Are new airline fee disclosure rules any good? By Christopher Elliott | September 24, 2011 FacebookTwitterGoogle+Pinterest Search for a flight between Washington and Los Angeles on United.com and you’ll find a notice posted high above the fares saying, “Additional baggage charges may apply.” On the Delta Air Lines site, a query for flights from Baltimore to Memphis yields a similar warning — albeit in slightly smaller type — that “there may be additional fees for your carry-on/checked baggage.” And on USAirways.com, a check for flights between Philadelphia and Phoenix reveals a disclaimer at the top of the screen: “Does not include taxes and optional fees. Checked baggage fees may apply.” None of this may look like a big deal to you, but it is. Because there’s big money at stake. The domestic airlines raked in $3.3 billion in luggage fees last year, an increase of more than half a billion dollars over 2009. For years, air travelers have complained that airlines weren’t adequately disclosing these so-called ancillary fees — indeed, that airlines were benefiting from a widespread assumption that checking a bag was included in the airfare, as it still is on Southwest Airlines and JetBlue Airways. But on Aug. 23, a new Transportation Department regulation went into effect, requiring airlines to disclose all fees for optional services through a prominent link on their Web sites. It’s just the first volley in what could be a protracted war between airlines and the government over fee disclosure. George Hoffer, a University of Richmond transportation economist, believes that the new rule makes sense. “Giving more price information facilitates rational decision-making,” he says. “Without such information, markets can’t function properly.” Even the airline industry, after initially resisting regulation, is now on board with the new online notification requirement. “The airline industry supports increased communication and full transparency, ensuring that our customers always know exactly what they are getting every step of the way,” says Steve Lott, a spokesman for the Air Transport Association, an airline industry trade group. But what is “full” transparency? The airline industry, for its part, believes that it has done enough to disclose fees and is resisting further regulatory moves. For example, it’s opposing efforts to force it to quote a fare that includes the most common fees, particularly for things that used to be included in the price of a ticket, such as reserving a seat or checking a suitcase. Ian Ford, chief executive of the travel site Undercover Tourist, has been following the DOT rules closely and thinks they’re just a start. Not only are air travelers still unsure about the final cost of a ticket, but finding the online link to the fees is like a “Where’s Waldo” hunt on every page, he says. The DOT says that its disclosure-rule enforcement is evolving. A spokesman told me that the agency is currently reviewing airline Web sites to ensure that they meet its requirements. Among the changes the agency has demanded: requiring the links to be moved to the first booking screen, so that no scrolling is required, and asking that words such as “fees,” “charges” and “optional services” be included in the links. Airline supporters say that the new rules, and any additional ones, are unnecessary. “It’s an over-reaching regulatory burden on a deregulated industry,” says Michael Miller, a vice president at the American Aviation Institute, a Washington-based think tank. He also maintains that the rules are unfair. The federal government isn’t asking hotels to disclose minibar fees or car rental companies to include insurance in a quoted rate. “Why airlines?” he wonders. One reason is that airlines occupy a unique space in American commerce. They can’t be sued in state courts because of federal rulings, so the DOT is the only bulwark against any unfair or deceptive business practice. And that’s exactly what concealing fees behind multiple screens is, maintains the federal government. Another reason airlines are bound to face further regulation is because of the money at stake. Any disclosure requirements that give passengers an edge in their fare searches, allowing easy price comparisons among airlines, probably wouldn’t benefit the companies financially. “Ancillary fees have become crucial to the bottom line of airlines,” says Jeff Straebler, an analyst with RBS Global Banking & Markets. A recent study by IdeaWorks concluded that the worldwide airline industry earned $21 billion in extra fees last year. For some airlines, these fees meant the difference between a profit and a loss, and for at least one, US Airways, they accounted for the entire profit. Bottom line, “when new rules are imposed on the airline industry, it shrinks their profit margins,” says Seth Rabinowitz, a management consultant who has worked with several airlines. All of which raises the question of whether the current fee-disclosure requirements are any good. They’re certainly better than what we had in May, when the rule was finalized. Back then, you had to click through three screens to find out that some fees “may” apply — not exactly hidden, but not clearly disclosed, either. Airlines can tolerate a requirement to link to a list of fees, but quoting a fare that includes all the required taxes and often-purchased but optional fees is unthinkable, from their perspective. And you don’t have to be an airline analyst to know that they’ll try to find a way around any rule that requires them to do that. In a perfect world, travelers would have plenty of choices and the market would reward the airline with the best disclosure. But in an industry dominated by only a few large carriers, there’s no true competition. And without stricter government regulation, many airlines seem content to answer your airfare query with a half-truth. FacebookTwitterGoogle+Pinterest Christopher ElliottChristopher Elliott is an author, journalist and consumer advocate. You can read more about him on his personal website or contact him at email@example.com. Got a question or comment? You can post it on our help forum.More Posts - Website - Twitter - Facebook - LinkedIn - Google Plus Carver I’m all for disclosing fees. I am troubled though when the government starts micromanaging the “where” and “hows” for business. Government bureaucratic thinking generally lacks the dynamic elements necessary for creative, profitable solutions which benefit everyone. For example, Chris has a certain travel paradigm. I have a different one. I a rarely check luggage. Quoting a fare that includes checked luggage would be misleading to me. I would much rather a system where the search provider gathers data from you and provides pricing based upon your inputs and user profile. For example, it might provide a list of potentially chargeable items and their price and you check which ones you desire, then a price is generated. thromby If airlines cannot make money if they tell the truth about their fees it simply proves that they have built a business based on lies. Perhaps such businesses do not deserve to make a profit at all. Having said that, at Thromby Air we consider that so long as we include an asterisk somewhere in front of your face… you have been told. The use of the asterisk has a long and proud history… http://www.thrombyair.com/2010/08/the-asterisk/ $16635417 It’s all about expectations. When I travel, I expect to pay to check my bag, unless I am on JetBlue or Southwest. I take what seat they give me at the aiport, unless I want a pre-assigned seat, then I expect to pay. I end up with a window or aisle more than a middle anyway. If they charge for snacks and meals, I either pay or bring my own. Who doesn’t know that these fees exist? Sure, put them on the website, give the airline the ability to easily disclose further fees. An average $300 ticket is already taxed at $61 on average, making it a larger sin tax than cigarettes or alcohol, according to Dave Barger, CEO of JetBlue. Put Washington even further on their back of the private sector…that’s always been a recipe for success! Douglas The government doesn’t require hotels to disclose ancillary fees and costs because hotels already do a fairly decent job of it themselves. I made a booking the other day at The Hotel in Las Vegas for a conference at the beginning of December, and the reservationist told me right up front that there’s a $7 resort fee (or was it $25, I forget, but it was certainly disclosed), and I’ve never seen a hotel room minibar without a ‘menu’, with prices, of the items inside. If airlines were as up front as hotels are about those minibars, there wouldn’t be any government action requiring airlines to disclose the fees. These disclosures are absolutely necessary for enabling passengers to make informed buying decisions. Without them, the airlines would be perfectly happy to continue with a fixed game of three-card monty with travelers. Douglas Yes. Air Asia has a ‘menu’ system when booking flights on line. You can pay extra for an amenity kit/big pillow, a meal, and even ‘priority’ boarding with a seat in the first three or four rows if you want these features. Those seats have a little extra leg room, too. I’ve only used the airline for two flights, but they’re definitely on the up and up with passengers, and successully bringing the low-coast carrier model to the long-haul market. If airlines in the US and the rest of the western world did the same thing, I think you’d see far far fewer complaints and and much more satisfied travelers. Mark K It seems like it has become a game for airlines with fees as they try to see how many new ones they can come up with that the flying public won’t refuse to pay. Because of the pressure put on them by search sites to display the lowest possible fare to capture the cheapskate travelers, regulation of price disclosure is absolutely required to keep the airlines honest. Air travel in the US has become a commodity and there is nothing to really differentiate the various airlines justifying any one charging a premium over the others. In most cases, I don’t have a problem with the fees if they truly are optional and provide actual benefit to me. A luggage fee doesn’t effect me because I never check luggage even on long