Little Airline Lies and Petty Deceits

Cory

Newbie
Jan 22, 2003
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Good Post.

You are wrong though, this is not lying, it's SPINNING. Unfortunately, today, everyone does it. The government is probably the master spinner, But Unions do it to support their points and management probably has a whole department dedicated to spinning. Executive VP slot maybe? It's a shame that no one today can tell the truth!
 

PITbull

Veteran
Dec 29, 2002
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[blockquote]
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On 3/12/2003 3:48:08 PM Cory wrote:

Good Post.

You are wrong though, this is not lying, it's SPINNING. Unfortunately, today, everyone does it. The government is probably the master spinner, But Unions do it to support their points and management probably has a whole department dedicated to spinning. Executive VP slot maybe? It's a shame that no one today can tell the truth!
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[/blockquote]

Good post and good point.
 

DCAflyer

Veteran
Aug 27, 2002
821
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I just ran across this article. Interesting points are made.
Little Airline Lies and Petty Deceits

BY JOE BRANCATELLI
October 3, 2002 -- Sometimes it is the little lies and the petty deceits that reveal the big picture and the larger truths. And when you stare into the heart of darkness that is the Big Six airlines, you can see how their little fibs are greasing the skids for their fast-track ride onto the scrap heap of history.
We frequent flyers know all about the carriers'' big lies: the phony schedules; the at-the-gate kabuki whenever a flight is late or delayed or cancelled; the cat-and-mouse fare games and upgrade scams; and the code-share deals that allow one airline to claim another carrier''s flights and services as its own. These deceits are so ingrained in the system that we are inured to their deleterious effects on our lives.
But every once in a while there is a moment of startling business clarity that perfectly illustrates the moral and governance bankruptcy of the hopeless little men who are destroying the Big Six.
When they trudged before the House Aviation Subcommittee on September 24 to demand another taxpayer-funded handout, Delta chief Leo Mullin and American chairman Don Carty rolled out a fusillade of charts, statistics, pseudo-facts and psycho-babble. And then Carty went off on a stunning screed on taxes.
Today, Carty began, federal taxes and fees on airline tickets account for $51.16, or 26 percent, of a $200 roundtrip ticket involving a single connection--that''s a $11.16 federal ticket tax, $12 federal segment tax, $10 federal security surcharge and up to an $18 airport passenger facility charge [PFC]. This is a 26 percent tax burden on airlines--up from 15 percent five years ago--compared to 11 percent on a bottle of rum, 9 percent on a pack of cigarettes and 0 percent on bus and rail tickets. Moreover, in addition to the taxes on tickets outlined above, airlines pay a federal fuel tax of 4.3 cents per gallon.
There are so many little lies and petty deceits in that one paragraph that you need to deconstruct them one by one to understand exactly how venal and shameless the Big Six truly are.
1) The 26 percent tax burden on airlines actually represents not a single penny of taxes on airlines. Every cent of that supposed $51.16 worth of taxes and fees is paid by the passenger, not the airline. Airlines collect those fees and taxes from passengers, they do not pay them.
2) That $51.16 federal fee and tax portion of Carty''s hypothetical $200 one-connection, roundtrip ticket is miraculously slashed by almost 50 percent when the itinerary is defined in a slightly different way. Let''s say that $200 fare represents a nonstop roundtrip ticket instead of Carty''s hypothetical connecting itinerary. That reduces the federal flight segment tax in half (to $6 roundtrip), cuts the federal security surcharge in half (to $5 roundtrip) and cuts the PFC fee in half (to a maximum of $9 roundtrip). And if that $200 roundtrip ticket was applied, for example, to the nation''s busiest route--New York to Los Angeles--the PFC charge would further decline to $6 roundtrip. That makes the fee and tax burden just $28.16, not $51.16. And that reduces the passenger''s tax burden on a $200 fare to just 14 percent, not 26 percent.
