Lapsed Airline Tax Won’t Help Travelers

For a second consecutive New Year’s Day, the 10 percent federal tax on commercial airline tickets is lapsing. Unlike last year, travelers won’t benefit.

The carriers, led by Continental Airlines, already have announced fare increases equal to the anticipated tax cut on 14-day and 21-day advanced-purchase tickets.

“It’s pretty clear they’re going to keep the selling price the same and pocket what used to be the tax,” said Ed Perkins, editor of the San Francisco-based Consumer Reports Travel Letter.

Analysts expect the industry to post a record $4 billion profit in 1996. Continental spokesman David Messing rejected the notion that airlines should automatically pass on the savings from the tax lapsing.

“Fares are ultimately set by the marketplace based on supply and demand for seats. They aren’t based on adding up all the cost components,” he said. “So a fare that’s $179 on Dec. 31 and $179 on Jan. 1 makes sense from an economic perspective.”

When the taxes died the first time in early 1996, airlines initially passed the savings to customers.