Airlines Benefit from Tax "Holiday," Not Consumers
The Federal Aviation Administration furloughed 4,000 employees, due to a squabbling Congress failing to reauthorizing funding for the FAA on Friday.
The government can't collect millions in airline tax revenues until the authorization is approved. So, will this lead to lower airfares for consumers? (Taxes can add up to 15% to a fare.)
The answer has changed over the last few days.
On Sunday, when I checked some sites, ticket prices had gone down, since the taxes were no longer included in the final ticket prices on many of the Web sites I checked. But that didn't last long.
Then, quietly, as the news sunk in that millions of dollars weren't being collected for the government, some airlines thought it might be a good idea to keep the ticket and taxes at the same level, and keep the entire fare for themselves
Instead of fares going down, most of the legacy carriers pocketed the difference -- and it was untaxed to boot. On the plus side, a handful of the low-cost carriers, like Spirit, Virgin America, and Alaska chose not to raise fares.
It's bad enough that the airlines had already figured out one of the biggest tax loopholes about three years ago: Since airline fares are taxed high, then keep fares at a lower level (with lower taxes) and then charge ancillary fees for everything else (a de facto fare increase) and get taxed at a much lower rate. As a result the airlines are gaining huge profits, and in fact, are making more profit from ancillary fees than they are from ticket sales.
So, isn't it ironic that the very week tickets aren't taxed, and the very week the airlines are lobbying for no new passenger fees from the government, they have apparently decided to keep the difference between their base fares and what the taxes would have been?
The ultimate whammy: When Congress reaches an agreement on the FAA re-authorization, I'm guessing the government will want to make up that tax shortfall.
And guess what will happen? The cost of air travel will go up once again.
Related:
- Airlines Profit from Fees, but Will Travelers Put up with It?
- Feds to Expand Passenger Rights
- The Airlines' Report Card: The Best and the Worst
