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Unpacking Airline Ticket Prices

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Airline passengers wait in line. Photo by Joe Raedle/Getty Images

Who do you blame if you are upset about the cost of a plane ticket? The airlines, right? Maybe not for long. Several members of Congress want people to know that the government also has a hand in jacking up those prices.

Two years ago, the Transportation Department issued new rules designed to make it easier for airline passengers to determine the total cost of their airline ticket. DOT now requires airlines and travel agents to include government taxes and fees in an advertised plane fare so that customers can see the entirety of what they are shelling out as they shop. This is especially helpful in preventing agencies from advertising "airfare" for a round-trip ticket at $130, while the extra fees—government and fuel taxes—add up to another $622, as the Consumer Travel Alliance pointed out when the rules came out.

 

Now, several members of Congress—Republicans and Democrats—are questioning whether embedding taxes into the total ticket price is such a good idea. They say the DOT rules allow substantial government fees and taxes to be hidden from consumers. It's a small part of a larger complaint in Congress, particularly among Republicans, that air travel is tapped too often as a source of revenue for the government.

The airline industry couldn't agree more. Last year, Airlines for America (A4A) President Nick Calio told Congress that most other industries aren't burdened with a requirement to include taxes in advertised prices. People understand about retail taxes, right? What's so different about a plane ticket? The answer is just plain sticker shock. While state sales taxes typically are well below 10 percent, airline taxes are about 20 percent of the cost of a domestic round-trip ticket, according to A4A.

The House Transportation Committee Chairman Bill Shuster, R-Pa., last week introduced legislation to allow airlines and travel agencies to state base airfare separately from government-imposed taxes and fees, along with the total cost of the travel. "The fact that Americans are paying higher and higher government-imposed taxes and fees to travel by air is being hidden from them," Shuster said.

 

Shuster's Democratic colleagues agreed, acknowledging, of course, that DOT officials had their hearts in the right place in issuing the rules. The administration rightly wants customers to understand the whole picture. And yet, "consumers haven't been getting the whole picture of what an airline ticket pays for," said Rep. Pete DeFazio, D-Ore.

The legislation would only change a small part of the DOT regulations. Rules would remain in place that require airlines to disclose extra fees for checked baggage and allow passengers to hold a reservation without charge for 24 hours.

In addition to DeFazio, committee ranking member Nick Rahall, D-W.Va., and Reps. Frank LoBiondo, R-N.J., and Rick Larsen, D-Wash., and Tom Graves, R-Ga., have signed on to the bill. Graves sponsored similar legislation in the previous Congress. Shuster is now looking for other co-sponsors.

A4A cheered the bill's introduction, noting that it would make consumers aware of "exactly how much of their ticket price goes to federal taxes." Their statement points to a larger issue that plagues air travel; fees continue to go up.

 

Airline lobbyists and consumer advocates alike are incensed that TSA passenger fees are slated to double in July, at $5.60 per one-way trip. What's more, Obama's proposed budget includes a $3.50 increase in the Passenger Facility Charge, a $2 increase in the customs user fee, a $2 increase in the immigration user fee, and a 40-cent increase in the TSA passenger security tax (on top of the increase coming in July).

Those added fees probably aren't going to become a reality because Obama's budget doesn't get much traction on Capitol Hill. But the even as a political document, the budget proposal shows where the administration's priorities lie. With the fees.

For our insiders: Has the DOT rule requiring taxes to be embedded in total airline ticket costs changed consumer behavior? Has it changed advertisers' behavior? How is the airline ticket pricing system evolving? What will the air travel market look like in a few years? What would be different if Shuster's bill were to become law? What else needs to be done to clarify the cost of air travel? Are government fees on air travel too high?

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(This is a moderated blog on transportation issues. Comments are approved on a case-by-case basis. If you want to be a regular commenter, contact me.)

Don't Miss Today's Top Stories

Chock full of usable information on today's issues."

Michael, Executive Director

Concise coverage of everything I wish I had hours to read about."

Chuck, Graduate Student

The day's action in one quick read."

Stacy, Director of Communications

Great way to keep up with Washington"

Ray, Professor of Economics

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