Sometimes, obscure fees and taxes instituted by governments and airlines create a surprising windfall when the overall economic milieu changes. These fees and taxes that might have been expected to pull in normal amounts of revenues can grow enormously as in the case of jet fuel taxes and frequent flier fees.
In Denver the airlines are howling about the once-innocuous fuel taxes and claim that the state is getting an unreasonable windfall profit. But it wasn’t always that way. When the current jet fuel taxes were put into effect they were set as a percentage of the price rather than as a flat tax per gallon.
With the rising jet fuel prices, the state is raking in far more revenues than they were in the past. I wasn’t in the legislature back when the taxes were being set for gasoline (a flat tax) and jet fuel (a percentage tax), but I’ll guess that the airlines were on board because they were getting a good deal at the time. Now the worm has turned and they are busy complaining. The Denver Post article puts real numbers to the situation.
Unlike Colorado’s tax on gasoline, which is a flat 22 cents a gallon, the state’s tax on aviation fuel used by commercial carriers is 2.9 percent.
The rising price of jet fuel in recent years, combined with growth in the number of flights especially at Denver International Airport, has led to an increase in state aviation fuel-tax collections from $12.1 million in 2003 to $29 million in fiscal 2008, which ended June 30.
On the other hand, the airlines are now reaping a windfall of their own from the confluence of increased frequent flier fees, a cutback in flights, new baggage fees and the increase in airfares.
Because airfares are increasing more travelers are now redeeming their frequent flier miles at an accelerated rate. According to a CBS report, “Redemption of frequent flyer miles is up fifteen percent for the first six months of 2008 compared to last year at the same time.” At the same time the airlines have instituted fees for virtually any free travel. With those fees they are raking in far more money than they had predicted when the fees were instituted.
Plus, the airlines by eliminating “free travel,” have an opportunity to pull in more revenue not only from the frequent flier booking fees but also from the fuel surcharges that are being applied to frequent flier tickets as well and the first-checked-baggage fees and additional baggage fees.
The revenues being generated by these fees is clearly a windfall to the airlines and they are piling more fees on to keep the windfall productive. The fees are also a way to escape aviation taxes. But, what I don’t hear is a clamor to give this windfall back to passengers or roll back the fees.
If the airlines can enjoy their unplanned windfall, why can’t Colorado? I think this comes under the category of “If it’s sauce for the goose, it’s sauce for the gander.”
