Airlines Set Record Charging US$7.1 Billion Fees for Bags and Flight Changes Last Year
USA TODAY | Sep. 20, 2017
Airlines collected a record US$7 billion last year in fees on baggage and flight changes, reflecting a steady rise in those fees since 2010, according to a government report Wednesday.
The US$7.1 billion compares to US$6.3 billion in 2010, in dollars adjusted for inflation, according to the Government Accountability Office. Consumer advocates complain that the growing fees make it tougher to compare prices, even as airlines say the fees cover choices are part the competition between carriers.
The 54-page GAO report found:
♦ On average, customers who paid for at least one checked bag ended up paying more for combined airfare and fees than they did when prices were bundled and included baggage.
♦ Consumer groups say optional fees can't always be paid when buying a ticket, leaving surprises for travelers at the airport.
♦ Department rules have made optional fees more transparent, but consumer groups say it can still be difficult for travelers to know what fees they face when buying tickets through online travel agents.
"Going to an airline check-in counter should not result in a last-minute shakedown," said Sen. Bill Nelson, D-Fla., who requested the study. "It's time for the airlines to stop run-away fees."
William McGee, an aviation adviser to Consumer Reports, said travelers searching for an airline ticket should be told the full price up front including all the fees, whether the airline or a travel agent is selling the ticket.
"Consumers should be able to shop for airline seats without being nickel-and-dimed, and without getting hit with post-purchase sticker shock," McGee said.
But the trade group Airlines for America, which represents most of the largest carriers, said the GAO report underscored that travelers have more choices among carriers and among amenities than ever before.
"U.S. carriers offer both all-inclusive and a la carte products, as well as price points that range from first-class to budget-friendly travel ensuring that flying is affordable and accessible to all," the group said.
The rising fees coincided with a profitable airline industry each year since 2010. Airlines reported $15.6 billion in net income last year, after a record under deregulation of US$26.4 billion in 2015, according to the Bureau of Transportation Statistics.
"These fees are shrouded in secrecy and clouded in confusion, making it nearly impossible for passengers to price compare and make informed choices," said Sen. Richard Blumenthal, D-Conn. "And these fees are rooted in the pursuit of greater profits - not in offsetting travel costs to airlines. This shell game in the skies must end."
Lower fuel prices helped. Fuel, which is traditionally one of the larger expenses for airlines, cost the carriers US$24.7 billion last year, down from US$50.2 billion in 2012, according to the bureau.
Airlines say they are plowing profits back into their product by buying new planes and improving labor contracts. The profits followed a decade of losses, including a US$23.8 billion loss in 2008, after the terrorist attacks of Sept. 11, 2001.
Nicholas Calio, CEO of the group, wrote Wednesday in Roll Call newspaper on Capitol Hill, that airlines opposed a move to regulate pricing and services again, after Congress deregulated the industry in 1978. He said the result "would drive up the price of airline tickets while eliminating customers' ability to choose which services they do and do not want."
When airlines created bag fees, they dropped average fares less than the average bag fees, according to peer-reviewed economic studies that GAO studied. So overall, travelers who continue to check bags with fees added to fares are paying more than when bags were included, while those with just carry-on bags are saving money, according to GAO.
"This report confirms what countless passengers across the country already know to be true - that airlines are nickel and diming captive passengers to line their pockets, not to cover the costs of the services provided," said Sen. Edward Markey, D-Mass.
Airlines note that average round-trip domestic fares including fees fell 41% from 1979 to 2016, according to Transportation Department figures. Average fares are down 17% in real terms from 2000 to 2016.
"It's quite clear our passengers are more than able to navigate the wide menu of choices that airlines offer without interference from Washington," Airlines for America said in its statement.
So far this year, airlines collected US$2.2 billion in bag fees and nearly US$1.5 billion in change fees during the first six months of the year, according to the department's Bureau of Transportation Statistics.
But fees are a point of contention between airlines and airports. Congress is debating whether to raise the US$4.50 federal cap set on 2000 on local fees added to airline tickets for construction projects.
Airlines oppose a fee hike to US$8.50 per ticket because of concerns that higher fees will discourage travel. But airport executives contend the construction fees are negligible compared to what airlines charge for bags and flight changes.
"Why do airlines think a bag fee is good and an airport facility fee is bad?" asked Todd Hauptli, CEO of the American Association of Airport Executives. "Because one goes in their pocket and the other builds facilities that can increase competition, resulting in lower fares."
Airline fees began to proliferate in 2008, as carriers sought revenue amid the losses after the Sept 11 attacks through a piecemeal approach outside of standard fares. Fees aren't subject to federal excise taxes like fares.
Roomier seating, earlier boarding and better food are all available for a fee now. But fees for bags and flight changes are the only ones reported to the Transportation Department by 11 larger airlines carrying 80% of U.S. passengers.
Consumer groups have criticized the fees for making it harder to compare fares. While airlines post fees on their web sites, some are more obvious than others. Travelers are occasionally surprised to learn about bag fees at the airport.
Airlines aren't monolithic in fee policies. Southwest Airlines doesn't charge bag fees - and markets that difference in competition with other carriers.
But the industry generally contends that fees allow customer to pay for what they need. For example, a traveler with just carry-on bags could avoid the change that would otherwise be built into the cost of a ticket.
Fees to change flights are sometimes larger than the original fare. Lawmakers routinely propose to limit change fees to the actual cost of changing the ticket.
But airlines contend that substantial fees are needed to discourage changes, in an effort to fly with as many seats occupied as possible.