Airlines raise fees in absence of federal taxes

CBS

If you bought an airline ticket before last weekend, but are traveling now, you might get some of your money back.

On Wednesday, the Internal Revenue Service asked airlines to refund federal taxes, which are included in those ticket prices, because those taxes expired last week when Congress couldn't agree on a plan to keep the Federal Aviation Administration running.

But just because there are no taxes, that doesn't mean tickets are cheaper. And it doesn't necessarily mean you'll get the money back.

As of last Friday, CBS News Correspondent Betty Nguyen reported, the Federal Aviation Administration has been on a partial shutdown, and as a result, the taxes they normally collect on airfares are on hold.

But instead of passing that savings onto the consumer in the form of lower ticket prices, most airlines have raised their fees to make up the difference.

Airline passenger Willie Ward said, "Instead of helping people, they're just looking out for themselves."

Transportation Secretary Ray Lahood agrees. He said, "Average citizens who are planning family vacations on these airlines can little afford to pay an additional cost on their ticket."

And those additional costs are adding up to big profits - $200 million every week from the extra $22 or more on every $200 ticket sold.

But a few carriers aren't raising fares: Alaska, Hawaiian, and Spirit Airlines.

Spirit even started a website this week called "Don't tax me Bro" to encourage customers to fight the increase. But not everyone is hopeful.

Traveler Jessica Barnes said, "You gotta take it cause there's not a lot else you can do."

And with the debt crisis taking center stage, it seems the legislative stalemate that caused the FAA shutdown will continue - with no relief in sight for fliers or their wallets.

CBS News Travel Editor Peter Greenberg said on "The Early Show" this is a de facto airfare increase of 7.5 percent.

He explained, "If you do an average airfare of $300, that's an additional $25 the airline now gets to pocket that would have normally gone to the IRS, and that's a big problem."

"Early Show" co-anchor Erica Hill asked about the legality of such a move.

Greenberg said, "Airlines can pocket the money because they kept the fares what they were before. They're not turning the money over to the federal government. Those taxes aren't collected until the actual plane takes off with you in it. So there's the real issue here, what happens if you bought a ticket three or four weeks ago, paid the taxes, but you haven't left yet, do you get the taxes back? ... Nobody knows."

Hill said with the airline industry facing a lot of public criticism in recent years, why don't the airlines take the chance to win the public over with a break?

"Isn't this ironic?" Greenberg said. "The very time that they're pocketing this difference, the airlines have been lobbying Congress, saying please don't increase our taxes because it will kill the airline industry. So it's a tax holiday, what do the airlines do? 'We'll take that money.' Not a good idea."

Greenberg added, Spirit Airlines, a company he says is known for "nickel and diming" passengers, has decided to keep fares down and take the 7.5 percent off tickets.

"They need to be applauded," he said.

He added, "Remember, the dirty secret here is the airlines figured this out years ago: They're charging the ancillary fees for pillows, blankets, food, checked bags, because those fees are taxed at a much lower rate. So that doesn't get the 7.5 percent excise tax, so that's less money the government is getting. The airlines are actually making more money from ancillary fees than they are from flying the planes. If they can figure out a way not to fly the planes they'd be great."

Hill said, "So as you look at this, if you're buying a plane ticket today, you're essentially paying more."

"You are," he said. "I'm waiting for a class action suit to tell you the truth. ... How many lawyers don't want to pay the 7.5 percent."

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