Fuel dump [fyoo-uhl duhmp] (noun):
1. An airfare construction designed to reduce the YQ fuel surcharge that airlines place on certain routes. Used by passengers to save potentially hundreds of dollars per ticket.
2. A tax avoidance scheme perpetuated by airlines via shell companies to avoid paying millions of dollars annually to the city of Chicago
A nod of the cap to Frequently Flying for mentioning this story yesterday. Basically American Airlines and United Airlines have both set up shell companies in Sycamore, IL where they buy lots of jet fuel. Sycamore is just over an hour west of O’Hare and doesn’t really have much to do with airport or airline operations, other than that the city government there was nice enough to set up a great kick-back system for the airlines.
When jet fuel is purchased in Illinois it is only taxed at the retail level. By placing the wholesaler in Sycamore the airlines are able to avoid a 1.75% Chicago city tax on fuel. Even better, however, is that the city actually refunds part of the city tax paid. Of the 8% sales tax charged only 5.25% goes to the state. The city gets to decide how they want to spend the other 2.75%. And the city has decided to give most of the cash back to the airlines in exchange for hosting the operations in Sycamore. The city keeps only about $400,000 of the funds and is "thankful for the revenue stream."
Makes me feel a bit less bad about trying to trim a couple hundred dollars of fat from a few fares every now and then.
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