Tax Analysts Blog

Airlines Say Ticket Taxes Would Be More Visible if They Were Better Hidden

Posted on Apr 29, 2014

There is something awesomely brazen about airlines calling for “transparent” fare pricing after they’ve pioneered opacity in their own pricing structures. It was airlines, after all, that rescued themselves from financial disaster by “unbundling” fares and charging consumers for “extras” like checked baggage and seat assignments (although cabin pressurization remains free, for the time being). The airlines are now insisting that consumers would be better off – and better informed – if carriers were allowed to omit government taxes and fees from advertised fares. With help from compliant lawmakers, airline lobbyists have drafted the Transparent Airfares Act of 2014. According to USA Today:


      the proposed law would remove government consumer protections by allowing an airline to initially claim that its tickets cost less than they actually do. Press the "buy" button online for the deceptively low airfare, and all taxes and mandatory fees would be added to your bill.

To defend the legislation, airline lobbyists have made some decent arguments. Or at least, arguments that seem decent until they get real scrutiny.

“It simply isn’t appropriate for the United States government to impose any amount of taxes and fees on air travel and then force the airlines to take the blame for the levies,” argued Nicholas Calio, president and chief executive of Airlines for America, an industry trade group.

“Other modes of transportation don’t have to lump taxes in with advertised fares,” Calio wrote in his letter to The New York Times. “Neither do hotels, rental cars or virtually any other consumer product or service. Airlines shouldn’t have to either.”

This would make sense if current regulations actually prevented airlines from identifying the taxes levied on any given fare. But in fact, the Department of Transportation already allows that sort of breakout. The agency simply insists that airlines make the bottom-line price more prominent than the unbundled, tax-exclusive price.

The Business Travel Coalition, an advocacy group for the “managed travel community,” has made this point nicely:
      Under the 2012 DOT rule, airlines must prominently present total ticket prices in advertisements; however, they are permitted to display breakouts of government taxes and fees so long as they are less prominently displayed than the total ticket prices. Additionally, there is no DOT requirement preventing airlines from also including in an advertisement base ticket prices (net of government taxes and fees), if they are likewise displayed less prominently than total ticket prices. As such, and as a matter of fact, airlines are free today to provide consumers with a detailed breakdown of total ticket prices, including government taxes and fees.
I’m all for making taxes more visible. People should know what they’re paying for, especially when it comes to government services. So airlines should definitely identify those taxes clearly, especially in their advertisements.

But that’s not what airlines want. In fact, they want something very nearly opposite: the freedom to hide those taxes whenever it suits them.

Apparently, that sort of opacity qualifies as transparency, at least in Washington.

Read Comments (4)

Surya GApr 29, 2014

What is transparent about the current rules? It allows the government to hide
their tax increases - and yes these taxes are pegged to CPI so they increase
every year.

Under the old rules, airlines and ticket agents are allowed to publish ads that
list government-imposed taxes and fees separately from the advertised fare, as
long as these taxes and fees are assessed on a per-passenger basis. Under the
current requirements, all mandatory taxes and fees must be included together in
the advertised fare.

Joe ThorndikeApr 29, 2014

Airlines are already free under current regulations to break out the taxes and
fees. They just can't make the tax-exclusive price the headline number in their
promotions and fare quotes. As a DOT representative said in 2012 when the regs
took effect: "“Nothing in our rule will prohibit a carrier from informing
consumers that the fare includes a specified amount of taxes and government
fees, as long as the stated fare includes those taxes and fees. The carrier can
then break out taxes and fees if it wishes.” You can see the story here.

Seems pretty transparent to me.

David BrunoriApr 29, 2014

Joe, great post. There is nothing more cynical than funding government with
hidden taxes. The airlines should be more concerned with reducing the
outrageously high taxes on air travel. A recent flight I took was $850 -- but
the tax was $110.

surya gApr 29, 2014

If the headline number includes all the taxes, the cost of government is
essentially masked. Businesses should not be forced to advertise their costs
plus the government's take. I would say the same for the gas tax, which
happens to be the only other analogous advertising requirement. Consumers like
David should be outraged by the taxes and fees imposed by our government for
mediocre "services" like TSA.

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