The trade group representing the nation’s biggest airlines dismissed the Senate Permanent Subcommittee’s report, calling it a “clear failure” by the panel to understand the values highly competitive airline industry brings to customers and employees. (Santiago Mejia/San Francisco Chronicle via AP),
Airlines made billions of dollars over the past two decades in “junk fees” charged to customers to fly with bags and sit next to their minor children, which has increased the cost to fly oon certain carriers, a new report found.
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In a critical 55-page report released last week, the Senate Permanent Subcommittee on Investigations “exposed new details about airlines exploiting customers with sky high junk fees,” the panel’s chair, Connecticut Democratic Sen. Richard Blumenthal said in a statement.
“This report pulls back the curtain on tactics like dynamic pricing that burden travelers and boost airline revenue,” Blumenthal said.
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The five airlines mentioned in the report are American Airlines, Delta Air Lines and United Airlines, as well as discount carriers Frontier Airlines and Spirit Airlines. I
The report said the ancillary fees imposed by the airlines under a strategy called “unbundling” — charging separately for goods and services once included in the price of a ticket — have become a vital revenue stream for the airlines. They have not lowered the cost of flying and the increasingly complex fee structures and lack of predictability about fees have made it more difficult for consumers to compare the cost of flying among airlines, the report said.
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Executives for the five airlines are expected to testify before the subcommittee on Wednesday. Congress should require airlines to provide more granular fee data to the Department of Transportation and strengthen fee disclosure requirements, the subcommittee said in its recommendations.
Airlines for America, the leading trade group for big U.S. carriers, said air travel has become more affordable because travelers can pay for the services they want and skip the ones they don’t.
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“The report demonstrates a clear failure by the subcommittee to understand the value the highly competitive U.S. airline industry brings to customers and employees. Rather, the report serves as just another holiday travel talking point,” the group said in a statement.
Among major findings in the report:
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Seat-Selection Fees Are Up
The five airlines are making more money than ever — $12.4 billion between them from 2018 to 2013 — on seat fees, which didn’t exist 20 years ago. Charges varied by airline: In 2023, United charged up to $319 extra for a seat with more legroom, Spirit charged up to $299 extra, American charged up to $140 more and Frontier charged up to $141 more. In 2024 Delta charged up to $265 more for those seats. Spirit charged as much as $899 more for its “Big Front Seats” last year.
Delta and Frontier saw the biggest increases in seat revenue from 2018 to 2023, more than doubling their revenue from such fees. For the first time, United collected more revenue ($1.3 billion) from seat fees than from checked bag fees ($1.2 billion). Spirit’s chief commercial officer told the subcommittee that the airline forces customers to provide personal information on the airline’s website before showing the price of selecting seats because this tactic makes customers more likely to complete their purchase.
Incentives Paid For Baggage Violations
Frontier and Spirit airlines together paid $26 million between 2022 and 2023 to incentives to gate agents and other personnel to catch passengers who hadn’t followed airline baggage policies, often forcing them to pay a bag fee or miss their flight. An official for Frontier told the subcommittee the incentives, which can be $10 for each bag a customer is forced to check, said the enforcement was necessary to stop customers from “stealing” from the airline. Spirit’s incentive is $5 per bag that violates the policy, the report said.
Airlines increasingly use algorithms to set fees and are investing in ways to target pricing based on customer information, particularly as it relates to set fees, which can vary greatly from flight to flight and customer to customer. Frontier and Spirit both use “dynamic pricing” to set their fees for carry-on bags and checked bags, meaning that each customer may pay a different price for their bag.
Internal marketing documents from 2022 show that Delta’s digital marketing team “built out propensity modeling to predict a customer’s willingness to buy-up based on their customer profile and unique characteristics.”
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Airlines Avoid Federal Excise Tax
Under federal law, airlines must pay a 7.5 percent tax on passenger air transportation.
Frontier, Spirit and United appear to avoid the federally mandated transportation excise tax by labeling portions of their chargers as non-taxable fees, which creates different tax rates across airlines. The ambiguity encourages airlines to charge more in non-taxable fees than for fares.
To avoid the federal taxes, some airlines classify certain services as “optional.” Frontier and Spirit both used ancillary fees to up-sell seats with extra legroom, resulting in an effective tax rate that was less than half than American and Delta paid on similar itineraries.
Airlines Say They Don’t Itemize Costs
Each of the five airlines told the subcommittee they did not regularly track the itemized cost of providing services for which they charge a fee.
Despite telling the subcommittee that it is unable to calculate the cost of checking a bag, American produced an internal document from 2018 estimating that the airline spent $28 to transport each checked bag that year.
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United failed to produce an estimate of the cost incurred to transport checked bags, despite its CEO testifying under oath that, “In 2016, at United we spent about $1.9 billion carrying checked bags.”
United also claimed that the Government Accountability Office must have misinterpreted United officials who communicated during interviews in 2017 that cost is a major factor in the airline’s ancillary fee pricing.
Airline competition does not constrain many fees; American, Delta, and United raise their checked bag fees in lock step.
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