The crisis in the Mideast, the federal deficit and the need to improve U.S. airports are all combining to produce the biggest jump in airline ticket prices in a decade.
Not surprisingly, the increases are taking their toll on the airline business as Americans cut back their travel plans because of the higher costs, industry officials say.The biggest increases are caused by higher prices the airlines are paying for jet fuel. The Iraqi invasion of Kuwait sharply pushed up oil prices, which in turn raised the price of fuel and the airlines have raised ticket prices by about 15 percent since August to cover the higher costs. That adds about $60 to what was a $400 ticket.
More recently, Congress raised ticket prices in two ways.
As part of the deficit-reduction package, the lawmakers decided to raise the federal air passenger tax from the current 8 percent to 10 percent on every passenger ticket effective Dec. 1.
In a separate move, Congress agreed to let airports impose a new fee on every passenger who goes through their terminals. The fee can be as high as $3 per flight and can total $12 on a round-trip through two airports.
The new revenue from the passenger fee will be used for much needed improvements and expansion at airports around the country.
The increases in ticket prices, while substantial, are not the biggest ever. The oil crises of 1973 and 1979 both generated bigger fare increases than what has been experienced so far, says David Swierenga, of the Air Transport Association.
But the current increases are hurting. Swierenga, the association's assistant vice president for airline industry data, is projecting a decline of 3 percent to 4 percent in passenger traffic next year.