GAO-04-406R Aviation Taxes and Fees 

United States General Accounting Office

Washington, DC 20548 

March 12, 2004 

The Honorable John McCain 

Chairman 

The Honorable Ernest Hollings 

Ranking Member 

Committee on Commerce, 

 Science, and Transportation 

United States Senate 

The Honorable Trent Lott 

Chairman 

The Honorable John D. Rockefeller, IV 

Ranking Member 

Subcommittee on Aviation 

Committee on Commerce, 

 Science, and Transportation 

United States Senate 

Subject: Summary Analysis of Federal Commercial Aviation Taxes and Fees 

For 2001 through the third quarter of 2003, the U.S. airline industry reported 

operating losses of $20.7 billion. A number of factors—including the economic 

slowdown, a shift in business travel buying behavior, and the aftermath of the 

September 11, 2001, terrorist attacks—contributed to these losses by reducing 

passenger and cargo volumes and depressing fares. To improve their financial 

position, many airlines cut costs by various means, notably by reducing labor 

expenditures and by decreasing capacity through cutting flight frequencies, using 

smaller aircraft, or eliminating service to some communities. Carriers have also 

reduced some airfares to encourage travel. Despite these efforts, several airlines 

filed for bankruptcy protection. It remains to be seen when the industry will emerge 

from this downturn. 

In response to the industry’s financial condition, Congress has provided several forms 

of financial relief. In September 2001, Congress passed the Air Transportation Safety 

and System Stabilization Act,1

 which authorized payments of up to $4.5 billion in 

pretax cash assistance to reimburse air carriers for losses incurred as a direct result 

of the 4-day government shut-down of air traffic and incremental losses stemming 

 

1

P.L. 107-42. 
 

Page 2 GAO-04-406R Aviation Taxes and Fees

from the terrorist attacks and also authorized up to $10 billion in loan guarantees to 

help airlines gain emergency access to capital.2 In January 2002, Congress 

appropriated $100 million for new or modified cockpit doors on commercial aircraft 

to improve security of the flight deck.3 In the fiscal year 2003 supplemental 

appropriations act, Congress appropriated $2.4 billion in security cost relief for 

airlines.4 

To provide information to Congress for its continuing deliberations about whether 

and, if so, how to provide additional help to the airline industry, you asked us to 

review the payments of major commercial aviation taxes and fees over the last 5 

years. The federal government levies or approves various taxes and fees on the 

commercial aviation industry. These taxes and fees generally are levied as a 

percentage of the base ticket price or are assessed at a flat rate per occurrence (e.g., 

per departure or passenger enplanement). The revenues from these taxes and fees 

support various aspects of the civil aviation system—including operation of the air 

traffic control system, modernization of airport facilities, and support of aviation 

security related activities. As requested, we focused on the following research 

questions: (1) What are the major commercial aviation taxes and fees, how much is 

collected annually, and how are the proceeds used? (2) How did changes in aviation 

tax and fee collections compare with changes in the industry’s operating revenues 

and expenses from 1998 through 2002? (3) How has the total amount of aviation 

taxes and fees paid varied among carriers? (4) In the two instances since 1996 when 

an aviation tax or fee was not collected, how did airfares change? 

 

2

As of December 1, 2003, the Air Transportation Stabilization Board, the entity created under P.L. 107-

42 to administer the loan guarantee program, had approved at least $1.2 billion in loan guarantees for 

seven airlines, including America West, ATA Airlines, and US Airways. 

3

Department of Defense and Emergency Supplemental Appropriations for Recovery from and 

Response to Terrorist Attacks on the United States Act, 2002, P.L. 107-117. The Federal Aviation 

Administration (FAA) distributed $97 million of this amount to U.S. airlines (about $13,000 per door). 

4

The Emergency Wartime Supplemental Appropriations Act of 2003, P.L. 108-11 (the act). Under the 

act, TSA was appropriated about $2.3 billion to be remitted to U.S. flag carriers in the proportional 

share each carrier had paid or collected as of April 16, 2003, in passenger security and air carrier 

security fees—a pretax reimbursement of security costs and foregone revenues. The act also 

suspended collections of both security fees (the September 11 passenger fee for security and the 

aviation security infrastructure fee) for tickets sold during the last 4 months of fiscal year 2003; 

extended the War Risk Insurance Program—which provides insurance coverage for aircraft operations 

that are deemed essential to the foreign policy interests of the United States when commercial 

insurance is unavailable on reasonable terms—until the end of fiscal year 2004; granted a 26-week 

extension of unemployment benefits for laid-off airline workers; and included $100 million to 

compensate air carriers for costs associated with reinforcing flight deck doors and locks. On May 16, 

2003, the Transportation Security Administration (TSA) distributed $2.3 billion to 66 U.S. air carriers. 

To receive a share of the funds, nine carriers were required to sign agreements limiting their top two 

executives’ compensation. These nine included the following seven airlines we included in this study: 

American, ATA Airlines, Continental, Delta, Northwest, United, and US Airways. We did not include 

the other two carriers—Planet Airways and World Airways—in this study because they do not provide 

scheduled passenger service. The $100 million for reinforcing flight deck doors was distributed to 58 

carriers on September 24, 2003. 
 

Page 3 GAO-04-406R Aviation Taxes and Fees

To answer these questions, we obtained and analyzed aviation tax and fee collection 

data for 1998 through 2002 from several federal agencies responsible for collecting 

and tracking the data, along with payment data from 12 airlines; analyzed Department 

of Transportation (DOT) data on the industry’s operating revenues, expenses, and 

fares; reviewed the results of studies examining variations in the amount of taxes and 

fees paid by carriers and passengers; and analyzed fare changes in several markets 

after taxes lapsed or fees were suspended. This report addresses only certain of the 

taxes and fees paid by commercial passenger airlines and their customers. It 

excludes, for example, all corporate taxes and some fees that are paid to airports 

(e.g., landing fees). In addition, this report does not address non-U.S. commercial 

aviation taxes and fees. All dollar figures related to the analysis of taxes and fees are 

expressed in constant 2002 dollars. For more information on our scope and 

methodology and the steps we took to ensure data reliability, see pages 10 to 11. We 

conducted our review from February 2003 through February 2004 in accordance with 

generally accepted government auditing standards. 

Summary 

On October 31, 2003, we briefed your Committee staff on the preliminary results of 

this work. This report summarizes the information presented in that briefing. 

Enclosure I contains the finalized slides from that briefing. Enclosure II contains 

2002 tax and fee payment data for 10 of the air carriers in this study.5

 

In summary: 

• In 2002, the collections from 13 major commercial aviation taxes and fees—

including the ticket tax and passenger fee for security—totaled about $12.6 

billion. These collections finance aviation infrastructure, including air traffic 

control, and services provided to the industry, such as security inspections. 

Collections did not cover all government aviation expenditures in 2002. For 

example, the taxes covered about 92 percent of the Federal Aviation 

Administration’s (FAA) 2002 budget; the general fund covered the remainder. 

• For 1998 through 2002, tax and fee collections rose in absolute terms and as a 

percentage of industry revenues and expenses. Collections of taxes and fees 

rose more than 15 percent during this period. Particularly after 2000, when 

industry revenues and expenses fell significantly, taxes and fees increased as a 

percentage of revenues and expenses. Similarly, because base airfares 

declined from 1998 through 2002, taxes and fees in 2002 accounted for a larger 

share of carriers’ average annual airfares. 

 

5

Two carriers, JetBlue and Northwest, did not permit us to release their data. 
 

