Senate tries to stop airline fees

GreedAir
By | March 11th, 2016

The U.S. Senate is taking a surprise stand against airline fees.

The Forbid Airlines from Imposing Ridiculous Fees Act of 2016 (FAIR Fees Act), introduced this week, would prohibit air carriers from imposing fees that are “not reasonable and proportional” to the costs incurred by the air carriers. And the Senate version of the Federal Aviation Administration reathorization bill, also introduced this week, contains a provision that would commission a government study on how air carriers calculate some of their most profitable fees.

The proposed laws came as a surprise to industry observers, who are accustomed to a hands-off approach to regulating airlines. Taken together, the developments suggest that even in a Republican-controlled Congress, there’s a limit to what the airline industry can get away with.

Grounding “soaring” fees

Fees are a chronic source of complaints among constituents. Airlines have sought to inoculate themselves from regulation by waiving ticket change fees for members of Congress and with generous campaign donations. But now, even that appears to be insufficient to stop proposed regulation.

“This measure will ground the soaring, gouging fees that contribute to airlines’ record profits and passengers’ rising pain,” said Sen. Richard Blumenthal (D-Conn.), who co-sponsored the Fair Fees Act. “With all the frills of flying already gone, airlines are increasingly resorting to nickel and diming consumers with outrageous fees.”

Take checked baggage fees, for example. Between 2009 and 2014, three airlines increased checked baggage fees by 67 percent, a recent investigation by the minority staff of the U.S. Senate Commerce, Science and Transportation Committee found. It’s a jarring increase, when you compare the modest $464 million earned in 2007 to 2014’s astonishing $3.5 billion. In the past, airline executives have said fees like this can represent the difference between a profit and a loss.

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Blumenthal also notes that four airlines increased domestic cancellation fees by 33 percent between 2009 and 2014, while one increased the fee by 50 percent, and one increased its fee by 66 percent, according to the Senate study. The numbers are dramatic here, too — cancellation fees skyrocketed from just $915 million in 2007 to $2.9 billion in 2014.

It’s difficult to argue that the airline’s cost to transport a checked bag or make a ticket change has increased by that much in just a few years, according to Blumenthal. He says these “runaway” fees can, in some cases, double a passenger’s airfare, and that people who are least able to afford them — non-elite level parents who are traveling with young children — are hardest-hit.

“A parent who wants to sit with his young child, a customer who wants to check or carry on a bag, or have Wi-Fi, or a traveler who needs to change or cancel a reservation should not incur exorbitant, unnecessary fees on the whim of an airline,” he adds.

An airline industry representative predicted that regulating fees would lead to higher fares.

“When the government last dictated airline pricing, many couldn’t fly because it was cost prohibitive,” warned Jean Medina, a spokeswoman for A4A, a trade association for airlines. “Customers have choices today. They can purchase non-refundable fares that are highly affordable. If they would like the flexibility to change their ticket at the last minute, they can do so as well.”



  • 42NYC

    Get rid of fees and all ticket prices go up.

    I’d rather have the option to pay $25 to check a bag vs being forced to pay $15 regardless.

    I’d rather have the option to pay $7 for a cocktail than be charged an extra $5-10 for a flight with an open bar.

    I’m 6’6″ so would rather have extra legroom baked into the price of the ticket but expect most would rather have the option to pay $39 for extra legroom than have a $20 ticket increase on all tickets

  • Melissa Ballard Jones

    The change fees for nonrefundable tickets are not proportional to the cost incurred by the carrier.

  • KanExplore

    Absolutely. The headline is misleading – it isn’t the Senate that’s proposing to ban low airfares; it’s a couple of Senators who tossed out a bill that is unlikely to get anywhere. People are happy to propose things to win votes without thinking through the unintended consequences. It’s part of a campaign against low airfares, and I’m not sure the legacy carriers would really mind policies that would drive their low priced competition out of business and force their peers to raise prices along with them.

  • Michael__K

    Get rid of fees and all ticket prices go up.

    Not necessarily. Did any carrier ever lower ticket prices when they raised fees? Why would you expect the reverse dynamic to work differently?

