Last Friday, American Airlines announced that it would cut its capacity projection for next year, meaning fewer seats for passengers. Simultaneously, the airline reported first-quarter profits that doubled last year's performance. Wall Street was happy with the news, sending the company's stock price up four percent in time for close and another three percent at the opening bell on Monday.
Also on Monday, a Wisconsin-based consultancy calculated that in 2014 airlines pocketed $38 billion in ancillary fees for items like checked bags and ticket changes, up 21 percent from the previous year.
Then, on Tuesday, the Associated Press released an analysis finding that consolidation in the airline industry has drastically cut service to many U.S. markets and is allowing airlines to keep prices inflated.
Air travel has attained its place on the Mount Rushmore of easy targets, along with the DMV, the IRS and mothers-in-law: it's so expected that these things are going to be unpleasant to deal with that we hardly even complain anymore.
Americans should not believe that it has to be this way, however, and they most certainly should not bear their suffering in silence. But it's not the airlines that should be getting the brunt of their gripes at the moment. It's Washington.
Take the bag fee issue. The trend toward exorbitant extra fees traces its roots to 2009, when the IRS ruled that base fares for flying were subject to federal taxes--but add-on fees were not. The airlines reacted, frankly, just as you or I would: by converting as much of their income as possible to the untaxable haven of fees. It saved them from having to fork over $487 million to Uncle Sam in 2014 alone.
The issues of pricing and capacity and service cuts are equally tied to actions in our nation's capital--or rather lack thereof. Thanks to Congress being perpetually gridlocked over how to fix the country's collapsing transportation infrastructure, airports are just as broke as our highways and rail system. It's a big part of the reason why U.S. airports, once the envy in the world, currently do not place a single facility in the top 25 worldwide. (The closest? Cincinnati, #30.)
But it also means airports cannot expand and modernize to cope with burgeoning passenger congestion--or add terminal space so new competitors can come into the market and challenge the old-guard carriers.
So if there's no public money to fix and expand airports, what is happening to the taxes (between 13 and 16 percent) that are collected on airfares? Well, those moneys go straight back to Washington, where Congress doles out the money according to its political whims and not necessarily according to greatest need.
Believe it or not, it is possible to fix practically all the problems I've described in one fell swoop. Congress should couple an airfare tax cut with a move toward user fees to fund the air transportation system.
This could eliminate the perverse bag fee incentive, increase competition in the airline industry, and even address the nagging problem of delays and cancellations, with no net cost increase on flyers--and possibly even some savings.
The user fee that could fix our airport infrastructure problems already exists. It's called the Passenger Facility Charge (PFC). The PFC is a thing of beauty because the law that created it stipulates that "airports use these fees to fund FAA-approved projects that enhance safety, security, or capacity; reduce noise; or increase air carrier competition"--otherwise known as items that actually help consumers.
The trouble with the PFC is that it has not been indexed for inflation since 2000, and many airports have already exhausted their borrowing power against the current PFC rate for existing projects that just can't up with their maintenance needs or growing demand. A plan exists to increase the maximum PFC from $4.50 to $8.50 per trip leg, while cutting the tax on tickets as much as $25. It would keep all other air travel-related functions fully funded.
But best of all, this plan would keep funds local and out of the congressional pork machine, so that flyers would see some real value for what they pay for a ticket.
Congress must reauthorize the operations of the Federal Aviation Administration this year, and already all sides (the airlines especially) are lining up at the trough for the items they want to see in that legislation. It is the perfect opportunity to implement the tax and infrastructure fixes that would put the traveling public's interests front and center. Apart from its sometimes innate-seeming aversion to common sense, what would prevent Congress from doing this?