Page 4 GAO-04-406R Aviation Taxes and Fees

• The total amount of taxes and fees paid by carriers in 2002 varied, largely 

based on passenger volume and the type of service provided. Additionally, 

according to a recent study by a team of researchers from the Global Airline 

Industry Program of the Massachusetts Institute of Technology (MIT) and 

from Daniel Webster College,6

 the share of taxes and fees included in the final 

ticket price in the second quarter of 2002 varied by carrier type (e.g., low cost), 

trip length, and ticket price. This study (henceforth the “MIT study”) found 

that taxes and fees paid directly by air travelers added 15.5 percent, on 

average, to the cost of tickets sold during that quarter. 

• During the 1996 ticket tax lapse and 2003 security fee holiday, carriers 

generally raised “base” airfares (i.e., airfares net of taxes and fees) compared 

with what they were in periods before the absence of the tax or fee. The effect 

of this to consumers was to maintain or increase gross fares. These fare 

increases were more moderate in markets where a low-cost carrier (e.g., 

Southwest) was operating and among leisure travelers. 

Taxes and Fees Offset Some Federal Costs to Provide Aviation 

Infrastructure and Services 

The 13 major commercial aviation taxes and fees fall into three main groups—

transportation taxes, user fees, and passenger facility charges (PFC)—each of which 

is used to finance aviation infrastructure (e.g., airports, air traffic control) or services 

provided to the industry (e.g., security inspections, customs inspections). (See table 

1.) Some of these taxes and fees apply only to the international portions of trips. (See 

slides 6 to 7.) 

 

6

“The Impact of Infrastructure-Related Taxes and Fees on Domestic Airline Fares in the United States,” 

Amedeo Odoni, MIT; Shiro Yamanaka, MIT; and Joakim Karlsson, Daniel Webster College, Working 

Paper, December 2003 (under review for publication in the Journal of Air Transport Management). 

This study estimated the effective tax rate on airfares. The study defined the effective tax rate as the 

percentage by which the base fare charged for a trip increased as a result of total taxes and fees paid 

directly by air travelers. 
 

Page 5 GAO-04-406R Aviation Taxes and Fees

Table 1: Major Commercial Aviation Taxes and Fees and 2002 Collections 

Type Specific charges Purpose 

FY 2002 

Collections 

($ billions) 

Taxes • Passenger ticket 

• Passenger segment 

• Waybill (cargo) 

• International 

departure/arrival

• Fuel (commercial aviation 

jet) 

• Rural airports 

Finance the Airport and Airway 

Trust Fund,a which funds the 

Airport Improvement Program 

(AIP) and significant portions of 

FAA operations, including air 

traffic control and other items 

$8.6 

Feesb

• Animal and Plant Health 

Inspection Service (APHIS) 

passenger inspection

• APHIS aircraft inspection

• Customs inspection

• Immigration and 

Naturalization Service (INS) 

inspection

• Passenger fee for securityc

• Air carrier fee for securityc

Finance inspections and other 

services provided to the 

industry 

$2.1 

PFCsd • Local tax assessed with 

federal approval 

Fund FAA-approved airportrelated projects $1.9 

Source: GAO. 

Note: Charges shown underscored apply only to the international portions of trips. In this review, all taxes and fees except 

PFCs are reported on a fiscal-year basis. The passenger segment and international departures/arrivals taxes are indexed to 

inflation and increased slightly in January 2004. 

a

For more information about the status of the trust fund, see U.S. General Accounting Office, Airport and Airway Trust Fund: 

Financial Outlook Is Positive, but the Trust Fund’s Balance Would Be Affected If Taxes Were Suspended, GAO-03-979 

(Washington, D.C.: Sept. 15, 2003). 

b

The Customs Service and parts of APHIS and INS are now incorporated into the Department of Homeland Security (DHS). We 

did not analyze payments of the overflight fees since primarily operators of non-U.S. aircraft pay this fee, which partially funds 

the Essential Air Service program. 

c

In P.L. 108-11, Congress suspended collection of these fees from June 1, 2003, through September 30, 2003; the fees were 

reinstated on October 1, 2003. 

d

PFCs are not federal fees; however, we included them in this analysis because similar analyses (e.g., those done by the Air 

Transport Association and MIT) have included them, and PFCs are a significant source of funds for aviation infrastructure. As 

of February 1, 2004, 312 locations were collecting PFCs. 

In fiscal year 2002, collections of these taxes and fees totaled nearly $12.6 billion 

($1.3 billion of which comprised security fee payments from U.S. and foreign 

carriers); however, these funds did not equal all government expenditures for 

aviation-related infrastructure and services. For example, security fee collections 

equaled about 22 percent of the Transportation Security Administration’s (TSA) $5.8 

billion budget authority, most of which was directed to aviation security. Trust fund 

collections (ticket tax, fuel tax, etc.) covered 91.6 percent of FAA’s $13.5 billion 

budget authority.7

 Security fees collected were required to be credited against 

 

7

FAA’s budget authority also included $28 million from overflight fees, which comprised less than 1 

percent of the agency’s total budget for 2002. 
 

Page 6 GAO-04-406R Aviation Taxes and Fees

appropriations and returned to the general fund of the U.S. Treasury as offsetting 

collections. (See slides 8 to 9.) 

Tax and Fee Collections Rose Although the Airline Industry Experienced 

Revenue and Expense Declines after 2000 

From 1998 through 2002, collections of 13 commercial aviation taxes and fees 

increased, although the airline industry’s revenues and expenses decreased after 

2000; as a result, taxes and fees rose as a percentage of the industry’s revenues and 

expenses. Tax and fee collections increased from about $10.9 billion in 1998 to about 

$12.6 billion in 2002 (15.6 percent). However, as the aviation industry responded to a 

unique combination of challenges—terrorist attacks on U.S. soil, an economic 

recession, wars in Afghanistan and Iraq, and the outbreak of severe acute respiratory 

syndrome (SARS) in Asia—revenues declined and, to a lesser extent, expenses 

decreased. Total revenues dropped 20.8 percent between 2000 and 2002 as passenger 

traffic and fares decreased. As revenues plummeted, carriers attempted drastic 

expense reductions. Industry expenses decreased nearly 10 percent between 2000 

and 2002. Because of these decreases in revenues and expenses, taxes and fees rose 

from 8.9 to 11.8 percent of the industry’s revenues and from 9.7 to 10.9 percent of the 

industry’s expenses between 1998 and 2002. Taxes and fees also increased as a 

percentage of the carriers’ average domestic fares during this period for 10 of the 

airlines we studied, primarily because carriers reduced their fares. (See slides 10 to 

16.) 

The Air Transport Association (ATA), the industry trade group that represents 26 

cargo and passenger carriers, argues that taxes and fees have risen significantly over 

time. ATA’s analysis suggests that taxes and fees increased 76 percent between 1992 

and 2002. ATA estimated that the tax and fee share of a $200 single-connection, 

domestic round-trip ticket—where the maximum possible PFC was levied—would 

have increased from $29 in 1992 (15 percent) to $51 in 2002 (25.6 percent). ATA 

officials characterized the level of federal aviation taxes and fees as a significant 

encumbrance on the financial performance of the industry, in large part because the 

industry at present lacks the pricing power to pass on such taxes and fees to 

consumers.8

 Our analysis of this issue as well as current levels of taxation follows. 

(See slide 17.)

 

8

In response to the financial distress that the airline industry experienced in the early 1990s, Congress 

created the National Commission to Ensure a Strong Competitive Airline Industry (the Commission) to 

investigate and study the financial condition of the airline industry, the adequacy of competition in the 

airline industry, and legal impediments to a financially strong and competitive airline industry (P.L. 

