US GOVERNMENT TO RECOVER AIRLINE TAXES

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By TESTCustomwebLP TESTCustomwebLP August 2, 2011 08:41

US GOVERNMENT TO RECOVER AIRLINE TAXES

US Transportation Secretary Ray LaHood is debating whether they can recover the tax revenue from airlines lost after the Federal Aviation Administration closed down on July 23. The 7.5% airline tax is paid by passengers when they buy their tickets, which the airlines send to the government. However, many airlines have not been able to send that amount onto the government and are pocketing the difference. LaHood wants to find a way to claw back that money.

American, United, Continental, Delta, US Airways, Southwest, AirTran and JetBlue have all raised their fares by 7.5%. LaHood has told several airlines that their decision to increase fares “was not right or fair”.

Some 4,000 FAA workers are furloughed and a further 70,000 temporary construction workers have also been affected as the agency has been forced to issue more than 200 stop worker orders for research and airline modernization and renovation projects. While, some 40 FAA safety inspectors are working without pay.

With now quick end to the funding row in sight as Congress enters its summer recess.

However some airlines have stated they will refund the taxes passengers have paid, which is what the Internal Revenue Service has advised.

From a passenger point of view, it is quite frankly astounding the airlines feel they have been able to simply stop charging tax and the raise fares to keep the difference. It would seem more logical that they would simply save up the tax revenues to pay onto the FAA once it reopens. But the government has dropped a clanger by failing to have any such business continuity measures in place. Admittedly it is a rather far-fetched notion that an entire government agency could be completely shut down, but these days firms have to be prepared for the worst and have contingency plans in place to continue to operate. For airlines, it is understandably that they want to benefit from a situation that is not their fault but they should consider the reputational risk impact of raising fares to profit from such a situation. Social media feeds are full of passengers complaining about the action from the largest US carriers. They may be thinking that if they all raise fares then it will lessen the impact but there are some airlines such as Spirit which has proven it can raise revenue by increasing ticket sales by passing on the tax savings to the passenger. It remains to be seen how this situation will play out over the busy summer schedule.

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By TESTCustomwebLP TESTCustomwebLP August 2, 2011 08:41
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