3) Federal excise taxes on airline fares are substantially lower than they have been in decades. And statistics provided by the Big Six''s trade group, the Air Transport Association (ATA), prove it. In 1943, for example, the federal excise tax was 15 percent. It was 10 percent in 1990, when the ATA began complaining that a flat-rate excise tax penalized passengers paying higher fares and subsidized travelers on low-fare carriers such as Southwest Airlines. So the tax was changed at the behest of the high-fare carriers we now call the Big Six. The excise tax is currently 7.5 percent of the fare plus a fee of $3 per flight segment. That formula dramatically lowers the total excise tax as a percentage of the fare as the ticket price increases.
4) Carty''s comparison of airfare taxes and fees to levies on booze and butts is an outrageous misrepresentation at best and a snide lie at worst. Only one entity--the federal government--is permitted to tax airline tickets. So Carty''s 26 percent tax burden on a $200 fare (or the alternate 14 percent formulation) represents the entire levy on an airline ticket. By comparison, alcohol and cigarettes are taxed by a legion of state and local agencies as well as the federal government. The total tax burden on a 750-milliliter bottle of booze is as much as 55 percent, if you believe the Distilled Spirits Council. And if you believe R.J. Reynolds, the nation''s second-largest tobacco company, taxes represent 47 percent of the retail price of a pack of cigarettes.
5) Carty makes note of the 4.3 cents per gallon federal fuel tax, the one tax on his laundry list that the airlines actually pay. Fair enough. But when you go to the pump to fill up your car, you pay 18.4 cents per gallon in federal gasoline taxes. Truckers pay 22.4 cents per gallon in federal diesel-fuel taxes. And consider this, since the Big Six seem so enamored of comparing airlines to the liquor business. The Federation of Tax Administrators reports that state excise taxes on a gallon of liquor range from $1.50 to $6.50. The national median is $3.30 a gallon.
As I said, lots of little lies and petty deceptions. But remember that startling moment of clarity I mentioned? Well, here it is, courtesy of Rep. William Lipinski, an Illinois Democrat who is usually a sycophantic supporter of the Big Six on the House Subcommittee.
A lot has been mentioned about the taxes and the fees that the airline industry pays, Lipinski said to Carty and Mullin. But, to the best of my knowledge, there is no tax or fee that you pay, other than your corporate tax when you make a profit, that doesn''t go for somehow improving the aviation system. Would everybody agree with that? We''re not taking any money out of the airline industry and subsidizing the railroad industry or the trucking industry or social security. Right?
In answer to that clumsily worded, but dead-on-target, question, Carty made an equally clumsy attempt to suggest that the $2.50 federal security fee imposed on passengers after September 11 could technically be considered funding for national security.
But Lipinski would have none of it.
All the fees, taxes you were paying, he said, all of that actually was going for the aviation industry improvements in some way, shape or form. Correct?
Yes, mumbled Carty.
Yes, murmured Mullin.
In other words, fellow travelers, far from being overtaxed, the airline industry pays virtually no taxes at all. That terrible burden of taxes Carty claimed the airline industry pays is actually a reasonably fair package of fees and taxes that we pay. And every dime, by the airlines'' own admission, goes to maintaining the nation''s air-transportation system. Taxpayers and travelers pay for everything, the airlines pay for almost nothing and now they''re once again demanding a bailout.
Like I said, fellow flyers, it''s amazing how little lies and petty deceits somehow reveal the big picture and the larger truths.
 

PITbull

Veteran
Dec 29, 2002
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Bob,

What is it that you ar agreeing with, that more money can go into their pockets if they didn't have to take that portion and put it towards the tax liability; which it is "earmarked for"?

That's like saying. "Gee, if I just didnt have to pay any income taxes from my paycheck, look at what I could take home".......
 

funguy2

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Aug 20, 2002
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"A lot has been mentioned about the taxes and the fees that the airline industry pays," Lipinski said to Carty and Mullin. "But, to the best of my knowledge, there is no tax or fee that you pay, other than your corporate tax when you make a profit, that doesn't go for somehow improving the aviation system. Would everybody agree with that? We're not taking any money out of the airline industry and subsidizing the railroad industry or the trucking industry or social security. Right?"

