Posted by: Five Star Travel & Cruises | August 9, 2011

Airlines rolling back fare hikes

So… i got slammed the past couple weeks and basically put the blog on the back burner and for that i apologize.

Today we are talking about the recent recall of airline price hikes. The hikes originated because the government temporarily lost its authority to tax tickets two weeks ago. the airlines grabbed the money that previously went to the government instead of passing the tax break to consumers. By raising fares to offset the expired taxes, airlines were able to pocket an estimated $400 million in just two weeks.

Anyone think this is really really wrong??? You would think the airlines would have reduced their fares since they are already collecting on baggage fees and anything else. It seems the airlines have become so greedy that they will take advantage of any major boost in income for their own selfish gain. The full story is below with the Associated press reporting.

DALLAS (AP) – Airline travelers are finally catching a break. Even though the government is taxing tickets again, the total cost to consumers is staying about the same.

That’s because airlines are rolling back prices to where they were before the government temporarily lost its authority to tax tickets two weeks ago.

The difference can add up. Federal excise taxes, which went back into effect Monday morning, add more than 7.5 percent to the cost of a flight.

Southwest Airlines Co. and its AirTran Airways subsidiary lowered fares Sunday night and were matched by Delta Air Lines Inc., AMR Corp.’s American Airlines, JetBlue Airways Corp. and others.

United Continental Holdings Inc., the world’s largest airline company, held out until Monday afternoon before also reducing fares. US Airways Group Inc. was still charging the higher prices, a spokeswoman said Monday afternoon.

Most U.S. airlines raised fares after a standoff between Republicans and Democrats in Congress on funding for the Federal Aviation Administration caused federal excise taxes on tickets to expire on July 23. In effect, the airlines grabbed the money that previously went to the government instead of passing the tax break to consumers.

By raising fares to offset the expired taxes, airlines were able to pocket an estimated $400 million in just two weeks.

Last week, Congress approved reviving the taxes through Sept. 16. The IRS then gave the airlines until the end of the weekend to resume collecting the fees.

The only question was whether airlines would roll back their short-lived price increase. Rick Seaney, CEO of FareCompare.com, said it wasn’t surprising that airlines couldn’t risk raising prices 8 percent to 15 percent on financially stressed-out consumers.

Tom Parsons, CEO of Bestfares.com, said the weak economy and stock market turmoil could force airlines to do more than just cancel last month’s fare hike.

“They have to be concerned over (travel demand in) the fall,” he said. “They may still have to bring fares down further.”

By DAVID KOENIG ASSOCIATED PRESS

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Responses

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