The wait is over. A couple months after carriers applied to provide service for four new slot pairs at Washington’s Reagan National Airport the DoT has announced the winners of the coveted operating permissions. And the winners are exactly what I predicted back when the applications were revealed:
JetBlue won their first choice of routes, adding service to their quickly growing operation in San Juan, Puerto Rico. Alaska Airlines won their first choice as well, with service to Portland, Oregon being approved. Austin, Texas had two different applications for service; both Southwest and JetBlue indicated that they wanted to add the destination. Southwest was awarded that authority. Virgin America won their only application, adding service to their hub in San Francisco. The route to SFO will be the only of the new operations with direct competition on it; United Airlines is also going to be operating on that route. Southwest will face competition on the proposed through-service aspect of their Austin service to San Diego from US Airways which will operate that route with a non-stop flight.
So no real surprises in the route authorities awarded. Probably for the best; the routes picked were the favorites because they made the most sense based on the economics of the markets. Still, every now and then I do wonder if the DoT has a sense of humor and would award something like the Colorado Springs application Frontier put out there.
Washington, DC‘s National Airport is one of the "lucky few" airports in the country where the government has limited destinations which can be served. The so-called "perimeter rule" keeps the long-haul flights out at Dulles for the most part, but there are a few exceptions to rule and those are coveted by the airlines. As part of the most recent FAA budget authorization bill Congress has added a few perimeter exceptions to the pool at DCA and now airlines are scrambling to grab those slots. The filing deadline was yesterday, and here’s what the proposals look like.
The slots are split into two pools, one for legacy carriers and one for new entrants. In the new entrants category six carriers – JetBlue, Virgin America, Southwest, Air Canada, Frontier and Alaska Airlines have applied.
Alaska Airlines is going big with their application, hoping to offer transcon service from both their Portland, OR hub as well as San Diego. Virgin America is also hoping for hub service from San Francisco. Southwest is aiming to provide service to Austin, TX, with onward connections to San Diego and JetBlue has applied to serve both Austin and San Juan. Air Canada is hoping for Vancouver service and Frontier is looking to serve Colorado Springs.
There is some interesting overlap with the routes being requested and it seems somewhat unlikely that the DoT is going to approve such applications so perhaps the final approval will look something like this:
For the legacy carriers the access to beyond perimeter slots comes with a slightly higher price, as they have to give up service to a destination inside the perimeter to get the new service. On the plus side, the route authorities are more or less guaranteed given that condition so the DoT has less work to do there. Of the eligible carriers, Delta, United Airlines and American Airlines all made their intentions known a couple weeks ago, with service to their Salt Lake City, San Francisco and Los Angeles hubs, respectively. Apparently US Airways has decided to not apply for an additional beyond perimeter slot. They already have service to Phoenix and Las Vegas but it is still somewhat surprising that they haven’t tried for more.
The new routes should be interesting to watch, especially with the potential for competition on the LAX and SFO routes.
When the TSA assumed responsibility for screening passengers at airports one of the provisions in the law allowed for private screeners to be used rather than federal employees, should a company choose to bid on the contract to operate such. There are a few airports where private screeners are working – San Francisco is the largest – but overall the number of locations with private screeners is incredibly small. This is, in large part, because the TSA has made it clear they don’t want anyone who they do not directly control working at the checkpoints.
Apparently Congress has decided that they’ve had enough. After issuing a rather scathing report in November 2011 on the 10th anniversary of the establishment of the TSA a few have now stepped up to actually act on the recommendations made in that report. One of those recommendations was that the TSA stop stonewalling private screener contract applications. Not surprisingly, the TSA ignored it. And now they are running out of chances.
The new legislation will reverse the burden of proof, requiring that the TSA demonstrate increased costs and decreased efficacy in order to reject contract applications. Given the incredibly high turnover rates and training costs that the TSA incurs, it shouldn’t be too hard for contractors to demonstrate that they can meet those standards. Of course, this doesn’t necessarily mean that things will get better with the screening process. After all, the private screeners will still have to follow TSA-mandated policies and the ludicrous “state your name” test started at SFO which is privately run. Still, there is a small chance that private contractors will be able to better manage their workforce, resulting in screeners who bring guns to the office or get caught on camera stealing form customers actually being fired and prosecuted rather than sheltered by the federal government.
And, yes, I know that much of the reason the provisions were pushed through was to benefit the constituents in Representative Mica’s (R-FL) district, but I’m willing to put up with that for the sake of maybe getting a bit better service for the billions spent. Maybe.
