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Dear Airlines: Stop Pocketing Tax Holiday Savings

by on July 27, 2011 · 24 comments

in Travel Industry

I know this may fall on deaf ears, but I’d like to urge the airlines to pass along the savings from not collecting FAA taxes onto consumers. I’m writing this post on a Delta flight that I was able to rebook for a $40 savings the day the taxes stopped being collected. That certainly helps considering the sky-high coach one way JFK-LAX fare was $440 – after the little bit of tax help!

Since then, Delta and most other major airlines – with the exception of Alaska and Spirit – have raised fares the amount of the foregone taxes and are now pocketing the money themselves.

Luckily, I’m not the only one who feels that this is a little messed up, though most senators want that money to be saved and put towards the FAA, like it’s supposed to be.

West Virginia Democrat John D. Rockefeller IV, chairman of the Senate Commerce, Science and Transportation Committee, said he was “deeply perplexed” that most airlines had decided to keep the money.

“We urge the nation’s airlines to put all of the profits that they are making from the lapse of the aviation taxes into an escrow account so that they can be transferred back into the Airport and Airway Trust Fund when Congress reinstates the taxes,” Rockefeller and fellow Democrat Maria Cantwell of Washington said Tuesday in a letter to Richard Anderson, the chief executive of Delta Air Lines Inc. and chairman of the Air Transport Association.

What are your thoughts? Should the airlines get a little revenue love because of this weird government issue? Or should it go to passengers or to the FAA?

I vote for passengers!

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  • Gene

    I think the airlines should pocket the money. it seems that everything works against the airlines – the economy, war, weather, disease, oil prices. For once they are profiting and everyone cries fowl. Not fair.

  • Corn

    The politicians need to get a budget and laws put together. That’s their job and they’re failing. The airlines can and should charge whatever they want as the market will bear.

  • Carsten Varming

    Well. The airlines change their prices all the time. The end price for the cheapest ticket is all that matters for lots of leisure travelers and that equation got shifted a little the other day, but only to be shifted back by fare increases. In a free market economy the airlines can pick the prices they want and I think that is a good thing.

  • Cory

    I took advantage of the tax holiday before Delta raised its fares to make up for the difference, and saved money on flights to both Miami and Las Vegas. I don’t have a problem with them raising their fares to fill the gap, unless it’s in their best interests from a revenue perspective to keep fares at their tax-free levels. Just like any pricing/sale strategy I’d think that if the tax holiday was sparking more business (Such as mine) then it’s silly to raise the fare. I am not a pricing expert, nor am I an economist.

    My general perception would be that the airlines are wasting a great opportunity to run a 10-15% off sale to fill additional seats at a price that they were charging anyway. It would be my position that they would earn more revenues had they just kept the fares where they were and run a “sale”.

  • Mitch B

    I think that the airlines should pass 50% of the savings back to the passenger. That act would be a show of good faith…even if it isn’t a huge savings, it could engender further loyalty.

    -Mitch

  • JA

    Imagine if, during a sales tax holiday, all major retailers suddenly increased their prices across the board by the equivalent of the waived sales taxes. You would end up paying the same as you were without the tax holiday. Would consumers be okay with it? The airlines are the most hated companies for a reason – namely, that they are dishonest with passengers. For another prime example of their dishonesty, take a look at fuel surcharges.

  • Kris

    I tend to agree with Gene, and as other blogs have noted, if pocketing a 20-40 dollars per tickets helps airlines facing financial trouble climb out of the red, then maybe it can turn out to be a good thing. HOWEVER… It’s a PR nightmare. Though if you want to fly bad enough, you’ll pay what the ticket costs, and the airlines probably don’t care all that much about PR. At the end of the day, we need as much as they need us.

  • Ed

    Free market system: the airlines can charge whatever they want.

  • David

    The problem is, that benefits won’t trickle back to consumers when the airlines are in a better financial position. It is take and never give (unless the market demands more consumer benefits).