102-581, as amended, P.L. 103-13). Among other things, Congress directed the Commission specifically 

to investigate and study whether changes were needed in the legal and administrative policies that 

govern the taxes and user fees imposed on U.S. airlines. The Commission’s August 1993 report 

included several recommendations to lessen the tax burden on the industry, including rolling back the 

ticket tax and cargo waybill tax increases authorized by Congress in 1990. 
 

Page 7 GAO-04-406R Aviation Taxes and Fees

Tax and Fee Payments Vary by Passenger Volume, Service, and Fares 

The total amount of taxes and fees paid by carriers varies, largely based on passenger 

volume and the type of service provided. For example, our analysis of 2002 payments 

by 10 airlines showed that airlines enplaning more passengers generally remitted 

more taxes and fees to the government. Variations in carriers’ tax and fee payments 

are also attributable to other service factors, such as how many segments are flown, 

whether international service is provided, or how much cargo is transported. (See 

slides 19 and 32 to 41.) 

The amount of taxes and fees also varies according to carrier type (e.g., low cost), the 

total amount of airfares, and trip length. A study by the Global Airline Industry 

Program at MIT found that, as a percentage of ticket prices, taxes and fees were 

higher for passengers who purchased tickets on low-cost carriers (e.g., Southwest) or 

who purchased lower-priced tickets in general. According to the study, the average 

tax share for tickets purchased on low-cost carriers was 17.1 percent (based on a 

total average fare of $198.17—i.e., tax- and fee-inclusive), compared with 14.6 percent 

(based on a total average fare of $335.67) for tickets purchased on six major carriers. 

By fare group, the average tax share for fares up to $200 was 22.3 percent, while the 

average tax share for fares from $200.01 to $400 was 16.4 percent. Thereafter, 

according to the study, the tax share decreased as fares increased. (See slides 20 to 

22.) 

Further, in contrast to ATA’s widely disseminated estimate that the tax share of a 

final $200 fare is 25.6 percent (or $51),9

 the MIT study estimated that the actual 

average tax share for tickets purchased during the second quarter of 2002 was 15.5 

percent, or $44.88 of the average domestic fare of $289.96. (See slide 23.) To gain 

some perspective on how the effective tax rate may have changed over time, the 

study estimated that the overall effective tax rate in the second quarter of 1993 (when 

the only taxes and fees applied to airline tickets were the federal ticket tax and any 

applicable passenger facility charges) was 10.9 percent, significantly less than the 

overall estimated 15.5 percent in effect in the second quarter of 2002. This significant 

increase in the effective tax rate was due primarily to a sharp decline in the price of 

the average round-trip domestic base fare, which dropped from $389.57 (adjusted to 

2002 prices) in 1993 to $289.96 in 2002. The average amount charged for taxes and 

fees in 1993 was $42.44 (adjusted to 2002 prices) versus $44.88 in 2002, a real increase 

of 5.7 percent. 

 

9

The ATA’s estimate begins with the total ticket price (including taxes and fees) of $200 for a singleconnection, domestic round trip; to derive the base fare, it then deducts a $4.50 PFC per segment, 

$2.50 passenger fee for security per segment, the 7.5 percent passenger ticket tax, and the $3.00 

domestic passenger segment tax. This estimate has been highlighted by ATA in various publications, 

such as “Airlines in Crisis: The Perfect Economic Storm.” ATA depicts other tax/fee scenarios on its 

Web site at www.airlines.org. 
 

Page 8 GAO-04-406R Aviation Taxes and Fees

When the Ticket Tax and Security Fee Were Not Collected, Carriers Raised 

Certain Fares 

In the two instances since 1996 in which Congress allowed the ticket tax to lapse and 

suspended the security fees, carriers generally raised “base” airfares (i.e., airfares net 

of taxes and fees), compared with what they were in periods before the absence of 

the tax or fee. To passengers, the final gross ticket price was generally the same or 

higher compared with prior periods. These fare increases were more moderate in 

markets containing a low-cost carrier than in markets where one was not present. 

Although we do not know the precise reasons for these fare increases, it may be that 

carriers were, in part, attempting to “capture” at least some of the revenue associated 

with the absent tax or fee that would normally have been remitted to the government. 

Carriers alter their fares in response to many factors, and more rigorous analysis 

would be needed to isolate the effect of each factor. Therefore, we cannot exclude 

other exogenous factors from accounting for these changes in base fares. That is, it 

is possible that the fare changes that occurred in these two instances may have been 

the result of factors other than the absence of a tax or fee and the presence or 

absence of low-cost carriers, such as changing economic and competitive conditions 

in those markets.10 

• Our summary analysis of airfare changes in four markets11 when the 10-percent 

passenger ticket tax was allowed to lapse for about 8 months in 1996 indicated 

that carriers generally increased their average base fares, compared with fares 

in effect in prior periods. To consumers, the average gross fares would appear 

to have stayed the same or increased.12 For example, in the New York-Chicago 

and Billings-Minneapolis/St. Paul markets, where no low-cost carriers were 

operating, carriers raised their average base fares by as much as 52 percent 

over the average fares they had charged in the same period during the previous 

year. By comparison, in two markets with service from low-cost carriers, the 

average base fare increases were less than in the markets without a low-cost 

carrier. For example, in the Las Vegas-Los Angeles market, in which a lowcost carrier competed against two network airlines, all carriers raised their 

average base fares at some point during the tax lapse, but no one raised them 

 

10Although it may appear that carriers succeeded in “capturing” these revenues when the taxes or fees 

were not in effect, the extent to which carriers may or may not have done so is uncertain, because the 

carriers’ various possible pricing options are not known. In addition, analyses of fare changes based 

on year-over-year analysis of quarterly data are less conclusive, because of the large number of factors 

that can influence fare levels over longer periods of time. For additional information on airline pricing, 

see U.S. General Accounting Office, Aviation Competition: Restricting Airline Ticketing Rules 

Unlikely to Help Consumers, GAO-01-831 (Washington, D.C.: July 31, 2001). 

11We actually studied 13 markets, but for illustration purposes, we included results from only 4 

markets—representing a low-cost, business, leisure, and dominated market—in the briefing. The 

results from the remaining nine markets were generally consistent with these four. 

12For purposes of this analysis, “base fares” represent the value of the airfare net of the ticket tax. For 

example, if the total value of a ticket were $400, the base fare would be $363.64 ($400 minus the 10-

percent ticket tax, or $36.36). (The current ticket tax rate is 7.5 percent.) 
 

Page 9 GAO-04-406R Aviation Taxes and Fees

over 15 percent. Similarly, the presence of a low-cost carrier in the Los 

Angeles-San Francisco market appeared to moderate the extent of the 

increases in average base fares. After the tax was reinstated, most carriers 

increased these average base fares in these four markets (compared with the 

average base fares in effect during the fourth quarter of 1995), but not to the 

same extent as when the tax initially lapsed.13 (See slides 25 to 29.) In 

addition, when the tax had lapsed, carriers generally raised average fares more 

(in both absolute and relative terms) on “business” passengers than they did 

on “leisure” passengers.14

• When Congress gave the industry a temporary holiday from security fees by 

suspending collection of the fees from June 1 through September 30, 2003, 

carriers also increased their base fares, which would be consistent with them 

capturing the tax.15 In an analysis of week-over-week changes in fares offered 

by seven carriers in each of their 20 largest passenger markets, Harrell 

Associates—an industry consulting firm that specializes in airfare 

benchmarking—found that, when carriers were no longer required to add the 

security fee on top of their fares, carriers raised base “business fares” they 

offered by the amount of the security surcharge in over 80 percent of those 

markets.16 After the security fee was reimposed beginning in October 2003, 

carriers generally did not restore those base fares to their prior lower levels. 

