Airlines Complaining About a $2.50 Fee? Pot, Meet Kettle

Last Updated May 24, 2010 3:25 PM EDT

After enjoying $7.8 billion in revenue from fees ranging from checked-baggage to premium seating, airlines are now complaining and lobbying against a bill in Congress that would fund the FAA by raising the passenger facility charge caps from $4.50 to $7 per segment. After swilling down profits from ancillary fees of $25 or more per passenger, airlines have the gall to protest $2.50 that would fund capital projects such as runway improvements, safety improvements and equipment purchases by airports.

The bill, which was passed by the House, drew fire from the airlines' trade lobby group and several CEOs:

In a letter to the Democratic chairmen and ranking Republicans on the House and Senate transportation committees, the airline industry's main trade lobby said the proposed increase would be "harmful and unnecessary."

"The PFC tax increase would raise travel costs, thereby harming both consumers and the travel/tourism industry," according to the letter, signed by chief executives of members of the Air Transport Association, including Delta Air Lines Inc. (DAL), AMR Corp.'s (AMR) American Airlines Inc. and UAL Corp.'s (UAUA) United Airlines Inc.

"Especially as difficult economic conditions persist, the airline industry and passengers cannot afford higher taxes that inhibit growth and add additional costs for consumers," the executives added.

I wanted to ask if they wrote that with a straight face. Delta received the highest amount of ancillary fees, $1.65 billion; American was second with just above $1 billion; and United was sixth with $619.5 million.

Not surprisingly, the American Association of Airport Executives protested the letter and took a shot at the airlines in a press release:

"Our airline partners argue that raising the PFC cap would 'raise travel costs, thereby harming both consumers and the travel/tourism industry,'" Barclay wrote. "However, the airlines apparently do not have similar concerns about the dramatic increase in travel costs from baggage fees and other ancillary fees."

While the airlines' collection of ancillary fees has skyrocketed in recent years, growing from $5.5 billion in 2008 to $7.8 billion in 2009, overall local passenger facility charges collections dropped more than $300 million from 2007 to 2009 to $2.5 billion. Adding to the problem for airports is the decline in purchasing power that those revenues produce because of construction cost inflation. The federal cap on local PFCs was last raised in 2000, and AAAE has asked Congress to increase the PFC cap from $4.50 to $7.50 with indexing for construction cost inflation.

The $2.50 fee can't be the reason, right? Because the law only raises the cap, not the actual fee. So perhaps the airlines think local airport authorities can fix the fees rather than the federal government. But what difference does that make? The $2.8 billion in annual fees, aside from funding the FAA, will go to capital improvements at airports that can only benefit airlines and travelers in the long run, such as Chicago-O'Hare International Airport using $1.4 billion in PFCs to add three runways and multiple taxiways.

While no one enjoys paying more, I can say that after paying more than $50 in baggage fees, I'm not going to notice an extra $2.50 on my ticket. And even if someone did, at least that $2.50 is going to improve the airport experience rather than simply improving a bottom line that a passenger will never personally benefit from.

Photo: cseeman