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The impact of infrastructure-related add-on taxes and fees on the cost of domestic U.S. air travel and of domestic and intraregional EU air travel is estimated. For the United States, an analysis of the Origin and Destination Data Bank 1A Ticket Dollar Value database shows that the average effective tax rate increased from 10.9% in 1993 to 16.1% in 2004. A large portion of the increase is due to a striking 25% decline in the real average base fare. The relative impact of taxes and fees is greatest on the least expensive tickets. The effective tax rate for low-cost carriers is moderately greater than for legacy carriers. For the European Union, a sample of about 335,000 tickets from January 13 and 14, 2004, was used, with the effective tax rate estimated at 12.5%. However, EU taxes and fees do not cover the cost of air navigation services, and thus the 12.5% effective tax rate should not be compared with the 16.1% U.S. rate. A preliminary correction for this difference suggests that the true effective tax rate is higher in the European Union than in the United States. The intra-European Union average of 12.5% also masks large differences among countries (which range from 6.6% for Luxembourg to 24.4% for the United Kingdom). The relative impact of taxes and fees on the least expensive tickets is even greater than in the United States.

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