WashingtonWire - 2002-03-25

By Barbara Cook / March 24, 2002

FAA Forecasts Flex Fares

Business demand for commercial airline travel will become more price elastic over the next decade, the Federal Aviation Administration predicted in its new forecast for air travel through 2013.

One of three major factors that will cause this change is the ability of technology, such as videoconferencing, to provide substitutes for commercial airline travel, and the increased use of corporate aircraft through arrangements that include fractional ownership. Second, concerns over security and the occurrence of delays due to security clearances have reduced the attractiveness of commercial airline travel, especially over shorter distances. Third, as the relative price of business fares increase compared with discounted tickets, business travelers will become more "tolerant" of the restrictions on discounted tickets in order to qualify for the discounts.

FAA also noted that if travelers turn away from short-distance airline trips due to security delays, "The loss of this traffic, mostly high price business travel, would be devastating to the profitability of U.S. commercial airlines."

Customs Fee Increase Raises Eyebrows

Several members of the House treasury, postal and general government subcommittee are raising questions about the Administration's plan to increase the U.S. Customs inspection fee on international airline passengers from $5 to $11. At a hearing in late February, Customs commissioner Robert Bonner and Jimmy Gurule, Treasury Department undersecretary for enforcement, said Customs hasn't raised the user fee since Congress approved it in 1985, even though the cost of inspections has increased.

Bonner said that as part of the Aviation and Transportation Security Act, airlines flying to the United States now are required to submit a passenger and crew manifest to Customs. According to Bonner, Customs will begin levying fines against airlines that fail to transmit this data prior to arrival. Further, he said Customs is dedicating $49 million in fiscal years 2002 and 2003 to upgrade its data collection system as part of the agency's efforts to expand the perimeter of security away from U.S. national boundaries and toward foreign departure points.

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