For those who fly, the squeeze has become the way to beat the system.
“We take the maximum amount on board and squeeze it in,” said Susan Williams, explaining how she and and her family avoid baggage fees on flights from Reagan National Airport.
Looking at untaxed airline baggage fees.
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The art of the squeeze is a matter of measurements. When Ross Davis flew to San Francisco last week he paid $25 to check his larger bag but squeezed his other bag, five inches smaller, into the overhead compartment.
American taxpayers are feeling the squeeze, too, even those who never board an airplane.
When the major airlines began charging fees for baggage a few years ago, the rationale the announced was straightforward: Fuel prices had spiked dramatically. Rather than increase ticket prices just as dramatically, airlines would charge for baggage.
Since then, they have collected $12.8 billion for something that once was free.
That has allowed the major airlines — called the legacy carriers — to keep their ticket prices competitive with low-cost airlines.
For taxpayers, however, here is the catch:
There’s a 7.5 percent federal tax on every airline ticket. The money goes into a fund that pays for the air transportation system: airports, capital improvements and the operation of the Federal Aviation Administration.
But in nine of the past 11 years, the amount of money flowing into that fund — mostly ticket-tax revenues — has fallen short of projections. When that happens, Congress can increase general fund contributions to cover the FAA’s budget. In both fiscal 2009 and 2010, Congress appropriated an additional amount of almost $1 billion.
When the airlines kept ticket prices down by shifting $12.8 billion to baggage fees, they also saved almost $964 million in federal taxes they would have owed if they had hiked ticket prices by that amount.
Was it a windfall, or was it salvation for a beleaguered industry?
“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 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.
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