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October 27, 2012

As airlines raise fees instead of fares, taxpayers pick up tab

(Continued)

WASHINGTON —

"Last year, our profit amounted to about 77 cents per passenger," said Jean Medina, spokeswoman for Airlines for America, the leading industry trade group. "It's a razor-thin profit margin, so any additional taxes on that is certainly not helpful to the industry and certainly not helpful to the consumer."

The first dozen years of this century have been a virtual nightmare for the airlines. First came the Sept. 11, 2001, terrorist attacks that grounded flights for a while and left the public skittish about flying for even longer. Then the cost of fuel nearly doubled by 2008, increasing the share of operating revenue that it gobbled up from 10 percent in 2001 to 35 percent in 2011.

Next, the deepest recession since air travel became central to American life made matters even worse.

More than 50 passenger and cargo airlines went bankrupt, the legacy carriers began to merge in order to withstand competition from low-cost airlines, and every airline became so efficient at managing its fleet that planes with empty seats became the exception rather than the rule.

As baggage and other fees mounted, the Department of Transportation (DOT) stepped in to make sure that passengers weren't being beguiled by advertised low fares that didn't reflect the true cost of a trip. It directed airlines and ticket agents to disclose baggage fees upfront in online advertising and during the reservation process.

While still too bruised to wax optimistic, the industry seemed to be regaining its footing in the second quarter of this year. Federal data released last month showed that all the major airlines made a profit in the quarter, after mixed results for several quarters.

Together, the airlines posted $2.3 billion in operating profit. But that does not take into account taxes, interest payments and investments outside the core business. Net profit, which does account for those other outlays, was a less imposing $647 million, Medina noted.

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