Hidden fees add to airlines' bottom line
An American Airlines luggage handler helps passengers check in luggage Friday at San Jose International Airport. American Airlines said it planned to charge passengers $15 for the first checked bag.
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If the airport pat-downs aren't enough to put the Grinch in your holiday travel this year, maybe it will be the cost of flying itself.
Traveling during a busy time? That could be $10 to $30 more. Reserving by phone? Tack on $15 to $35.
Need more leg room? Add $5 to $109. Want an aisle or window seat? Five dollars to $20 more. Pillow and blanket? That will be $7 to $15. Flying standby? Pay $16 to $50, stay close to the gate.
And, of course, there's checking a bag -- $15 to $45 for the first one, $15 to $55 for the second, potentially even higher for the third and fourth. All in addition to the fare itself. No wonder Santa doesn't fly coach.
More and more, airlines are turning to fees and surcharges to supplement base fares and raise revenues during tough economic times.
While carriers see the fees as a way of keeping base fares low and giving customers the choice of adjusting their flight experience to their needs, some travelers have a less charitable view.
"All they have to do is put a mask on because to me they're robbers," said Rocky Washington, 49, of Beaver Falls, before catching a flight at Pittsburgh International Airport last week.
The growing dependence on fees is drawing scrutiny from travelers rights groups, which complain that many fliers don't know what charges they will face until they get to the airport.
Some legislators also have an eye on the practice, particularly since baggage and many other fees are not subject to the 7.5 percent federal excise tax on airline tickets. The IRS ruled in 2009 that optional fees were exempt from the levy.
The fees are producing big numbers for the airlines and helping many of them return to profitability after years of losses because of high oil prices and the recession.
In 2009, airlines collected $2.7 billion in revenue from baggage fees alone, according to the federal Bureau of Transportation Statistics. They are on pace this year to generate even more money, hauling in $1.6 billion in baggage fees in the first two quarters alone.
Airlines raised another $2.4 billion in reservation, cancellation and change fees in 2009; $1.1 billion in the first half of this year.
The U.S. Government Accountability Office has estimated that if baggage fees in 2009 had been subject to the 7.5 percent tax, they would have produced about $186 million for the Airport and Airway Trust Fund, which helps to fund the Federal Aviation Administration.
The GAO report also concluded that baggage fees have produced at least one less than desirable (just ask any frequent flier) consequence: Greater amounts of carry-on luggage and pitched competition for limited overhead storage space.
While charges for minors flying alone or for overweight or oversized bags have been around for some time, the fees for checked bags, meals, extra leg room and other conveniences have popped up more recently.
David Castelveter, spokesman for the Air Transport Association, the lobbying group for the major airlines, said the proliferation of fees was driven first by high oil prices and then the recession.
Many carriers saw the fees as a way to meet the demand for low fares while at the same time generating more revenue to help offset costs, he said.
The goal was to "keep the base fare low and then charge for other services," he said.
In the past few years, fees have taken off to cover nearly every aspect of flight, from meals to preferences for aisle or window seats. There are fees for early boarding; booking by phone or in person; blankets, pillows or "sleep sets"; and even snacks, in some cases.
"We're not happy with it, but it's the way of business these days," said David Stempler, president of the Air Travelers Association, a group that represents the interests of airline passengers. "Airlines can't increase fares so they're trying to nickel and dime us with all the fees."
Rick Seaney, CEO of FareCompare.com, an online travel site, said the ones hardest hit by fees are families of four who don't travel often, have no loyalty to any particular airline, and who typically are looking for the cheapest fare. He noted that frequent fliers and those with certain airline credit cards usually can avoid the fees.
One of the newest fees travelers are encountering these days is what FareCompare.com describes as a "peak travel day surcharge." Started last year, some major airlines, including US Airways, United, Delta and Continental, are adding an extra $10 to $30 to the cost of the one-way base fare to fly on busy days.
For instance, travelers flying tomorrow will face a $30 surcharge, according to FareCompare.com. Through the last half of December, the fees, built directly into the ticket price, range from $10 to $30, depending on the day, Dec. 23, 26 and 27 being highest.
Overall fees vary from airline to airline and sometimes within certain categories. Low-cost carriers typically have fewer. Southwest, for instance, does not charge for the first or second checked bag. JetBlue does not charge for the first one. Neither carrier imposes the peak travel surcharge.
