Flyers Won't Benefit From Expired Travel Taxes

By DAVID KOENIG
|  Saturday, Jul 23, 2011  |  Updated 2:17 PM CDT
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Fare Hike Offsets Traveler Tax Savings

AP

US Airways and American Airlines say they've raised fares to offset any tax savings.

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Some airline customers won't see savings this weekend even though several federal taxes on tickets have expired.

US Airways and American Airlines say they've raised fares to offset any tax savings.

That means instead of passing along the savings from expired taxes, the airlines are pocketing the money while customers pay the same amount as before.

The expired taxes can total $25 or more on a typical $300 round-trip ticket.

The taxes expired after midnight Friday night when Congress failed to pass legislation to keep the Federal Aviation Administration running.

That gave airlines a choice: They could do nothing -- and pass the savings to customers -- or they could grab some of the money themselves.

"We adjusted prices so the bottom-line price of a ticket remains the same as it was before ... expiration of federal excise taxes," said American spokesman Tim Smith. US Airways spokesman John McDonald said much the same thing -- passengers will pay the same amount for a ticket as they did before the taxes expired.

Southwest Airlines and its AirTran subsidiary raised prices by $8 per round trip even if the taxes on the trip would have been more, said spokeswoman Marilee McInnis. She declined to say whether the increase would be rescinded if Congress revives the travel taxes.

Fare experts said JetBlue Airways also raised fares. The airline did not immediately answer requests for comment.

The Transportation Department says it will lose $200 million a week. J.P. Morgan analyst Jamie Baker said airlines could take in an extra $25 million a day by raising fares during the tax holiday.

Southwest's support could be crucial if the airlines are to benefit from the expiring taxes.

Southwest carries more U.S. passengers than anyone, and it effectively sets rates on many routes. Southwest torpedoed attempts by other airlines to raise prices in the last two weeks. CEO Gary Kelly has publicly worried that airlines could frighten away passengers by raising prices too high.

That may be less of a fear this time around, however, since consumers wouldn't be shelling out more money for tickets -- they just wouldn't get an unexpected discount, courtesy of Congress.

Several federal travel taxes expired when Congress adjourned for the weekend without passing FAA legislation. Lawmakers couldn't break a stalemate over a Republican proposal to make it harder for airline and railroad workers to unionize.

Air traffic controllers stayed on the job, but thousands of other FAA employees were likely to be furloughed.

Airlines stopped collecting a 7.5 percent ticket tax, a separate excise tax of $3.70 per takeoff and landing, and other fees. Those add up to about $32 on a round-trip itinerary with base fare of $240 and one stop in each direction.

Other government fees for security and local airport projects are still being collected. They boost the final cost of that $240 base-fare ticket to $300.

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