For example, if an airline charged a base “business fare” of $447 for a one-way 

flight between point A and point C over point B the week before the holiday, 

raised that fare to $452 for the same ticket once the holiday began, and left the 

fare at $452 when the holiday was over, it would appear to have captured the 

$5 security surcharge. Harrell Associates’ data indicate that carriers were able 

to effectively capture the security fee on business fares, but not to the same 

degree on leisure fares, in most markets. We interpret this as an indication 

that, because of greater competition for leisure passengers, airlines were 

forced to relinquish potential revenue on some routes. (See slide 30.) 

 

13In addition to not controlling for exogenous factors that could have affected fare changes during this 

period, our use of quarterly data in determining what fare changes occurred also make it difficult to 

isolate the effect of the tax on the fare changes observed. 

14Airline ticket data do not indicate whether passengers are traveling for business or leisure purposes. 

To simplify our analysis, we assumed that travelers purchasing cheaper tickets were leisure travelers 

and those who purchased more expensive tickets—often fares available at the last minute—were 

business travelers. 

15In a final rule on the security fee holiday, TSA interpreted the act (P.L. 108-11) to prohibit it from 

collecting the aviation security infrastructure fee (the “air carrier fee for security”) from airlines and 

from requiring passengers to pay the September 11 Security Fee (the “passenger fee for security”) if 

they purchased air transportation during the suspension period. 

16Carriers included in the analysis are America West, American, Continental, Delta, Northwest, United, 

and US Airways. Domestic “business fares” are coach fares offered by carriers with three conditions: 

an advance purchase requirement of less than 3 days, fully refundable, and no minimum stay 

requirement. “Leisure fares” are restricted and include a longer advance purchase requirement, a 

required Saturday-night stay, and a financial penalty for changes or cancellations. 
 

Page 10 GAO-04-406R Aviation Taxes and Fees

Concluding Observations 

The commercial aviation taxes and fees we reviewed were all enacted to support the 

infrastructure and operation of the nation’s aviation system. With the cyclical nature 

of the industry, these taxes have in recent years risen higher than in prior years as a 

percentage of airline revenues and expenses. This has certainly been the case since 

September 11, 2001, when the terrorist attacks and the ongoing economic downturn 

jeopardized the viability of the industry. Additional security fees and requirements 

were imposed on the industry, although they were offset by the government’s 

assumption of many aviation security responsibilities as well as the security fee 

holiday and other governmental assistance. Furthermore, even though total 

collections of these taxes and fees have risen since 1998, the collections do not 

always cover the government’s costs of providing aviation-related services. 

Indications are that the 2003 security fee “holiday” was financially positive for 

carriers, because they appear to have been able to retain revenues—on some fares—

that would have ordinarily been remitted to the government. However, the overall 

effect of the holiday was limited by the amount of revenues carriers were able to 

retain—since carriers, for competitive reasons, may not have been able to capture the 

potential revenue from the fee on some routes. 

Scope and Methodology 

To identify major commercial aviation taxes and fees, how the proceeds are used, 

and the amount of annual collections, we reviewed Congressional Research Service 

and ATA studies of aviation taxes and fees as well as DOT, Office of Management and 

Budget, and agency data on collections. We also examined laws and regulations 

implementing the taxes and fees. To determine how changes in tax and fee 

collections compare with changes in industry revenues and expenses, we analyzed 

data from ATA and various federal agencies that collect these fees, in addition to 

DOT data on industry revenues and expenses. To determine how tax and fee 

payments vary among carriers, we analyzed tax and fee payment data from eight 

major and four low-cost carriers (AirTran, Alaska, America West, American, ATA 

Airlines, Continental, Delta, JetBlue, Northwest, Southwest, United, and US Airways) 

from 1998 to 2002.17 We also reviewed the results of a recent study from MIT’s Global 

Airline Industry Program. To determine how airfares changed when a tax or fee was 

not collected, we analyzed changes in average quarterly base airfares charged by 

individual carriers in 13 markets for the quarters before, during, and after the 1996 

lapse of the passenger ticket tax, including the four markets illustrated in the 

briefing--Billings-Minneapolis/St. Paul, Las Vegas-Los Angeles, New York-Chicago, 

and Los Angeles-San Francisco. We judgmentally selected these markets to illustrate 

differences in competition in business and leisure markets, with and without the 

competitive presence of low-cost airlines and to include a small community and a 

 

17JetBlue began operating in 2000. 
 

Page 11 GAO-04-406R Aviation Taxes and Fees

dominated market.18 The results from these markets cannot be generalized to the 

industry as a whole. We also reviewed trade literature to determine whether there 

had been any analyses of airfare changes relating to the 2003 security fee holiday. As 

a result of this review, we obtained and reviewed data from Harrell Associates related 

to their analysis of week-over-week airfare changes at the onset and conclusion of the 

2003 security fee holiday. Because of data reporting delays, this was the only 

available analysis of fare changes related to the security fee holiday. 

We performed various tests of reliability to each set of data analyzed. For data 

obtained from airlines or their trade association, since these data are proprietary, we 

were unable to independently verify them because we have no authority to require 

access to the underlying data. However, we applied logical tests to the data and found 

no obvious errors of completeness or accuracy. For data obtained from federal 

agencies (including data on airfares reported by individual carriers to DOT), we 

discussed their quality assurance policies and procedures with relevant officials. 

Along with our use of corroborating evidence, we believe that the data we used were 

sufficiently reliable. 

Comments 

We provided a draft of this report to DOT and the Department of Homeland Security 

(DHS) for their review and comment. DOT and DHS provided some technical and 

clarifying comments that we incorporated where appropriate. We also provided 

selected portions of a draft of this report to the Internal Revenue Service, airlines, 

and other groups cited to verify the presentation of factual material. We incorporated 

their technical clarifications as appropriate. 

 - - - - - 

 

18We defined “dominated market” as a city-pair market in which a single airline provides more than 50 

percent of the available seating capacity. 
 

Page 12 GAO-04-406R Aviation Taxes and Fees

Unless you publicly announce the contents of this report earlier, we plan no further 

distribution of this report until 30 days from the date of this letter. At that time, we 

will provide copies to relevant congressional committees and other interested parties 

and will make copies available to others upon request. In addition, this report will be 

available at no charge on the GAO Web site at http://www.gao.gov. If you have any 

questions about this report, please contact me or Steve Martin at 202-512-2834. Other 

key contributors to this assignment were Janet Frisch, Stan Stenersen, Rich Swayze, 

and Pamela Vines. 

JayEtta Z. Hecker 

Director, Physical Infrastructure Issues 

Enclosures 
Enclosure I 

 

Page 13 GAO-04-406R Aviation Taxes and Fees

Briefing Slides 

1

Commercial Aviation

Summary Analysis of Federal Commercial Aviation 

Taxes and Fees

Briefing for the

Subcommittee on Aviation

Committee on Commerce, Science, and Transportation

U.S. Senate

U.S. General Accounting Office
Enclosure I 

 

Page 14 GAO-04-406R Aviation Taxes and Fees

2

Overview

• Objectives

• Information Sources and Data Reliability

• Current Taxes and Fees

• Changes in Tax and Fee Collections and Industry Revenues 

and Expenses from 1998 through 2002

• Variations in Tax and Fee Payments

• Changes in Airfares in Absence of Taxes or Fees

• Summary
Enclosure I 

 

Page 15 GAO-04-406R Aviation Taxes and Fees

3

Objectives

• What are the major commercial aviation taxes and fees, how much 

is collected annually, and how are the proceeds used?

