BY MARK DUNKERLEY – On Monday, the Federal Government resumed charging federal taxes on airline tickets after a two week ‘tax holiday’.

During this hiatus, our customers were able to make substantial savings in the cost of flying.  The tax holiday, short-lived though it was, has highlighted just how burdensome are the taxes and fees charged by the federal, state and local governments on air travel.

Flying is among the heavily taxed of all goods and services.  Over 20%, or more than $35, of the cost of a typical interisland ticket is paid over by Hawaiian Airlines to government entities.

The taxes not collected during the last two weeks were just two of six federal levies, and they alone accounted for $18.65 on the cost of a typical ticket.  [Footnote: based on a $150 interisland round trip fare].

The deadweight of fees and taxes is information that taxing authorities would seemingly rather not be widely known to air travelers.  Federal regulations inhibit airlines from prominently displaying taxes and fees in fare advertising.  Astonishingly, these regulations are set to become even more restrictive in the new year.  Air travelers are being systematically denied the opportunity to understand just how heavily taxed air travel has become while taxing authorities enjoy ample cover to increase these levies.

And increase they have.  In the last decade, the burden of federal and local government taxes, fees and charges on a typical interisland ticket, for example, has more than doubled.  The inflation in taxes and fees paid to government and in the price of oil means that today, much less than half of the price of a ticket on Hawaiian goes to actually operating the airline.  Ticket prices have gone up while profit margins have come down.

The accompanying pie chart illustrates the breakdown in costs of a Hawaiian Airlines’ ticket system-wide.

It is unfathomable that air travel is taxed at rates similar to products, like firearms and alcohol, that governments are trying to dissuade us from consuming.  This makes little sense in any context but especially so when seen through the lens of our needs in Hawaii.  There are no alternatives to air travel for moving in and around and to and from the State.  Flying is inseparable from our way of life.

Individually and corporately, these taxes and fees influence our actions.  People decide to fly less frequently; airlines consequently offer fewer flights.  That’s why it is so important that the burden of taxes not be hidden from view.

The tax holiday has ended, but for a short time it allowed some light to shine on this important issue.

 

Mark Dunkerley is the President and CEO of Hawaiian Airlines

 

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