The airlines have been loud and clear about their opposition to a recently proposed $100-per-flight fee that the administration wants to impose on commercial aviation to help reduce the federal deficit. As Southwest CEO Gary Kelly, quoted in Bloomberg recently said, “We are already overtaxed.”
But would the airlines ultimately pay this new tax? Or would passengers have a harder time finding cheap flights?
Who Pays New Flight Tax: Airlines or Passengers?
The $100-per-flight fee may not add much of an initial financial burden to any airline, since expenses that go to airlines’ bottom line ultimately end up hitting consumers via higher ticket prices and new or higher add-on fees. Call it a “win” for the airlines. Or is it?
Even if Passengers Pay, Airlines May Ultimately Lose
Airlines operating on razor-thin margins really have no choice, but passing the cost onto customers isn’t much of a solution either, says Southwest’s Kelly: “If our costs go up, fares will be higher, [and] more people will not fly.”
Call it a “lose” for the airlines. So which is it, a win or a lose?
Cost for Airlines, Cost for Passengers
Breaking down the per-passenger cost may seem difficult because of the wide variety of aircraft used by domestic carriers (with varying numbers of seats). However, a few back-of-the-envelope calculations will do the trick. Here’s what our flight schedules database tells us (figures are approximate):
- Number of flight departures in the U.S. per day: 26,000
- Average number of seats per plane: 100 seats
This means the $100-per-flight tax would cost airlines about $2.6 million a day, or just shy of $1 billion a year.
Now let’s assume these planes are about 80 percent full. This leaves us with about 2 million passengers a day, or 750 million a year. If we presume the airlines could pass on the costs to passengers (many of whom balk at even the slightest increase), that added cost works out this way:
- $1.33 per passenger, per flight
- $5+ per passenger for connecting round-trip
Whether travelers will balk at that amount is by no means clear. They are already being nickeled and dimed to death with a variety of optional fees – will one more break the camel’s back?
Another concern: the additional $15 per trip (by 2017) that the TSA is asking for as part of this deficit reduction package.
Airlines Find Allies in Congress
The Air Transport Association, which represents most U.S. airlines, doesn’t want to take any chances. It recently passed out air sickness bags (better known as “barf bags”) with information about the new tax as part of its “Stop Air Tax Now” campaign.
The ATA also circulated a letter that was sent to the House leadership on Oct. 6 and signed by 119 representatives. Five of the signatories were from the state of Georgia, home of Atlanta-based Delta Air Lines. Let’s take a closer look:
- Rep. John Barrow, Democrat
- Rep. Paul Broun, Republican
- Rep. Henry Johnson, Democrat
- Rep. John Lewis, Democrat
- Rep. Lynn Westmoreland, Republican
It would seem party affiliation plays little part in opposition to this flight fee, unless those who signed the letter realize it’s not the same as casting a binding vote.
It should also be pointed out that Georgia has a total of 13 House members. Others might have signed the letter but weren’t available when it was circulated. How much sway the letter will actually have against the proposed fee is unclear at this time.
Question for readers: Is the proposed tax a solution to deficit woes? Or just another burden on the air travel industry and you?