Airlines Fees vs. Fares: Impacting Taxes

The liberal Washington Post complains:

There’s a 7.5 percent federal tax on every airline ticket. The money goes into a fund that pays for the air transportation system: airports, capital improvements and the operation of the Federal Aviation Administration.  …

When the airlines kept ticket prices down by shifting $12.8 billion to baggage fees, they also saved almost $964 million in federal taxes they would have owed if they had hiked ticket prices by that amount.

via The Washington Post.

What crap.

First let’s take a look at the real story when it comes to airline taxes:

– September 11 Security Fee: A September 11 Security Fee of $2.50 USD applies per flight segment (maximum charge per trip — $5.00 USD one-way, $10.00 USD round-trip). A flight segment is defined as one takeoff and one landing.

– Passenger Facility Charges: Passenger Facility Charges (PFCs) of up to $18.00 USD may apply, depending upon the itinerary chosen.

– Federal Excise Tax: A 7.5% domestic tax is applied to the airline base fare. The tax may be pro-rated for flights to/from the 48 contiguous U.S. states and Alaska and Hawaii, and some international destinations. A Travel Facilities Tax of $8.40 USD per direction also applies to flights to/from Alaska and Hawaii and the 48 contiguous U.S. states or between Alaska and Hawaii.

Federal Domestic Flight Segment Fee: A federal domestic flight segment fee of $3.80 USD applies per flight segment. A flight segment is defined as one takeoff and one landing.

Looks like the G is getting more than it’s fair share of the airline travelers’ dollar.  The money collected — and wasted — by the TSA and FAA is staggering.  It’s no wonder that back in March the Orlando Sanford Intl. Airport was choosing to opt-out of using the TSA for security screenings.  Regardless of how they spend it, the government is taking plenty of money from the airline traveler.

Also, let’s take a look at the wording of the story.  The newspaper writes, “When the airlines kept ticket prices down by shifting $12.8 billion to baggage fees, they also saved almost $964 million in federal taxes….”  Wrong!  The airlines didn’t save anything; the consumer saved.  This sentence should be written, “By shifting $12.8 billion to baggage fees airline passengers saved nearly $1 billion in taxes that the federal government would have otherwise imposed.

The headline of this story should be, “Shifting fares to fees permitted $1 billion in extra air travel last year.”  Air traveler the big winner.

Further, the baggage fees were NOT paid by everyone.  If you travel light and didn’t check a bag you paid nothing.  If you needed to check a bag, then you paid for the service you received.

The whole situation seems very fair to me.  That the government is out the money is just icing on the cake.

High Gas Prices Raise Airline Ticket Costs

“[R]ising jet fuel costs put significant cost pressure on the airline industry,” Steve Lott, vice present of communications for Airlines for America told CBSDC. “Regarding fuel, it was the airline industry’s largest expense in 2011, representing 35 percent of total costs. In 2011, the price of jet fuel reached a record high of $3.00 per gallon for the year.  …

“As with any business, if [an airline] pays more for fuel and operational costs, they need to pass that cost on to the consumer,” she told CBSDC. “There have been [similar] effects in the past.”

via CBS DC.

The article cites way that airlines try to reduce the impact of rising fuel prices, include “single engine taxi” which is just as it sounds.  One issue with this practice is that jet engines are really designed to run “at operating temperature” and not take to the air immediately upon start-up.  Naturally the airlines’ practices are pretty safe, but I would suggest this particular solution is less than ideal.