WashingtonWire - 2003-10-06

Gov't Reinstates Security Fee, Airlines Pass It On

The U.S. government last week reinstated the $2.50 per flight segment security tax that it temporarily suspended in June to stimulate travel and help airlines recover economically. Airlines followed with statements that they will not officially raise published fares in conjunction with the fees—up to $10 per roundtrip ticket—nor will they absorb the fees. Instead, carriers will pass the fee to passengers as a separate item in addition to the ticket price, effectively raising fares. When the security tax first was implemented in February 2002, domestic airlines complained they were forced to lower their fares by the same amount to avoid alienating cost-conscious travelers. In response, Congress more than one year later temporarily suspended the fee for the 2003 summer travel season as part of a $3 billion emergency relief package for the industry. However, airlines raised fares by $5 each way, effectively keeping prices paid by consumers stable, while the airlines pocketed the extra revenue. Unlike the other taxes that go mostly to the Federal Aviation Administration and local airports, this tax finances Transportation Security Administration initiatives, including paying for baggage screeners, air marshals, bomb-detection devices and other security measures.



DHS Funding Bill Passed, No Cargo Screen Deadline

President Bush last week signed the first Homeland Security Appropriations Bill, earmarking $37.6 billion for the U.S. Department of Homeland Security's FY2004 budget. The approved version of the bill rejected an amendment by Democrats for a timeline to screen cargo on passenger aircraft. The bill includes $1.8 billion for passenger screening; $1.3 billion for baggage screening, including $250 million for explosive detection systems; $85 million for air cargo security; and $60 million for research and development of anti-missile systems for commercial aircraft. The proposed amendment would have required DHS to produce a plan for screening all cargo carried on passenger planes by January and to have it implemented within one year. Instead, lawmakers agreed to direct DHS to develop new technology for screening cargo.