Dutch Plans of an EU-wide Air Passenger Tax won’t fly High with Consumers

Last month, the Dutch government began circulating a position paper suggesting the EU should introduce a Union-wide air passenger departure tax on flights departing from the European Union. The paper promoted by the Netherland’s Secretary of State for Finance Menno Snel suggests a 7 EUR per passenger flight tax be rolled out within all Member States. Then, the funds should be allocated to the national budgets of the respective airport of departure. Snel argues that this tax would ‘disincentivize passengers from frequently using low-cost’ carriers and make more Europeans switch to trains.

While France, Belgium, and Finland support this initiative to create an EU-wide tax, passengers should be worried about this massive fiscal intrusion of tax authorities in the daily choices of consumers. Several European countries already have hefty air passenger departure fees.

The United Kingdom’s Air Passenger Duty ranges between 13 and whooping 150 GBP for each flight, pushing many Brits to take the train to take flights elsewhere, often Brussels or Paris.

The German Luftverkehrabgabe ranges between 7 and 42 EUR and has decreased in the past years. The Netherlands had a similar tax over a decade ago and got rid of it as passengers were commuting to nearby airports in Germany and Belgium. That move ushered in a loss of up to one billion Euros to the Dutch airline economy.

Looking at the map, one sees that mainly wealthy Northern European countries have introduced such taxes but not a single Eastern European country, save for southern Italy. The liberalization of air travel within Europe and the emergence of low cost carriers and massive competition within the airline industry have allowed millions of European to use planes for either leisure or economic activities.

Economic migrants and commuters from Eastern Europe can visit their families more often and more cities are connected to the rest of the continent. Assuming that a European tax would move more of these travel patterns to the rail neglects the realities of European rail networks and actual distances to travel. Passengers flying from Bucharest to Brussels will hardly be able to use buses or trains for this journey.

More remote European countries such as Bulgaria, Greece, Portugal, or Spain would also suffer from such a mandatory air passenger tax. Given that many of the countries without an existing tax rank below the average EU income, its introduction would over-proportionally hit low income households and families. Rich western EU Member States mandating high taxes on emerging economies seems to be a recipe for discord. The EU28 has nearly 1.5 billion departing air passengers a year. The Dutch plans would cost European consumers 10 billion Euros a year and likely ground many Europeans’ plans to visit friends or study abroad.

Countries with this tax usually saw a reduction of passenger numbers between 1 and 2 percent. This means not just that many passengers won’t be able to afford air travel anymore, but it may also be the nail in the coffin of many struggling European airlines.

In times of rising populism and many European economies being at the brink of a new recession, policy makers should instead focus on how to underscore the value of the Single Market and the European Union.

Introducing Union-wide taxes and limiting consumers’ choice and purchasing power is not the right way to win back the hearts and minds of people.
 

By Fred Roeder, Managing Director of the Consumer Choice Center

Originally published at https://ftn.media/dutch-plans-eu-wide-air-passenger-tax-wont-fly-high-consumers

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About Fred Roeder

Fred Roder has been working in the field of grassroots activism for over eight years. He is a Health Economist from Germany and has worked in healthcare reform and market access in North America, Europe, and several former Soviet Republics. One of his passions is to analyze how disruptive industries and technologies allow consumers more choice at a lower cost. Fred is very interested in consumer choice and regulatory trends in the following industries: FMCG, Sharing Economy, Airlines. In 2014 he organized a protest in Berlin advocating for competition in the Taxi market. Fred has traveled to 100 countries and is looking forward to visiting the other half of the world’s countries. Among many op-eds and media appearances, he has been published in the Frankfurter Allgemeine Zeitung, Wirtschaftswoche, Die Welt, the BBC, SunTV, ABC Portland News, Montreal Gazette, Handelsblatt, Huffington Post Germany, CityAM. L’Agefi, and The Guardian. Since 2012 he serves as an Associated Researcher at the Montreal Economic Institute.

Calls for a new EU carbon and aviation tax

The suggestion has not been greeted favourably by the domestic market. Fred Roeder, managing director of the Consumer Choice Center (CCC), says that such a move would limit passenger choice and burden consumers from all over the EU with a new tax.

