The ancillary fee circus is coming to town!


Mention the word “ancillary fees” to someone like John Cashman, and I can promise you his eyes will glaze over. Yours too?

They shouldn’t.

Ancillary fees are the travel industry’s code word for deception. As in, we keep our base fares and room rates low, then sock you with extra fees. They’re fees that ought to be included in the price, like the ability to carry a bag on the plane or use the hotel pool, and they add up to tens of billions of dollars in ill-gotten profit.

Think of it as the Ancillary Fee Circus.

From the perspective of a consumer like Cashman, it’s simple: the fees shouldn’t be stripped away from the product and then added on afterwards because it leaves him with the impression the product costs less than it does. But if they do it, then they should at least make the fees refundable.

As you can probably guess, I’m writing about Cashman’s problem for a reason. The latest Federal Aviation Administration Reauthorization Bill promises to improve the disclosure of these controversial fees, and new regulations on the horizon might even require that airlines and hotels make these fees transactable. Currently, you have to pay for these fees directly, but not through a travel agency.

An agency like Expedia.

Cashman used a flight credit to book tickets through Expedia on Virgin America and had confirmed premium main cabin “select” seats, a $200 value. For some reason – it’s not clear why – he lost those preferred seats when he changed his flight and used his credit to rebook through Expedia. Repeated requests to get a refund from Expedia have gone unanswered.

I’m not going to keep you in suspense. Our advocacy team will jump in and see what it can do. Expedia should at least respond, don’t you think? Even if to just say “no.” (We’re guessing that since the upgrade was purchased directly through Virgin, he’s chasing the wrong company, but we’ll find out soon enough.)

But Cashman’s problem is an excellent example of the ancillary dilemma. It’s worked out great for airlines and hotels. They get to fool their customers with low rates, and then they pile on the profits afterwards.

By the way, I should add that there are some customers who actually prefer these stripped-down tickets because they don’t want any of the amenities, like the ability to check a bag or sit in a seat with a humane amount of legroom.

These consumers think they’re being clever, but they are really just falling for deceptive marketing. The cost to provide these services is not in line with the amount of the fees. Not having these “optional” items leaves you with less than half a product. In journalism terms, it would be like writing a headline but then charging you extra for the story. Some of you say, “But I just read the headlines.” Come on. It’s not a story, and you know it.

Ancillary fees, particularly the way they’re presented today, haven’t worked out so well for customers. They’re often poorly disclosed and added on at the end of the transaction. You can’t easily compare prices between hotels or airlines, which is exactly what companies want. You also end up paying more for the product after the fees are added on. Double bonus to the company.

Cashman deserves a refund, of course. But should the government get involved in regulating this multibillion dollar scheme? The problem is, there’s more than one problem:

  • Ancillary fees are often poorly disclosed or undisclosed until a guest is presented with a folio or invoice. The Federal Trade Commission is a pushover when it comes to pricing displays.
  • The fees are the result of an elaborate price game, removing something that used to be included and then adding it back as an expensive fee. Prices are never lowered during the process. The net result? Higher prices for everyone and higher profits for the company.
  • While companies refund tickets quickly, in accordance with federal law, the ancillary fees for seat reservations or checked baggage get stuck in the system. If airlines had their way, they’d keep the money; after all, aren’t these fees nonrefundable?>

The only practical solution is a simple rule that clearly defines the product (an airline ticket is a seat, a seat reservation and a checked bag), requires the company to disclose the full price of a product up front (not at checkout), and enjoins the carrier to refund all fees promptly whenever a flight is canceled, whether by the airline or the customer.

The net effect would be an end to the deception. Airlines would be free to call the fees whatever they wanted, but they’d have to enumerate all costs at the start of the booking process. No games, no gimmicks.

It’s too bad the government needs to step in and do this. But we’ve seen where laissez-faire deregulation got us. Companies are allowed to surprise you with fees and then keep the money, even when they shouldn’t. They can hide behind travel agents like Expedia. Maybe it’s time for this circus to leave town.

Should the government regulate ancillary fees?

