Taxing Airline Fees: Is the “Gravy Plane” Over?

Currently, airlines enjoy the freedom to charge as much as they want for ancillary fees and not have to worry about paying any taxes on them — not even the 7.5% excise tax currently levied on core passenger airfares. This, combined with the lack of transparency to inform passengers about the true price of their airline ticket, has caused a lot of angst and grief amongst consumers — who were used to traveling on airfares that were all-inclusive only as few as three years ago, for the most part — and lawmakers.

However, according to The Wall Street Journal, lawmakers are contemplating taxing airlines on the ancillary fees they currently collect. The fees are being called a “backdoor price increase” in airfares. Democratic lawmakers recently held a hearing to “determine whether legislation should be proposed to rein in the fees and ensure the government gets a cut of the revenue.”

Ben Baldanza, president of Spirit Airlines, the airline that is expected to institute next month a fee of as much as $45 to place a carry-on bag in the overhead compartment, defended the “à la carte” fee model, saying it gives passengers a choice of what services to pay for, and that “such taxes would surely harm competition, raise costs and slow the industry’s recovery from a decade of losses.”

Who is right in this debate? What are your thoughts? Please post your comments. We want to hear from you…

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