Airlines Not Passing On Savings Of Not Having To Pay FAA Taxes

When Congress failed Friday to extend a bill that would have kept the Federal Aviation Administration (FAA) running, they handed airlines a $25 million a day gift. Without the extension, the FAA doesn’t have the authority to collect taxes. But rather than pass on the savings, nearly all airlines actually raised fares to about the same amount as the federal taxes. Most consumers won’t notice because prices are the same, even though it’s effectively a price hike.

As we reported yesterday, US Airways and American Airlines were among the first to bump up their prices, with other major airlines following soon thereafter.

The taxes include a 7.5% levy on domestic tickets, $3.70 for each segment of the fight, and a $16.30 tax on international arrivals and departures. Spirit and Alaska Airlines were among a small clutch of airlines to not pocket the bonanza.

“The consumer should have saved anywhere from $25 to $50 round trip,” Rick Seaney, CEO of FareCompare told NYT. “Instead, it’s a windfall for the airlines.”

“Basically, consumers are now paying the same as they did last week,” Jean Medina, a spokesperson for the Air Transport Association, responded rather unhelpfully.

But what about people who bought their tickets before Saturday? They already paid the federal taxes, but now, during the period during which they’re flying, no one has the authority to collect them. How about a refund?

That will probably happen. JetBlue has already said they would give out refunds to flyers who asked for them. Virgin America told customers that they might be able to get one from the IRS. Most airlines are probably going to wait for guidance from the Feds on what to do, once they are authorized to pick up their pencils again.

A Bonanza for Airlines as Taxes End [NYT]