Flying Higher

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4 min read

This story appears in the February 1998 issue of Business Start-Ups magazine. Subscribe »

Travel costs are heading skyward: Federal laws passed by Congress last summer increased taxes on international airline tickets and could inflate costs for travelers buying tickets for domestic flights or redeeming frequent-flier miles.

"The total impact of this new tax package means that over the next five years, taxes on air travel will increase from $30 billion to $34 billion," says David A. Fuscus of the Air Transport Association. But just how much of that tax will get passed on to consumers remains to be seen.

One price hike business travelers will see immediately is on international travel. Under the new law, which took effect in October 1997, the international departure tax doubles from $6 to $12. In addition, an international arrival tax of $12 was created--resulting in a total increase of $18 per international round-trip ticket. "Excise taxes are more problematic," says Fuscus. "The straight excise tax does decrease, but now we have the addition of a head tax."

As of October 1997, the 10 percent tax rate on airline tickets was reduced to 9 percent and will eventually drop to 7.5 percent by 2000. The bad news: A flight segment tax now applies to each leg of a traveler's domestic trip--starting at $1 per leg and increasing to $3 per leg by 2002.

The third part of the travel tax--and the one that has caused the greatest stir throughout the industry--applies to frequent-flier miles. Companies that purchase frequent-flier miles from airlines, such as credit card companies, as well as businesses that partner with the airlines, such as hotels, will now be taxed at 7.5 percent on the transactions.

Some airlines, wanting to keep their relationships with frequent-flier program partners secure, may simply absorb the taxes and pass the costs on to consumers. In this case, consumers who belong to frequent-flier programs (52 million in North America alone, according to InsideFlyer magazine), may feel the sting through award "redemption" fees. Where frequent-flier partners are asked to cover the new tax, diminished program availability may become a problem.

"What some partners of [frequent-flier] programs--and so far it's been primarily car-rental companies--are likely to do is reduce the number of programs they participate in," explains Randy Petersen, editor and publisher of InsideFlyer.

For business travelers, this may simply require developing new travel-planning strategies. Says Petersen, "Consumers, if they're really playing the miles game, may have to change car-rental companies."

Road Notes

By Catharine Brockman Kuchar

  • Delta Air Lines Crown Room members can now view more than 42 popular cable channels, such as CNN, the Discovery Channel and The Weather Channel, in Crown Room airport lounges.
  • What are the most important factors for international travelers when choosing an airline? According to the 1997 OAG Business Travel Lifestyle Survey, they are (in order of importance): most convenient schedule, safety, punctuality, comfort and efficient check-in.
  • AirTran's (formally ValuJet) new business-class section features four more inches of seat width and seven more inches of legroom. The cost: $25 more than AirTran's regular one-way full coach fare on nonstop flights and $40 more on multistop flights.
  • Inter-Continental Hotels now offer guest rooms with business amenities. The rooms include such features as a large desk, a Hewlett Packard Office Jet Model 300 workstation, two-line telephones with voice mail, and office supplies. Business rooms are available in Chicago, Los Angeles, Miami, Montreal, New Orleans, New York City, San Francisco, Toronto and Washington, DC.
  • To lure more business travelers, TWA has expanded its first-class seating by 60 percent in 155 narrow-body aircraft.

Room Service

When selecting a hotel, one where you'll need to get work done as conveniently and efficiently as in your own office, consider the following criteria:

1. Cost, value and location

2. Voice mail availability

3. Two-line speaker phone

4. In-room fax machine/printer/copier

5. Convenient outlets and dataports

6. Good lighting

7. Adequate desk space

8. Ergonomic chair

9. 24-hour room service

10. Electronic locks/in-room safe

11. In-room coffee maker, iron and ironing board

source: Alphanet Hospitality Systems Inc.

Contact Sources

AirTran, (800) AIR-TRAN,

AlphaNet Hospitality Systems Inc., (201) 327-4700,

Delta Air Lines,

InsideFlyer magazine, (800) 333-5937,

Inter-Continental Hotels, (800) 327-0200,

TWA, (800) 221-2000,


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