A travel organization on Tuesday called for major changes to the nation’s aviation system, including how to pay for it and eliminating a tax loophole that it says encourages airlines to charge extra fees for services like checked bags.
U.S. Travel Association CEO Roger Dow said the group’s plan is “realistically achievable in the current political climate” and “stops the incessant kicking the can down the road with no real improvement.”
The centerpiece of the plan is to eliminate five passenger aviation taxes. The net effect on a domestic airline ticket would be a reduction of between $9.50 and $25.50, based on a base average round-trip airfare of $340, according to U.S. Travel’s calculations.
However, the group advocated raising an airport fee, called a passenger facility charge, from $4.50 per ticket to $8.50, and permanently adjusting the fee for inflation.
The change would have a pro-consumer benefit, the group said. It would eliminate airlines’ incentive to collect revenue through what airlines call ancillary fees, such as for bags and ticket changes. The IRS in 2009 ruled that those fees are not subject to taxation, which the group said resulted in “unleashing a major move toward fees by airlines that has been roundly criticized by travelers.”
Eliminating the Domestic Passenger Ticket Tax, one of the five it proposes axing, would remove the airlines’ incentive to “shelter mass amounts of revenue in fees,” the USTA said.
Raising the airport fee would also allow U.S. airports to modernize. In surveys and rankings, they typically don’t rank in the top 25 even though the U.S. has some of the busiest airports, including O’Hare International in Chicago, which is the busiest in the world when counting passenger and cargo traffic.
Among those modernizations could be expanding airport terminal space, allowing new airlines to compete in markets now dominated by one or a few airlines. “The potential effects for prices and service could be tremendous,” the USTA said.
The fee would also provide a source of funding for airports that sidesteps airlines, which typically pay for airport improvements and today have the power to block major projects, the group said.
Airlines have been opposed to raising the airport fee, saying it’s unnecessary.
The travel group also suggested changing the air traffic control system to be a “user-fee model.” Airlines and other users of the air traffic control system would pay a new independent, nonprofit organization that would provide air traffic services, instead of the Federal Aviation Administration.