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Keith Alexander

It's Two for The Money in Bush's Budget

By Keith L. Alexander
Tuesday, February 8, 2005; Page E01

Business travelers could get hit by at least two proposals in the Bush administration's 2006 budget.

Under the White House budget released yesterday, airline ticket prices could increase $3 each way. The proposal, which has to be approved by Congress, would increase passenger security fees to $5.50 per leg from $2.50, capping the charge at $8 for a one-way trip with multiple legs and at $16 for a round trip.

_____Live Discussion_____
Transcript: Washington Post reporters Sara Goo and Keith Alexander discussed holiday air travel woes.
_____Budget Airlines_____
Invasion Of the Budget Carriers (The Washington Post, Apr 18, 2004)
List of Budget Airlines (pdf)

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The new budget also proposes eliminating the federal subsidy for Amtrak, possibly plunging the rail service into bankruptcy. Under a Chapter 11 restructuring, Amtrak would probably eliminate less profitable routes. The proposal to kill the subsidy has surfaced previously and been voted down by Congress.

"The proposal is irresponsible and a surprising disappointment," said David L. Gunn, president and chief executive of Amtrak.

If Amtrak were forced to downsize to save money, travel experts say that business travelers would likely feel the pinch along the Northeast corridor, primarily between Washington, Philadelphia and New York, the rail service's most popular routes.

The nation's airlines and their customers, however, could expect to feel the biggest impact from the budget proposals. The White House's security fee increase would suck $1.5 billion from passengers. The government was expected to collect about $2.65 billion in fees this year under the current $2.50 charge per leg, according to figures from the Transportation Security Administration.

Airline officials argue that they are prevented from raising fares to offset the proposed fee increases because of competition from budget carriers. Instead, the airlines would likely have to absorb the cost to keep airfares low, said Kevin P. Mitchell, chairman of the Business Travel Coalition. And that could mean additional financial pressure on already weakened carriers such as US Airways and United, both of which are operating under bankruptcy protection. "The pricing environment will not allow the airlines to pass these increases onto the passengers," he said. "This is going to end up taking more resources from the airlines."

Last year, the industry lost more than $9.5 billion, up from $5 billion in 2003.

The budget proposals come as travel demand has grown at the fastest pace since 2000. Business travelers took 3.8 percent more trips in the first six months of 2004, compared with the same period in 2003, according to a survey of 2,043 travelers to be released today by the Travel Industry Association of America.

And while more passengers are flying today, they're paying the lowest ticket prices in 15 years. To bring down fares, many carriers have been forced to cut costs -- trimming jobs, pay, and benefits and traveler perks such as hot meals and extra leg room.

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