A guy can dream…Here’s hoping.
Citibank caused quite a stir a week ago when they started sending out 1099s to folks who had received large quantities of bonus miles for opening accounts. Needless to say, there was quite the uproar, with various opinions being shared, ranging from Congress to bloggers. Well, a week has passed and the IRS have finally clarified its position. Sortof. Things are still not incredibly clear, though it is readily apparent that the IRS sees some miles as taxable and not at a particularly favorable rate.
Michelle Elridge, an IRS spokeswoman is quoted in that LA Times column as offering up three very specific bits of information about points and their taxability:
When frequent-flier miles are provided as a premium for opening a financial account, it can be a taxable situation subject to reporting under current law.
This part is pretty clear, though not necessarily what most folks want to hear. It suggests that Citi was correct to be sending out the 1099s and reporting the tax liability. The particularly interesting bit is the use of the term "financial account." Not only would this apply to bank accounts, but it could also be reasonably interpreted to apply to credit card and investment accounts as well. After all, those are financial accounts and the points are provided as a premium for opening the account. Not particularly good news for folks who are accustomed to churning CCs and Fidelity/Ameritrade accounts for the huge sign-up bonuses.
As for taxing "regular" levels of mileage earning on CC spend or the actual flying, that’s still safe. The IRS continues to see that as a rebate and not income, so no tax liability there.
A common analogy is buying a $500 television at a retail store and receiving a $50 manufacturer’s rebate. It’s not income, just a deemed reduction of the cost of the television.
The most complicated (and oft-debated) part of the debate might be the valuation of the miles. Many insist that the liability should be the fraction of a cent that the banks pay to buy the points from the airlines. The banks disagree, reporting the value at the full retail price as reported by the airlines. And the IRS is somewhere in the middle.
Under the income tax law the amount of income to the taxpayer is the value of the property received, not the cost that the business paid to acquire the property.
The real gray area there is "value of the property received" which is, by the nature of the property in this case, variable. And it could even be argued that the recipient actually never receives property since the T&Cs of the programs say that the points are the property of the programs. There are others who have explained how to dispute the value reported on the 1099s.
Whatever the approach consumers take, it is clear that the IRS sees these sign-up bonuses as a very different beast from the regular spend earning. And the use of the term "financial account" is very open-ended. The CC churn boondoggle may be coming to an end sooner than we all hoped.
I love when our elected representatives decide to speak up and express just how idiotic their thoughts are. I’ve heard a Representative state for the record that she thought Adobe Acrobat should be outlawed, for example, but I’m not so convinced that her view there is more ridiculous than that put forth today by Representative Tom Graves of Georgia. Graves, who represents Georgia’s 9th Congressional District (North of Atlanta, up to the Tennessee, North Carolina and Alabama borders), has announced that he will be introducing legislation which will repeal the DoT rule requiring airlines to list the full price of tickets, including all taxes, when they advertise.
This rule, put forth as part of the DoT’s consumer protection efforts, has come under attack from such legendary consumer advocates as Sprit Airlines, who is complaining the rule violates their first amendment rights because they cannot advertise one number and then charge a completely different number when the customer goes to actually make the purchase. Seems like just the sort of actions that should be protected, right?
The Congressman has a very simple premise for why the rule is bad: It prevents the airlines from indicating what part of the fare is actually the fare and what part is taxes and fees.
The federal government should not be inserting itself in the private sector to limit consumers’ ability to see how much they’re getting taxed. If the American people can’t see these costs clearly, I fear it will be easier these fees and taxes to be raised without their knowledge.
There’s just one problem with this line of thought (two, really, but I’m ignoring that the second line there isn’t a complete sentence): it is completely unfounded in reality. There is absolutely nothing in the rule that prevents the airlines from explaining in excruciating detail how much the taxes are and how much the fare is. There is nothing preventing them from reminding the consumer that there are a dozen or so different taxes and fees on the average airfare and way more on international itineraries. What the rule does, however, is prevent an airline from advertising a $9 fare which cannot be purchased for less than $20, no matter how hard you try. And that’s a good thing for consumers.
Fare listings like these, which are fully compliant with the rules, make it quite clear what the taxes and fees are, without violating the DoT rules:
And, yet, somehow apparently it is actually impossible for the airlines and OTAs to actually publish the information this way, as they are inhibited by the DoT rules. Strange, isn’t it, how they’ve managed to do it anyways??
