by Bruce Myint | December 01, 2003

Airlines like Southwest
say taxes are unfair

group of low-cost airlines is crying “foul” after the U.S. government in September reinstated a $2.50 security tax per trip segment.
   “The imposition of taxes and fees by the government has an enormous and disproportionate impact on our cost structure,” wrote a coalition of nine low-fare carriers in a recent letter to Congress.
   According to the Washington, D.C.-based Air Transport Association, government taxes and fees amount to 16.3 percent of a $200 nonstop, roundtrip ticket. In comparison, these costs account for 9.3 percent of an $800 ticket.
   “If things are going to get more expensive, we’re afraid it will get passed on,” said Tom Chapman, legislative council for Dallas-based Southwest Airlines.
   Dan Kasper, an airline economist working for the consulting firm LECG, based in Emeryville, Calif., said flat charges adversely affect discount carriers and ultimately could be passed on to airline passengers through higher prices or smaller corporate discounts.
   Kasper added the charges could especially hurt short-haul routes which bear the highest percentage of security fees if the cost prompts business travelers to drive instead of fly.
   Tempe, Ariz.-based America West Airlines felt the impact when it had to slash service to two cities due to drive-market competition, said Scott Bowers, the carrier’s vice president of revenue management.
   The prospects of price hikes and route cuts come at a crucial time for low-fare airlines, as their use rises among business travelers. A recent study by the Radnor, Pa.-based Business Travel Coalition found more than 76 percent of 110 companies surveyed have increased bookings on low-fare carriers, a trend 65 percent expect will continue in 2004.