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I thought, and maybe I am wrong, somebody can correct me, that the excise taxes of 7.5% + $3/segment technically went into the general fund, and over the years got syphined away from the industry. This caused infrastructure problems which caused the FAA to approve $3 PFC charge per departure fee, up to $12 roundtrip, which goes directly to the airport departed from (basically, a local tax, and most airports have them). In other words, if the excise tax went to the proper place, the PFC's would not be necessary. If I recall, this was the industries argument against PFC's when they were instituted in the mid-late '90's... around the time the excise tax was dropped from 10% to 7.5% + $3.

In theory, federal government grants to aviation related activities should equal the revenue from the excise tax. Can anyone prove if that is true? I am not sure if I believe Rep. Lipinski, that all federal airline taxes fund aviation related endeavors. And it sounds like Leo and Don should have had this knowledge to make their argument.
 

N305AS

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Aug 20, 2002
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[blockquote]
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On 3/12/2003 4:48:07 PM PineyBob wrote:

God Strike me mute but i am actually going to take the side on Big Six management here. What the said was not what they meant. I fly to GRR from PHL regularly. Fares vary at the low end from $177.50 to about $235.00 for a round trip. Since I have the e-tic in front of me. Of the $177.50 only $138.00 actually goes to US Airways. What they were trying to say was if the they had the $39.50 in taxes flow to them as revenue then the airlines wouldn't be hurting. Their point was that $177.50 is price the market will support and that if they had 100% of that number alot of the problems would be eliminated. I happen to agree with that, but as usual the so called airline leaders are not used to being questioned and they blew the presentation. The job of the Fed government is to protect us and larding security fees on top of the taxes was just wrong.
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Another part that the CEOs failed to point out is that many price-sensitive consumers are choosing not to travel when faced with the added fees. That $98.00 roundtrip fare you're quoted suddenly looks more like $120.00 after taxes and airport fees, causing some people to simply stay home instead.

That costs a ton of money in lost revenue.
 

olivia

Advanced
Aug 19, 2002
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You are right.....all of the years
of paying transportation taxes got
the us taxpayer and flyer exactly nothing.
All the money was siphoned off...
we had no updated weather equipment
at the airports for years...even up to
1995 at charlotte airport. Your local
tv station has far better weather equip.
Another pitiful example..air traffic
control....old computers....etc.

I think if the price of airline tickets
did not have such heavy taxes added on..
that travel costs would be more attractive
to everyone. High taxes drive the fares
into the stratosphere.
 

DLFlyer31

Senior
Aug 20, 2002
444
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[blockquote]
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In theory, federal government grants to aviation related activities should equal the revenue from the excise tax. Can anyone prove if that is true? I am not sure if I believe Rep. Lipinski, that all federal airline taxes fund aviation related endeavors. And it sounds like Leo and Don should have had this knowledge to make their argument.
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[/blockquote]

It is widely believed that a large portion of aviation taxes do in fact go to fund other projects like building unused highways in West Virgina (thank you Senator Byrd). However, proving it is very difficult. Gov't accounting and budgeting is arcane and complex and makes Enron out to look like innocent school girls.

I'm sure Mullin and Carty would have loved to call Congress on this fact. However, if you're going to Congress asking for tax relief, you can't turn around and attack those Congressmen for corruption. The only way to get to the hearts and minds of most Congressmen is through their wallets. It's one of the reasons that many of the airline unions have lost their sway with their Congressional reps...they simply don't have the money to pony up.
 

ref80

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Aug 19, 2002
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Can you imagine working for a company that has a little more than 500 employees and has the following statistics:
29 have been accused of spousal abuse
7 have been arrested for fraud
19 have been accused of writing bad checks
117 have directly or indirectly bankrupted at least 2 businesses
3 have done time for assault
71 cannot get a credit card due to bad credit
14 have been arrested on drug-related charges
8 have been arrested for shoplifting
21 are currently defendants in lawsuits
84 have been arrested for drunk driving in the last year

Can you guess which organization this is?
Give up yet?