I understand the complaint that nothing else in the USA is required to be marketed with the all-in price rather than allowing for customers to be surprised at the cash register. Let’s not use the examples of things that are bad for us as citizens as examples of why progress shouldn’t be made. Let’s got the other direction instead. Let’s hold hotels and rental car companies accountable, too. Let’s stop rental car companies from hiding the 50%+ surcharges until the final page of the check-out process. Let’s stop hotels from adding on $15-30 or more, per guest, per night, as a "resort fee" rather than actually including those charges in the fine print. After all, you cannot avoid paying them.
There is nothing wrong with calling attention to the fact that the average airfare has so many taxes associated with it. But pretending that there is some unwritten rule out there which is somehow preventing airlines from actually doing so is just plain lying.
Time to step up and face the facts, Congressman Graves: you’re full of it. Step up and do something that actually helps your constituents rather than lying to them. I’m sure they’ll appreciate it when elections roll around.
Sure, there was tremendous uproar when Spirit Air announced their plan to charge passengers to have larger carry-on bags on the plane. But what if the TSA, the idiots charged with securing our transportation infrastructure, suggests something similar? Will the same congress-critters who displayed outrage maintain it or will they roll over to the "anything for security" mantra?
It looks like we are all going to find out soon enough. The Secretary of Homeland Security, Janet Napolitano, testified to congress this week that the costs related to carry-on bags are in the range of $260MM annually because of the need to have TSA agents screening those bags. These are the same agents who are great at spotting bottles of water and apparently not so much at spotting things that are actually arguably dangerous, but that’s a whole different rant.
The Secretary conveniently managed to skip over the part about how there are other agents who are inspecting all the checked baggage; if the bags are checked instead of carried on someone is still going to have to check them. Then again, the checked baggage systems (particularly the new ones) are much more automated and faster, in part because there is more space to work with in those sections of the airport and in part because they’re actually looking for dangerous goods instead of extra large tubes of toothpaste or sunscreen.
The statement from the Secretary was in response to a rather leading question from Senator Mary Landrieu:
Checked bagged fees are increasing, it looks like, the cost to TSA because people don’t want to pay the fees so they are not checking bags and putting more on the planes. My question is, do the taxpayers have to pick up this fee? Or should we be looking at the airlines for some of the profits that they make from these fees to offset the cost the taxpayer.
The Secretary is trying to convince Congress to increase the fees paid by passengers to the tune of $600MM annually. No word yet on what other wasteful projects the spare $340MM will be earmarked for. Apparently the Senator is just looking for a cash-grab.
Our government, hard at work.
Part of me says that I should have seen this all coming. The TSA has been pretty good about demonstrating just how incompetent they are and their latest moves really are just a continuation of that trend. Still, I’ve found myself so completely dumbfounded over the past 3 weeks that I’ve not been able to form a coherent set of thoughts about just what specifically I find so objectionable. As National Opt-Out Day approaches tomorrow, however, I’m going to try.
It was about 50 weeks ago that I posted what I thought was a relatively tame post here on this blog: The TSA makes another stupid move. Just another example of the TSA being stupid, right? Actually, this one was worse then most. The story got some legs and before I knew it there were congressional hearings where I was excoriated as part of the problem (“Rest assured that we will hold the department to account”) while the Acting Director of the TSA sat there, smiled, declined to actually answer any of the questions posed and then went back to running the circus that is the TSA. Congress promised changes but no oversight of the agency materialized.
Fast forward 11 months and we’re dealing now with outrage and near revolt on the part of the passengers in many camps. The Director of the TSA has made statements effectively blaming us, the passengers, for causing the problems and reminding everyone that if they are delayed at security and miss their flight on Wednesday it is because other passengers have decided that being strip-searched was simply too much, not because the searches are happening.
I hear people say “Well, as long as it makes us safer,” as a justification for the searches. They do not. These searches are not based on any actionable intelligence report. They are based on random reactions to previous events and to extensive lobbying on the part of former DHS employees to score huge contracts to sell the strip-search machines.
I hear people suggest that doing it “Israel-style” will make us safer. Probably not, and even if it would our society is not willing to accept the costs – time or dollar – to go there. And we shouldn’t. The threats and the infrastructure being secured are very different.
