Congress failed to pass legislation on Friday night to keep the Federal Aviation Administration up and running, and as part of that several taxes and fees that airlines typically collect on top of base fares are not being collected. For domestic flights, airlines will no longer collect a 7.5% excise tax and a $3.70 segment tax. International flights will not collect a $16.30 fee that is normally applied.
Some airlines have opted to pass this savings on to passengers, while others (US Airways, American and Southwest) have opted to take this opportunity to raise fares. Congress will likely sort this all out in the next couple of days, and you’ll have these fees and taxes re-instated. At that point, the airlines that have not raised fares would be crazy not to take this opportunity to take the extra revenue. With fuel at pretty high levels right now, airlines that have reported second quarter earnings are all bemoaning the high fuel costs while at the same time saying that they have been able to pass some of the cost on to consumers.
With the reduced capacity (and continued upcoming reductions in capacity) airlines should be able to continue to get fares a bit higher to offset fuel costs, and this seems like as good an opportunity as any to try to push that through. Sure, a couple of airlines (JetBlue, Virgin America, Spirit) have been touting that you’ll be able to save a few dollars for now by not paying the tax, but I’d guess when the tax is re-instated, we see fares even higher than before.