It's the 535 members of the United States Congress.

The same group of Idiots that crank out hundreds of new laws each year designed to keep the rest of us in line.
 

PITbull

Veteran
Dec 29, 2002
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www.usaviation.com
[blockquote]
----------------
On 3/13/2003 11:20:24 AM ref80 wrote:

Can you imagine working for a company that has a little more than 500 employees and has the following statistics:
29 have been accused of spousal abuse
7 have been arrested for fraud
19 have been accused of writing bad checks
117 have directly or indirectly bankrupted at least 2 businesses
3 have done time for assault
71 cannot get a credit card due to bad credit
14 have been arrested on drug-related charges
8 have been arrested for shoplifting
21 are currently defendants in lawsuits
84 have been arrested for drunk driving in the last year

Can you guess which organization this is?
Give up yet?


It's the 535 members of the United States Congress.

The same group of Idiots that crank out hundreds of new laws each year designed to keep the rest of us in line.
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[/blockquote]

That is UNBELIEVABLE!

Can you tell me where you get this and who those Representatives are?

 

ref80

Member
Aug 19, 2002
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This info was sent to me by a friend who teaches political science.I can't guarantee the accuracy of it. Don't know the representatives names,I'm sure they all have their spin doc's working hard to conceal this stuff.
 

funguy2

Veteran
Aug 20, 2002
1,755
0
[blockquote]
----------------
On 3/13/2003 8:25:44 AM DLFlyer31 wrote:

[blockquote]
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In theory, federal government grants to aviation related activities should equal the revenue from the excise tax. Can anyone prove if that is true? I am not sure if I believe Rep. Lipinski, that all federal airline taxes fund aviation related endeavors. And it sounds like Leo and Don should have had this knowledge to make their argument.
----------------
[/blockquote]

It is widely believed that a large portion of aviation taxes do in fact go to fund other projects like building unused highways in West Virgina (thank you Senator Byrd). However, proving it is very difficult. Gov't accounting and budgeting is arcane and complex and makes Enron out to look like innocent school girls.

I'm sure Mullin and Carty would have loved to call Congress on this fact. However, if you're going to Congress asking for tax relief, you can't turn around and attack those Congressmen for corruption. The only way to get to the hearts and minds of most Congressmen is through their wallets. It's one of the reasons that many of the airline unions have lost their sway with their Congressional reps...they simply don't have the money to pony up.

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[/blockquote]

DLFlyer31: You have a point, that when you are begging for help, you might not want to be arrogant. But, if you believe (or know) what the Rep. said is false, then you should call him on it. You might make him mad, but the other will take note.

So the question from Lipinsky:

"But, to the best of my knowledge, there is no tax or fee that you pay, other than your corporate tax when you make a profit, that doesn't go for somehow improving the aviation system. Would everybody agree with that? We're not taking any money out of the airline industry and subsidizing the railroad industry or the trucking industry or social security. Right?"

Answer: funguy2, CEO of Funguy Airlines [img src='http://www.usaviation.com/idealbb/images/smilies/3.gif']:

"The federal taxes collected from taxes on airline tickets last year was $X and the appropriations for Aviation related endeavors was $Y. I cannot speak to the where-abouts of the difference. However, the facts remain that airline tickets are taxed much more heavily than other services, and are now additionally burdened with new taxes to fund new national security efforts which protect all Americans, not just airline passengers as evidenced by the tragic events of 9-11-01, where the vast majority of victims were not on board airplanes."

Of course, I am assuming that:
1. You can determine X and Y via the ATA or GAO or other publicly available info.
2. That X is greater than Y.
 

funguy2

Veteran
Aug 20, 2002
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Just a follow up... I did do some research, and I was able to find some high-level budget data breaking out what is spent by the Federal Government on the national aviation system, however, I could not find any significant break-out of where the money comes from. The best break-out I could find was "Excise Taxes" with no further explanations. So, I could not prove (with public internet documents) if my theory is correct. I will keep looking when I find the time.