Airlines pocketing $25 million per day after government lockout

Monday, July 25th, 2011 By

Spirit Airlines

Spirit is the only airline that has not hiked prices to match the loss of FAA taxes. Image: Flickr / beleaveme / CC-BY-ND

On Monday morning, the Federal Aviation Administration was gutted by Congress’s failure to pass legislation to keep the agency running. Some air travelers had been looking forward to this because it means no federal taxes on tickets. As of Sunday night, however, most airlines had raised prices to negate this price drop.

The FAA shutdown

As a part of the congressional showdown about federal government funding, the Federal Aviation Administration lost operating authority on Monday. The bill that would continue this operating authority has been held up by a debate over union rights. Air traffic controllers are continuing to report to work, but 4,000 “non-essential” employees have been furloughed without pay, and 87,000 construction workers have been idled as FAA-funded projects are shut down. This shutdown also means that the FAA no longer has authority to collect the 7.5 percent ticket tax, $3.70 takeoff tax and security fees. All told, the Transportation Department estimates that the uncollected fees will add up to $200 million a week.

How airlines are taking financial advantage

Some, though not all, airlines are taking advantage of the airline tax holiday. As of Monday morning, Spirit Airlines had committed to passing the tax holidays on to customers. Southwest Air and AirTran raised prices by $8, and most other airlines have raised prices by between $25 and $60, the average amount of the taxes the government would have charged. Estimates say the airlines will rake in an extra $10 million to $28 million per day. Consumers may not notice a difference because the end price paid is the same, the government just is not getting the money.

What this FAA shutdown means for customers

For the most part, customers won’t see a big difference in air travel while the FAA is running without authority. Air travel will continue to operate, as will air traffic controllers and the Transportation Security Administration. Depending on where you plan on flying, you may be able to get slightly less expensive tickets on certain airlines. If you are flying between now and when the FAA regains operating authority, you may be able to get a refund of the taxes you have already paid. The Transportation Department has not yet released guidelines for these refunds, but you should keep your receipts handy, just in case.

Sources

Wall Street Journal
Seattle Post-Intelligencer
Boston.com
Daily Kos

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