    During a recession or fuel spike, airlines tend to slash amenities and things, but when the economy picks up, those benefits rarely return. Will we ever get our food and headphones for free anymore on a plane (in coach)? I think it’ll never happen. Once they’ve gotten us accustomed to flying like animals on a plane, they’ve altered the market expectation……

    What happens to the financial windfalls when the airlines are profitable? Well, they’re publicly traded, so the profits are for the benefit of shareholders, NOT consumers.

    I’m always surprised to see how quickly consumers defend greedy corporate behavior, but that is a political discussion for another day. :)

    I’m from Washington, sue me!

  • David

    The problem is, that benefits won’t trickle back to consumers when the airlines are in a better financial position. It is take and never give (unless the market demands more consumer benefits).

    During a recession or fuel spike, airlines tend to slash amenities and things, but when the economy picks up, those benefits rarely return. Will we ever get our food and headphones for free anymore on a plane (in coach)? I think it’ll never happen. Once they’ve gotten us accustomed to flying like animals on a plane, they’ve altered the market expectation……

    What happens to the financial windfalls when the airlines are profitable? Well, they’re publicly traded, so the profits are for the benefit of shareholders, NOT consumers.

    I’m always surprised to see how quickly consumers defend greedy corporate behavior, but that is a political discussion for another day. :)

    I’m from Washington, sue me!

  • David

    This, by the way, is why the airlines are constantly involved in antitrust/collusion/price-fixing lawsuits. They are obviously signaling each other to change rules and trying to trigger fare increases in tandem.

    But, they are only willing to screw consumers if they aren’t the only ones out there trying to do it, so instead they all gang up together by signaling each other in trade publications (or sometimes direct phone calls!).

    You can sometimes get the insinuation that this stuff is going on if you watch Flyertalk forums very closely.

  • DL

    That’s rich–having a member of *Congress* deride airlines, telling them to put the money into escrow until *Congress* reinstates the tax. Just get to work and reinstate the tax!

  • http://www.racheltalkstravel.com Rachel

    I’m happy so long as it goes anywhere but to the government! They’re the ones who failed, not the people and not the airlines.

  • Tim

    Another reason why generally speaking, the masses hate the airlines. They only have themselves to blame.

  • Ryan B

    Discussions about fairness are absurd. The airlines are for-profit entities and can and *should* charge as much as they can. The only reason to decrease a fare is if they think it will increase demand (short or long run) to more than offset the lost revenue. Oil prices are hurting airline profits (which are rare to begin with) right now, so airlines are trying desperately to make up for the higher costs. Fare increases aren’t always feasible, and this temporary tax holiday provided the perfect opportunity. Think of it this way… if it weren’t for the tax holiday, the odds of a fuel surcharge or other similar measures would increase.

  • Anonymous

    I work for an FAA contractor, and my counterparts directly employed by the government aren’t at work this week. This impacts my ability to do my job, which in the end costs tax-payers. There are no winners in this situation. Either the government employees come back to work and get retro pay, which costs the tax-payers — feds just got paid for doing nothing — or the feds come back to work, and don’t get paid, which screws the employees over. In the mean time, no matter what happens, we can’t contact our government counter-parts for needed direction.

    Congress deserves to get punished for acting like a bunch of kids. I don’t care if the airlines or the travelers keep the tax money… just as long as it isn’t the government.

  • http://www.racheltalkstravel.com Rachel

    I wasn’t sure where you were going there for a minute, but it seems as if in the end we agree.

    I totally understand and agree that there are no winners here (my husband works for DOT and would have been one of the people out of work during the threatened shutdown a few months ago)–I suppose all we can do is make our voices heard and do our best to prevent the re-election of all these Congresspeople who can’t get the job done (all of them?).

  • http://www.racheltalkstravel.com Rachel

    I wasn’t sure where you were going there for a minute, but it seems as if in the end we agree.

    I totally understand and agree that there are no winners here (my husband works for DOT and would have been one of the people out of work during the threatened shutdown a few months ago)–I suppose all we can do is make our voices heard and do our best to prevent the re-election of all these Congresspeople who can’t get the job done (all of them?).

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  • cody braunschweig

    are we still required to pay taxes on award flights?

  • michelle

    This money is supposed to go towards making air travel and airports safer. It should go in the escrow account.

  • Anonymous

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