    Anyway, no one has suggested getting “rid of fees.” This bill is about the $9 fares with $100 fees for a small duffel bag that fits under your seat. That is good for passengers how exactly?

    Not saying that this bill is the most intelligent way of attacking the problem, but the knee-jerk “ticket prices will go up” reactions to every single proposal to make any changes to the status quo are a bit over-wrought.

  • Tanya

    I just think that Congress has better things to be debating about. As a friend pointed out, if you think that $25 for a bag is too expensive, then ship it fedex, don’t fly, or pack lighter. This will only drive the price of the ticket up.

  • Lindabator

    but by making the fee low, people change their tickets as often as they change their minds – which makes it impossible for an airline to manage their load factors – which is WHY they raised them in the first place.

  • Michael__K

    What gave you the idea that this particular bill has anything to do with $25 baggage fees? Those fees are easily justifiable and proportional to the service costs incurred.

    This is about $800 change fees, $200 fees for certain bags (e.g. 1 lb. overweight), and $100 fees to put a small duffel bag underneath the seat in front of you.

  • joshie

    They raised them to make money and lock in passengers. Air fares change daily (and sometimes throughout the day). Change and cancelation fees are set high enough to dissuade flyers from changing to a lower fare itinerary or canceling altogether and going with a cheaper flight that just showed up from a competitor.

    A change fee could be set at a reasonable price point (say $25) that would dissuade most people from changing their mind on a whim but would allow switching to a lower priced ticket or canceling without losing a wad of cash. I wouldn’t have a problem with the fee being higher within say 24 hours (while still being reasonable) since it’s less likely they can resell a seat at the last minute. But months in advance? Come on!

    Not to say that this proposal is the right approach–it probably goes too far–but I’m in favor of some limitations being enforced.

  • John Baker

    Ok … Option #2 – Its a non-refundable ticket. So, instead of having a change fee, they just change the fare rules to say no changes. Would you be happier then?

  • John Baker

    Or … they’ll just ban changes and you have to eat the ticket if you don’t want to fly on that flight. Would you be happier then?

  • LostInMidwest

    Meh … mixed bag in that proposal. I want 4 airlines BANKRUPT. Their CEOs in Washington with a hat in their hand suffering enormously from the hot air being blown at them from above. That’s what I want. No amount of oversight, of NTHSA, DOT, rules upon rules upon rules … none of that did consumers in this country much good until Detroit imploded. That was when Americans started getting awesome product to buy.

    Nothing sobers you up as good as near-death experience.

  • Michael__K

    If fewer passengers were changing their minds, then we would expect total revenue from change fees to increase by a smaller percentage than the fee hikes.

    Data published by Airlines for America (an airline lobbying/advocacy organization) demonstrates quite the opposite. Revenue increases from change fees over time can be explained almost perfectly by fee hikes and stricter policies.

    This strongly suggests that passengers were no more likely to change their minds in the early-mid 1990’s (when the change fee was generally $50 — which would be about $80 today adjusting for inflation) than they change their minds today.

  • joshie

    I’d be happier without asinine responses like this.

  • Melissa Ballard Jones

    Oh good grief. Ask Southwest how they do it…

  • Michael__K

    I’d like to see a narrowing of the airlines’ broad exemptions from state and local consumer protections laws under the Airline Deregulation Act, as interpreted by the Supreme Court

    Let’s make contract provisions automatically reciprocal, as is the standard in many states. Then if an airline wants to charge an $800 change fee, they can, but guess what they owe each of their passengers when they make a significant schedule change?

    And if no changes whatsoever are permitted? Then passengers receive a refund and a free alternate flight if the airline pulls the flight from its schedule.

  • AJPeabody

    Pie in the sky. No regulation proposed by a Senate Democrat will make it through a Republican House dedicated to obstruction.

    Anyway, define “reasonable.” Debate different versions of “reasonable.” Take “reasonable” to court. Appeal. Never going to happen, folks.

