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Entries in Congress (2)

Friday
Aug052011

Congress brokers FAA deal, ending shutdown - 555

On Thursday, Aug. 4, Congress came to a bipartisan agreement ending the partial Federal Aviation Administration shutdown threatening jobs and halting airport projects.

The shutdown was a result of disputes over funding the FAA and has continued since July 22. During the shutdown, taxes collected on fares lapsed; 4000 jobs were furloughed; and 70,000 airport contruction jobs were affected. The uncollected taxes added up to $30 million a day that would have contributed to government revunue available for halted projects.

The compromise reached by Congress is only a temporary extension until it returns from recess in September. According to Reuters,

The FAA impasse hinged on cutting more than $16 million in subsidies for rural air service — a demand by the Republican-led House that rankled key Senate Democrats like Reid, Finance Chairman Max Baucus and John Rockefeller, chairman of the Commerce Committee.

Congressional and transportation officials said the linchpin of the compromise gives LaHood authority to waive cuts in service to rural airports targeted in the bill, raising the prospect that some or all of the cuts will not be made.

There are undertones of another partisan showdown, though. Congressional Republicans want to rework the FAA funding such that unions are not easily created at airlines. As Reuters also point out, the extension of FAA funding ends the revenue stream created by the uncollected taxes, which some airlines capitalized on by raising fares equal to the hole left.

Wednesday
Jul272011

Airlines quietly raise fares after tax lapse - 548

When Congress failed to confirm an extension of a bill funding the Federal Aviation Administration (FAA) last Friday, that seemed to be the end of it for federal taxes airlines collected from each ticket. It seemed that, in the short term, the prices of airline tickets would actually help consumers save some money, or at least the equivalent of the taxes on those tickets.

While some airlines (particularly Alaska and Spirit Airlines) decided to offer the lower fares, most airlines actually raised prices to equal what the taxes would’ve been. That’s right: they kept prices relatively equal, in essence pocketing the cost of the taxes. In a release from the Air Transportation Authority of America, spokesman Steve Lott said,

Customers are not impacted and are paying the same ticket prices they were last week.

As Forbes points out, this is the same entity who recently said “hiking aviation taxes would slow economic recovery, further burden customers and cost jobs”.

In light of this cash grab, members of Congress are voicing their displeasure. According to the same Forbes article,

Aviation Operations, Safety and Security Subcommittee Chairwoman Maria Cantwell (D-WA) and Chairman John D. (Jay) Rockefeller IV (D-WV) sent a letter to Mr. Richard Anderson, CEO of Delta Airlines and Chairman of the Air Transport Association, calling for an end to the profiteering, noting:

We are deeply perplexed by the industry’s pocketing of passenger tax revenue even though they expired on July 22, 2011.  Most of ATA members have elected not to pass the savings along to consumers through reduced ticket prices, but rather have decided to increase the base fare of airline tickets…We urge the nation’s airlines to put all of the profits that they are making from the lapse of the aviation taxes into an escrow account so that they can be transferred back into the Airport and Airway Trust Fund when Congress reinstates the taxes.

Whatever happened to the airlines’ familiar refrain of blaming the taxes and fees for depressing consumer interest in air travel, thus hurting the industry? The increases aren’t likely to roll back when new taxes are imposed, so again, consumers will still be hurting.