Yes its true. The Obama Administration’s proposed tripling of the passenger security tax is on the table. Will Congress go along? After all there is a real need to cut the deficit. As one can imagine this new tax is not going over well – the ATA is reacting by speaking to one and all. As ATA VP Communications Steve Lott explains, ATA is busy with an education process. He shares some simple numbers that are very interesting. Many would be surprised to find out how much of an airline ticket is taxation. And it is going to get worse. Government has learned over the years that they can keep taxing air travel and it keeps growing. But the airlines are truly burdened at this stage and consumers are running into sticker shock.
Although flights are at record load factors, airlines are producing awful returns on capital. Which means the industry is ever more a risky bet for the financial industry. Without an industry business model that provides a reasonable rate of return there will be a smaller tax base to exploit.The tax base is huge – from the aerospace industry through to the tourism industry. It is a tax base to nurture not needle.
Public policy cannot assume that air travel has an inelastic demand curve, because it does not. The airline industry has laid off thousands of people – and it shows on every trip you take. The industry employees are exhausted and ill tempered. Which is not great for an service industry.