Airlines Shouldn’t Gain on Ticket-Tax Lapse, LaHood Says

U.S. Transportation Secretary Ray LaHood said airlines shouldn’t have raised fares by the amount of excise taxes they stopped collecting July 23, when the Federal Aviation Administration’s revenue-raising authority expired.

“They’re collecting this money and it’s going to their bottom line and I think that is not right,” LaHood said at a White House press briefing in Washington today. “It’s not fair for them to do that, and I made that known to them.”

Although the airlines aren’t collecting ticket taxes, many travelers are still paying the same price for their tickets. Air passengers who bought tickets before the tax lapsed for travel on or after July 23 may be entitled to a tax refund. The Internal Revenue Service said yesterday it asked airlines to repay eligible customers who request refunds. Those who don’t receive one from the airlines can submit claims to the IRS.

Congress has been deadlocked over extending the FAA’s funding because of a dispute over ending subsidies to 13 rural airports. The House included the cuts in a bill it passed to continue the agency’s authority through Sept. 16. Senate Democratic leaders oppose the cuts and have refused to consider the House’s legislation.

Industry Letter

Steve Lott, a spokesman for the Air Transport Association, the industry’s Washington-based trade group, referred to the letter ATA sent yesterday to senators Jay Rockefeller, a West Virginia Democrat and chairman of the Commerce, Science and Transportation Committee, and Maria Cantwell, a Washington Democrat and chairwoman of the panel’s aviation subcommittee.

The letter was a response to one by Rockefeller and Cantwell July 26, urging airlines to pass the savings from the lack of tax collection to customers. ATA President Nicholas Calio wrote that airlines can’t pass all taxes and fees onto their customers and “are merely seeking to function as responsible businesses that are able to recover their costs.”

LaHood also said as many as 70,000 construction workers have been idled because about $2.5 billion in grants for airport projects around the country has been suspended. The trust fund that pays for those projects is funded with ticket and other aviation taxes, such as those on fuel and cargo, which lapsed when the FAA’s collection authority expired.

“For all of my friends on Capitol Hill who give speeches every day about jobs, the importance of jobs, putting people to work, this is not the time to be laying off 70,000 construction workers,” the former Republican Representative from Illinois said. LaHood served in Congress from 1995 to 2009.

Another 4,000 FAA employees, including engineers, program analysts and computer specialists, have been furloughed since July 23. Air traffic controllers, considered essential, continue to work.

“Safety is not compromised,” LaHood said.

To contact the reporter on this story: Lisa Caruso in Washington at lcaruso7@bloomberg.net

To contact the editor responsible for this story: Andrea Snyder at asnyder5@bloomberg.net

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