Airports Want to Raise Ticket Fees. Airlines Say No. Fight Ensues

By Susan Carey Features Dow Jones Newswires

Airports and airlines are fighting over a proposal that could bump the federal taxes and fees on a typical round-trip ticket to more than $70.

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The proposed increase to the so-called passenger facility charge, included in the Senate version of budget legislation that lawmakers hope to reconcile with a House version in the coming days, would be the first in 17 years.

Airports support what would amount to an $8 increase on domestic round-trip tickets. They say they need the extra funds to update aging facilities.

Airlines, which collect taxes and fees that help fund everything from security to agricultural inspections to the Federal Aviation Administration, say more fees could deter passengers. Delta Air Lines Inc., the nation's No. 2 airline by traffic, says that for every $1 increase in the passenger facility charge, passenger demand declines by more than 1%.

"It's easy to advocate for a tax increase when you don't have to own it, " said Sharon Pinkerton, senior vice president of legislative and regulatory policy for the trade association Airlines for America.

On a typical $300 domestic trip, the higher passenger facility charge would push the total for taxes and fees to over $70 from the current $63. Fliers would pay $8.50 instead of $4.50 on each departing flight on a round-trip itinerary, bringing the total increase to $8.

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Those taxes and fees also include a 7.5% excise tax on fares in North America and a $5.60 one-way security fee implemented after the Sept. 11 attacks. International passengers encounter even more and costlier fees.

Kevin Burke, chief executive of Airports Council International-North America, a trade group, said U.S. airports have found funding for just half of the $100 billion in improvements they need to make in the next five years. Without those upgrades, he said, airports will continue to struggle with congested runways and crowded terminals. U.S. airports are about 40 years old, on average.

"We are not, by any stretch, sitting on a pile of money," Mr. Burke said. He challenged the airlines' assertion that the fee could dissuade people from flying. "Airline profits are through the roof and they're arguing over $4," he said.

Most carriers have ramped up the fees they charge for checked luggage and ticket changes. Those two fees alone raised more than $7 billion last year, according to the government. Those charges don't show up on fares when consumers are shopping for tickets, only when they check in or make changes, allowing airlines to offer lower base prices.

Travelers United, a passenger advocacy group, said fliers are unfairly penalized because immigration and security fees aren't levied on bus or train trips, for instance.

All in all, passengers paid a record $14 billion in taxes and fees this year, including an estimated $3.4 billion in facilities charges, according to Airlines for America. The facility charge could bring in an additional $2.6 billion if the increase is approved, the airline trade group says.

The increased passenger facility revenue would go to airports with approved infrastructure projects underway. Airports say they need the extra help because a type of bond that local government owners sell to finance some infrastructure projects could lose tax-exempt status. The House version of the tax bill would do away with the tax break, forcing airports to sell costlier, taxable bonds.

Airports have about $88 billion in combined outstanding debt, about 60% of it through these bonds. Moody's Investors Service said the elimination of the tax exemption could increase financing costs and inhibit infrastructure investment.

Ms. Pinkerton of the airline association, questioned the $100 billion price tag the airport lobby puts on needed infrastructure upgrades. Since 2008, according to her group, the top 30 U.S. airports have started or completed $100 billion in projects.

In some cases, she said, airlines are paying to renovate or build their own terminals. Public-private partnerships are paying some of the bills, and many airports also issue tax-exempt general obligation bonds to raise funds for runways, moving walkways and electrical systems.

Write to Susan Carey at susan.carey@wsj.com

(END) Dow Jones Newswires

December 08, 2017 05:44 ET (10:44 GMT)