WASHINGTON (MarketWatch) — The tax airline passengers pay to cover the cost of airport security could triple by 2017 as the U.S. recoups some of the billions it has invested in scanners and staff since 9/11.
It’s a move that’s infuriated airlines. In the past year the industry has struggled to raise their airfare just to cover a sharp jump in fuel costs, and with economic growth looking brittle heading into the next year, carriers are worried the higher passenger tax could turnoff travelers.
“This is absolutely the wrong approach,” said Tony Tyler, general director of the International Air Transport Association, on Tuesday. “Making air travel progressively more expensive is not a sound economic strategy.”
The NYSE Arca Airline Index has declined more than 27% year to date as the industry struggles with higher fuel bills and concerns that stagnating global trade and decline in business confidence could result in fewer fliers.
Earlier, the International Air Transport Association said it expects profits for the global industry to decline about 29% to $4.9 billion next year from about $6.9 billion in 2011. Read more about the airlines’ outlook .
“It looks like we are headed for another year in the doldrums,” said Tyler.
On Monday, the White House proposed to raise the so-called 9/11 tax to $10 a round trip from $5, and then increase the tax by $1 a year between 2013 and 2017.
The revenue would go toward funding the Transportation Security Agency, which has an annual budget of around $8 billion, but a part of the tax would also be set aside for the general fund to help reduce the national deficit.
Airport security costs the U.S. nearly $5 billion a year, or $6.66 a passenger, based on data from the Department of Transportation and AirlineForecasts LLC.
But it was not always so expensive. Prior to the terrorist attacks on Sept. 11, 2001, the airports relied on private contractors to screen passengers at a cost of about $500 million a year, or about $1.34 for each passenger.
Analysts have said the higher costs better reflect a country that boards nearly half the world’s departing passengers, and that the U.S. has strengthened security standards as well as installed high-tech body scanners that make it harder for terrorists to target aircraft.
“If you have to spend $70 billion over the next ten years to avoid 9/11 again, I think it’s worth it,” said airport-security expert Brian Jenkins, director of the Mineta Transportation Institute in San Jose, Calif., noting the U.S. has spent more than a trillion on wars in Iraq and Afghanistan since 9/11.
“An airline hijacking can cause not just one catastrophe, but also a political crisis with calls for retribution,” he said.
That argument is similar to the one airlines made, with the industry describing aviation security as a benefit that extends beyond the airline industry.
“No other industry or mode of transportation pays for its security as airlines do, even though it is clear that the terrorists targeting commercial aircraft are not attacking the airlines themselves but, rather, the U.S. economy and the American way of life,” said Nicholas Calio, head of the Washington, D.C.-based Air Transport Association.
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