However, finding what fees, if any, apply to your flight might not be easy. Consumers searching for the lowest fare on sites such as Expedia, Travelocity or Orbitz or even those booking through travel agents won't find information about the fees they will be paying.
The airlines typically don't disclose that information to third party sources. Usually, the only way to find it is to go to each individual airline website and compare.
Kate Hanni, executive director of FlyersRights.org, a California-based nonprofit group that represents airline passengers, described the lack of disclosure as "sneaky" and "deceptive."
"There's probably no other purchase in America as complicated today as buying a simple airline ticket," said Charlie Leocha, director of the Consumer Travel Alliance in Washington D.C. "It's easier to get a mortgage."
Mr. Leocha believes airlines separate their fees from the ticket price to make their fares look "as cheap as possible" and to compete against low-cost competition.
In a summer experiment, his group found that it took almost 20 minutes, a check of seven airline websites and visits to 47 web pages to find baggage fees for a flight between Washington and Orlando.
Last month, the same group analyzed fees charged on four popular routes -- New York to Los Angeles, Boston to Washington, Chicago to Miami, and Washington to Orlando. It discovered the amount of "hidden fees" charged to a typical traveler with a single bag ranged from 10 percent to 82 percent of the base fare; fees charged a traveler checking two bags ranged from 21 percent to 153 percent of the fare.
The alliance and other groups want the U.S. Department of Transportation to require airlines to release the fees they are charging at the time a traveler is booking so they have a better idea of what they are actually paying for a flight.
"It is literally impossible for people to compare apples to apples among the carriers what the total cost of their ticket is. It's a crapshoot," Ms. Hanni said.
The DOT has taken notice. It is considering a rule that would require airlines to make all fees available to global distribution systems and by extension to online booking sites and travel agents. U.S. Sen. James Webb, D-Virginia, has proposed legislation with similar goals.
"Generally, we were looking at a number of areas where we saw the need for stronger consumer protection," DOT spokesman Bill Mosley said.
The Air Transport Association agrees in theory that there "needs to be greater transparency" governing fees, but it is opposed to forcing airlines to provide proprietary information to third-party sources such as online travel site Expedia, Mr. Castelveter said.
He noted the airlines currently provide information regarding fees on their websites. No airline, he said, should be forced to provide data to a travel website or agent that makes it easier to choose a competing carrier.
"There is no reason one airline should help a customer decide to fly someone else," he said. "When I went to the Lowes website, it didn't tell me what Home Depot's prices were."
Even with baggage and reservation fees taken into account, the ATA estimated that air fares increased only four-tenths of one percent between 2000 and 2009.
In his bill, Mr. Webb also is proposing to extend the 7.5 percent excise tax to fees for checked and carry-on bags. The ATA is opposed to any new taxes, arguing that the industry is already overtaxed.
Consumer groups are divided over the issue. Ms. Hanni believes taxing the fees would stop airlines from charging them separately and would provide needed revenue for the trust fund.
Others are opposed, saying that any new taxes simply would be passed on to the traveler. Mr. Leocha said the current exemption amounts to a "tax break for the consumer."
"The fewer taxes the consumer has to pay the better," he said.
Regardless of what happens, few see the fees going away. In fact, some see a new generation coming that could include baggage and other fees based on the flight's distance. Some airlines now do that with legroom fees. Some see airlines offering package deals, in which certain amenities are available for a flat fee.
"The nuclear option is weighing people when they get to the gate. I don't expect that to occur. It's all about what you can sell, what you can market and the push back you get," Mr. Seaney said.
At the airport last week, travelers seemed to be ready to push back, calling the fees "pitiful," "ridiculous" and "absurd."
While the ATA claims no one is forced to pay for services they don't want, several women noted that they had no choice but to check bags because they had liquid makeup that they couldn't bring on board in carry-ons.
Jennifer Bragg, 38, of Mars, said she pays fees about half the time she travels. Echoing others, she said the airlines should just wrap the extras into the price of the ticket and be done with it.
"They're just out of control," she said of the carriers. "It's like the people are at the mercy of the airlines."
Jen Bodnar, 30, of the North Hills, paid an extra $50 to US Airways last week to fly standby to get an earlier flight out of Philadelphia, where she competed in a half marathon.
"It hurt," she said. "But it's better than sitting at the airport for five hours."
To view a chart listing fees charged by major airlines, visit www.farecompare.com.
First Published November 28, 2010 12:00 am