It's peak vacation season, and many U.S. airlines are taking
a tax holiday, as Congress' failure on Friday to pass a Federal Aviation Administration reauthorization bill has nullified the government's authority to
collect some airfare taxes. Most carriers during the weekend raised base fares,
but passengers may not even notice as increases largely mirror the dollar sum
otherwise collected by the government. Meanwhile, the shutdown has halted
airport projects, prompted furloughs and prohibited the collection of millions
in revenue.
Farecompare.com CEO Rick Seaney in a research note claimed
the "expiration of the FAA reauthorization Friday night at midnight was
poised to give consumers up to a 15 percent break on airline ticket
prices." Instead, airlines took the break.
American, Delta, JetBlue, Southwest, United Continental and
US Airways, among others, have raised ticket prices by "at least 7.5
percent" to "capture the tax windfall," according to Seaney. Alaska
Airlines and Virgin America have yet to file fare increases. "We are also
seeing activity for those that fly internationally to recoup the up to $50 per
roundtrip ticket sales tax holiday," according to Seaney.
Until a resolution is reached, the government will be unable
to collect the 7.5 percent excise tax on domestic air transportation, the
$16.30 per-way international departure or arrival tax and others. However, the September 11 Security Fee and
airport passenger facility charges continue to be levied.
It is unclear how quickly Congress could resolve the
shortfall, though Seaney suggested the possibility of "several weeks, as
the debt ceiling issue takes up all the oxygen in D.C."
The Department of Transportation urged quick action, as it
already has furloughed 4,000 FAA employees across 35 states and issued "dozens"
of work stoppage orders "for major projects designed to build and
modernize control towers and other aviation infrastructure from coast to coast."
DOT, however, asserted that "the safety of the flying public
will not be compromised" during the FAA shutdown.
JP Morgan aviation analyst Jamie Baker in a research note
last week suggested the industry's revenue windfall and benefits could approach
$25 million a day "for the duration of the shutdown." If the delay
lasted a month, it could boost the industry's unit revenue by around 9 percent,
Baker noted.