vacation trips. Paying for a meal in coach is OK since it means I actually get something that is edible compared to the “free” meal I used to get. Paying extra for a seat with more legroom is also OK with me, after all you pay more for a 1st class seat, so why not pay a little more for a better seat elsewhere on the plane. I do have a problem where the fees are mandatory and the initially quoted price grows exponentially as you go through the booking process because of them. If it is mandatory, it is not a fee and should be included in the initially quoted fare. My favorite example was a trip I took on a discount European airline. The initial price was quoted at 10 euro to fly from Munich to Berlin. Great deal! But, there was a mandatory fuel surcharge of 50 euro, a credit card surcharge of 15 euro, an online booking fee of 15 euro, and the at the airport a boarding pass printing fee of 10 euro making the flight 100 euro plus taxes which was more than any other airline was charging. And these fees were not disclosed until you entered your payment info and clicked purchase. Luckily, there was a second purchase button that had to be clicked before the card was actually charged. $16635417 Hotel resort fees are mandatory, why not include them in the rate? May I decline them, like I can decline to check a bag, pay for food onboard or upgrade to a more legroom seat? MeanMeosh I second Carver’s comments. The problem with forcing airlines to quote a price with the “most common” fees is that someone has to make a judgment on what constitutes “common”, which may or may not gel with what the purchaser wants. One of the favorite proposals of the consumer rights crowd is to mandate a fare quote including one checked bag. Such a price is completely useless to me, as I almost never check bags (this was true even before the fees were around). I have been advocating forever to implement a “menu” system instead, where you pick what extras you want on the first booking screen where you select the flights you want. And the bottom line is, for all the screeching that goes on about how evil ancillary fees are, I don’t exactly see travelers fleeing for the exits (or JetBlue or Southwest) in droves. People complain about bag fees – and then keep on flying the same airlines that charge them. Carver I respectfully disagree Hotels have tons of fees that are hidden or nominally disclosed. Resorts fees, energy surcharge fees, safe fees, etc. are all charges that unsuspecting travelers have been it with $16635417 Thank You. I don’t wish to subsidize the checked bag crowd when I am fine with just my backpack for a day trip. Why does Spirit Airlines continue to grow? With all the complaining about fees, they are probably the worst…yet they are adding new routes. You mention Southwest, while perceived by many to be “cheapest” and doesn’t charge you for your first two checked bags. Yet, they are not always the cheapest. But how would you know that unless you checked their website along with other airlines. If we want transparency, lets allow their fares to be viewed on other booking sites as well. They hope you go to their website and buy a ticket without checking other carriers, thereby preying on the uninformed as well. Tony A. Stop complaining! It’s called the RyanAirfication of the airline industry. The Low Cost Airlines are growing faster than the legacy airlines. Proof that consumers are voting with their wallets and are sophisticated enough to weigh the tradeoffs with all these ancillary fees. No Frills service decoupling and fee unbundling is here to stay. Get used to it. Raven_Altosk Also, in the past few weeks most domestic carriers have QUIETLY changed their checked bag weight limits. Continental/UA is now 40lbs. I bet the rest have followed suit. $16635417 I haven’t picked up on that. According to the United and Continental websites, it is still 50 lbs for travel within the US. When does this take effect? Tony A. Me, too. Just checked their websites and they say 50 lbs. I suggest Raven tell us what her source is. Walker For all those commentators who self-righteously say they never check bags anyway, you are the ones everyone has to wait on to exit the plane while you retrieve your carry-on bags! I wish EVERYTHING had to be checked and the airlines do away with the overhead bins. Oh-oh, did I just give the airlines the perfect way to make even more money off travelers? Raven_Altosk My boarding pass for my flight two days ago on a DOMESTIC flight. It says “Please note your bag must not exceed 45 in or 115 cm (L+W+H) or weight more than 40lbs or 18kg.” And I’m a guy. $16635417 I’m not the one who said I nver check bags, but I have three scenarios: I carry on a backpack on day trips that I usually put under my seat. On short trips I use the same rollaboard I’ve used for years, even before the airlines starting charging for checked bags. I would check it more, but I prefer not to wait in another line at the ticket counter or curbside for the honor. You are not the only one who dislikes waiting. On extended trips, I check bags and plan it into my budget. Spirit does charge for carryons, so you have not