“The Netherlands seem to flip-flop on whether consumers should be burdened with a passenger departure tax or not. They used to tax passengers, got rid of the tax, and now plan to reintroduce one again. Learning from the effects of having a passenger tax while neighbouring countries don’t have one, the Dutch government must have come to the conclusion that all European passengers should be burdened with this tax. Thus, Dutch passengers would not be able to [access] cheaper and levy-free flights in Belgium or Luxembourg,” said Roeder.

“This shows that Dutch policymakers are aware that this is a bad policy and hurts passengers. No Eastern European EU Member State has such a tax yet. Introducing it would especially hurt the mobility of economic commuters and young Europeans travelling from Eastern Europe to the rest of the continent.

“Right now, we see a concentration of a few carriers in the market, foreign carriers aren’t allowed to offer inner-European routes due to cabotage rules, and at the same time, policymakers want to squeeze out more money from passengers. Instead of burdening European air passengers with more taxes we should rather open up European skies to further competition from the world,” concluded Roeder.

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About Fred Roeder

Fred Roder has been working in the field of grassroots activism for over eight years. He is a Health Economist from Germany and has worked in healthcare reform and market access in North America, Europe, and several former Soviet Republics. One of his passions is to analyze how disruptive industries and technologies allow consumers more choice at a lower cost. Fred is very interested in consumer choice and regulatory trends in the following industries: FMCG, Sharing Economy, Airlines. In 2014 he organized a protest in Berlin advocating for competition in the Taxi market. Fred has traveled to 100 countries and is looking forward to visiting the other half of the world’s countries. Among many op-eds and media appearances, he has been published in the Frankfurter Allgemeine Zeitung, Wirtschaftswoche, Die Welt, the BBC, SunTV, ABC Portland News, Montreal Gazette, Handelsblatt, Huffington Post Germany, CityAM. L’Agefi, and The Guardian. Since 2012 he serves as an Associated Researcher at the Montreal Economic Institute.

Dutch Plan for a European Air Passenger Levy is a Punch in the Face of European Consumers

February 8th, 2018 – Today the Dutch government released a paper suggesting an EU-wide passenger levy on flights. It suggests the next EU Commission should work on a Europe-wide tax on commercial flights.

Fred Roeder, Managing Director of the Consumer Choice Center (CCC), is alarmed by this move limiting passenger choice and burdening consumers from all over the EU with a new tax. 

“The Netherlands seem to flip-flop on whether consumers should be burdened with a passenger departure tax or not. They used to tax passengers, got rid of the tax, and now plan to reintroduce one again. Learning from the effects of having a passenger tax while neighbouring countries don’t have one, the Dutch government must have come to the conclusion that all European passengers should be burdened with this tax. Thus Dutch passengers would not be able to cheaper and levy-free flights in Belgium or Luxembourg,” said Roeder.

“This shows that Dutch policymakers are aware that this is a bad policy and hurts passengers. No Eastern European EU Member State has such a tax yet. Introducing it would especially hurt the mobility of economic commuters and young Europeans travelling from Eastern Europe to the rest of the continent. “Right now we see a concentration of a few carriers in the market, foreign carriers aren’t allowed to offer inner-European routes due to cabotage rules, and at the same time, policymakers want to squeeze out more money from passengers. Instead of burdening European air passengers with more taxes we should rather open up European skies to further competition from the world,” concluded Roeder. 

Contact:
Fred Roeder
Managing DirectorConsumer Choice Center
[email protected]

***CCC Managing Director Fred Roeder is available to speak with accredited media on consumer regulations and consumer choice issues.

Please send media inquiries HERE.***

The CCC represents consumers in over 100 countries across the globe. We closely monitor regulatory trends in Ottawa, Washington, Brussels, Geneva and other hotspots of regulation and inform and activate consumers to fight for #ConsumerChoice. Learn more at consumerchoicecenter.org.

