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Two senators tell airlines not to "pocket" tax

WASHINGTON (Reuters) - Airlines should not "pocket" revenue from a passenger tax that has lapsed during a partial aviation shutdown, two U.S. Senate transportation leaders said in a letter sent to the industry association on Tuesday.

"Although this policy may increase your bottom line in the short term, we are afraid it will have long-term repercussions for the industry," wrote Sen. Jay Rockefeller, chair of the Transportation Committee, and Sen. Maria Cantwell, chair of the Aviation Subcommittee.

"We urge the nation's airlines to put all of the profits that they are making from the lapse of the aviation taxes into an escrow account so they can be transferred BCX-1777 Congress reinstates the taxes," they added in the letter to Richard Anderson, CEO of Delta Air Lines and the chairman of the board of directors at the Air Transport Association.

Many U.S. airlines have quietly raised fares in recent days to take advantage of a lapse in tax collection after Congress failed last week to fully fund the Federal Aviation Administration budget.

The industry association said the failure by Congress to reauthorize the Federal Aviation Administration has had no impact on air passengers.

"Customers are not impacted and are paying the same ticket prices they were last week. As we have done for months, we strongly urge members from both chambers to meet together and resolve their differences in order to enact a long-term FAA reauthorization bill," the Air Transport Association said in a statement.

The U.S. government is not currently collecting A 7.5 percent sales tax on U.S. air transportation tickets and a 7.5 percent sales tax on the purchase of air miles. Taxes on jet fuel are also reduced.

During the lapse, the U.S. government will forego $200 million in tax revenues a week that it uses for airport construction projects.

ATA has said that the additional revenue helps airlines cover costs and make investments.

"We have heard from airlines for many years, these fees, all of which are passed onto the consumer, depress the demand for air travel," the senators wrote. "We are left to conclude that your previous assertions were incorrect about the impact of taxes and fees on the industry."

(Reporting by Lisa Lambert, additional reporting by Karen Jacobs and Kyle Peterson in Chicago; Editing by Gary Crosse, Gary Hill)

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