Flight prices go up as lose benefit of tax savings

Airlines are tossing consumers aside and grabbing the benefit of lower federal taxes on travel tickets. By Saturday night, nearly all major US airlines had raised fares to offset taxes that expired the night before. That means instead of passing along the savings, the airlines are pocketing the money while customers pay the same amount as before. American, United, Continental, Delta, US Airways, Southwest, AirTran and JetBlue all raised fares, although details sometimes differed. Most increases were around 7.5 per cent. For consumers who wanted to shop around, only a few airlines were still passing the tax break on to passengers on Saturday night, including Virgin America, Frontier Airlines and Alaska Airlines. The expiring taxes can total $25 (Dh91.8) or more on a typical $300 round-trip ticket. They died after midnight on Friday night when Congress failed to pass legislation to keep the Federal Aviation Administration running. That gave airlines a choice: They could do nothing and pass the savings to customers or grab some of the money themselves. "We adjusted prices so the bottom-line price of a ticket remains the same as it was before... expiration of federal excise taxes," said American spokesman Tim Smith. US Airways spokesman John McDonald said much the same thing passengers will pay the same amount for a ticket as they did before the taxes expired. They declined to say whether the increases would be rescinded if Congress revives the travel taxes. Tom Parsons, who runs the Bestfares.com travel website, said consumers should get the tax break. "Why would the airlines deserve it?" he said. "They already hit us with enough fees. Now they're keeping the government fees too." The Transportation Department says it will lose $200 million a week until Congress restores the taxes. J.P. Morgan analyst Jamie Baker said airlines could take in an extra $25 million a day by raising fares during the tax holiday. That's a tempting sum for airlines that have struggled against high jet fuel costs for most of the last three years. Some airlines that didn't raise fares sought to turn the controversy to their advantage. Spirit Airlines said it would pass tax savings on to consumers while rivals, "have not been so generous." It warned travellers Congress could end the tax holiday at any time, so book a flight quickly. Virgin America hawked tickets with the slogan, ‘Evade taxes. Take flight.' For a September trip between Dallas and San Francisco, Virgin America was $7 to $24 cheaper than United, Continental and American. Southwest Airlines and its AirTran subsidiary raised prices by $8 per round trip. From / Gulf News