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  • pmcw

    If an ancillary fee is mandatory (not for an optional service) it needs to be quoted in the price up front. Doing otherwise would be like an auto dealer advertising a car for a certain price, and then during the closing process disclose the buyer will have to pay extra for the engine. Hmmm, come to think of it, auto dealers already do something similar by adding dealer fees, paper work fees and such at closing… Well, at least they haven’t pulled the engine trick – yet.

  • Regina Litman

    “In journalism terms, it would be like writing a headline but then charging you extra for the story.”

    This actually happens on websites with premium content or with articles reserved only for subscribers , particularly subscribers of print editions. In a pre-online context, it happened and still happens with newspapers in vending boxes.

    I know this comment doesn’t add to the point you were intending to make with this article, but I couldn’t resist posting it. Please feel free to delete it if you feel it is not appropriate.

  • David___1

    I voted no, not because I’m in favor of fees, but because the issue is disclosure and refunds. It should be regulated that the price quoted is the full cost. If I need to pay $169 for a hotel room, I don’t care if it’s $169 as a total, or $109 for the room, $40 for resort fees, and another $20 for a room cleaning fee. Tell me the cost up front, tell me the total so I can compare. And I agree that there should be regulations on the refund process. No games. Something is cancelled, get it all back, no delays, no loopholes, all back.

  • Tanya

    I voted no, simply because I am not a fan of more government regulation. When someone can actually show me that the government does not waste my money and is efficient, then I will be all for more government regulation. Until then, the government needs to be handed back to whom it is there for. We the people. Not we who were elected and now pay ourselves far more than we are worth.

  • Michael__K

    This is silly and confuses regulations and budgets.

    A regulation doesn’t necessarily even impose a dime of new government expenditure. A regulation can merely empower consumers to seek justice in court. Or a regulation could even be a revenue generator with the imposition of substantial fines for violations. Of course there are pro’s and con’s with such an approach.

    But if you dislike federal regulations so much, why don’t we repeal the regulations which give the aviation industry broad exemptions from state and consumer protection laws (as well as from FTC oversight)? Why should they not be subject them to the same set of rules that We the People have already decided should apply to every other industry?

  • KanExplore

    That’s the point – mandatory and it’s not a “fee” but lying about a price. Optional and it is a fee. I despise “resort” fees because they amount to lying about the price. I favor baggage fees, though, because baggage represents a real cost to the airline for something some people want and others don’t. I don’t check bags and would rather not pay to check other people’s bags in the form of higher prices. Let the consumer choose by offering a range of options and spelling out the costs clearly.

  • Harvey-6-3.5

    I hear you, but when our local metro shut down for safety for a day, the local conservative radio guys blamed the “government”. But these same radio guys repeatedly refuse to support funding for needed repairs because they oppose mass transit. You can’t have it both ways. We need regulation because the airlines will cheat. The only entity that can control them is government.

  • KarlaKatz

    And, I had the same reaction: The New York Times and The Wall Street Journal, just to name two, have “teaser” headlines to draw one’s attention. To read the story, however, one must be an online subscriber.

  • KanExplore

    You have a point, but cheating is different from simply adopting a business model that gives people options to pay for services they want or not pay for services they don’t want. The airlines have largely adopted that model, but some people want the government to force them to include services they themselves use, but others don’t, in a base price that would certainly rise to take into account the increased expenses and foregone revenue the airlines would experience. I see the need for regulation in the area of operational safety, for example, but not in the area of charging for hauling people’s baggage.

    Giving people options is certainly not unique to the airline industry. My cell phone company has a dizzying array of possible plans I could select, depending on my needs and preferences. I wouldn’t want the government dictating they must include a specific menu of services unrelated to safety in a base price that everyone has to pay, whether they want to utilize the services or not.

  • Michael__K

    The airlines are playing the same display bias game that they used to complain to Congress about.

    When Sabre had a virtual monopoloy on the display of flight itineraries, the airlines outside of AA fought and succeeded to get hearings in Congress, and succeeded to institute regulations against “display bias” in GDS’s, because they proved that >>travel agents<< were unduly influenced by the order in which flight itineraries appeared in search results.

