Thursday, February 26, 2009

New taxes on airfare coming your way in new Obama budget

The new Obama budget will increase the current the current $2.50 per segment (and ominously named) "September 11th Security Tax" to something higher - exact details have not emerged as of yet but expect it to be substantial. The government claims that the current tax covers only 36% of the actual costs of security screening.

While all airline tickets are already heavily taxed, this is the only tax that (currently) also applies to frequent flyer award redemption tickets. Its that little (and annoying) $5 or $10 that airlines collect from you when you make an award redemption.

Here is an interesting description of the current taxes on an airline ticket have increased over the years. Its only going to get worse.

Expect the Air Transport Association (ATA) to fight this vigorously. Southwest will also fight this harder than the other carriers because they are hit harder by segment fee taxes than percent of revenue taxes due to their lower average fares, shorter flights and lack of higher-priced international services.

1 comment:

  1. So conceptually, it's reasonable to say that we need to adjust our "Security Fee" to reflect actual security costs instead of 'losing money' on every passenger.

    But it raises the need for other aspects of rationalization:
    1. We must reduce TSA costs. Too much of TSA costs go to things that do not improve security. It's security theater and widely known to be. Think the idiotic ban on liquids. Think the new 'police-wannabe' uniforms when the old ones were fine. Think Kip Hawley's salary. And the dozens of people, at each airport, standing around.

    2. Why do I pay 2 security fees for a connecting flight? TSA is not screening me at the 2nd checkpoint, and while they are incurring costs they are not the same as on my originating segment. If the fees are being raised, are they being raised for the first segment or for both? And what of my arriving airport - I don't pay a TSA or PFC fee there but I use the facilities and the secure area.

    3. What other fees should be rationalized / aligned to actual costs? Should we limit Airport PFCs to actual passenger improvements? Airports are jacking them up, and they seem to be getting more grimy, more congested, more expensive, and less hospitable. Should we extend the rationalization to 'fuel surcharges'?

    It's conceptually a good idea to align fees to costs, but the government first must look at the costs, and then rationalize not just this one airport fee but a whole litany of others.