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Grounding the FAA brings surprising economic ripples

U.S. Federal Aviation Administration seal

STEVE CHIOTAKIS: A Federal Aviation Administration team of engineers is back in Washington today -- but not working their regular jobs. Instead, they are lobbying Congress to come to some kind of agreement on an FAA budget. So they can get back to work. The political standoff has gone on for weeks now -- and has cost the government more than $300 million in airline ticket tax revenue. Air traffic controllers are still patrolling the skies -- but "non-essential" employees have been furloughed.

Marketplace's Gregory Warner is with us now live to talk about it. Good morning, Gregory.

GREGORY WARNER: Good morning.

CHIOTAKIS: A lot of politics in the debate there -- but what's the economic impact over this impasse?

WARNER: Well, you mentioned the $300 million. There are really two other impacts. One is specific to the aviation industry, which is constantly in need of modernization. Now you have hundreds of infrastructure projects currently on hold. But second is the impact to the economy. I called Allen Michel he's a professor of finance at Boston University who focuses on aviation. He said when you have 70,000 people out of work -- you can guess what that means.

ALLEN MICHEL: When you're outta work, you're not spending money. And when you're not spending money, you're not buying things, and the companies that are producing products, they've got to lay people of. It affects the economy thru the ripple process and there's a giant ripple process with 70,000 people.

CHIOTAKIS: If the economic ripples are so clear, why is this fight still going on?

WARNER: Well, Professor Michel, and other analysts say, that what we're really watching is a fight over which political party makes the laws in Washington. The Obama administration passed rules last year that would make it easier for airline unions to organize. Republicans don't like that, and they want to use this budget extension process -- this FAA budget extension process -- to change those rules. And there's also a smaller fight over subsidies to rural airports, but as they said, that's a smaller issue, economically. This is really a fight over which party makes the laws in Washington. The Obama administration passed pro-labor rules last year that would make it easier for airline unions to organize. Republicans want to use this budget extension process to change those rules. Both sides are squaring off.

The big winner here might be the airlines, because now that the FAA has shut down, they're not collecting those taxes on your ticket price, so some airlines are keeping those taxes, as profits, other carriers are charging less for the flights and selling more tickets. In fact, Alaska Airlines reported a 26 percent jump in ticket sales the week after the FAA shutdown. So. Bad month to be an FAA employee, but a good month to climb a glacier, I guess.

CHIOTAKIS: There you go. Marketplace's Gregory Warner reporting live for us. Gregory, thanks.

WARNER: Thank you, Steve.

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