• How did changes in aviation tax and fee collections compare with

changes in the industry’s operating revenues and expenses from 

1998 through 2002?

• How has the total amount of aviation taxes and fees paid varied 

among carriers?

• In the two instances since 1996 when an aviation tax or fee was not 

collected, how did airfares change?
Enclosure I 

 

Page 16 GAO-04-406R Aviation Taxes and Fees

4

Information Sources and Data Reliability

• Information Sources

• Bureau of Transportation Statistics (BTS);

• Congressional Research Service (CRS) ;

• Massachusetts Institute of Technology (MIT);

• Air Transport Association (ATA);

• Several federal agencies responsible for collecting taxes and fees (e.g., Federal Aviation Administration (FAA), Transportation Security 

Administration (TSA));

• Eight major and four low-cost carriers; and

• Prior GAO work.

• Data Reliability

• We performed various tests of reliability to each set of data analyzed and, along with corroborating evidence, believe that the data we used 

were sufficiently reliable.
Enclosure I 

 

Page 17 GAO-04-406R Aviation Taxes and Fees

5

What Are the Major Taxes and Fees, How Much Is 

Collected Annually, and How Are the Proceeds Used?

• Domestic taxes, fees, rates, and uses

• International taxes, fees, rates, and uses

• Aviation tax and fee collections in 2002 totaled about $12.6 

billion

• Fiscal year 2002 collections did not fully cover budget 

authority for TSA and FAA
Enclosure I 

 

Page 18 GAO-04-406R Aviation Taxes and Fees

6

Domestic Taxes and Fees, Rates, and 

Uses

Airport-related projects; federal 

approval required

Maximum of $4.50 per enplaned 

passenger and $18 per round trip

Passenger facility 

charge (PFC)

Based on carriers’ costs for security in TSA

2000

Air carrier fee for 

securityb

$2.50 per enplanement and maximum $5 

per one-way trip

7.5% on domestic tickets to qualified 

rural airports exempt from segment tax

$0.043/gallon

6.25% of the price charged for 

transporting cargo by air

$3.10 per domestic flight segment

7.5% of domestic ticket price

2004 Rate

TSA

Airport and Airway Trust Fund

Airport and Airway Trust Fund

Airport and Airway Trust Fund

Airport and Airway Trust Fund

Airport and Airway Trust Fund

Use

Passenger fee for 

securityb

Rural airports

Fuel (commercial jet)

Waybill

Passenger segmenta

Passenger ticket

Tax or fee

What are the major taxes and fees, how much is collected annually, and how are the proceeds used?

Source: GAO.

aThe passenger segment tax is indexed to inflation and increased slightly in January 2004. 

b P.L. 108-11 suspended all security fee collections from June 1 through September 30, 2003.
Enclosure I 

 

Page 19 GAO-04-406R Aviation Taxes and Fees

7

International Taxes and Fees, Rates, and 

Uses

$65.25 per aircraft on international arrivals 

(not collected from aircraft operating solely 

between the United States and Canada)

$3.10 per arriving international passenger 

(not collected from passengers originating in 

Canada)

$5 per international passenger (not collected 

from passengers originating in Mexico, 

Canada, or U.S. territories)

$7 per arriving international passenger

$13.70 for each international departure and 

arrival

2004 Rate

APHIS/USDA

APHIS/U.S. Department of 

Agriculture (USDA)

Customs Service

INS

Airport and Airway Trust 

Fund

Use

International 

departures/arrivals 

taxesa

Animal and Plant 

Health Inspection 

Service (APHIS) 

passenger inspection 

fee

APHIS commercial 

aircraft inspection fee

Customs inspection fee

INS inspection fee

Tax or fee

What are the major taxes and fees, how much is collected annually, and how are the proceeds used?

Source: GAO.

aThe international departures/arrivals taxes are indexed to inflation and increased slightly in January 2004. 
Enclosure I 

 

Page 20 GAO-04-406R Aviation Taxes and Fees

8

2002 Aviation Tax and Fee Collections 

Totaled About $12.6 Billion

Transportation 

taxes

68%

PFCs

15%

Other fees

7%

Security fees

10%

Source: GAO analysis of ATA (transportation taxes), IRS (fuel tax), APHIS, Customs Service, FAA (PFC), TSA (security fees), and INS 

data.

Note: Transportation taxes include the passenger ticket tax, segment tax, waybill tax, international 

departures/arrivals tax, rural airports tax, and fuel tax. Other fees include the APHIS, Customs, and 

INS user fees. Security fees became effective in February 2002 and were suspended from June 1 

through September 30, 2003. 

2002 Totals

(Dollars in millions)

Transportation $8,603

PFCs $1,857

Security fees $1,298

Other fees $818

$12,576

What are the major taxes and fees, how much is collected annually, and how are the proceeds used?
Enclosure I 

 

Page 21 GAO-04-406R Aviation Taxes and Fees

9

In FY 2002, Collections Did Not Fully Cover 

TSA and FAA Budget Authority

$1.3

$12.4

$4.5

$1.1

0

2

4

6

8

10

12

14

TSA FAA 

Dollars in billions

General

fund (8.1%)

Airport and 

Airway Trust 

Fund (91.9%)

Security

fees (22.4%)

General

fund (77.6%)

$5.8

$13.5

What are the major taxes and fees, how much is collected annually, and how are the proceeds used?

Source: TSA and U.S. Budget for FY 2004.

Note: For TSA, $1.2 billion of the total $1.3 billion in security fee collections were from U.S. carriers. 

FAA’s 2002 budget authority also included $28 million derived from overflight fees; 

these funds comprised less than 1 percent of the agency’s total budget authority for that year.
Enclosure I 

 

Page 22 GAO-04-406R Aviation Taxes and Fees

10

How Do Changes in Collections Compare With Changes 

in Industry Revenues and Expenses from 1998 through 

2002?

• Trends in tax and fee collections, 1998 to 2002

• Industry revenues and expenses, 1998 to 2002

• Tax and fee payments relative to expenses

• Tax and fee payments relative to revenues

• Taxes and fees as a share of domestic base fares, 1998 and 

2002

• Changes in average domestic base fares between 1998 and 

2002
Enclosure I 

 

Page 23 GAO-04-406R Aviation Taxes and Fees

11

Tax and Fee Collections, 

1998 to 2002

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1998 1999 2000 2001 2002

Dollars in millions

Security fees

Other fees

PFCs

Transportation taxes

Source: GAO analysis of ATA (transportation taxes), IRS (fuel tax), TSA (security fees), APHIS, Customs Service, FAA (PFCs), and INS data.

Note: Includes payments

by foreign as well as

domestic carriers. All data except 

PFCs are on a fiscal year 

basis.Transportation taxes include 

the passenger ticket tax, segment 

tax, waybill tax, fuel tax, 

international departures/arrival 

tax, and rural airports tax. Other 

fees include INS, Customs, and 

APHIS inspection fees. Security 

fees became effective in February 

2002 ; therefore, the reported 

amount does not reflect an entire 

year. FAA has indicated that 

deposit rule changes affected 

fiscal year 1999 trust fund 

revenue estimates. All dollar 

figures are expressed in constant 

2002 dollars.

How do changes in collections compare with changes in industry revenues and expenses from 1998-2002?

$10,875.1

$12,872.2

$12,215.1

$11,526.3

$12,576.9
Enclosure I 

 

Page 24 GAO-04-406R Aviation Taxes and Fees

12

Industry Losses Largely Due to Lower 

Revenues

-20

-10

0

10

20

30

40

50

60

70

80

90

100

110

120

130

140

1998 1999 2000 2001 2002

Year

Dollars in billions

Total operating revenue

Total operating expense

Total operating profit/loss

Total taxes & fees paid

Source: GAO analysis of ATA (tax) and BACK Aviation Solutions (DOT Form 41) data.

