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What’s Really Behind the Airline Add-on Fees?

If the current trend by airlines to charge for pillows, blankets, overhead carry-on space and even toilet privileges has you hot under the collar, perhaps you’d like to know why they are here for the foreseeable future. In retrospect, it seems odd that it took the airlines so long to recognize a substantial revenue stream sitting right under their noses. To be fair, they had a few things on their minds – like game-changing federal security regulations following 9/11, bankruptcies, mergers, soaring fuel costs and recessions.

But now that they have found the golden goose, they may just lose it because of poor public relations in their overzealous implementation of add-on fees. Simply raising their rates would have met with much less resistance.

One airline – Spirit – has even gone so far as to claim that it has lowered its regular fees in order to charge for carry-on bags. The brouhaha over this public relations debacle will have far-reaching effects when it becomes generally known that the reason they did this was to save money on taxes. Yes, TAXES. It seems that the federal government (plus any number of other quasi-governmental entities, including airport authorities) charge taxes on tickets but not on baggage handling, food, drink, pillows, bathroom use, and whatever else the airlines can think up. By unbundling these fees, and at least in this one case, by lowering actual flight fees, the airlines are saving enormous amounts of money on taxes.

Airlines currently pay a 7.5-cent tax to the federal government for every dollar they collect in fares, but no tax is imposed on fees collected for so-called “non-essential services”, which the Treasury Department has deemed carry-on bags to be. I for one, think the members of the Treasury Department need to get out more.

At least two bills have been introduced in Congress designed to stop this practice, but neither addresses the real problem. Senator Chuck Schumer’s bill would exempt only the carry-on bag rule, leaving all other add-ons fair game. His largely pollyanna approach relies on pledges from the airlines not to charge fees for carry-on bags because they are a necessity. The other bill, sponsored by six Democratic Senators including Schumer, would tax the fees charged for carry-on bags, thus negating the rationale of the airlines of using these fees to avoid taxes. But again, it only addresses the carry-on bag charges and none of the others.

You’d think the Treasury Department would perk up its ears when it learns how much un-taxed revenue is flowing to the airlines. Until it does, we had better become accustomed to schlepping our own meals, and being nickled and dimed at every step of the air travel process.

Shebby Lee is a historian, writer and tour operator specializing in the historic and cultural heritage of the Great American West. Her early training was in the theatre and she served a tour of duty as an entertainer with the USO. She is also an Admiral in the Nebraska Navy.

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