Will Airlines Roll Back Fare Hikes Now That The FAA Can Collect Taxes Again?

Immediately after a standoff in Congress left the FAA without the authority to collect taxes on airfares, almost every major airline moved to jack up their ticket prices. But now that the shutdown has ended — at least temporarily — will the airlines respond by lowering prices to where they were before?

Rick Seaney of FareCompare.com tells Bloomberg News that he believes it will happen and that Southwest will eventually lead the way. However, he cautions, “I wouldn’t be shopping for tickets this weekend… There’s no incentive to do something right now until someone dips their toe in first. But it’s coming.”

He adds that the current low demand for airline tickets means it would be difficult for airlines to justify keeping airfares at the higher level for too long.

An analyst for JPMorgan Chase points out that, by keeping those price hikes in place after taxes return would be about a 10% cost increase to consumers, but it’s unlikely that it will stay. “[R]arely has the industry raised fares by this magnitude in a single effort,” he writes.

The temporary agreement that ends two weeks of unpaid furlough status for 4,000 FAA employees and gives the agency authority to collect taxes, only lasts through mid-September, at which point we could be revisiting this topic all over again.

Airlines collected around $28 million per day from the increased fares, essentially the same amount the federal government lost in uncollected taxes.

The IRS has announced it will not attempt to collect those unpaid taxes from the airlines or consumers.

Airlines May Roll Back Fare Hike as Taxes Return [Bloomberg]

IRS Won’t Impose Retroactive Ticket Tax on Airlines, Fliers [Bloomberg]