Read original press release here: https://consumerchoicecenter.org/statements/#/publication/5c5dc5f5ee172800049a7ca8/5aa837df2542970e001981f6?&sh=false

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About Fred Roeder

Fred Roder has been working in the field of grassroots activism for over eight years. He is a Health Economist from Germany and has worked in healthcare reform and market access in North America, Europe, and several former Soviet Republics. One of his passions is to analyze how disruptive industries and technologies allow consumers more choice at a lower cost. Fred is very interested in consumer choice and regulatory trends in the following industries: FMCG, Sharing Economy, Airlines. In 2014 he organized a protest in Berlin advocating for competition in the Taxi market. Fred has traveled to 100 countries and is looking forward to visiting the other half of the world’s countries. Among many op-eds and media appearances, he has been published in the Frankfurter Allgemeine Zeitung, Wirtschaftswoche, Die Welt, the BBC, SunTV, ABC Portland News, Montreal Gazette, Handelsblatt, Huffington Post Germany, CityAM. L’Agefi, and The Guardian. Since 2012 he serves as an Associated Researcher at the Montreal Economic Institute.

Alitalia bridge loan

TRAVEL DAILY: THE Italian Govt is discussing plans to extend a 900m bridge loan to Alitalia, a move consumer advocate Consumer Choice Center said would “hurt consumers”.

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About Luca Bertoletti

Luca graduated with a degree in Political Science from the University of Milan in December 2014. He worked as a Business Economics Analyst for the Italian magazine TheFielder in Milan and as Think Thank Coordinator for the Austrian Economics Center in Vienna.

He is a fellow of Competere Institute in Rome, a columnist for Atlantico Quotidiano, and he sits on the scientific board of New Direction Italia. He has been featured in the New York Times, Radio RAI, RAI 1, El Economista, The National and many other newspapers.

Monthly update: October 2018

DIGITAL SINGLE MARKET CAMPAIGN

On 10 October, the CCC’s Luca Bertoletti and Bill Wirtz handed the Consumer Choice Center’s Digital Single Market research paper to the European Commission’s Head of E-Commerce.

TESTIMONY ON ONTARIO’S CANNABIS RULES

On 12 October, the CCC’s David Clement testified at the Ontario Standing Committee on Social Policy to provide comments on Bill 36, the province’s cannabis regulations.

CAPITOL HILL BRIEFING ON FDA REFORM

On 18 October, our Jeff Stier participated in a panel discussion dedicated to the FDA’s role in approving new consumer products that will improve countless lives. The event was co-hosted by Taxpayers Protection AllianceR Street Institute and the Consumer Choice Center.

PUBLIC CANNABIS CONSUMPTION BAN IN ONTARIO WAS REVERSED

On 26 September, Ontario reversed their decision to ban all public consumption for cannabis. Check out how the Consumer Choice Center contributed to the creation of a more equitable, just and consumer-friendly cannabis market in Ontario.

NICOTINE IS NOT YOUR ENEMY SOIRÉE

On 2 October, the CCC hosted the ‘Nicotine is Not Your Enemy Soirée’ in Genève (Switzerland) to celebrate the life-saving advancements in nicotine consumption technology.

BAN AWARD

The Framework Convention on Tobacco Control, a treaty of the World Health Organization (WHO), received the October 2018 BAN Award for preventing tobacco harm reduction and denying the science on life-saving e-cigarette and vaping technology.

EFFECTIVE STAND AGAINST THE FAIR FEES ACT

The FAA reauthorization is off to the White House, after the Senate voted 93-6 to clear the legislation without the FAIR Fees Amendments. Airlines can keep offering modularized services to different passengers with different preferences and price sensitivity. This is a win for consumer choice and competition in the airline industry.Check out how the Consumer Choice Center helped to keep the skies free by effectively opposing the FAIR Fees Act. #FreeSkiesAreFAIR

Verbraucherschutz treibt manchmal seltsame Blüten

Die EU hat Einzelhändlern verboten, Kreditkartengebühren von Verbrauchern zu verlangen. Eine solche Regulierung kann sinnvoll sein, aber auch das Gegenteil bewirken – wie das Beispiel Fluggebühren zeigt.

Seit Januar dieses Jahres sind Kreditkartengebühren durch eine Richtlinie der Europäischen Union verboten. Das ist zumindest das, was in den Zeitungen stand, obwohl die eigentliche Geschichte in Wirklichkeit etwas komplizierter ist. Die Europäische Union hat es den Einzelhändlern verboten, zusätzliche Gebühren zu erheben, wenn Kunden mit einer Kredit- oder Debitkarte einkaufen.

