It's a taxing time for air travelers,
researchers discover
March 11, 2005 - Airline passengers are
giving an ever-increasing portion of their travel dollars to Uncle Sam,
according to data released by
MIT's Global Airline Industry Program and Daniel Webster College.
Airline ticket prices overall have actually
dropped over the past several years, the researchers emphasize. However,
many of the taxes and fees passengers pay, which fund a significant portion
of the costs of U.S. air-traffic control and airport systems, are not linked
to the base price of the tickets and have remained about the same.
As a result, the effective tax rate on
airline tickets is steadily increasing, and will increase more under the
Bush administration's recently released federal budget proposal, researchers
report.
Which raises the question: Who should pay
for the increases? The airlines or U.S. taxpayers?
"The Bush administration's proposed
increase in the security fee added after September 11, 2001, has generated
strong reactions from the airline industry," said MIT Professor Amedeo Odoni,
the project's director. "The increased fees will place further strain on the
airlines at a time when several of them are struggling. On the other hand,
it is difficult to argue that taxpayers-at-large should subsidize the
security costs of airline customers."
Odoni believes that his team's 2004 study
and its recent update can add a more factual note to the ticket tax debate.
"This study provides an objective basis for Congress to examine the issue
and make informed decisions on airfare taxes."
The study team's initial results were
published in the July 2004 Journal of Air Transport Management. The U.S.
General Accounting Office cited the study in U.S. Senate briefings and in a
report submitted to Congress.
After the administration's proposed hike in
security fees, passengers would, on average, pay 19 percent in taxes and
fees on top of the ticket price, the researchers found in their update of
last year's study. In 2004, passengers paid 16.1 percent in taxes on top of
the price of a domestic ticket. This is up from 15.5 percent in 2002 and
10.9 percent in 1993.
Professor Joakim Karlsson of Daniel
Webster College explains the significance of the study's results: "The
airlines have lost the ability to raise airfares, even to just keep pace
with inflation. The average round-trip ticket has dropped 40 percent in real
terms since 1993. Meanwhile, average ticket taxes and fees have stayed
relatively constant at $45 per ticket."
Karlsson adds: "With the total cost
of taxes changing only slightly, the relative share of each ticket that goes
to taxes and fees has been steadily increasing."
The federal government and airports
currently add four types of taxes and fees to the basic cost of each
domestic airline ticket. The administration's new proposal increases the
security fee associated with passenger and baggage screening by up to $6.
The MIT/Daniel Webster College ticket tax
project estimates taxes and fees by analyzing a representative sample of
actual tickets sold. "The airline industry usually computes taxes by picking
a single 'typical' ticket. That choice usually results in a much higher
estimate of the tax impact, and we usually see the airline industry report
the tax as 26 percent," Karlsson said.
Shiro Yamanaka, an MIT graduate student in
Transportation and Operations Research, is the third member of the study
team. MIT's Global Airline Industry Program is funded primarily through a
grant from the Alfred P. Sloan Foundation. Partial support for this study
was also provided by a gift to the program from Amadeus, S.A.S.
CONTACT
Elizabeth A. Thomson, MIT News Office
Phone: 617-258-5402, E-mail:
thomson@mit.edu
or
Annette Kurman, Daniel Webster College, Dept. of Public Relations
Phone: 603-577-6625 , E-mail:
publicrelations@dwc.edu
URL:
http://web.mit.edu/newsoffice/2005/tickets.html
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