Tuesday, 9 August 2011

Airlines cut ticket prices as federal taxes return

U.S. airlines are cutting fares. But many fliers will pay no less now that federal ticket taxes are back in place.

  • By Patrick Pleul, AFP/Getty Images file
By Patrick Pleul, AFP/Getty Images file

Southwest and AirTran were the first to roll back the 7.5% fare increase they imposed last month when a congressional stalemate resulted in airline ticket taxes being suspended.
JetBlue, American and other carriers cut some prices as collection of the taxes resumed Monday.
"Almost all the domestic airlines are starting to roll back … to previous levels," says Rick Seaney, CEO of FareCompare.com, who analyzes ticket prices.
Federal ticket taxes expired July 23 when Congress failed to reauthorize the Federal Aviation Administration, which collects the revenue. Rather than give a break to passengers, most airlines boosted fares to the level they'd be with the taxes included. That allowed carriers to pocket roughly $400 million over 16 days.
Congress last week approved allowing the FAA to operate through Sept. 16, which also required passengers to again pay the taxes. If the higher fares had remained along with the restored taxes, travelers could have paid up to 15% more for some flights, Seaney says.
Kate Hanni, executive director of passenger rights group FlyersRights.org, says she's disappointed with an IRS decision not to refund taxes paid by passengers who bought tickets before July 23, then flew during the two weeks the taxes weren't in effect.
But she says she's pleasantly surprised by the fare cuts.
"It's despicable they did not offer a tax refund," she says. "It's also despicable that the airlines raised the airfares during the time of the FAA furlough and (did not pass) along the savings to the flying public. That said, I'm very surprised and pleased that airlines are cutting their fares now that the taxes have been reinstated."
The airline industry is trying to be profitable amid higher fuel prices. Hanni says carriers may have feared that failing to rescind the higher fares could keep some fliers on the ground.
"I think maybe they've had a wake-up call because the flying public really doesn't like to fly anymore," she says.
But Seaney says fliers remain on the losing end. "The winner is the airlines," he says. "You've got passengers who didn't get a refund nor a tax holiday."

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