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Airline Tax Expires, Two Major Airlines Offset Savings By ‘Adjusting’ Fares

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(File photo by Kevork Djansezian/Getty Images)

(File photo by Kevork Djansezian/Getty Images)

DALLAS (AP) — Some airline customers won’t see savings this weekend even though several federal taxes on tickets have expired.

US Airways and American Airlines raised fares to offset the tax savings.

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

But other airlines left their prices unchanged on Saturday. Consumers could save money by shopping around.

The expired taxes can total $25 or more on a typical $300 round-trip ticket. For a September trip between Dallas and San Francisco, the cheapest American flight on Travelocity.com was $24 higher than offerings from United, Continental, Delta and Virgin America, which did not raise fares.

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.

Smith declined to say whether the increase would be rescinded if Congress revives the travel taxes.

Tom Parsons, who runs the Bestfares.com travel website, said consumers should get a break.

“Why would the airlines deserve it?” he said. “They already hit us with enough fees. Now they’re keeping the government fees too.”

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.

Parsons said competitive pressure eventually will force the airlines to match — either they’ll all pass the tax savings on to passengers, or they’ll all raise fares and keep the money themselves.

Southwest Airlines and its AirTran subsidiary raised prices by $8 per round trip, said spokeswoman Marilee McInnis.
Southwest’s support could be crucial if the airlines decide to keep the tax money. 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, 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.

Passengers who bought tickets before this weekend but travel during the FAA shutdown could be entitled to a refund of the taxes that they paid, said Treasury Department spokeswoman Sandra Salstrom. She said it’s unclear whether the government can keep taxes for travel at a time when it doesn’t have authority to collect the money.
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AP Airlines Writer Joshua Freed in Minneapolis contributed to this report.

(© Copyright 2010 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

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