    If you really want to end the fee farce, just tax all fees at twice the rate that fares are taxed, while requiring only all-in prices to be advertised. Presto! No fees means lower advertised prices and the jig is up.

  • MarkKelling

    Ticket prices were not lowered when fees were added because the fees were added instead of raising ticket prices. So if fees are eliminated, the airlines will get that money replaced the only way they can – by raising ticket prices.

  • MarkKelling

    Southwest has no problem managing their load factors, yet they don’t charge any change fees.

  • KanExplore

    How often can they really do that, though? Unless it was the last seat on a sold out plane, anyone buying a seat will merely be buying one they would have purchased anyway.

  • KanExplore

    There is some validity to the idea there’s no quid pro quo in terms of fees and fares. But the airlines factor into their operational cost and revenue projections for any given flight their expected income in fees. If decreased revenue means the new airfare at which they can make a profit is higher, they can be expected to raise the price accordingly. No it won’t go purely in tandem, but the fact that banning fees also bans the low cost carrier model means decreased competition altogether, which is another factor that will inevitably drive prices up.

  • KanExplore

    Higher advertised prices because the bundled fare you’re hoping for will always be higher than the fare before fees is now.

  • Michael__K

    So if fees are eliminated, the airlines will get that money replaced the only way they can – by raising ticket prices.

    Not necessarily. The airlines may not succeed to replace that money at all. Remember, when ancillary fees first took off, the airlines were mostly losing money and yet they were still unable to maintain base fare increases to reflect their high fuel costs at the time.

    The advantages of ancillary fees were that:
    (a) they didn’t hurt the placement of the airline’s flights in search engines and were generally less noticeable than fare increases
    (b) they were tax free (a 7.5% revenue bonus)
    and
    (c) some fees (e.g. baggage) changed passenger behavior such that fuel costs and other operational costs were lower.

    Absent those structural advantages, they may not be able to replace that net revenue.

    Of course, no one here is seriously proposing to “eliminate” fees. This is mainly about the predatory fees that are completely out of line with the cost of the service rendered.

  • Michael__K

    I haven’t seen any proposal to ban fees. Have you?

  • Alan Gore

    Rather than having the FAA set specific fee amounts, I would settle for requiring that any fee for a non-optional item be quoted as part of the base fare. There would have to be some language in the bill defining what a base fare includes (minimum seat size and pitch, one checked bag, etc.).

  • Michael__K

    The proposed bill would require the Secretary of Transportation to draft regulations defining “reasonable” in as much detail as they choose to. Which of course would leave a great deal to the discretion of whoever is in charge of the DOT. Agree with the rest of your comment.

  • Michael__K

    Starbucks doesn’t enjoy a special exemption from state and local consumer protection laws and their record profit margin was ~14%.

    When they charge $50 for a cup if you didn’t bring your own — after they’ve already pocketed the (non-refundable) charge for your drink order — then maybe we could revisit this.

  • John McDonald

    exactly, what the hell is a left wing senator advocating higher airfares for ?
    If you don’t like the baggage fees, don’t check so much, if you don’t like the airfare, drive, although many more people will then die on your roads.
    If you don’t like the change fees, don’t change or don’t fly.
    Seriously this senator is not very bright (how do you become a senator in USA anyway-a prize in a packet of corn flakes ?)
    The senate can probably control stupid security fees. Flying in USA is far LESS safe than prior to SEP11, but the TSA will tell you, you are safer. What a joke.
    Airport fees are crazy. Recently looked at flying for 90 mins in Australia & fares were high, as airport charges along were AUD$75 before any airline costs. In other words, the airline was better off letting seats go empty than to dump seats for less than say $120. This is all before govt taxes. Govts everywhere waste hundreds of billions of dollars everywhere. If we reduce this waste, then funds can be used somewhere useful.

  • KanExplore

    Ok, “sharply restricting fees”. Same result.

  • Michael__K

    “Sharply?” How many fees do you believe are “not reasonable and proportional” to the underlying costs?

    And why would anyone believe that such fees — think of the $9 fare with a $100 fee for a duffel bag underneath the seat in front of you — are good for passengers?