FAA Stalemate: Airlines to Refund Passengers Directly

Airlines have decided to pass on the ticket tax benefit to passengers as the House and Senate adjourn their session until Sept. 7, leaving the Federal Aviation Administration (FAA) stalemate unresolved.

Delta Air Lines took the lead as they offered to process tax refunds to passengers who bought tickets on or before July 22, flying at a time when federal ticket taxes were being suspended.

Aviation ticket taxes expired on July 23 when Congress failed to reauthorize the FAA, the agency in charge of collecting revenue. Following the July 23 FAA stalemate, airline passengers were not sure how to get their money back.

The tax component works out at around 15 percent of the ticket price or $60 or more on a $300 round-trip ticket.

Delta is awaiting guidelines from the IRS on the process of refunds. The Atlanta-based carrier said in a statement: "To streamline the process, the airline will process refunds directly for customers once an agreement is reached with the IRS on the procedure for doing so."

Appreciating Delta's move, IRS Commissioner Doug Shulman said, "The IRS is committed to working with Delta and other airlines to ensure they can provide a smooth refund process for their passengers."

US Airways Group has also pledged to offer direct ticket refunds to passengers for tickets bought before the FAA governance on tax collection lapsed on July 23. US Airways said it "is working with the Internal Revenue Service to implement the refund, but has not yet decided how it will occur."

Other airlines have directed passenger queries on refund to the IRS desks. The IRS has, instead, asked the airlines to directly refund the saved tax benefits to the passengers.

Seattle-based Alaska Airlines and Spirit Airlines, keeping in tow with their ongoing pricing policies, has passed on the tax benefits to its travelers. Fliers on Alaska Airlines could save an average of $25-$50 per customer, estimates show. Virgin has also discounted ticket fares on the Seattle and Mexico sector.

Virgin America has asked travelers to file for their refunds directly through the IRS. Seattle-based Alaska Airlines is routing its refund queries via the Air Transport Association trade group to develop an easy way for Alaska and Horizon Air fliers.

The IRS has posted queries and subsequent answers on www.irs.gov.

As the Senate and the house adjourn for the next five weeks, the number of entitled passengers is growing quickly. With no signs to expand the FAA's authority in this case, passengers have to go through either IRS protocols or wait for the airlines to refund their monies later.

Senators have, however, ticked off airlines and requested them not to cash in on their profit margins from this ticket tax holiday. Most airlines have recently raised fares equivalent to the amount of the taxes, leaving the travelers pay more amount during the FAA shutdown, starting from July 23.

Sens. John Rockefeller, D-W.Va., chairman of the Transportation Committee, and Maria Cantwell, D-Wash., aviation subcommittee chairwoman, in separate letters to the airlines earlier this week said, "Like the 'ancillary fees' that many airlines now charge for blankets, checked luggage, priority seating and itinerary changes, this recent fare increase has further damaged the industry's relationship with airline passengers,"

Otherwise, the FAA standoff has resulted in a monthly loss of $1 billion to the Federal exchequer as it is no longer mandatory for airlines to turn over taxes on ticket prices.