Airline Baggage Fees

Airline Fees = Ticket Tax Avoidance

March 6, 2023 by Scott Spangler

During the State of the Union Address, President Joe Biden said he wanted to crack down on airline “junk fees” that airlines added to their ticket prices. Given the motivation for the ever expanding menu of these fees, I’m not holding my breath for their demise. Simply put, these fees are exempt and do not contribute to the price of a ticket that’s subject to the 7.5% tax that airlines pay to support the national aviation infrastructure. General aviation pays its way with taxes on avgas and Jet-A.

This reality is rarely mentioned in media coverage of the junk fee vendetta. It is easier—and attracts a larger audience for the advertising media (are clicks and page views the media’s junk fees?) than digging into the history of the subject. Or maybe it doesn’t matter because avoiding taxes that support an industry-supporting culture is so commonplace that it is considered the American way. Given the frequency of airline close calls and railway disasters, it sure seems to be the case lately. Or maybe it is just coincidence.

In a thumbnail history, airline junk fees were born with airline deregulation in the 1980s, which introduced low-fare lines to the marketplace. To compete, the legacy lines subtracted their costs for baggage (and everything else, over time) and provided for the service that used to be covered by the ticket price. And when the government let them use this scheme to reduce their ticket tax bill, the new era soon became firmly entrenched.

Last year the Department of Transportation published a notice of proposed rulemaking that would “require U.S. air carriers, foreign air carriers, and ticket agents to clearly disclose passenger-specific or itinerary-specific baggage fees, change fees, and cancellation fees to consumers whenever fare and schedule information is provided to consumers for flights to, within, and from the United States.”

Really, it doesn’t matter if this proposal becomes a final rule. Either way, passengers will still have to pay the fees, the fees are still exempt (as far as I can discern), and the airlines are still getting away with their ticket tax avoidance to support an aviation infrastructure designed with them as first in line. If we really want to be fair about it to all Americans, add a line to the NPRM that makes the total cost of the ticket and all of its fees subject to the infrastructure-supporting ticket tax. — Scott Spangler, Editor

Fair Taxation Instead of Aviation User Fees

July 15, 2013 by Scott Spangler

Inadequate revenue from aviation taxes on fuel and tickets, which fund the U.S. aviation infrastructure and the agency that regulates it, is how some in the FAA justify their desire for user fees to make up the difference. Before they go there, why doesn’t government catch up with current airline business practices and include the myriad fees that are not subject to the ticket tax.

Looking at untaxed airline baggage fees.

We’re taking some serious money here, an average of $250 million a year from baggage fees alone, according to a Washington Post article, “As airlines raise fees instead of fares, taxpayers pick up the tab.” As the article’s graphic above shows, between 2007 and 2012 the airlines collected $12.8 billion in baggage fees. At the 7.5 percent ticket tax rate, that’s $960 million in lost revenue. During the same period, the airlines charged another $11 billion to change a ticket.

Simply put, airline fees not subject to the ticket tax is one reason why aviation revenue has not kept pace with its costs. Let’s face it, we’d all like tax-free income, but it is not fair to anyone who pays the fees and uses the system. The DoT took the first step in its fiduciary responsibilities when it required airlines to include all applicable fees when passengers bought a ticket. Making the total subject to the ticket tax seem the logical next step.

With Air Show ATC Fees, the FAA is Following the Airlines’ Lead

July 1, 2013 by Scott Spangler

Searching for a scintilla of logic behind the FAA’s ATC fees for the air traffic control services it provides at fly-ins, I realized that the roughly $500,000 bill it sent EAA AirVenture Oshkosh was, in effect, an airline baggage fee. From either source, forget all their trumpeted rationalizations. That nonsense drowned in the fetid swamp of cynicism government and big business long ago created as they redeveloped society so that it met their needs at the expense of their customers.

In other words, they did it because they could.

Government has been trying to recreate an airline business model of charging fees for everything, and sequestration gave them the “authorization” to do it. What’s really ironic is that airline fees, which are not taxed like tickets or fuel, contribute no revenue to the aviation infrastructure, airports, capital improvements, and FAA operations including ATC. Yup, airline fees are a parasite, and to make up for the financial nutrition it sucks from the system, FAA is starting with ATC fees.

According to the Washington Post, since they started the practice, the airlines have collected $12.8 billion in fees for something that was once free. In 2012 they collected $924 million—that’s right, nearly a billion dollars—in baggage fees, a 3 percent increase over the same period in 2011. Oh, and baggage fees are not taxed like airline tickets. With the aviation fuel tax, this ticket revenue pays for the American aviation infrastructure, at least until FAA fees on all the services it provides takes over.