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The impact of infrastructure-related taxes and fees on domestic airline fares in the US

Author

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  • Karlsson, Joakim
  • Odoni, Amedeo
  • Yamanaka, Shiro

Abstract

This paper estimates the impact of infrastructure-related add-on taxes and fees on the direct cost of domestic air travel in the US. We work with the large DB1A database of the Bureau of Transportation Statistics of the US Department of Transportation to conclude that the effective tax rate (ETR) on the average base fare (BF) was 15.5% in the Second Quarter of 2002. Depending on the filtering rules for extremely low and high fares in the database, the ETR ranges from 15.4% to 16.3%. The incidence is much heavier on the least expensive tickets, because three out of the four add-on taxes and fees are based on the passenger's itinerary and are independent of the BF. Partly as a result, the ETR on tickets issued by low-cost carriers is somewhat greater than on those issued by other airlines. A comparative analysis of 1993 data indicates that the ETR was 10.9% at the time. A large portion of the increase between 1993 and 2002 is due to a striking 25% decline in the yields achieved by the airlines during that period.

Suggested Citation

  • Karlsson, Joakim & Odoni, Amedeo & Yamanaka, Shiro, 2004. "The impact of infrastructure-related taxes and fees on domestic airline fares in the US," Journal of Air Transport Management, Elsevier, vol. 10(4), pages 283-291.
    • Handle: RePEc:eee:jaitra:v:10:y:2004:i:4:p:283-291
    DOI: 10.1016/j.jairtraman.2004.03.006
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    Citations

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    Cited by:

    1. Sebastien Bradley & Naomi E. Feldman, 2020. "Hidden Baggage: Behavioral Responses to Changes in Airline Ticket Tax Disclosure," American Economic Journal: Economic Policy, American Economic Association, vol. 12(4), pages 58-87, November.
    2. Johnson, Tracy & Savage, Ian, 2006. "Departure delays, the pricing of congestion, and expansion proposals at Chicago O’Hare Airport," Journal of Air Transport Management, Elsevier, vol. 12(4), pages 182-190.
    3. Yao Cui & A. Yeşim Orhun & Izak Duenyas, 2019. "How Price Dispersion Changes When Upgrades Are Introduced: Theory and Empirical Evidence from the Airline Industry," Management Science, INFORMS, vol. 65(8), pages 3835-3852, August.
    4. Ashley, Katherine & Savage, Ian, 2010. "Pricing congestion for arriving flights at Chicago O'Hare Airport," Journal of Air Transport Management, Elsevier, vol. 16(1), pages 36-41.
    5. Sainz-González, Rubén & Núnez-Sánchez, Ramón & Coto-Millán, Pablo, 2011. "The impact of airport fees on fares for the leisure air travel market: The case of Spain," Journal of Air Transport Management, Elsevier, vol. 17(3), pages 158-162.

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