Air travel could become even more expensive if airports and travel industry leaders succeed in convincing Congress to raise taxes on passengers.
The Passenger Facilities Charge, a tax that is added to the cost of plane tickets for each airport a passenger lands in, is used to fund capital-improvement projects—such as improving safety, reducing noise or expanding capacity—at U.S. airports.
The actual fees are levied by individual airports, but are limited by a federally mandated cap. When it was created in 1992, the PFC was initially capped at $3 per flight and $12 per round trip, though in 2001 the caps were raised to $4.50 per flight and $18 per round trip.
As Congress prepares legislation to reauthorize the Federal Aviation Administration later this year, airport operators and others are calling on lawmakers to raise the cap significantly, to $8.50 per flight, and to index future increases to inflation. (VIDEO: Tonight at 10: Small Airports, Big Upgrades)
In a December press release, the American Association of Airport Executives noted that since the $4.50 cap was put in place, inflation has reduced its real value to about $2.50, and argued that the proposed increase would “restore lost purchasing power and ensure that airports don’t lose ground in the future as costs increase.”
In addition, AAAE President and CEO Todd Hauptli pointed out, “Airlines will likely collect more than $3.5 billion in baggage fees in 2014—an amount that dwarfs the $2.5 billion that the nation would realize … if our PFC proposal were adopted. Keep in mind that those resources would go directly to building infrastructure important to airlines.”
Last week, Politico Pro reported, U.S. Travel Association CEO Roger Dow delivered a speech to the U.S. Conference of Mayors in which he threw his organization’s support behind the PFC hike as well. (RELATED: United Airlines Matches Baggage Fee Increase)
Dow simultaneously excoriated the airlines for opposing the measure, pointing out that fuel prices have plummeted in recent months, and claiming that airlines have been padding their profits with fare hikes and ancillary fees that dwarf the comparatively modest $4 increase he supports.
“We can’t have airports that are the top system in the world if we’re not willing to pay for them,” Dow said later in an interview with Politico, adding that airports are “the front door to economic growth.”
In response, the trade association Airlines for America issued a blog post refuting Dow’s arguments in detail, saying, “Airlines are committed to enhancing the passenger experience at airports,” but that the industry also favors “good stewardship and responsible spending of the resources available for airport improvements.”
Dow, they claim, “completely ignored the fact that since 2008, U.S. airlines, together with airport partners, have invested more than $52 billion in airport infrastructure,” helping to provide new terminals, better facilities and more amenities at airports across the country.
A4A also addressed Dow’s claim that airfares are increasing, which they called “not true.” In reality, they say, “airfare for an average domestic round-trip fell 10 percent from 2000-2013 when adjusted for inflation.”
Over the same period, “airport revenues per passenger grew 52 percent,” exceeding the growth of both inflation (35 percent) and average domestic airfare (22 percent, including ancillary fees). (RELATED: PAY UP: TSA to Raise Fees Next Week)
Sharon Pinkerton, A4A Senior Vice President of Legislative and Regulatory Policy, told The Daily Caller News Foundation that raising the PFC is not necessary, because “most airport funding is already paid for by passengers through ticket taxes, the revenue from which goes into the Aviation Trust Fund,” which finances airport projects.
Currently, she claimed, there is about $6 billion “sitting in the ATF, unobligated,” which is almost double the amount that is disbursed by the fund annually. In addition, “the airports have another $11 billion in cash on hand, which is about a year’s worth of operating expenses for the approximately 450 airports around the country.”
“Passengers pay a total of 19 taxes on airfare, totaling over $20 billion per year,” Pinkerton added. “When you add up all the taxes, the tax rate on the average $300 ticket is about 20 percent, which is roughly the same as alcohol and cigarettes, which are taxed to discourage their use.”
The airlines are completely in favor of upgrading the nation’s aviation infrastructure, she said, but “we just don’t think it needs to be done on the backs of customers who already pay so much.”
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