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Airlines Get the Gold Mine, Passengers Get the Shaft, in FAA Fiasco

If the government stopped collecting sales taxes, you'd expect prices to drop accordingly, right? Wrong way, Corrigan—at least when it comes to the airline industry. Last Friday, Congress failed to meet a deadline to fund the Federal Aviation Administration (FAA), which meant airlines were no longer authorized to collect a 7.5% federal excise tax and a minimum $3.50 segment tax that are built into published airfares. Instead of decreasing their airfares by an equivalent amount, most major airlines simply raised their fares in equal measure, giving the false impression that airfares remained the same. But some travelers who bought their tickets before Friday, when the tax was still included, are arguing they deserve a refund. And the chances of that happening are…?

Actually, pretty good, according to the U.S. Treasury Department. A Treasury spokeswoman told CNN that travelers who paid the tax—that is, before the partial shutdown of the FAA—and who fly during the so-called tax holiday may be eligible for a refund. The amount of the money won't be huge, amounting to as little as $29.50 on a $300 round-trip airfare, but affected travelers may be able to apply to the IRS for a refund. Details are still being worked out.

One of the surprises in this fiasco is that Spirit Airlines, infamous for charging extra fees for everything from advance seating assignments to carry-on baggage, is one of only three airlines that have elected not to raise their fares during the tax holiday. (Hawaiian and Alaska are the other two.) In a news release on Saturday the airline said, "Spirit Airlines is all about saving customers money and today is no different." Wait, what?

Another surprise (to me, at least) is how brazen the major airlines have been in unapologetically raising their fares to take advantage of the Congressional inaction regarding the FAA. "Friday evening we adjusted prices so the bottom line price of a ticket remains the same as it was prior to the expiration of the federal excise taxes, etc.," American Airlines spokesman Tim Smith told Reuters news service in an email. Almost as if the airlines were, like, you know, doing you a favor by keeping the "bottom line" stable. Thanks, airlines!

But there's a larger issue here than whether you'll get a $30 refund from the IRS. The FAA is in an awful mess because of Congress's failure to act. According to a FAA statement released today, the agency has halted "dozens of major projects ranging from long-term runway safety initiatives to NextGen air traffic control research and testing." The FAA is losing some $30 million a day in tax revenues that would otherwise have gone into the agency's aviation trust fund, according to the Christian Science Monitor. Some 4,000 federal workers have been furloughed so far. Air traffic controllers and other workers responsible for safety issues are not affected by the temporary layoffs. Airport and inflight safety is not expected to be compromised, according to officials.

2010-hs-mark-orwolljpgSmart Traveler Mark Orwoll is T+L's International Editor. Follow him on Twitter.

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