Den Banken hingegen ist nicht verboten, dem jeweiligen Einzelhändler die Gebührweiter zu erheben. Bis zu dieser Richtlinie gaben die Einzelhändler lediglich Bankgebühren an den Verbraucher weiter und müssen nun selbst zahlen. Gute Nachricht für Verbraucher? Nicht wirklich.

Andererseits werden diejenigen, die online einkaufen, feststellen, dass Unternehmen immer noch eine allgemeine Verwaltungsgebühr erheben können, solange sie nicht direkt mit der Zahlungsweise verbunden ist. Dies kann dann die Kredit- und Debitkartengebühren umfassen, die Unternehmen an die Banken zahlen müssen. Der Haken: Anstelle von Kreditkartennutzern zahlen jetzt alle. Diejenigen, die bisher versucht haben, die Gebühr durch die Nutzung von mit dem Unternehmen verbundenen Zahlungsdiensten zu vermeiden, müssen jetzt mehr zahlen. Die, die bisher bar im Laden bezahlt haben, werden auch mit höheren Rechnungen konfrontiert werden als bisher.

Und doch, selbst diejenigen, die immer mit Kreditkarte bezahlt haben, sollten nicht zu voreilig sein und glauben, dass sie bei jedem Kauf besser dran sein werden. Wenn diese Richtlinie die Kosten für jede Zahlung verallgemeinert, dann werden Kreditkarten wahrscheinlich die bevorzugte Option werden, da sie mehr Kaufschutz bieten. Der vermehrte Einsatz von Kreditkarten würde dann auch zu allgemein höheren Preisen und einer allgemeineren Verteilung der Kosten führen. Im Wesentlichen wird also niemand davon reicher, außer den Banken, die die Gebühren erheben.

Im Luftfahrtsektor versuchen amerikanische Senatoren derzeit, zusätzliche Kosten beim Kauf von Flugtickets zu verbieten, damit, so heißt es, Verbraucher nicht weiter ausgebeutet werden. Aber ist es wirklich ein Problem, wenn Unternehmen mehr für zusätzliche Dienstleistungen wie Gepäck, Getränke oder WLAN verlangen?

Man könnte sich die Flugkosten auf diese Weise vorstellen: Es sind keine Gebühren, es sind „Opt-out-Optionen“. Wenn Sie auf einer kurzen Strecke fliegen, um einen Freund am Wochenende zu besuchen, können Sie mit Handgepäck, ohne WLAN, ohne Mahlzeiten oder Getränke den Flug trotzdem genießen. Für viele Flugreisende geht es eh nicht um Luxus oder Schnickschnack. Anstatt ihnen Produkte in Rechnung zu stellen, nach denen sie nicht verlangt haben, befreit man sie von all diesen Gebühren.

Tatsächlich sind Fast-Track-Sicherheitschecks und Flughafenlounges auch Dienstleistungen, für die Fluggesellschaften und Flughäfen Gebühren berechnen, und doch scheint es für jeden normal, dass für diese Dinge Extragebühren verlangt werden. Der Grund, warum diese Senatoren Unterstützung für ein solches Gesetz erhalten könnten, ist, dass einige glauben werden, dass es ihre Transportkosten senken würde, obwohl es wahrscheinlich genau das Gegenteil tun wird.

Wie üblich scheint es, dass der Name des Gesetzes (genannt FAIR Fees Act: „Gesetz für faire Gebühren“) fast genau das Gegenteil von dem ist, was es verspricht. Fluggesellschaften jegliche Art von Zuschlägen zu verbieten führt dazu, dass sie alle Gebühren wieder in den durchschnittlichen Ticketpreis einbeziehen. Passagiere, die diese Dienstleistungen sowieso nicht benutzt hätten, aber jetzt dafür bezahlen müssen, haben Anspruch auf Gepäck, WLAN oder Getränke.

Man muss Folgendes beachten: Flugreisen sind nur halb so teuer wie in den 70er-Jahren. Dieser Trend hat den Flugverkehr erschwinglich und damit für viele einkommensschwache Verbraucher zugänglich gemacht. Politiker, die hier regulieren wollen, haben nun einen Weg gefunden, diesen riesigen Erfolg umzukehren.