given any ideas to anyone. Tony A. Sorry Raven. My mistake on the gender assumption. I think UA/CO was referring to a carry-on bag not checked-in luggage. Carrie Charney I have also assumed you were female. Thanks for the clarification! Carver No one is being self righteous. The simple truth is that not everyone needs to check bags. In fact, if you have anything of value, e.g. medicine, a computer, jewelry, etc you cannot check bags. Grant I’D been having fantasies. Ewww :-( W. Actually you can check these items if you wish; its just that if they disappear or are damaged you won’t be reimbursed. I know because the luggage I checked in had medicine in it. Of course, I knew if it didn’t show up I was out of luck. And no, not everybody needs to check bags, but I believe that many need to have checked luggage. Jeanne_in_NE Raven is a fantasy video game character of the anime persuasion. The avatar is clearly male, if you’ve had any acquaintance with anime-style. I’m sure that there are some out there still have the fantasies, though . . . :p Jeanne_in_NE I don’t pack much, so when I fly, I want to make sure that the small amount I pack actually arrives at the same destination at the same time as I do. If someone is clearly in a hurry or if the flight attendants request it, I let that person or people go first. Sometimes I’m the one in a hurry. My bag fits just fine “wheels out” and I can lift it and lower it quickly. I really am sorry if I’ve ever personally delayed you. Otherwise, I suggest you try to get tickets closer to the front of the plane so you can get out more quickly. I don’t think that this trend is going to go away any time soon, even if the airlines charge for carry ons. TowerRat Okay, so apparently I’m the only one here who checks 3 bags every day. Oh, and 2 of them weigh 60 lbs. I don’t LIKE the bag fees, but I’ll PAY the bag fees, JUST PRINT ME A STINKIN’ LIST OF THE FEES!!! It’s about HOW they’re disclosed, every airline has their own little list of what cost how much, 2 bags for 1st class, 3 bags for elite travelers, unless they’re going to Brazil on a Tuesday…….. 40lbs, 50lbs, 70lbs, 31kg, why all the differences? Chris said it “3,300,000,000 in luggage fees last year”. Like the movie/play Chicago – “Give ’em the old Razzle-Dazzle!” Cause once you’re at the airport with the family and luggage, you can’t just decide which bag or child stays with the ticket agent……. Raven_Altosk I think you’re right, now that I re-read the pass. But, I wouldn’t put it past an airline to suddenly drop checked bag weights on us to grab more “ancillary” fees! Tony A. Actually you bring up a damn good point! It’s not only the FEE (cost) that must be disclosed ahead of time, but also the FREE BAGGAGE ALLOWANCE also must be disclosed. Is it one piece 50 lbs; 2 pcs, or whatever? IATA Baggage Resolution 302 was suppose to resolve the latter. However not all airlines (like CO and UA) agreed to upload their baggage allowance to ATPCO (Airline Tariff Publishing Co.). For most other airlines you airline eticket (itinerary receipt) now tells you how much check-in luggage you are entitled to. Mark K And how much stuff are you dragging onto the plane with you? Do you check everything when you fly? I carry on one bag — ONE. Not one bag and a computer bag and a backpack and a suit bag like I have seen others do. You must be addressing those people. And you should be addressing the airlines asking them to enforce their own limits for carry on bags. My bag does not have wheels (if it has wheels, it is NOT a carry on in my opinion since you are dragging it not carrying it), it never weighs more than 20 lbs, and is well within the posted size limit (it fits in the sizing bin with room to spare). I can place it into or retrieve it from the overhead bin in less than 10 seconds while standing out of the aisle allowing people to pass. So how am I making you wait? Mark K I agree as well. What good is a statement that the “first checked bag costs $50” when that bag can only weigh 40 lbs on one airline but 70 lbs on another? So if you take the 70 lb bag on the first airline you might get hit with a $100 overweight charge. Listing any fee without details is meaningless. Eric I don’t know how this is such an imposition on an airline. Every airline site I’ve ever seen has a search function right there on the homepage. Just add some check boxes for baggage, seat selection, etc. The customer checks whichever options he/she needs, executes the search and when the flights are displayed, they are displayed with the final price including all the ancillary fees for what the customer needs. No muss, no fuss. What’s so tough about that? Charles J Brabec My pet peeve: Not only will the airlines not disclose the bag fees until they have to, they refuse to collect them before the day of travel. I know in advance I will check one bag on every flight. So why can’t I pay for them at the time of booking? My suspicion is that they also count on me not being able to do so online when in the middle of the trip, so they can add the $5 convenience fee for paying for the bag at the airport. What other reasonable explanation is there?