Airline ticket tax holiday is windfall-- for airlines

Finally, good news from the gridlock in Congress. Or maybe not. The federal government Saturday stopped collecting taxes on airline tickets, so flying suddenly got cheaper, right? Wrong. Many airlines just increased their airfares to match the tax drop. At stake can be about $30 on a $300 ticket, the Associated Press says.

What happened is that squabbling lawmakers failed to extend laws that authorize the government to collect the airline ticket tax and other aviation-related taxes. So the laws, and the authority, expired at midnight Friday.

In interviews Saturday, spokesmen for JetBlue Airways and American Airlines said their airlines raised fares even as they stopped collecting the taxes. And they said many others in the industry had done the same.

“So in effect the taxes are not being collected, but the price paid by the customer remains the same,” American’s Tim Smith said.

Except now the airline gets to keep more of the money.

There’s nothing illegal about this, as far as I know. Airlines have the right to raise and lower their prices. But the tax holiday on air tickets sure looks like a a nice windfall for them.

Smith declined to discuss American’s reasoning for raising its fares, citing a longstanding industry consent decree by the federal government that he said “doesn’t allow us to discuss why we did something or what we may or may not do in the future” on pricing.

When I asked JetBlue spokesman Alex Headrick why the airline raised its fares, he said, “I don’t know the thinking behind the fare adjustments.”

What to do? Here are two scenarios:

-- If you bought your airline ticket after midnight Friday, check to make sure no federal taxes were charged. They shouldn’t have been. If they were, dispute it with your ticket seller.

- - If you bought your ticket earlier than midnight Friday and are flying Saturday or later, Smith and Headrick said you can apply for a refund on the federal taxes. It’s up to you to take action, they said.

Smith suggested you contact the Internal Revenue Service for refund information. But when I checked Saturday, I didn’t see instructions on the IRS website on how to do this; just a vague statement in the news section. Headrick suggested customers email JetBlue to pursue a refund. The JetBlue website provides details on its process.

All this may change, of course, as the situation develops. So check for updates with your airlines and monitor the news.

“We’re figuring it out right now too,” Headrick said of the tax collection changes. “It’s confusing to absolutely everybody.”