Note: Most tax/fee information is on a 

fiscal year basis. All dollar figures expressed in 

constant 2002 dollars.

How do changes in collections compare with changes in industry revenues and expenses from 1998-2002?
Enclosure I 

 

Page 25 GAO-04-406R Aviation Taxes and Fees

13

Industry Tax and Fee Payments Relative to 

Expenses

10.9

111.6

9.7 12.2

127.7

9.6 12.6

115.3

10.9

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

Taxes/fees paid Operating expenses Taxes/fees as a percentage

of expenses

1998

2000

2002

Source: GAO analysis of ATA (tax), agency (fees), and BACK Aviation Solutions (DOT Form 41) data.

How do changes in collections compare with changes in industry revenues and expenses from 1998-2002?

Dollars in billions
Enclosure I 

 

Page 26 GAO-04-406R Aviation Taxes and Fees

14

Industry Tax and Fee Payments Relative to 

Revenues

10.9

121.7

8.9 12.2

134.9

9.1 12.6

106.8

11.8

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

Taxes/fees paid Operating revenues Taxes/fees as a percentage

of revenues

1998

2000

2002

Source: GAO analysis of ATA (tax), agency (fee) and BACK Aviation Solutions (DOT Form 41) data.

How do changes in collections compare with changes in industry revenues and expenses from 1998-2002?

Dollars in billions
Enclosure I 

 

Page 27 GAO-04-406R Aviation Taxes and Fees

15

Taxes and Fees Accounted for a Larger Share of 

Carriers’ Average Domestic Base Fares in 2002 ... 

Note: This analysis 

includes the ticket tax, 

passenger segment tax, 

PFCs, and passenger 

fees for security that 

were in effect for the 

majority of the year. 

JetBlue and Northwest 

are not included. 

Calculations for 1998 are 

based on fares 

expressed in constant 

2002 dollars. 

Source: GAO analysis of Bureau of Transportation Statistics (BTS) (fare) and ATA (rates) data.

15

13

15.3

13.1 13.3 12.1 12.5 12.5 11.9 12.9

22.6

20.2

23.6

18.1

19.8

16.5 16.3

17.8

15.7

18.6

0

10

20

30

AirTran

ATA

Southwest

Alaska

America West

American

Continental

Delta

United

US Airways

Percent of average domestic fare

1998

2002

How do changes in collections compare with changes in industry revenues and expenses from 1998-2002?
Enclosure I 

 

Page 28 GAO-04-406R Aviation Taxes and Fees

16

... Because Most Carriers’ Average Domestic 

Fares Declined between 1998 and 2002

-0.6

-9.9

-1.8

-4.5

-12.4

-15

1.1

-15.1

-11.5 -12.2

-20

-15

-10

-5

0

5

AirTranATASouthwest

AlaskaAmerica West

AmericanContinentalDelta

UnitedUS Airways

Percent change in fares

Source: GAO illustration of BTS data.

Note: JetBlue and Northwest 

are not included. Calculations 

are based on fares expressed 

in constant 2002 dollars.

How do changes in collections compare with changes in industry revenues and expenses from 1998-2002?
Enclosure I 

 

Page 29 GAO-04-406R Aviation Taxes and Fees

17

ATA Estimated That Taxes and Fees Have Risen 

Significantly Over Time

• ATA estimated that the 2002 tax rate was 25.6 percent

($51) of a single connection domestic round-trip $200 

ticket, an increase of 76 percent since 1992.a

• ATA maintains that taxes and fees encumber the industry’s 

financial performance because carriers are not always able to 

pass these costs on to consumers.

How do changes in collections compare with changes in industry revenues and expenses from 1998-2002?

aThis figure has been disclosed by ATA in various publications, such as “Airlines in Crisis: The 

Perfect Economic Storm.” ATA depicts other tax/fee scenarios on its Web site at www.airlines.org.
Enclosure I 

 

Page 30 GAO-04-406R Aviation Taxes and Fees

18

How Has the Total Amount of Aviation Taxes 

and Fees Paid Varied among Carriers?

• Variations in carrier tax and fee payments are attributable to 

variations in passenger volume and other service factors.

• An MIT study found that the share of taxes and fees included 

in the final ticket price paid by passengers varies by carrier 

type, trip length, and total fare amount.

• The MIT study estimates that the taxes and fees that are 

added directly to the base fare for a trip add, on average, 

15.5 percent, to the cost of that ticket.
Enclosure I 

 

Page 31 GAO-04-406R Aviation Taxes and Fees

19

Carrier Tax Payments Vary, Primarily According to 

Passenger Volume, 2002

Note: Northwest and Jetblue are not included because these carriers requested that we not report their data separately. 

Source: GAO analysis of airline data.

0

500

1,000

1,500

2,000

2,500

0

10

20

30

40

50

60

70

80

90

Tax and fee payments

Enplanements

How has the total amount of aviation taxes and fees paid varied among carriers?

Air Tran

Delta

America

West

Alaska

United

US Airways

American

Southwest

Continental

ATA

Dollars in millions Enplanements in millions
Enclosure I 

 

Page 32 GAO-04-406R Aviation Taxes and Fees

20

MIT Determined That the Tax and Fee Share of 

the Final Ticket Price Varies

• The MIT study analyzed 7.8 million ticket coupons from the 

2nd quarter of 2002 and calculated the tax share using the 

ticket tax, passenger segment fee, passenger fee for 

security, and PFCs.

• The MIT study found that the share varies according to 

carrier type, the total fare amount, and trip length.

• The share is higher for passengers who purchased 

lower priced tickets and for tickets sold by low-cost 

carriers.

Source: “The Impact of Infrastructure-Related Taxes and Fees on Domestic

Airline Fares in the United States,“Amedeo Odoni, MIT; Joakim Karlsson, 

Daniel Webster College; and Shiro Yamanaka, MIT; working paper, December 

2003; under review for publication in the Journal of Air Transport Management .

How has the total amount of aviation taxes and fees paid varied among carriers?
Enclosure I 

 

Page 33 GAO-04-406R Aviation Taxes and Fees

21

MIT: Passengers Who Purchased Lower Priced Fares 

Pay a Higher Rate of Taxes and Fees

22.3

16.4

12.7

11 10.2 9.5 8.8 8.4

0

5

10

15

20

25

under $200 $200.01-

$400

$400.01-

$600

$600.01-

$800

$800.01-

$1,000

$1,000.01-

$1,500

$1,500.01-

$2,000

Over $2,000

Base fare

Average tax share (%)

Source: MIT.

How has the total amount of aviation taxes and fees paid varied among carriers?
Enclosure I 

 

Page 34 GAO-04-406R Aviation Taxes and Fees

22

MIT: Low-Cost Carriers Have a Higher 

Average Tax Share

Low-Cost Carriers

• Average tax share for 3 

low-cost carriers is 

17.1%

• $33.94 in taxes

• $198.17 average roundtrip base fare

• Low-cost carriers are 

ATA Airlines, JetBlue, 

and Southwest

Major Carriers

• Average tax share for 6 

major carriers is 14.6%

• $48.88 in taxes

• $335.67 average roundtrip base fare

• Major carriers are 

American, Continental, 

Delta, Northwest, 

United, and US Airways

Source: MIT.

How has the total amount of aviation taxes and fees paid varied among carriers?
Enclosure I 

 

Page 35 GAO-04-406R Aviation Taxes and Fees

23

MIT’s Estimate of the Average Tax Share of the Final 

Ticket Price Is Lower Than ATA’s

• ATA has estimated that the final tax share of a singleconnection domestic round trip $200 ticket is 25.6 percent.

