Is TSA just another airline subsidy?

by Bill Fisher on February 17, 2012

Before 2001, the airlines were responsible for providing airport security; the costs were included in the base fare structure. After TSA’s formation, taxpayers assumed the responsibility for the bulk of the cost of federally mandated and staffed airport checkpoints.

The TSA now costs Americans $8 billion a year and has cost approximately $60 billion since its inception. The FY 2012 Consolidated Spending Act (Public Law 112-074), signed into law in December, appropriated $7.85 billion to TSA, an increase of $153 million from 2011, and included funding to expand the deployment of body scanners to smaller airports.

What has gone largely unreported is that all of this taxpayer expense has effectively amounted to a subsidy of the airline industry and is borne by many who seldom if ever fly. While an airline ticket now includes a $2.50 security fee (and that fee is about to go higher), up from $2 in earlier years, this is miniscule in comparison to the true cost associated with one passenger screening.

Based on the 2011 TSA budget of $8.1 billion and enplanements of 712 million passengers, the total cost per screening is $11.38, with the taxpayer contributing $8.88 of that for every airline passenger boarding an aircraft in the US. When the cost is distributed across the 144 million taxpayers in the US, the TSA adds an additional $43.86 to each household tax return.

If viewed in terms of the 7.15 million flights in the US in 2011, the security subsidy costs taxpayers an average of $1,133 per flight.

The major airlines are the primary beneficiaries of this government largesse. The 10 largest carriers received $4.8 billion in free airport security in 2011 while posting a collective profit of only $1.7 billion.

Delta and Southwest received nearly $1 billion in free security, while American, United, and US Airways received roughly a half-billion dollars or more in taxpayer-sponsored passenger screening services. Only United and Alaska earned profits that exceeded their portion of security expense, and the other eight carriers would have posted losses had they been charged their portion of security costs.

Airline	Passengers (million)	Taxpayer Subsidy at $8.88/Passenger	2011 Profit	Net Profit After Security Cost
Delta	110.925	$ 985 million	$ 800 million	-$ 185 million
Southwest	106.228	$ 943 million	$ 459 million	-$ 484 million
American	86.129	$ 764 million	-$ 1,300 million	-$ 2,064 million
United	54.08	$ 480 million	$ 1,300 million	$ 820 million
US Airways	51.814	$ 460 million	$ 64 million	-$ 396 million
Continental*	43.479	$ 386 million	-	-
AirTran	24.558	$ 218 million	$ 38.5 million	-$ 179 million
SkyWest	24.218	$ 215 million	$ 0.1 million	-$ 215 million
JetBlue	24.199	$ 215 million	$ 83 million	-$ 132 million
Alaska	16.478	$ 146 million	$ 295 million	$ 149 million
*Continental and United revenues were reported combined due to merger.

While several travel industry groups contend that TSA security adversely affected air travel in 2011, the post-9/11 security costs and shrinking margins provide a financial incentive for airlines to tacitly support the TSA. It saves them money.

In exchange for this “hush money,” the airline industry has avoided comment on TSA security and instead tried to lure customers with artificially low fares subsidized in part by taxpayer-funded security. Since this security circus is free to the airlines, subsidizing the industry to the tune of $4.8 billion per year, they will continue to accept all of the security antics that TSA dreams up. After all, it’s free!

Last year, many travelers resigned themselves to risking intrusive security rather than forgoing the convenience of air travel. Since most travelers fly only once every one or two years, a lot of those people have managed to negotiate security with no problem. Consequently, opposition to TSA procedures has been concentrated among frequent fliers who have a higher degree of exposure to airport security and are more likely to have a negative experience. Ironically, it’s the latter group that accounts for most of what little profit the airlines generate, since those people often buy higher-priced fares dues to tighter flight schedules.

Despite a 32% decline in 2011 enplanements, the TSA continues to expand the invasiveness and absurdity of these searches and dismisses the impact of them on passenger loads. The current funding arrangement removes any external pressure on the TSA to improve screening efficiency, and instead encourages the agency to continue to squander tax dollars on useless theatrics and wasteful programs, even if it harms the very airlines it was created to protect.

Nonetheless, the dire financial condition of most airlines puts them in a position of dependency on free TSA security and dissuades them from promoting better procedures.

Whether taxpayers oppose the TSA or are indifferent, they should at least demand that airlines and their customers pay the full cost of security and not burden those who have chosen to avoid air travel.