Airfares are on the rise but who's to blame?

March 25, 2012|By Hugo Martin

An airline trade group says higher taxes on airfares will hurt the industry. (Al Seib / Los Angeles Times )

A legislative proposal to double the airline security tax is disappointing and shortsighted, an airline trade group charged last week, claiming that the higher ticket cost could severely hurt the industry as it rebounds from the recession.

The reaction from Airlines for America, the Washington, D.C.-based trade group, came in response to a budget proposal by House Budget Committee Chairman Paul Ryan (R-Wis.). Among other budget ideas, he proposed changing the so-called Sept. 11 security fee from $2.50 for every segment of a trip to $5 for each way, regardless of the number of stops.

The chairman’s proposal differs in other ways from the Obama administration’s 2013 budget but calls for the same airline fee increase that the White House has requested to help pay for airport security costs. The increase would raise a total of about $700 million a year.

“We cannot continue to put more taxes on airline passengers — who already pay more than $60 in taxes on a typical $300 round-trip ticket — with this disappointing and shortsighted approach that ultimately will discourage business travel and tourism,” said Nicholas E. Calio, chief executive of the group.

The airlines themselves are responsible for two rate hikes so far this year that have increased fares by up to $30 per round trip. Under a new law that requires airlines to wrap taxes and fees into advertised rates, it is now difficult for consumers to tell who is increasing airfares — the airlines or the government.

It does matter who is raising airfares, said John Heimlich, chief economist for the airline trade group.
If airlines raise airfares, the carriers can use the extra money to improve services, such as buying new planes or adding routes, he said. But if the government raises rates through new fees, the higher fares will discourage passengers from flying without benefiting the airlines, Heimlich said.

“The bottom line is who gets to keep the revenue and who benefits,” he said.

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