New legislation is worked out to limit airlines’ revenue collected from fees

Wednesday, airline companies came under strong  criticism by US House Democrats because of increasing fees, the charge for checked baggage, seat selection and other services. Hence, the authorities are considering legislation to tax the revenue collected from the fees.

As it became known, airlines are increasingly relying on ticket surcharges to offset spikes in fuel prices and overcome weak demand. Airlines thus collected $1.3 billion from fees for checked baggage and reservation changes in the first three months of this year, that reflected a 13% increase over the same period in 2009, according to the official data.

House Transportation Committee Chairman James Oberstar called the fees to be "backdoor price increase" in airfares, with consumers now paying for many items that previously used to be included in the price of a ticket.

That Therefore, the hearing was held in a move to determine whether legislation should be proposed to rein in the fees and ensure the government gets a cut of the revenue.

At present, the government collects a 7.5% excise tax on passenger fares but not on ancillary fees. Applying the excise tax to baggage fees, which provided about $2.5 billion in revenue for airlines last year, would have led to an additional $186 million in federal excise taxes, congressional investigators said.

However, Rep. Jerry Costello worries that by reducing the portion of revenue taxed by the government, the fee model is diverting money from a fund used to finance airport renovations and construction. The fund is increasingly short on revenue.

In turn, Spirit Airlines Inc. President Ben Baldanza, defended the "a la carte" fee model, saying it gives passengers a choice of what services to pay for. He believes, taxing the fee revenue would hurt industry and consumers as this would probably hamper competition, raise costs and slow the industry's recovery from a decade of losses.

The Transportation Department recently proposed rules requiring greater transparency of fees. The rules would require that ticket prices include fuel surcharges and greater prominence of other ancillary fees on websites.

Some  airline companies appeared to be fully agree with such a government move, Thus, for instance, the senior vice president of one more airline company, Southwest Airlines Co, unveiled he supported proposed rules by the Transportation Department requiring greater disclosure of the fees on airline and travel websites.