Some airports (Orlando and Colorado Springs are the two most recent to suggest such) want the TSA out and replaced with private screeners. Sadly, however, the screening policies are still set by the TSA and ultimately it is these policies that cause the problems. Having transited security at SFO several times in the past couple years I can safely say that the private contractors performing the unreasonably invasive searches are no better than anyone else performing the same.
When I can walk through the checkpoint and see a document out in plain view labeled “Unpredictable Screening Checklist” complete with the details on what types of events are considered “unpredictable” and how often each TSO is expected to perform such there is something VERY wrong with the SOP. When I explain to the folks running the checkpoint that they probably shouldn’t have those documents in plain view they generally shrug and move them somewhere else that is still in plain view of the passengers.
Lots of people suggesting lots of things, except the obvious solution: hold the TSA accountable. Elected officials are only just now starting to consider suggesting that the TSA isn’t perfect. Doing so when it was not clear that the public was opposed to the TSA was political suicide as their opponents would campaign against them on that front. But now that there is some political cover – hard for their not to be as the TSA is groping passengers, adult and child alike – the politicians are finally starting to speak up. Not enough, yet, but the movement is afoot.
Here’s hoping the uproar continues. Here’s hoping that passengers see the TSA for what they really are. Here’s hoping that our country can finally choose to not live in fear. These will be my thoughts as I travel this week, knowing that I have the right to not be strip-searched just to get on an airplane.
I will fly proud, not afraid. I will not let anyone terrorize me, including my own government.
The State Department has published a proposed rule in the Federal Register announcing their intentions to change the rates charged for a number of consular services that they render around the world. Among these services are the issuance of passports and visas for travelers. Unsurprisingly, these fees are being increased to “ensure that fees for consular services reflect costs to the United States of providing the services.”
The Department conducted a study of their operational costs for a two year period, August 2007 through June 2009 and have concluded that they are not appropriately recovering the costs for performing these activities through the fees they are charging to the public. The issuance of passports, visas and other consular services is based on the following principle:
[E]ach recipient should pay a reasonable user charge for government services, resources, or goods from which he or she derives a special benefit, at an amount sufficient for the U.S. Government to recover the full costs to it of providing the service, resource, or good
For the most part the fee changes are trivial. The cost for a new or renewed Passport Book is increasing by $35 to $110. That is a 46% increase and the new number breaks a somewhat mythical $100 barrier, but the total dollar amount difference is still tolerable in most regards. Of this increase, $20 is attributed to the increased costs of producing the passport books with increased biometric capabilities. These are the RFID chip passports that the US Government has been issuing for about four years now. They are the same passport books that have been the subject of controversy for at least two years. Passport books that are being sold to the Department of State at a huge markup from the actual production costs – a full 100% – and now the State Department has decided to finally account for that largesse. By passing the costs on to the consumer.
Similarly the costs for issuance of Passport Cards are increasing, but not nearly as significantly nor in a manner that actually covers the production costs. Based on the reasoning that, “the card is intended to be a substantially less expensive document than the passport book, for the convenience of citizens who live close to land borders and cross back and forth frequently,” the Passport Card fee is increasing to only $30, well below the cost of about $77. It is worth noting that the cost-basis for Card and the Book are calculated to be different numbers even though both documents are issued based on the same credentials. Gotta love government math.
I’ve previously documented some of the adventures I’ve gone through trying to get extra visa pages in my passport and at least I could take solace in the fact that I was only out time to make that happen. That will change in a big way as part of the proposed changes. Having additional pages inserted into passports apparently doesn’t happen particularly frequently. The expectation is that there will be only 218,000 requests for this service in Fiscal Year 2010 compared to 11.9MM passport books and 1.56MM passport cards issued. Apparently this rarity contributes to the costs of performing the actions. The new fee for this service will ring in at $82 per instance.
[T]he cost of the pages themselves, of having the pages placed in the book in a secure manner by trained personnel, and of completing the required security checks results in a cost to the U.S. Government of $82.48 based on a projected FY10 workload of 218,000. Therefore, the Department will charge $82 for this service.
I can’t figure out which bit actually costs so much. The pages shouldn’t be too expensive as they don’t have the RFID chip that makes the book cost so much. And the “security checks” shouldn’t be much more than swiping the passport like at immigration to make sure that it is still valid and hasn’t been reported lost or something similar. Yet the cost is increasing dramatically. Not good at all.
The most significant dollar amount change for any service is that for the renunciation of citizenship. This process used to be fee-free for folks seeing citizenship elsewhere. It will now ring in at $450. Yikes!
