U.S. airlines led by United Continental Holdings Inc. (UAL) may pocket $1.3 billion in higher fares tied to the Federal Aviation Administration’s partial shutdown as Congress deadlocks on the agency’s funding.
The FAA already has been unable to collect $28.6 million a day in aviation taxes since midnight on July 22. Missed receipts may climb by $1 billion more until lawmakers reconvene in September, FAA Administrator Randy Babbitt said yesterday.
The largest U.S. carriers, including United, Delta Air Lines Inc. (DAL) and Southwest Airlines Co. (LUV), stand to reap that much new revenue after raising fares to mirror the suspended taxes and keeping the difference, said Rick Seaney, chief executive officer of Dallas-based ticket researcher FareCompare.com.
“This is manna from heaven, and a real windfall for the airlines,” Seaney said in an interview. “I don’t expect them to drop the fare increases. Why would they? Total ticket prices are the same and it doesn’t seem to be hurting bookings.”
Congress was set to begin its August recess today without a new FAA funding bill. The expiration of tax-collecting authority last month halted a 7.5 percent sales tax on domestic tickets and a $3.70 fee for each flight segment. Similar, higher fees on international tickets also were suspended, and airlines started saving about 15 cents a gallon on jet fuel.
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4 Responses
Don’t blame the Congress. The House approved the funding but the Senate is insisting on including substantial subsidies ($1K+ a ticket) so certain rural airports will stay open so people near them won’t have to drive 100 miles to a larger airport. This is important to certain Democrats whose districts benefit from this “pork”. They are also arguing over the rules that allow a private sector union to win an election with support with less than half the people who will be forced to join the bargaining unit (the Democrats need union contributions, and the unions need help in getting unwilling workers to pay dues)
The part about the unions win an election to be uionized exists here in New York. All the unions need here in the city is about 25% saying yes and the title becomes a union title.
If I recall correctly, Obama when running for office said something about stopping the pork; nu?
“Pork” is what the opposition gets for its constituents. If you get it, it is service for those who elected you.
Similarly, those who give you money are further democracy, and your support for their agenda is based on merits alone, whereas your opponents’ donors are corrupting the political system and your opponents support of their agenda is in return for their de facto bribes.
No hiddushim here.
What are the chances of the airlines rolling back fares after the FAA starts collecting the tax again? Or will they just add it to the increased fares?
Maybe we should re-establish the CAB to regulate fares.