Lawsuit against American Airlines moves forward

March 13, 2014
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By Jim Hagerty
Staff Writer

The lawsuit brought against American Airlines by the Regional Transportation Authority (RTA), accusing it of running a sham office in Sycamore, Ill., to avoid paying millions of dollars in retail taxes is moving forward.

The complaint, filed last year, had been stayed while American emerged from Chapter 11 bankruptcy.

American set up the office in the Sycamore City Hall building for its subsidiary, American Aviation Supply. There, the company says its one employee is responsible for purchasing jet fuel for the airline’s fleet of planes.

The RTA alleges the 750-square-foot office was opened in Sycamore to avoid paying retailers’ occupation taxes in Cook County, home of O’Hare International Airport.

The office cost the City of Chicago and Cook County more than $23 million in 2013, the complaint states.

“Governments across the country have been forced to do more with less,” said RTA Executive Director Joe Costello said last year. “CTA, Metra and Pace have had to work with constrained budgets and have needed to raise fares and reduce service because the money’s just not there. Now we know why. These airlines happily accept taxpayer-supported services – like the mass transit that many of their customers and employees use – but don’t pay what is due to support those services. That is just wrong.”

The RTA also oversees the Chicago Transit Authority (CTA), Pace bus services and Metra rail line.

United Airlines also was named in the complaint. United has had a relationship with the City of Sycamore since 2001.

The RTA claims American and United have cost the City of Chicago and Cook County more than $300 million in last seven years.

“Both airlines purchase and use millions of gallons of jet fuel in Chicago,” the RTA claims. “Despite this, since 2001, United has claimed to ‘accept’ jet fuel at its office in a Sycamore strip mall, while American has been ‘accepting’ jet fuel at its small, windowless office.”

American opened its Sycamore office in 2004. Under a 25-year agreement, the city receives more than $350,000 a year in exchange for allowing the airline to claim it accepts jet fuel. The company is also rebated on millions of dollars in sales taxes.

American Airlines pays DeKalb County annual sales taxes of about $2 million.

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