Like many other things the government does these days the fee increases are repeatedly labeled as based on increased costs to comply with “security” changes instituted by Congress. There are “increased costs related to new passport agencies serving border communities,” “costs of increased border security,” and “costs of the enhanced security screening requirements associated with fingerprint collection.” Even worse, is this claim with respect to the increased costs for Passport Book issuance:
[T]his fee incorporates the costs of meeting the increased demand for passports as a result of actions taken to comply with section 7209(b) of the Intelligence Reform and Terrorism Prevention Act of 2004, Public Law 108-458 (reproduced at 8 U.S.C. 1185 note).
In other words, the government is requiring all citizens to use passports for travel because of the Western Hemisphere Travel Initiative (WHTI) rules. And those rules mean that more folks will need passports. Yet the cost to produce the passports isn’t going down as the volume increases. In fact, the per unit processing cost somehow managed to increase. That seems quite backwards from the way things work in the rest of the world.
The worst part of all these fees is that encouraging global travel amongst its citizens is a good thing for the country. Insularity and ignorance of global cultures are bad things for any society. And now the US Government has decided – again – to make it even harder for folks to overcome those limits. Bummer.
A few months ago I wrote about some inquiries that Congressfolks were making over the unbundling of airfare components. Basically the airlines have been shifting more and more of the travel costs out of the base ticket price but the feds are only able to tax that base ticket price. The end result is that all the unbundled services are about 7.5% better for the airlines than simply raising fares by a comparable amount across the board.
It seems that the folks on the ill can take a break from that saber-rattling or at least find a way to refocus their efforts. The IRS released a ruling in response to a request from American Airlines, clarifying about 40 different scenarios and the taxability of each under the IRS code. The document is, as one might expect, a rather boring read. But it does provide some insight into just what the carriers can charge for without having to pay any taxes. In addition to any baggage handling the ruling addresses the taxability of buying miles (taxable), lounge memberships (not taxable) and fuel surcharges (taxable).
Probably not a huge surprise but it does confirm that the airlines’ decision to unbundle services and charge fees is more profitable for them than simply raising fares, to the tune of about 7.5%. In an industry that has been bleeding cash every little bit helps.
I must admit that being admonished by a Congressman has never been particularly high on my list of things to do. I’ve generally tried to stay under the radar of Congress. That all went out the window a couple weeks ago when the TSA’s Screening Management SOP document was published online with the supposedly redacted text still in the body. I’ve been in contact with a number of Congressional staffers since then and have been trying to help them understand that this wasn’t the case of crazy hackers acting maliciously. It is copy and paste. Really quite simple.
I sat through about 90 minutes of hearings from the Subcommittee on Transportation Security and Infrastructure Protection on Wednesday, hoping to hear that the congressfolk were going to do something about this event. Instead I was treated to nuggets like this one from Congressman Charles Dent (R-PA):
To those who repost this security information on the internet you should share in the blame should security be breached as a result of this disclosure. In the future I would ask that you please, please use the whistleblower process congress has created for you. Call the department. call the inspector general. Call congress and its committees. But please do not circulate sensitive security documents. Rest assured that we will hold the department to account.
In essence he’s calling me out for sharing this document rather than using “internal” procedures to address the issue. While I can understand the Congressman’s point – ideally truly secret information should never be made public – I must respectfully disagree with his thoughts on this topic.
Many minutes were spent throughout the hearing listening to TSA Acting Director Gale Rossides explain to the Congressmen that she would not provide them with copies of the current version of the SOP document even though she is bound by law to do so when requested. She refused to provide a timeline under which such a delivery would be made. It is quite humorous that Congressman Dent feels Congress can “hold the department to account” when the Agency shows no signs of actually respecting the rule of law.
The published version of the SOP contains many sections that were redacted seemingly out of convenience rather than a need to legitimately hide information. Among other things, the Agency chose to hide the fact that their policies seem to be in violation of their own public policy on discrimination as well as international treaties and executive orders. Is that a matter of actual security or hiding legal wrongdoing?
The TSA continues to hide their policies behind the veil of SSI while refusing to be held accountable to anyone for their behavior. The Congressman may believe that the Agency can be controlled but all evidence thus far seems to prove otherwise. In the meantime, it seems completely reasonable to me to continue to share when the Agency misbehaves. Perhaps if more people did so they would actually be held accountable.