Understanding the Price of Your Plane Ticket

The holiday season is approaching and many Americans are booking their flights to see family and friends. Last year, an estimated 112 million Americans traveled for Christmas alone–many on airplanes. We all know the headache of trying to find good flights at reasonable prices and very few of us have time to pay attention to taxes levied on airplane tickets.

Navigating the many taxes and fees imposed on domestic plane tickets can be difficult for even the most seasoned travelers. Most won’t even notice them, as they are often included in the advertised price. However, these taxes and fees make up a significant part of the price for a regular domestic flight.

The U.S. government charges an excise tax on all domestic travel of 7.5 percent. In addition, there is a Flight Segment Tax of $4.20 per segment. Finally, passengers pay a September 11^th tax of $5.60 to the federal government per one-way trip.

Local airports can also charge a fee (and almost all do). This fee is called the Passenger Facility Charge (PFC) and is meant to cover the costs of maintaining and improving airports. The PFC is capped at $4.50, but this year Congress has considered doubling the cap. Many, ourselves included, have argued that the federally imposed cap hinders investment into much needed modernization and infrastructure improvement.

What does all that mean for the price of your ticket? Below is a calculation showing taxes’ effect on total cost of a hypothetical round-trip ticket between Reagan National Airport (DCA) in the Washington, D.C. suburbs and O’Hare International Airport (ORD) in Chicago:

As shown above, the plane ticket price includes $47 in taxes and fees, which equals 16 percent of the final costs. But if you can’t find a direct flight and need a layover, taxes go up significantly. See below (we have used Newark Liberty International Airport (EWR) in New Jersey as the intermediary point):

The new total tax is $64 or almost 21 percent of the ticket price.

This post has only mentioned the taxes imposed on domestic travel, but international travelers, like me, must pay even higher taxes. Remember that next time you complain about the price of your plane ticket.