Originally published at https://www.welt.de/debatte/kommentare/article181746762/Versteckte-Kosten-Verbraucherschutz-treibt-manchmal-seltsame-Blueten.html

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About Bill Wirtz

Bill Wirtz is policy analyst for the Consumer Choice Center, based in Brussels, Belgium.

Originally from Luxembourg, his articles have appeared across the world in English, French, German, and Luxembourgish.

He is Editor-in-Chief of Speak Freely, the blog of European Students for Liberty, a contributing editor for the Freedom Today Network and a regular contributor for the Foundation for Economic Education (FEE).

He blogs regularly on his website in four languages.

Delta Airlines increases its fee for checked baggage

CONSUMER AFFAIRS: “With more competition among airlines for routes and flyers, consumers, on the whole, are seeing a great trend in cheaper tickets,” Yaël Ossowski, deputy director of the Consumer Choice Center, a consumer advocacy group based in Washington, D.C., told ConsumerAffairs.

“But that means airlines are having to bump up prices for checked luggage to help recoup some of the costs, but it looks like loyalty to a specific airline is paying out dividends. Many airline customers are applying for airline-branded credit cards that offer free check-in bags and discounted second bags, while others are using the perks of airline status to opt out of the costs.”

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About Yaël Ossowski

Yaël Ossowski is a journalist, activist, and writer. He's currently deputy director at the Consumer Choice Center, and senior development officer for Students For Liberty. He was previously a national investigative reporter and chief Spanish translator at Watchdog.org, and worked at newspapers and television stations across the country. He received a Master’s Degree in Philosophy, Politics, Economics (PPE) at the CEVRO Institute in Prague. Born in Québec and raised in the southern United States, he currently lives in Vienna, Austria.

Senators receive award for trying to make flying more expensive

FLYERTALK: The Consumer Choice Center has awarded two senators with a sarcastic Bureau of Nannyism Award (BAN) for their attempts to re-regulate the air travel industry and make flights more expensive.

Two senators have been recognized by the Consumer Choice Center (CCC), a global consumer rights body, for their efforts in making air travel more costly. Senators Edward Markey (D-Mass.) and Richard Blumenthal (D-Conn.) have received September 2018’s Bureau of Nannyism (BAN) award, an accolade that, according a media statement by the CCC, wryly acknowledges, “…the work of an individual or organization that has made major contributions to advocating limits on consumer choice.”

The senators’ names are attached to a provision that is included within the Federal Aviation Administration reauthorization bill. The bill itself is currently with the U.S. Senate, but the provision supported by Markey and Blumenthal – referred to as Forbidding Airlines from Imposing Ridiculous (FAIR) Fees Act – could, according to the CCC’s Deputy Director Yaël Ossowski, “…force airlines to abandon the successful business model that has made commercial air travel the most affordable it has been in over 20 years.”

As Ossowski explains, this level of regulation would not only harm consumers, but alter the structure of the air travel industry itself.

“Deregulation of the airline industry helped countless Americans access affordable airline travel for business, leisure, and family obligations. FAIR Fees would be a re-regulation of the U.S. airline industry and would thus lead us back to a command economy in the skies, where flights are accessible to only wealthy passengers and business travelers. That’s the opposite of where we should be heading in the 21st Century,” he states.

The CCC hopes that this month’s prize, given to bring attention to the organization’s #FreeSkiesAreFAIR campaign, will “highlight how the setting of airline prices by politicians will only lead to higher prices for flyers and will be a huge detriment to consumer choice,” explains Ossowski.

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About Yaël Ossowski

Yaël Ossowski is a journalist, activist, and writer. He's currently deputy director at the Consumer Choice Center, and senior development officer for Students For Liberty. He was previously a national investigative reporter and chief Spanish translator at Watchdog.org, and worked at newspapers and television stations across the country. He received a Master’s Degree in Philosophy, Politics, Economics (PPE) at the CEVRO Institute in Prague. Born in Québec and raised in the southern United States, he currently lives in Vienna, Austria.

Governments are going after airline and credit card fees: why that will cost us more than it saves

You could think of add-on fees this way: they aren’t fees, they’re opt-outs.