    Ironically, those same airlines are now playing that very same game with consumers today. They don't want their a la carte pricing to be transparent. Each carrier wants their flights to appear at the top of the search results, and they refuse to publish their ancillary fees to any of the standardized distribution systems (as they are required to do for base fares), where search engines could allow consumers to select their optional services up front and allow for consumers to see the true cost of their purchase up front.

  • Extramail

    I think we ought to know what the taxes are also. Hotel rooms add city tax, state tax, tax because we can tax and is, in my humble opinion, the ultimate in taxation without representation.

  • cowboyinbrla

    But that “worthwhile impact” isn’t necessarily the case. What you often end up with is someone packing the equivalent of a brick wall into their carry-on bag, and overstuffing a “personal item” so that it barely fits (or doesn’t really fit) beneath the seat in front. On every flight I take, I see at least 3 or 4 people put two items (sometimes 3, if you count winter coats) into the overhead bins, none of which would have remotely fit under an airline seat.

    So the people who pay for checked bags are subsidizing the rude people who break the carry-on rules and reduce the space available for everyone else who followed the rules.

    That said, baggage fees don’t really bother me (although they’re ridiculously high, as Chris notes) – they really are an optional service. They may have once been included in the fare, but then so was first-rate meal service, once upon a time. I’ve said for a long time, though, that advertising for fares should be regulated so that quoted fares specify what is and is not included, and also shows the add-on cost of a common basket of extras – seat selection fees, checked bag fees, etc. The problem isn’t the fee (in those cases); it’s the lack of disclosure.

  • IGoEverywhere

    I would appreciate the idea of using 1 price 1 product, but not through government intervention / regulation. It is not brain science to know what the price is for travel! Every time that the government gets involved, it costs more money, time, and aggravation. Another point; there is a hell of a lot of difference in a “Travel Agent” and an online travel agency. We are not part of the travel industry’s deception as in your first paragraph depicted. We have the business knowhow to present the client with the proper rates and rules. I do not present you with a 30 paragraph smallest print “I agree” check off, We explain it all to your satisfaction. I charge a minimal amount for services, but my clients as with most local store front “Travel agencies” do not have to write to with their small minded complaints. We have a few a year that have problems with their trips, but never the type with Avis, cruise lines, insurance companies, etc that are seen on your site. Leave the government out of it.

  • sheldan

    “…it would be like writing a headline but then charging you extra for the story.”

    Actually, that does exist. It’s called a paywall. :-) Unfortunately, I can’t read Wall Street Journal articles (such as “Best of the Web Today) without paying them anymore.

  • Maxwell Smart

    rule 101. Regulate & pay more !!!
    In Australia, petrol prices vary by up to 30 cents within 24 hours at same petrol station, because of a discounting cycle. (nothing to do with the oil price of the day)
    There have been plenty of calls to regulate fuel prices, but all that would mean is no discounting whatsoever & so everyone would pay more.
    Similar analogy.
    Many people want striped down airfares, which is why they will persist. Learn to travel light & save.

  • Harvey-6-3.5

    If the business model clearly displays the all in price, with opportunities to select those ancillary products I want, so that I can properly compare, that would be one thing. I don’t see many of the airlines, or OTAs, offering that sort of service. By comparison, when I buy car insurance, my insurer (GEICO) let me pick from a menu of different choices online so that I could play with different amounts of coverage to see different final costs.

  • Michael__K

    It’s all on the airlines, in conjuction with the GDS’s. The OTA’s can only display what’s published (garbage in / garbage out) and ancillary fees are not published in any standard usable way.

    The DOT has repeatedly proposed rules to require ancillary fees to be published and then repeatedly punted the issue.

  • Michael__K

    So then why are tax-inclusive airfares in the EU lower than in the US, in spite of EC 261 and in spite of higher taxes on airfares in the EU?

    No one (in the US) is proposing to return the days of the Civil Aeronautics Board setting fares. Just rules to promote transparency so that confusing passengers isn’t a profitable game.