Stalemate in Congress could be boon for travelers

by
July 25, 2011

By DAVID KOENIG, AP

DALLAS (AP) — Gridlock in Congress could be a boon for airline consumers this weekend.

Several federal air travel taxes were set to expire Friday night if Congress failed to pass legislation to keep the Federal Aviation Administration operating.

That means travelers could avoid about $30 in taxes on a $300 round-trip ticket — unless the airlines try to grab the windfall for themselves by raising fares to offset the expiring taxes.

Rick Seaney, CEO of travel website FareCompare.com, said airline reservations systems were alerted to stop collecting various taxes at midnight.

“I am shopping at 12:01 tonight and so should the rest of the public,” he said.

But it was possible that airlines could raise fares to offset the uncollected taxes. That would leave consumers paying the same amount to fly — just that more would go to the airlines and less to the government.

Seaney and Jamie Baker, an analyst for J.P. Morgan, said that US Airways began raising fares Friday, apparently to offset the lower taxes. Baker said expiration of the taxes “represents a potential industry windfall” if airlines capture the government’s share of consumers’ money.

A spokesman for US Airways Group Inc., John McDonald, confirmed that the airline had raised prices. He declined to discuss specifics of the increase but said passengers are “likely not going to see any change in fares from what they would normally see” before the taxes expired.

Officials for United Continental Holdings Inc., Delta Air Lines Inc., AMR Corp.’s American Airlines and JetBlue Airways Corp. said Friday afternoon that they had not raised fares but declined to discuss pricing plans for the weekend. Southwest Airlines Co. did not immediately respond to a request for comment.

Airlines were expected to stop collecting the 7.5 percent ticket tax; a separate excise tax of $3.70 per segment, or a takeoff and landing; a $16.30 tax on international arrivals and departures; a 6.25 percent tax on freight shipments, and other levies, according to a Treasury Department spokeswoman.

Airlines would continue to collect the passenger security fee of $2.50 per segment and the “passenger facility charge,” or PFC, of up to $18 per round trip, which helps pay for local airport projects.

The FAA was headed toward a partial shutdown — air traffic controllers would stay on the job because they are considered essential workers — after lawmakers failed to settle a partisan dispute of legislation to keep the agency running.

Democrats oppose a provision by House Republicans that would make it harder for airline and railroad workers to unionize. The airline industry supports the Republicans’ proposal.

 

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