US government taxes on air tickets died - probably only temporarily - on 31 December but their demise, however short-lived, could be good news for US airlines.

At presstime the 10 per cent excise tax on domestic tickets and $6 departure tax on international tickets still had not been renewed because of the federal budget impasse. The $6 billion raised from these taxes every year goes into the Aviation Trust Fund, which funds the Federal Aviation Administration, but the fund's perennial surplus means the FAA could survive for at least a year without them.

When the taxes died, most US airlines - led by American, Continental, Delta and North-west - stopped collecting them, thus effectively lowering their domestic ticket prices by 10 per cent. They hoped this would stimulate traffic, but this cannot be quantified and may have been outweighed by January's snowstorms.

Always the maverick, Southwest continued to collect the charge on most routes, and thus effectively took a 10 per cent rate increase. The 6.25 per cent cargo tax also expired but UPS and Federal Express did not lower their rates, saying the tax was an integral part of their operating expenses.

Congress has linked the taxes' reauthorisation to a two-year extension of the fuel tax exemption sought by US airlines. Since 1 October, when the last exemption expired, carriers have been paying 4.3 cents a gallon, or $1.5 million a day. If the ticket taxes are reinstated, it is unclear whether the government will try to collect them retroactively. The Air Transport Association says this would be up to the Internal Revenue Service, not the carriers.

Jane Levere

Source: Airline Business