Nam Y. Huh, AP
Travelers walk through Terminal 3 at Chicago's O'Hare International Airport.
Travelers walk through Terminal 3 at Chicago's O'Hare International Airport. less
Of all the hot-button topics in the airline industry in recent years, none has been hotter than the issue of airlines charging fees, particularly for services that once were free, such as checked baggage. As I predicted two years ago with the "Airline fee quiz ," the money airlines rake in from "ancillary revenue" continues to grow and grow. In fact, last year it reached $50 billion worldwide.
2015 air travel forecast: From bad to worse
But what exactly are those mandatory taxes and fees? The short answer is, it varies from itinerary to itinerary and ticket to ticket, sometimes considerably. Determining what you will pay on a given trip can be difficult, while determining if such public expenditures are fair and accurate has become a hot political issue.
Breaking it down
It's a bit overwhelming to consider just how many governmental departments and agencies are directly involved in maintaining the nation's commercial aviation infrastructure. This long list includes -- but is not limited to -- the U.S. Department of Transportation; its subsidiary, the Federal Aviation Administration (FAA); the Transportation Security Administration (TSA); Customs and Border Protection; Immigration and Customs Enforcement; the Animal and Plant Health Inspection Service; and the National Transportation Safety Board. Furthermore, commercial airports throughout the United States are operated on state, county and city levels, as well as by independent port authorities and operators.
In various ways, airline passengers help pay for services provided by all these entities. But because such fees are comprised of both flat-rate and percentage-based amounts, it's difficult to determine averages (the flat-rate fees comprise a much smaller chunk of more expensive fares).
Much of the revenue collected from ticket taxes supports the Airport and Airway Trust Fund ; the FAA states it is "funded primarily" by the AATF. Other mandatory taxes support other functions. Here's a breakdown of the most common taxes, fees and surcharges you can expect to see added to the price of your ticket:
• Domestic Passenger Ticket Tax. collected for FAA; 7.5% of ticket price
• Domestic Flight Segment Tax. collected for FAA; $4 per segment, defined as "a flight leg consisting of one takeoff and one landing by a flight"
• September 11th Security Fee. collected for TSA; $5.60 one-way for flights departing the United States, but not to exceed $11.20 round-trip
• Passenger Facility Charge. collected for "commercial airports controlled by public agencies"; up to $4.50 per passenger
In addition, note there are quite a few caveats; exceptions exist for "stopover" flights and non-continental U.S. travel, and rates vary on travel between the mainland U.S. and Alaska and Hawaii. As for PFCs, they can vary wildly; the most recent FAA report in early June indicates such charges ranged from $1 to the maximum $4.50.
Crunching the numbers
For years the airlines, industry analysts and paid consultants have claimed that commercial aviation in the United States is overtaxed and this is having a negative effect on passenger bookings. For example, in 2011 a report by the American Aviation Institute stated: "We show that an uncoordinated federal aviation policy characterized by ad hoc initiatives by DOT and Congress is dampening demand, hurting local communities and costing jobs at a time when the country can least afford it." And yet the total number of passengers carried by U.S. carriers increased each year between 2011 and 2014. rising from 731 million to 762 million, while passenger load factors rose from 82.0% to 83.4%.
The U.S. airline industry's primary lobbying group, Airlines for America, has been particularly vocal, claiming, "U.S. and foreign taxes have grown in number, amount and scope since the advent of air transport." Of course, one could argue the costs of maintaining the world's safest, busiest and most reliable commercial
air transportation network have grown as well.
Thus the price of aviation infrastructure has become quite the political football. The airlines -- individually, collectively and through their lobbyists -- have made it clear they want to see tax burdens lowered for air carriers and for passengers. Which raises obvious questions, such as who then should pay the cost for all this government oversight? And is it fair or not for more of that burden to be shifted to taxpayers who don't even fly yet still may benefit? It's worth noting that, according to the White House, the 2015 Fiscal Year Budget includes $14 billion in discretionary funding for Transportation.
A4A provides a detailed breakdown of passenger taxation at its site, and it even includes a "sample itinerary" as an illustration. The origin airport is Peoria, Ill.; the destination is Raleigh/Durham; and the connection is through Chicago's O'Hare International. The base airfare for this round-trip journey is $237, while the taxes total $63, or a whopping 21%.
But the devil -- as always -- is in the numbers. In fact, the Business Travel Coalition, which represents the interests of corporate buyers and travelers, has deconstructed this sample and found: "This example inflates taxes on 'typical' fares by selectively constructing multi-segment itineraries to maximize segment fees, security fees and PFCs and deflates the top airfare-revenue number by choosing a substantially lower-than-average round-trip airfare and, importantly, by ignoring ancillary fees and airline surcharges." The BTC further notes recent DOT data indicate the average domestic round-trip airfare was $391, which would drive that same $63 figure down to 16%. And many other itineraries do not impose as many taxes at all, so the percentages are much lower.
Such points seem valid, particularly when looking closer at that Peoria-Chicago-Raleigh/Durham trip and its odd ratio of a low base fare coupled with multiple high taxes and surcharges. Perhaps the industry's largest lobbying group knows more than the rest of us when it comes to finding the cheapest ticket prices, but I used a major travel site for a Peoria-Raleigh/Durham itinerary with a single connection (in all cases at O'Hare) and did not find fares even close to $237:
• One-day advance: $500
• Seven-day advance: $440
• 14-day advance: $474
• 21-day advance: $410
As for the issue of fees imposed by the airlines themselves, there are two key factors to consider. The first is that it's becoming increasingly harder to view all the airline-added fees and determine the bottom-line fare while comparison shopping prior to booking. The second factor, as the BTC notes, is that because of airline "unbundling" of ticket prices, billions of dollars of air travel revenues have become exempt from ticket taxes now; in other words, by segregating the price of checked baggage, fewer tax dollars are being collected. So as infrastructure costs increase, tax revenues are falling -- even when more Americans fly and even when base fares increase.
So how do we as a nation subsidize our aviation system, particularly the ambitious upgrade to our air traffic control network known as the Next Generation Air Transportation System? The BTC concluded: "Airlines fight hammer and tongs an increase in PFCs with grossly misleading claims while the competitive gap between U.S. airports and modern foreign airports widens and U.S. airlines offer no coherent alternative with respect to financing FAA operations and investment programs."
There's another related issue that even affects taxpayers who never fly. How does the U.S. Government financially support domestic airlines? We'll address that in an upcoming column.
Bill McGee, a contributing editor to Consumer Reports and the former editor of Consumer Reports Travel Letter, is an FAA-licensed aircraft dispatcher who worked in airline operations and management for several years. Tell him what you think of his latest column by sending him an email at firstname.lastname@example.org. Include your name, hometown and daytime phone number, and he may use your feedback in a future column .