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Airlines Get Break Under U.S. Budget Deal, Not Passengers

U.S. airlines won a repeal of $380 million in fees they pay for aviation security each year as part of a congressional budget agreement this week that raised related charges on their passengers.

The Aviation Security Infrastructure Fee is to be repealed on Oct. 1, 2014, according to a summary of the deal released by the House Rules Committee yesterday. The Sept. 11 Security Fee paid by passengers on airline tickets will more than double, over the objection of lawmakers who set aviation policy.

“The government and the administration shouldn’t treat airline passengers to be like piggy banks,” House Transportation and Infrastructure Committee Chairman Bill Shuster, a Pennsylvania Republican, said in a speech in Washington yesterday. “Those of us who fly are paying more than our fair share to reduce the deficit in this country.”

Airlines and their passengers have helped pay for airport security since the Transportation Security Administration was created after the Sept. 11, 2001, terrorist attacks. The agency was allowed to charge carriers annual fees equal to the costs they paid for passenger and baggage screening in 2000.

Airlines paid $380.2 million in fiscal 2012, according to TSA data. The industry paid a high of $572.8 million in 2007.

The fee paid by passengers rises under the budget deal to $5.60 each way of a trip, from $2.50 per flight segment or a maximum of $5 each way. The amount of TSA aviation-security costs covered by fees will rise from 30 percent to 43 percent, according to the House summary.

Tax ‘Fiction’

Increasing the passenger fee was one of the few money-raisers that both political parties supported in budget negotiations. Airlines and other parts of the aviation industry, such as the Air Line Pilots Association union, lobbied against it, saying higher ticket prices would discourage consumers from traveling.

“Airfares are going to go up for consumers,” Delta Air Lines Inc. (DAL) Chief Executive Officer Richard Anderson said at the company’s annual investor day in New York yesterday before the House Rules Committee summary was published.

“That tax increase will not be absorbed by Delta,” Anderson said. “It’s a tax increase. Let’s call it what it is, not some service-fee fiction.”

The new TSA fee structure will generate $12.6 billion over 10 years, according to the House summary.

“Airlines and our customers are overly taxed,” said Jean Medina, a spokeswoman for Airlines for America, the Washington-based air carrier trade group.

‘Tax Burden’

“In reaching this deal, congressional leaders agreed to eliminate one of the 17 unique taxes on the aviation industry,” Medina said. “Any relief we can get from our onerous tax burden ultimately benefits our customers.”

David Castelveter, a TSA spokesman, said the agency doesn’t comment on pending legislation.

The budget accord also would block the TSA from forcing U.S. airports to assume responsibility for monitoring exits from secure areas, according to the House summary.

TSA proposed shifting the staffing and funding of exit-lane monitoring in a cost-cutting move earlier this year. The policy was set to begin in January.

The move would have cost 155 airports between $100 million and $200 million a year, said Joel Bacon, an executive vice president with the American Association of Airport Executives.

The Alexandria, Virginia-based trade group joined Airlines for America and 18 airports in a lawsuit challenging the policy, filed Dec. 6 in Washington, Bacon said.

Sickness Bags

“This has been a big deal for the airports and the airlines,” Bacon said. “This is a function TSA felt was a necessary part of its mission since the agency was founded.”

The passenger surcharge for the TSA has never been raised, even as the agency grew to more than 50,000 employees, added high-technology explosive scanners at airports and expanded its mission beyond airport checkpoints.

Earlier this month, Airlines for America handed out leaflets and air-sickness bags at airports with the message: are higher taxes on air travel making you ill?

The group’s public statements spoke about the total tax burden on aviation growing to $17 billion through 17 different charges. They didn’t mention a desire to roll back the airlines’ share of TSA’s costs.

To contact the reporter on this story: Jeff Plungis in Washington at jplungis@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

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