FAA stops collecting airfare taxes — and the airlines cash in

by Grant Martin on

Recent budget woes in the legislative branch of our US government have been creating a cascade of disruptions, and the most recent hiccup involves the Federal Aviation Administration (FAA). Without proper agreement on a fiscal plan moving forward, the government has been forced to shut down a portion of the agency, most notably the section that collects taxes on our domestic airplane tickets.

Those taxes account for a modest percentage of each flight, roughly between 5 and 10%, and when travelers caught wind that the taxes would be discounted, they saw the silver lining of the shutdown as being a temporary sale on domestic tickets.

As planned, the FAA shutdown took place at midnight this morning, but the savings have barely matured. What happened?

Turns out, some of the airlines also realized the gap in price difference and decided to make that up by increasing their fares. So rather than passing the tax savings along to customers, they’re greedily taking the margin for themselves.

Not all airlines have reached into our wallets, however, apparently Virgin America has not only refused to increase fares but they’ve turned the event into a bit of public promotion. Last night the airline had a countdown to tax-free bookings on their sites and as promised, the fares have stayed low. Similarly, United appears to be keeping its fares in place.

On the flip side of the coin? US Airways, American and JetBlue seem to be the leaders in ripping off their consumers. AP has a bit more info if you want to become even more disappointed.

[Flickr image via Fly for Fun]

American Airlines makes largest purchase in airline history

by Grant Martin on

There was deep speculation in the airline nerdery about whether American Airlines was going to be making a purchase at the Paris Air Show, and though the event came and went without a spark of activity, a palpable sense of excitement has been humming ever since. After all, with one of the oldest fleets on the planet, there was no doubt that American needs to freshen up — it was just a matter of when.

American Airlines broke that tension that week in a big way by announcing the order of a whopping 460 new medium and narrow body aircraft, the largest order in aviation history.

Perhaps more surprising was the way in which the order was split. For the first time, American begin flying equipment from European manufacturer Airbus, causing several in the community to question the “American” value of American Airlines. But the bottom line is the bottom line in this economy, and the official Flyertalk entity of @AmericanAir probably put it best:

“..as we are operating in a global economy, this investment makes the most sense for our airline and is in the best interest of our employees and customers. We are very proud of our heritage and home in the U.S.”

If you want to learn more you can check out the official release over at American’s news page. Otherwise, AP did a great job of wrapping up the events in the below video.


Airlines dominate Most Hated Companies list

by Chris Owen on

This week, The Atlantic used The American Consumer Satisfaction Index (ACSI) data to compile a list of the 19 Most Hated Companies in America. Joining Bank of America, JPMorgan Chase and Facebook all with a score of 64 or more out of 100 are even lower-scoring American Airlines (63), United Airlines (61), and US Airways (61). Worst of all air carriers? Delta Air Lines scoring an ultra low 56 on the index.

On Delta, The Atlantic notes:

“Complaints include additional costs for food, beverages and baggage fees. The airline collected more than $952 million in baggage fees from flyers in 2010, almost twice as much as any other airline carrier.

Since acquiring Northwest airlines in 2008, Delta’s consumer satisfaction score has plunged. According to ACSI, a big merger in service companies usually have a negative impact on customer services in the short-term, because of organization issues. Delta’s rating dropped another 6 points this year.”

The results add to concerns noted by Gadling back in April when we reported on America’s Meanest Airlines after 2011’s Airline Quality Report came out. Those results:Meanest major carrier: United Airlines
Meanest regional carrier: American Eagle
Most complained about airline: Delta Air Lines
Most likely to be unsafe: Jetblue
Most likely to overcharge for bags: Delta Airlines/ US Airways / Continental
Most likely to bump you: American Eagle
Most likely to be late: Comair
Most likely to mishandle your bag: American Eagle

One wonders if there might be a link between companies that are hated and companies that are mean.

Are there any companies on this list that you hate? Tell your story in the comments section…

Flickr photo by Loren Sztajer

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Airline fees are worth more than Facebook

by Tom Johansmeyer on

Outside the travel world, everyone’s marveling at the prospect of a Facebook IPO, which could be valued at as much as $100 billion. So, what are we missing while we fawn over Mark Zuckerberg’s creation? How about the slow, stodgy, ugly airline industry. Known for a painful user experience and a steady decline of free features, the likes of Delta and American Airlines are outdoing the hottest online property in the world simply by annoying their customers.

According to data from the U.S. Department of Transportation‘s Bureau of Transportation Statistics, baggage and reservation change fees brought the U.S. airline industry a whopping $5.7 billion last year. Delta picked up close to a billion dollars on baggage fees alone, which doesn’t include what they yanked from the wallets of soldiers returning home from combat. The largest airline in the country also brought in approximately $700 million from reservation change fees.

American Airlines, the fourth largest airline in the United States, came in second in both categories, with $580.7 million in baggage fees and $471.4 million in reservation change fees.The particular beauty of these fees is that they are basically found money. Some passengers need to check bags, and the airlines have to invest in the overhead required to meet this demand. It’s an expense that can’t be avoided. With this fee, they monetized what they’d have to pay anyway. The same is the case for reservation change fees.

The top five earners of baggage fees in 2010 are:

1. Delta: $952.3 million

2. American: $580.7 million

3. US Airways: $513.6 million

4. Continental: $341.6 million

5. United: $313.2 million

Unsurprisingly, the top five earners of reservation change fees don’t look much different:

1. Delta: $698.6 million

2. American: $471.4 million

3. United: $321.5 million

4. US Airways: $253.1 million

5. Continental: $237.4 million

No doubt, activist groups will be up in arms shortly. And airline employees will lament the fact that their executives are so richly compensated while they have endured round after round of pay cuts and layoffs for years upon years.

Frankly, I offer my congratulations to the airline industry. Yes, they are soaking us. Passengers are a captive audience, particularly on routes with limited coverage, and we sometimes have no choice but to pay. The airlines are using this to generate profitable growth for their shareholders, which is their primary responsibility.

So, what about Facebook? The company is estimated to pull in revenues of somewhere above $4 billion this year, most of it from advertising. It is pretty interesting that the popular social network is annoying its customers as a way to generate revenue, just like the airlines!

Who knew that pissing off your target market was an awesome business model?

[photo by Tobin Black via Flickr]

Mexico safe says American Airlines, for flying anyway

by Chris Owen on

American Eagle’s sold-out inaugural flight arrived in Mazatlan, Mexico (MZT) from Dallas-Fort Worth International Airport (DFW) this week. The move supports tourism authorities that say Mexico is safe for travel. As Mexico struggles to repair it’s image and shift international focus from drug-lord induced crime headlines to business-as-usual, American’s new daily flight was welcomed with open arms.

“We come to Mazatlán to make our contribution and be good partners in tourism” said

Marvin Diaz, Director General of American Airlines in Mexico.

The new 2-hour flight from Dallas affords new travel options for the more than 2 million travelers who visit Mazatlan each year opening up connections from more than 250 international markets


“Mazatlán is a vibrant destination alive with rich culture and unrivalled hospitality on the Pacific Coast,” said Carlos Berdegue, vice president, Mazatlán Hotel Association and Tourism Board in a press release. “We are delighted to begin our new partnership with American Airlines, which will allow visitors from all over the world to discover our beautiful weather, golden-sand beaches, historic center and premier resorts.”

The new American Eagle non-stop flight to Mazatlán offers daily service from Dallas-Fort Worth International Airport (DFW), departing from Dallas at 11:45am and arriving in Mazatlan at 1:05pm.

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