• Base fare = $148.84

• Taxes and fees = $51.16

• MIT estimated that the average tax share is 15.5 percent.

• Average round-trip base fare = $289.96

• Taxes and fees = $44.88

• Both estimates include the ticket tax, passenger segment fee, 

passenger fee for security, and PFC.

How has the total amount of aviation taxes and fees paid varied among carriers?

Sources: ATA and MIT.
Enclosure I 

 

Page 36 GAO-04-406R Aviation Taxes and Fees

24

In Two Instances Since 1996 When an Aviation Tax or 

Fee Was Not Collected, How Did Airfares Change?

• 1996 passenger ticket tax lapse (January 1 through 

August 27, 1996)

• 2003 security fee holiday (June 1 through September 

30, 2003)
Enclosure I 

 

Page 37 GAO-04-406R Aviation Taxes and Fees

25

1996 Passenger Ticket Tax Lapse 

(January 1 through August 27)

• The 10-percent passenger ticket tax lapsed from January 1 through August 

27, 1996.

• We analyzed fare changes from 1995 to 1996 in four markets with different 

characteristics to illustrate how carriers responded to the tax lapse. 

• Carriers raised base airfares compared with what they were in periods 

before the absence of the tax. 

• To consumers, average gross fares would appear to have stayed the same 

or increased.

• Airfare increases were more moderate in markets with a low-cost carrier 

and among leisure travelers.

In two instances since 1996 when a tax or fee was not collected, how did airfares change?

Note: We analyzed fare changes in a total of 13 markets, but for illustration purposes included the results from four markets.

The results from the remaining nine markets were generally consistent with these four.
Enclosure I 

 

Page 38 GAO-04-406R Aviation Taxes and Fees

26

Billings, MT -- Minneapolis/St. Paul Market

Served by Northwest Airlines

Small community with dominated market

-10%

0%

10%

20%

30%

40%

50%

60%

Q1 96*/Q1 95 Q2 96*/Q2 95 Q3 96*/Q3 95 Q4 96/Q4 95 

Quarter

Percent change 

*Indicates no passenger ticket tax in effect 

this quarter.

Note: Year-over-year percentage changes 

are calculated on average (mean) fares, 

expressed in constant 2002 dollars. Only 

carriers with at least 10 percent passenger 

share that served the market the entire 

period are shown. We defined “dominated 

market” as a city-pair market in which a 

single airline provides more than 50 

percent of the available seating capacity.

Source: GAO analysis of BTS traffic and fare data.

Average Northwest Base Fares Increased throughout Period of Tax Lapse

In two instances since 1996 when a tax or fee was not collected, how did airfares change?
Enclosure I 

 

Page 39 GAO-04-406R Aviation Taxes and Fees

27

Las Vegas -- Los Angeles Market

Served by America West, Southwest, and United

Leisure market with low-cost carrier 

-10%

0%

10%

20%

30%

40%

50%

60%

Q1 96*/Q1 95 Q2 96*/Q2 95 Q3 96*/Q3 95 Q4 96/Q4 95

Quarter

Percent change 

America West

United

Southwest

Weighted avg.

*Indicates no passenger ticket 

tax in effect this quarter.

Note: Year-over-year 

percentage changes calculated 

on average (mean) fares, 

expressed in constant 2002 

dollars. Only carriers with at 

least 10 percent passenger 

share that served the market 

the entire period are shown. 

The 4-percent increase in the 

weighted avg. fare for 

4Q96/4Q95 is the product of 

America West's increase in 

market share and its fares, 

which remained higher than 

those of United and Southwest.

Source: GAO analysis of BTS traffic and fare data.

All Carriers Eventually Raised Average Base Fares

In two instances since 1996 when a tax or fee was not collected, how did airfares change?
Enclosure I 

 

Page 40 GAO-04-406R Aviation Taxes and Fees

28

New York -- Chicago Market

Served by American, Continental, and United

Business market without low-cost carrier 

0%

10%

20%

30%

40%

50%

60%

Q1 96*/Q1 95 Q2 96*/Q2 95 Q3 96*/Q3 95 Q4 96/Q4 95

Quarter

Percent change

American

Continental

United

Weighted avg.

Source: GAO analysis of BTS traffic and fare data.

Base Fares Increased Significantly When Taxes Initially Lapsed 

and When Reinstated

*Indicates no passenger 

ticket tax in effect this 

quarter. 

Note: Year-over-year 

percentage changes are 

calculated on average 

(mean) fares, expressed in 

constant 2002 dollars. 

Only carriers with at least 

10 percent passenger 

share that served the 

market the entire period 

are shown.

In two instances since 1996 when a tax or fee was not collected, how did airfares change?
Enclosure I 

 

Page 41 GAO-04-406R Aviation Taxes and Fees

29

Los Angeles -- San Francisco Market

Served by Southwest and United

Business market with low-cost carrier 

0%

10%

20%

30%

40%

50%

60%

Q1 96*/Q1 95 Q2 96*/Q2 95 Q3 96*/Q3 95 Q4 96/Q4 95 

Quarter

Percent change 

United

Southwest

Weighted avg.

*Indicates no passenger ticket tax in 

effect this quarter. 

Note: Year-over-year percentage 

changes are calculated on average 

(mean) fares, expressed in constant 

2002 dollars. Only carriers with at 

least 10 percent passenger share 

that served the market for the entire 

period are shown.

Source: GAO analysis of BTS traffic and fare data.

Both Carriers Raised Base Fares but Network Carrier’s Base Fares

Showed a Larger Percentage Increase Initially

In two instances since 1996 when a tax or fee was not collected, how did airfares change?
Enclosure I 

 

Page 42 GAO-04-406R Aviation Taxes and Fees

30

2003 Security Fee Holiday 

(June 1 to September 30)

• At the outset of the holiday, network carriers raised business 

fares; the fare hike did not hold for the lowest-priced leisure 

fares.

• Carriers raised fares for tickets sold on 80 percent of the 

routes; the exceptions were routes where network 

carriers were competing with low-cost carriers.

• After the security fees were reinstated in October 2003, 

carriers generally did not restore base fares to their prior 

levels, effectively capturing the security surcharge.

Source: Harrell Associates. 

Note: Harrell Associates monitors the top 20 routes of seven network carriers and does not include Southwest.

In two instances since 1996 when a tax or fee was not collected, how did airfares change?
Enclosure I 

 

Page 43 GAO-04-406R Aviation Taxes and Fees

31

Summary

• Thirteen major taxes and fees supported aviation infrastructure and 

services in 2002. Collections totaled about $12.6 billion but did not cover all 

expenditures.

• Collections rose 15.6 percent from 1998 to 2002, but industry revenues 

and expenses fell significantly after 2000. Carrier taxes and fees in 2002 

accounted for a larger share of base fares because fares declined from 

1998. 

• The total taxes and fees paid by carriers in 2002 varied based on 

passenger volume and other factors. MIT found that the tax share is higher 

for lower priced tickets and low-cost carriers. MIT’s estimated average tax 

share of 15.5 percent is lower than ATA’s estimate of 25.6 percent. 

• During the 1996 tax lapse and 2003 security fee holiday, carriers increased 

base airfares compared with what they were before the absence of the tax 

or fee. Consumers saw a stable or somewhat increased gross fare. Fare 

increases were more moderate in markets with a low-cost carrier.
Enclosure II 

 

Page 44 GAO-04-406R Aviation Taxes and Fees

Taxes and Fees Paid by 10 Airlines, 1998-2002 

AirTran Airways Taxes and Fees Paid, 

1998-2002

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

1,800

1,900

2,000

1998 1999 2000 2001 2002

Dollars in millions

Security fees

Other fees

Fuel taxes

PFCs

Transportation taxes

Source: GAO analysis of AirTran data.

