Airport user taxes are popular because they are easy to implement. But there they have the effect of … [+]
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When you consider how the pandemic has affected the aviation industry, it is more likely that the first thoughts go to the airlines and everyone who works for them. Every flight starts and ends at an airport, and these small towns are also very busy. Airports were also injured by the weak travel. One way for many airports around the world to self-finance is through direct user taxes. These are easy to manage and airport managers like them for their ease and effectiveness. Heathrow Airport in London has tacitly added a new, supposedly temporary one. £ 8.90 fee per departing passenger stare in April. This is added to every ticket from Heathrow and has been known as the “pandemic tax”.
Talk about a bad idea for now! This type of tax is loved by airports and hated by airlines for good reasons. Passenger traffic is very price elastic, which means that small price increases lead to a sharp drop in travel demand. At a time when travel is still weak and the future of leisure and business travel is still uncertain, another tax that increases airfares will step into an industry if it is not available and will make the airport problem worse as fewer passengers pass through.
Passenger Facility Charges (PFCs) in the US and Canada
The Federal Aviation Administration (FAA) authorizes airports in the United States to charge up to $ 4.50 per passenger, which is added to the ticket price. This can be calculated four times for a round-trip passenger. From February 2021 371 U.S. airports use a PFC and 361 of them (97.3%) charge the maximum rate. Of these 371, 202 are classified as “non-hub” and 74 others as “small”.
Airport managers tend to think that PFCs are “free” as they are collected by the airlines and added to every ticket. Airlines know that when the PFC is added or increased, sales drop immediately, as this is the case in price elastic markets. Whenever an airport wants to raise or raise a PFC, the airlines that serve the airport almost everywhere reject it because they understand the long-term implications of a short-term good idea. In Canada, this fee is known as the AIF (Airport Improvement Fee) and is as follows as high as $ 40 per passenger in some airports.
PFCs hurt families and small towns
Since PFCs and AIFs are charged per ticket, families traveling together pay for each person, and even if they are capped at $ 4.50, it can mean adding up to $ 72 to tickets for a family of four when they connect. Also, smaller city travelers often need to connect to a hub for their final destination, which means they pay twice each way, unlike large hub customers who can fly non-stop. However, the connection customer makes more money for the airport because these people buy and eat things during the connection, and the airport benefits from it. The local passenger just goes through security and gets on the plane. This is regressive in the sense that those who are more valuable ask for more taxes. Airlines for America, the industry lobby group, also points out that over $7B (yes, billions) of the Aviation Trust Fund have not been drawn and this could fund the same things as a PFC.
Heathrow model not right for the US
Why worry so much about a new tax on departing passengers at Heathrow? Airports around the world are facing many of the same problems and will see how effective this tax is in generating revenue and some will see how much traffic is lost or diverted to alternative connection points that are not taxed . There is often a “lemming” approach to these types of taxes, and the US is likely to seek to raise the current $ 4.50 cap to increase the tax. One hundred of the 100 largest airports in the US are currently collecting a PFC. The only way to do more would be to increase the cap. Higher taxes mean fewer passengers and fewer passengers mean fewer flights. With the introduction of vaccines looking more promising, and with the summer of 2021 proving to be somewhat robust for air travel, the introduction of this tax in the US would damage the economy, create more unemployment and prevent an increasingly likely short-term recovery.
A better answer
Rather than levying taxes that cause passenger cutbacks, airports should work proactively to attract more customers. This could be achieved by ensuring that physical resources are used to the full, low-cost airlines are given access to generate traffic at lower tariffs, and lower usage fees to encourage more flights through cost-effective facilities. Airports make money from people who use the airport, so more people should be the target, not more money from each person. Being creative with parking, carpooling and concessions can be used with a larger passenger base across the facility. There are airport managers who understand and act, but unfortunately there are others who take the easy route and add a passenger tax. Keep the prices down and more people will be flying!
