Q&A from IRS: Refunds for Airfare Taxes Paid During Expiry Period?

The IRS sends this useful Q&A for fliers wondering how they might get refunds for federal taxes on tickets purchased before July 23 for travel after that.

As of 12:01 Saturday morning, with the failure of Congress to pass another extension of the omnibus bill to keep the F.A.A. funded, various federal taxes on airline tickets expired until the funding reauthorization bill is reinstated.

At that point, airlines stopped collecting the federal taxes, which amount to a total of about $25 million a day. Here's my column on that in the Times yesterday. As noted, airlines then raised fares by roughly the same amount as the taxes would have totaled. (The notable exceptions were Spirit and Alaska airlines).

It was the seventh across-the-board airline fare hike of the year. No one would have taken great notice of still another incremental fare hike, except for the fact that this one clumsily was initiated to coincide with the federal tax expiration.

It's a sign of how worried the airlines really are about fuel prices and a slowing in revenue growth that they chose to take it on the chin from consumers by pushing this fare increase through this way.

Anyway, it isn't clear yet exactly how the airlines and IRS will address the issue of refunds for those who already paid taxes on tickets purchased before the expiration for travel during the tax holiday period.

For one thing, a lot depends on how Congress, may God help us, fixes the F.A.A. bill, assuming this pitiful Congress is capable of fixing anything.

But this IRS Q&A is a handy guide to where things stand today taxwise.

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Airlines Starting Another Fare Hike Attempt as Summer Peak Arrives?

[Chart: Rick Seaney, Farecompare.com]

If it's Friday it might be time for another concerted fare-hike attempt by domestic airlines. Yup, the 13th this year, in which seven so far have been "wildly successful," says Rick Seaney of Farecompare.com, who watches this stuff like a hawk.

United/Continental launched the first domestic airfare hike attempt since late April this morning, he says. "United increased prices by $4 to $10 roundtrip (loosely based on trip distance)," he adds.

However, "fortunately for the domestic air traveling public the new airline economy ushered in by high oil prices in late 2007 requires domestic airlines to fill every middle seat with price sensitive folks – effectively limiting an unchecked rise in ticket prices," Seaney says. So the airlines appear to be biting into fare hikes in small increments instead.

From Seaney:

"I suspect United is probing their competition’s appetite for a lift in ticket prices as airlines have some recent booking demand trend information after launching a couple of fall sales the past few weeks.

"Domestic airlines still have to operate within a competitive equilibrium of never being $1 more or less than their competition (except when they have a convenience advantage) simply because carriers that are $1 more than their competition end up on page 15 of popular comparison shopping sites."

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