32

Note: Transportation taxes include 

the passenger ticket tax, 

passenger segment tax, waybill 

tax, international 

departures/arrivals taxes, and rural 

airports tax. Other fees include 

INS, Customs, and APHIS 

inspection fees. Security fees 

became effective in February 

2002; therefore, the amount 

reported does not reflect an entire 

year. All dollar figures expressed in 

constant 2002 dollars.
Enclosure II 

 

Page 45 GAO-04-406R Aviation Taxes and Fees

ATA Airlines Taxes and Fees Paid, 

1998-2002

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

1,800

1,900

2,000

1998 1999 2000 2001 2002

Dollars in millions

Security fees

Other fees

Fuel taxes

PFCs

Transportation taxes

Source: GAO analysis of ATA Airlines data.

33

Note: Transportation taxes include 

the passenger ticket tax, segment 

tax, waybill tax, international 

departures/arrivals taxes, and rural 

airports tax. Other fees include 

INS, Customs, and APHIS 

inspection fees. Security fees 

became effective in February 

2002; therefore, the amount 

reported does not reflect an entire 

year. All dollar figures expressed in 

constant 2002 dollars.
Enclosure II 

 

Page 46 GAO-04-406R Aviation Taxes and Fees

Southwest Airlines Taxes and Fees Paid, 

1998-2002

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

1,800

1,900

2,000

1998 1999 2000 2001 2002

Dollars in millions

Security fees

Fuel taxes

PFCs

Transportation taxes

Note: Southwest does not fly 

international routes, so certain 

fees and taxes are not incurred, 

including the international 

arrivals/departures taxes and 

Customs fees. Transportation 

taxes include the passenger 

ticket tax, segment tax, waybill 

tax, and rural airports tax. 

Security fees became effective in 

February 2002; therefore, the 

amount reported does not reflect 

an entire year. All dollar figures 

expressed in constant 2002 

dollars.

Source: GAO analysis of Southwest data.

34
Enclosure II 

 

Page 47 GAO-04-406R Aviation Taxes and Fees

Alaska Airlines Taxes and Fees Paid, 

1998-2002

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

1,800

1,900

2,000

1998 1999 2000 2001 2002

Dollars in millions

Security fees

Other fees

Fuel taxes

PFCs

Transportation taxes

Note: Includes taxes and fees

paid for Horizon Air since ticket

sales of both carriers are made 

under the same code. 

Transportation taxes include the 

passenger ticket tax, segment tax, 

waybill tax, international 

departures/arrivals taxes, and rural 

airports tax. Other fees include INS, 

Customs, and APHIS inspection 

fees. Security fees became effective 

in February 2002; therefore, the 

amount reported does not reflect an 

entire year. All dollar figures 

expressed in constant 2002 dollars.

Source: GAO analysis of Alaska data.

35
Enclosure II 

 

Page 48 GAO-04-406R Aviation Taxes and Fees

America West Taxes and Fees Paid, 

1998-2002

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

1,800

1,900

2,000

1998 1999 2000 2001 2002

Dollars in millions

Security fees

Other fees

Fuel taxes

PFCs

Transportation taxes

Note: The PFC amounts shown are 

those collected from passengers, not 

the amounts remitted to the 

authorities. Transportation taxes 

include the passenger ticket tax, 

segment tax, waybill tax, 

international departures/arrivals 

taxes, and rural airports tax. Other 

fees include INS, Customs, and 

APHIS inspection fees. Security fees 

became effective in February 2002; 

therefore, the amount reported does 

not reflect an entire year. All dollar 

figures expressed in constant 2002 

dollars.

Source: GAO analysis of America West data.

36
Enclosure II 

 

Page 49 GAO-04-406R Aviation Taxes and Fees

American Airlines Taxes and Fees Paid, 

1998-2002

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

1,800

1,900

2,000

1998 1999 2000 2001 2002

Dollars in millions

Security fees

Other fees

Fuel tax

PFCs

Transportation taxes

Source: GAO analysis of American data.

37

Note: Transportation taxes include 

the passenger ticket tax, segment 

tax, waybill tax, international 

departures/arrivals taxes, and rural 

airports tax. Other fees include 

INS, Customs, and APHIS 

inspection fees. Security fees 

became effective in February 

2002; therefore, the amount 

reported does not reflect an entire 

year. All dollar figures expressed in 

constant 2002 dollars.
Enclosure II 

 

Page 50 GAO-04-406R Aviation Taxes and Fees

Continental Airlines Taxes and Fees 

Paid, 1998-2002

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

1,800

1,900

2,000

1998 1999 2000 2001 2002

Dollars in millions

Security fees

Other fees

Fuel taxes

PFCs

Transportation taxes

Source: GAO analysis of Continental data.

38

Note: Transportation taxes 

include the passenger ticket tax, 

segment tax, waybill tax, 

international departures/arrivals 

taxes, and rural airports tax. 

Other fees include INS, Customs, 

and APHIS inspection fees. 

Security fees became effective in 

February 2002; therefore, the 

amount reported does not reflect 

an entire year. All dollar figures 

expressed in constant 2002 

dollars.
Enclosure II 

 

Page 51 GAO-04-406R Aviation Taxes and Fees

Delta Air Lines Taxes and Fees Paid, 

1998-2002

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

1,800

1,900

2,000

1998 1999 2000 2001 2002

Dollars in millions

Security fees

Other fees

Fuel taxes

PFCs

Transportation taxes

Note: Delta attributes its 

dramatically lower tax and fee 

payments for 2001 to the events 

of September 11. Transportation 

taxes include the passenger ticket 

tax, segment tax, waybill tax, 

international departures/arrivals 

taxes, and rural airports tax. Other 

fees include INS, Customs, and 

APHIS inspection fees. Security 

fees became effective in February 

2002; therefore, the amount 

reported does not reflect an entire 

year. All dollar figures expressed in 

constant 2002 dollars.

Source: GAO analysis of Delta data.

39
Enclosure II 

 

Page 52 GAO-04-406R Aviation Taxes and Fees

United Airlines Taxes and Fees Paid, 

1998-2002

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

1,800

1,900

2,000

1998 1999 2000 2001 2002

Dollars in millions

Security fees

Other fees

Fuel taxes

PFCs

Transportation taxes

Source: GAO analysis of United data.

40

Note: Transportation taxes include the 

passenger ticket tax, segment tax, 

waybill tax, international departures/ 

arrivals taxes, and rural airports tax. 

Other fees include INS, Customs, and 

APHIS inspection fees. Security fees 

became effective in February 2002; 

therefore, the amount reported does 

not reflect an entire year. All dollar 

figures expressed in constant 2002 

dollars.
Enclosure II 

 

Page 53 GAO-04-406R Aviation Taxes and Fees

US Airways Taxes and Fees Paid, 

1998-2002

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

1,800

1,900

2,000

1998 1999 2000 2001 2002

Dollars in millions

Security fees

Other fees

Fuel taxes

PFCs

Transportation taxes

Source: GAO analysis of US Airways data.

41

Note: Transportation taxes 

include the passenger ticket tax, 

segment tax, waybill tax, 

international departures/arrivals 

taxes, and rural airports tax. 

Other fees include INS, Customs, 

and APHIS inspection fees. 

Security fees became effective in 

February 2002; therefore, the 

amount reported does not reflect 

an entire year. All dollar figures 

expressed in constant 2002 

dollars.

(544066) 
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