This is one reason why ailine tickets still cost more than they should.
Airlines, passengers find fees a nuisance
By PAUL J. GESSING
Published on: 03/09/05
Atlanta-based Delta Air Lines has made several moves over the past year to avoid bankruptcy and lure new customers, including an overhaul of its fare structure. Unfortunately, one major threat to the solvency of Delta and other carriers has been ignored, even as it has grown progressively worse since Sept. 11: heavy-handed government policies that burden airlines and taxpayers alike.
The most recent federal power grab came last month, when the White House confirmed plans to boost the passenger security fee from $2.50 to $5.50, with the maximum fee rising from $5 to $8 for a one-way fare.
These latest hikes are expected to cost airline passengers $1.5 billion annually, in addition to the $3.2 billion in fees airlines and travelers already pay each year for homeland security. As if socking airline passengers with this punch to the pocketbook weren't enough, the president's proposal comes on top of another 61 percent "passenger inspection fee" increase put in place by the U.S. Department of Agriculture on Jan. 1 â?? five weeks before the official "public comment period" came to an end.
That nuisance charge will again increase on Oct. 1 (to $5), while a separate USDA "aircraft inspection fee" (which recently went to $70) will continue to rise through 2008. These fees alone will cost airline passengers $680 million over the next six years and are being imposed without a single vote of Congress.
Even before the USDA-sponsored shakedown, taxes represented 26 percent of a typical $200 round-trip ticket, making air travel among the most heavily taxed activities in America (rivaling smoking, gambling and drinking). Yet, beyond these heavy tax and fee burdens, federal meddling has made failing airlines dependent on massive taxpayer-financed loans, dampened security innovation by socializing it and saddled air carriers with a mismanaged air traffic control system.
For example, the Transportation Security Administration is notorious for its inability to stop dangerous items from getting through checkpoints. Less well known is that in forming its crack security team, TSA spent an absurd $12,000 per recruit. With 60,000 new airport screeners hired, TSA squandered an estimated $720 million of taxpayers' money just on recruiting.
The government's similar inability to modernize air traffic control services is also a major problem. A congressional investigation of the Federal Aviation Administration's halting implementation of the STARS system, which would be used to further automate air traffic control, found the project to be three years behind schedule, with costs rising from close to $5 million per facility to at least $17.5 million per facility.
The latest FAA inspector general's audit also found that 20 FAA modernization projects have had cost overruns of $4.3 billion and schedule slips of one to seven years. Canada's system, on the other hand, has been privately managed since 1999, and as a result fees have gone down (in real terms) while capacity has gone up with the introduction of new technologies.
Ironically, even as the federal government forces airlines and their customers to pay for these debacles, it provides loans to carriers who are financially struggling â?? due in part to the very tax and regulatory burdens Washington imposed in the first place. Any new federal tax or fee raises ticket prices and in turn the cost of doing business for U.S. airlines. We shouldn't be surprised if the pressure for more loans worsens.
As a home base for Delta and a hub for other air traffic, Atlanta's economy relies on a robust airline sector for its well being. Atlantans employed in this industry or its partners (such as rental car companies, hotels, and tourist venues in the city) may suffer additional harm unless Washington's reckless course is reversed.
Rather than reducing air carriers to a state of poverty and then providing handouts, the president should strip away the government-created impediments that prevent consumers and providers from developing a workable market for air travel. Spending more money without significant reform will only bring more turbulence for airlines in the future.
A must read for anyone who flies
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