BoilerUP

Unfortunately, reality doesn't often work the way an economics textbook tells you it should..

lolwut

Yep except those taxes (that aren't being collected right now) fund the FAA, and without that funding the FAA won't be able to certify new entrants.

So its doubly good for airlines. Less taxes and no new competition!

HSLD

It's a jump in logic to assume that the AATF act of 1970 will cease to exist should should deficit talks continue beyond the Aug. 2 deadline. The history of the congressional appropriations process, and the FAA reauthorization bills specifically, show that taxes have been collected retroactively once approval for the bill have been made.

Here's some fun reading to get you started:

http://www.aviationacrossamerica.org...-_10_06_06.pdf

http://www.senate.gov/CRSReports/crs...4Q%2C%3B%3F%0A

http://www.jct.gov/publications.html...3724&no_html=1

http://www.gao.gov/decisions/archive/281779.pdf

My name is Herb Kelleher. I co-founded Southwest Airlines in 1967. Because I am unable to perform competently any meaningful function at Southwest, our 25,000 Employees let me be CEO. That is one among many reasons why I love the People of Southwest

Elvis90

Delta making $4 million a day on expired-tax fare hike

By Ben Mutzabaugh, USA TODAY

Delta Air Lines says its decision to offset expired FAA taxes by raising fares has increased revenue by between $4 million and $5 million per day, The Wall Street Journal reports. The newspaper adds: "Delta said it has no plans to change its ticket prices."

"The tax is a tax on passengers," Glen Hauenstein, Delta's Executive Vice President for Network Planning, Revenue Management and Marketing, is quoted as saying by the Journal. "What the industry has done is simply to maintain prices at market-clearing levels."

That revelation came out today during a call to discuss Delta's second-quarter earnings results. The Associated Press reports the carrier's "second-quarter net income fell by 58% compared to a year ago. It earned $198 million, or 23 cents per share, compared with $467 million, or 55 cents a year ago. Fuel costs rose 36% to $2.66 billion in the latest quarter. Revenue rose 12% to $9.15 billion as Delta raised fares to try to pay the increased fuel costs."

Delta's results fell short of Wall Street expectations once special items were excluded.

Elvis90

How will taxes be collected from Alaska & Spirit, and any other companies who did not raise fares to match the tax revenue income?

HSLD

And there's the gamble that these airlines are taking. After the dog and pony show is over in DC, airlines may still be on responsible for the fees - whether they collected them or not. Based on the history and accounting for the AATF, I don't see Congress issuing a pass on the income especially given the budget and debt climate.

The media is framing this as greedy airlines pocketing the fees, (and it may turn out that way) although until a ruling is made, it would be wise to have an escrow fund set aside to pay fees.

Schwanker

Not quite correct:

If the taxes did not exist, there would be more capacity in the system which would drive down prices to maintain similar margins. What the airlines are simply doing is keeping prices at the current point on the supply/demand curve as supply won't be increased due to this temporary event.

BoilerUP

Again...reality doesn't always work the way an economics textbook says it should.

Phuz

Similar to the bag fees, the first year or two of a new source of income results in a temporary increase in profit margins. Eventually one company realizes it can afford to reduce fares on a given route, then a second company follows and so on. Same thing with these "ex-tax" revenues.

flybynuts

What is going on in our country? Congress is telling the airlines to be ethical and do the right thing? Same ones who have their own special health insurance and I will have Obama care? Next they will tell corporate executives that they need to stop making all those golden parachutes and gluttonous compensation packages.

Hello pot...