NBTA On Air Fees, Transparency And Taxes

A Congressional subcommittee last month noted that a non-binding IRS ruling leaves "unsettled" the question of whether ancillary airline fees for bags and add-ons should be taxed. As the National Journal's Transportation Experts blog explores the debate, the National Business Travel Association is undecided for now, executive director Mike McCormick said.

Regarding airline fees in general, NBTA in testimony submitted July 14 to Congress called for "full transparency" on fees. "Our position is simple: Fees equal fares," it stated. NBTA on July 28 announced a task force that originated with discussions last fall.

Here's part of my July 26 interview with McCormick on the fees in general, and a bit about taxes.

Campbell: This has been a brewing situation for three or four years now, with travel managers finding they're having trouble tracking airline fees and including them in negotiations, etc. What prompted NBTA to come out with a statement now?

McCormick: The issue was hitting the headlines and was at the forefront because of the testimony we were asked to provide--as well as that others gave--and I think it was the timing of those hearings that drove the releases and the attention on it. We announced our task force earlier in the year. This is an issue that's been around and been brewing, but certainly the attention it's been getting in Congress now is a concern to us on many levels because it's an important issue for the industry. In what we outlined, we're very clear: We think transparency is the real issue. We're not trying to tell airlines or anyone in any way that we should be regulating what they charge or how they charge. But the issue in our industry is there's more to it than that. For our direct [buyer] members, it's all about being able to accurately track and understand what's being spent and to tie that information back to the individual traveler in expense management. That's why we ended up putting together the global task force to start to address the issues. On the task force are airlines and intermediaries and buyers ... and geographical [representation] as well. We've got folks from Europe involved too, because clearly that's where a lot of this got started on the airline side years ago anyway.

Campbell: What's next for the task force?

McCormick: We'll get you some information as they are releasing their charter and more details; we can get you their brief.

Campbell: Has anyone in the industry responded, especially the airlines, to the NBTA statement?

McCormick: Yes, we got a positive response. Clearly everyone has an opinion on this issue. But we got a positive response. The involvement in the task force, and the way we see our role in the industry, is not just to have an opinion on the issue, but also to provide a forum for solving industry problems. The testimony and the release is great for that day, but it's not about solving and really working through the complex and detailed issues involved in making this work, and that's what we needed to do.

Campbell: Has NBTA taken a position on whether the ancillary revenues should be taxed?

McCormick: No, we don't have a comment on tax issues, yet.

Campbell: Does that require more research or are you seeing where other commentators go with it?

McCormick: That's more what will come out of our task force work.

Asked separately for his position on taxes, Business Travel Coalition chairman Kevin Mitchell, a contributor to the National Journal blog and a witness at the mid-July Congressional hearing on the issue, said, "The problem is that the Trust Fund is being depleted without being topped off. And whether it is ancillary fees that get taxed or the remaining fare levels, or some other method ... one way or the other, something's gotta give so that the Trust Fund is solid over the long term. It's got to be solved, so if people smarter than I think that taxing the ancillary fees is the fairest and best way forward, then we would support that."

The Department of Transportation just extended to Sept. 23 the deadline for interested parties to submit thoughts on its related proposed rules. Visit here and search for "DOT-OST-2010-014" to comment.