09 August 2009

It Only Took Them A Year Or Two But.....

Finally it seems that the esteemed powers that be in Washington DC pay attention to the Professor's Blog. OK so that is what I would prefer to believe other than to think that independently the US Senior Congressman from Minnesota and Chairman of the US House of Representatives Transportation Committee came up with this idea on his own.

And what is the idea? TAXES: IE That the process by which ancillary revenue is charged to the customer by the airlines was actually lowering the amount of potential revenue that the US government received for things like the FAA. (Oh yes and paying back some of its recently increased obligations). I say potential because this has not been proved.

Here is the article from CNN Money/Dow Jones:(Courtesy of BTC).


When I first raised this issue in 2007, I received a few nasty notes from some airlines who disagreed with me and when I once raised the issue at an airline forum I was almost booed off the stage for suggesting such a thing.

However I think it is inevitable. Taxation is coming to Ancillary Revenue. Some countries have been able to impose VAT type taxes on fees. This will only extend. For the US the situation is simple. Ancillary Revenues are either aviation revenue in which case the purvey of the Federal Government or they are sales revenue in which case they are subject to state taxes. They cannot be neither. (Sorry for the poor use of English here). Thus in my view they are subject to Tax.

The difficulty for everyone - and this is a fair warning - is that it will be treated differently by separate taxation jurisdictions. Thus the complexity of the airline product pricing is about to get VERY complicated.

Be prepared. If you are not ready for this - there will be great amounts of difficulty. Particularity this will affect airlines and those who set independent prices for air fare products such as Consolidators and other travel intermediaries. Ditto their suppliers and providers of solutions that must create, monitor and report this revenue/taxation.

Now you have been warned! If you would like to know what to do about it - send me a note.


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