Be it credit card fees or extra fees on airlines, politicians are trying to crack down on extra charges in the name of protecting the consumer. In reality, they do quite the opposite.

Since January of this year, credit card fees have been outlawed through a directive by the European Union. Well, that at least is what it said in the newspapers, when in fact the real story is a bit more complicated. The European Union made it illegal for retailers to charge extra when customers purchase with a credit or debit card while doing nothing to stop banks from charging a fee to the retailers. Until this directive, retailers were simply passing bank fees on to the consumer, but are now stuck with the bills. Good news for the consumer? Not quite.

On the other hand, those making purchases online (like airplane tickets), will notice that companies are still charging a general administration fee, which they are allowed to do as long as it is not directly associated with the mode of payment. This can then encompass the credit and debit card fees that companies have to pay to banks, but the slight twist is that now everyone will be charged the fee, regardless of how they chose to make their payment. It is either this option or generally including the fees in higher prices for goods and services. Those who previously tried to avoid the fee by using payment services associated with the company, or those who paid in cash in the store, will now generally be charged more.

And yet, even those who always paid by credit card should not be too hasty in believing that they will be better off on each purchase. If this directive generalizes the cost for each payment, then credit cards are likely to become the preferred option as they offer more purchase protection. Increased use of credit cards would then also lead to generally higher prices and more generalized distribution of costs. So, in essence, nobody wins from this apart from the banks who charge the fees.

The new FAA reauthorization bill in America includes a provision by Sens. Ed Markey, (D-Mass) and Richard Blumenthal, (D-Conn), that would effectively turn the entire business of air travel upside down. The so-called FAIR (Forbid Airlines from Imposing Ridiculous Fees Act) Fees Act targets any fee for a change or cancellation of a reservation for a flight in interstate air transportation, any fee relating to checked baggage to be transported on a flight in interstate air transportation; and any other fee imposed by an air carrier relating to a flight in interstate air travel.

Once again, this legislation appears to have a noble goal on the surface: no additional fees, so cheaper flights! Wrong again.

You could think of air travel fees this way: they aren’t fees, they are opt-outs. When you fly on a short-distance flight in order to visit a friend for the weekend, you might choose that you only need a carry-on, no wifi, and no meal or drinks on the flight. Instead of charging you for commodities you didn’t ask for in the first place, you’ll be exempt from all of them. In fact, fast check-ins or lounges are also services for which airlines and airports charge you a fee, and yet you’d never object to paying for an extra service like this, would you? The reason the two senators could pick up support with such a bill is some people will believe that it would lower their transportation costs when, in fact, it is likely to do the exact opposite.

As usual, it seems to be that the name of the bill is almost the opposite of what it contains. Banning airlines from charging any type of extra fee will lead the companies to re-incorporate all the charges into the average ticket price. Baggage allowances, Wi-Fi, or food and drinks will be available to those passengers who wouldn’t have used them anyway but will now be required to pay for them.

Adding to that: if all fares are fully refundable, airlines will see many last minute cancellations by passengers and we will see many empty seats on planes. Being unable to get a good estimate of how many passengers are actually going to fly (and pay) will lead airlines to increase the average ticket price to cover the inevitable losses.

Consider this: airfares have halved since 1978. This trend has made air travel affordable and therefore accessible to many low-income consumers who never had access to flights before. Uniquely, two senators have now found a way to revert this tremendous success.

Even to those aware of the consequences of banning fees, the word in itself doesn’t sound good. We notice this in our everyday life: paying $3 for Wi-Fi anywhere would be considered an offense, but once generalized in the price of the goods and services, we don’t seem to mind. We have to realize that every opt-out offered to us is actually a choice to consume or not consume, and that makes us freer and wiser in determining what we actually want and need.

Ultimately, those who were always able to afford every extra-service in the first place—such as the bureaucrats and politicians who make these laws—will now benefit even more from spreading extra costs among all consumers.

The EU’s directive wants to “protect” consumers, the FAIR Fees Act claims to be fair. Once again, it seems to be proven that when a piece of legislation has a certain descriptive name, the opposite is usually the case.

