Taxes Rising on Air Tickets

[Guest fountainhall]

We all know that a significant portion of the price we pay for an air ticket gets nowhere near the airlines. The New York Times recently reviewed these extra charges and who gets them. If you fly from London to New York return or vice versa, by the end of this year just one of these taxes - the Air Passenger Duty - will have risen to approx. US$180 for coach and a whopping US$360 if you sit in business or first! And that's before departure taxes, fuel surcharges, landing fees and a host of others.

 

 

"A recent search for a flight from New York to London turned up an eye-catching fare: $229 each way on several airlines. But nine government taxes and fees added $162 — more than a quarter of the total ticket price.

 

Baggage fees may be the cause of more grumbling among passengers, but airlines are trying to draw attention to other charges lurking in the fine print: all the taxes and fees that go toward airport projects, air traffic control, airport security, customs inspections and, in some cases, projects that have nothing to do with flying — like a French “solidarity tax” on departing passengers that is meant to subsidize purchases of drugs to fight diseases like AIDS, tuberculosis and malaria in developing countries.

 

Most of these taxes are small individually, but they can add up to a significant share of the price of a ticket, particularly for international flights.

 

For travel within the United States, there are four basic taxes on airfares: a passenger ticket tax (7.5 percent of the base fare); a flight segment tax ($3.70 a flight); a passenger facility charge (up to $4.50 a segment); and a federal security fee, also called the Sept. 11 fee ($2.50 a segment). The first two taxes go to the Airport and Airway Trust Fund, which finances the Federal Aviation Administration; passenger facility charges are passed on to airports; and security fees finance the Transportation Security Administration.

 

Airline representatives say taxes and fees account for 25 percent of a domestic ticket price, but according to two professors who have examined millions of ticket records from 1993 to 2008, the effective tax rate has increased to 16 percent from 11 percent of the average domestic fare in that time.

 

“What’s happened is airfares have become cheaper, so proportionately taxes have gone up,” said Joakim Karlsson, a professor of aviation policy at Daniel Webster College, who heads the project with Amedeo R. Odoni, a professor at the Massachusetts Institute of Technology. In fact, their analysis found that the total tax on a domestic ticket has been relatively constant since 1993: about $52, adjusted for inflation.

 

International travelers are even more likely to feel the tax collectors’ pinch, as governments around the world have increased passenger fees to pay for security, airport improvements, customs inspections, tourism promotions and environmental concerns — though critics say many of these taxes end up in general treasury accounts.

 

Exhibit A in that regard is Britain’s Air Passenger Duty, which went up last year and is scheduled to increase again this fall. This fee varies based on the passenger’s class of service and destination; from London to New York, it is £45 in economy class and £90 in premium cabins, and will rise to £60 ($90) and £120 ($180), respectively, on Nov. 1.

 

“The Air Passenger Duty is supposedly an environmental tax, but all these taxes go into the treasury,” said Brian Pearce, chief economist for the International Air Transport Association, adding that France’s solidarity tax — 1 euro to 40 euros a passenger — meets a similarly murky end.

 

“We fear there are going to be more taxes coming down the road as governments look to reduce budget deficits,” he said. “It’s contagious.”

 

The United States is not immune to the bug. Congress just passed legislation that will charge foreigners, from about three dozen countries, who do not need visas $10 to enter the United States. The money will be used to promote travel to America, an idea that has been criticized abroad."