002, she said, although she added that the federal agency has "undercollected" some of the fees.

"What you are seeing is a move by TSA to collect it," McCauley said.

The head of the Air Transport Association, the trade group representing most airlines, took issue with the latest move by the government.

"The method TSA used to calculate the amount it claims carriers owe is inconsistent with congressional intent," ATA President and Chief Executive James May said. "We strongly oppose TSA's action and the notion that airlines should be the source of funding for aviation security, whichis a function of national security."

The TSA was initially created as a part of the Transportation Department, but then was folded into the Department of Homeland Security after it was created. Questions about the agency's effectiveness have been raised almost since its inception.

Robert Poole of the Reason Foundation said in a report issued this week that the Aviation and Transportation Security Act is best known for federalizing airport security.

Poole said the nation should instead switch to a risk-based security model and transform the Transportation Security Administration into an oversight agency for contract screeners.

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