Originally published at https://fee.org/articles/governments-are-going-after-airline-and-credit-card-fees-why-that-will-cost-us-more-than-it-saves/

 

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About Bill Wirtz

Bill Wirtz is policy analyst for the Consumer Choice Center, based in Brussels, Belgium.

Originally from Luxembourg, his articles have appeared across the world in English, French, German, and Luxembourgish.

He is Editor-in-Chief of Speak Freely, the blog of European Students for Liberty, a contributing editor for the Freedom Today Network and a regular contributor for the Foundation for Economic Education (FEE).

He blogs regularly on his website in four languages.

Price controls on checked bag fees will not make flying cheaper

The cheapest return flight from New York to Los Angeles is five times lower today than it was back in the 1970s, when airfares were regulated by the Civil Aeronautics Board.

Despite this massive decrease in fares and increase in consumer choice, some politicians are planning to re-regulate the U.S. airline industry and go back to the days when the government set prices.

The trigger for the revival of this bad idea came when JetBlue announced it will increase the fee for the first checked bag to $30, one of the highest fees for checked bags in the United States. In response, Sens. Ed Markey, D-Mass., and Richard Blumenthal, D-Conn., are pushing to re-regulate the U.S. airline industry through the so-called FAIR Fees Act.

While many passengers might be unhappy about JetBlue’s fee increase, you need to think about it in perspective. Not all passengers check bags. This change may let the company lower or keep lower its base fare, thus allowing for very price sensitive passengers to travel for even less when they make do with just a carry on bag.

On the other hand, if JetBlue merely adopts this as a strategy to increase its profit margin, it will find itself at a disadvantage against its competitors.

When Washington gets worried about airlines charging additional fees, they would do better not to blame the airlines, but the tax incentives that are set by the IRS. As airlines expert Gary Leff points out, checked bag fees are apparently not subject to the 7.5 percent excise tax Washington has imposed on airfares. This gives all airlines an incentive to shift as much of their costs as possible onto passengers who are laden with baggage.

So if Markey and Blumenthal are really worried about airline fees, they should work to scrap this excise tax.

Instead of abolishing government fees and taxes, their proposed amendment to the FAA reauthorization lets the FAA set price limits on checked bag fees and seat selection charges. It would also drastically limit how much airlines could charge for same-day ticket changes and cancellation fees. One likely result would be that airlines will stop offering flexible fares at all and raise prices across the board, because the premium that they can charge for flexible tickets would be too low to make this a viable business model.

We can clearly see that the deregulation of the airline industry allowed for low fares and the democratization of air travel. A limit on consumers to one-size-fits-all fare packages will lead to a one-size-fits-all fare schedule that will disproportionately affect price-sensitive consumers.

On most domestic routes, there is already tons of airline competition, such that if one airline starts to get too expensive, passengers will start flying with their competitors. Price and product differentiation has allowed consumers to choose among different airlines and products.

Overburdening regulation, on the other hand, has historically limited choice and competition in the airline industry. Flying can probably become even cheaper than it is right now, but that would require further deregulation and a reduction in government-imposed taxes and fees, not new price controls that will take us back to the days when flying was only possible for the affluent few.

Fred Roeder is managing director of the Consumer Choice Center.

Originally published at https://www.washingtonexaminer.com/opinion/op-eds/price-controls-on-checked-bag-fees-will-not-make-flying-cheaper

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About Fred Roeder

Fred Roder has been working in the field of grassroots activism for over eight years. He is a Health Economist from Germany and has worked in healthcare reform and market access in North America, Europe, and several former Soviet Republics. One of his passions is to analyze how disruptive industries and technologies allow consumers more choice at a lower cost.

Fred is very interested in consumer choice and regulatory trends in the following industries: FMCG, Sharing Economy, Airlines.

In 2014 he organized a protest in Berlin advocating for competition in the Taxi market.

Fred has traveled to 100 countries and is looking forward to visiting the other half of the world’s countries.

Among many op-eds and media appearances, he has been published in the Frankfurter Allgemeine Zeitung, Wirtschaftswoche, Die Welt, the BBC, SunTV, ABC Portland News, Montreal Gazette, Handelsblatt, Huffington Post Germany, CityAM. L’Agefi, and The Guardian.

Since 2012 he serves as an Associated Researcher at the Montreal Economic Institute.