Airline fees are out of control — but who can stop them?

By | August 17th, 2013

No two ways about it: The travel industry loves fees. Airlines in particular.

A few days ago, Canada’s Porter Airlines slapped a new $25 checked-baggage fee on all flights between the USA and Canada. The carrier, which promises to bring “dignity and refinement back to flying,” said it needed the extra money to stay “competitive.” And of course the US Department of Justice cited the rise of airline fees as a reason it sued to block the planned merger of American Airlines and US Airways.

Porter has a long way to go before its passengers storm away from the ticket counter in disgust. Other travel companies are light years ahead of the airline, whether it’s hotels that charge mandatory “resort” fees on top of their room rates, airlines that make you pay for your carry-on bag or car rental companies that add nuisance “tire disposal” fees to your bill.

The real question everyone wants answered is this: How much is too much? When will the travel industry’s fee revolution finally fizzle?

To find the answer, it helps to know the extent of the problem.

Basically, fees are out of control. For example, the global airline industry earned $2.3 billion in ancillary revenues in 2006, according to airline consulting firm IdeaWorks. Six years later, that number had ballooned to $27 billion.

Anecdotal evidence suggests other travel-related companies are trying to follow that ambitious trajectory, although it’s difficult to know how successful they’ve been because they aren’t subject to the same stringent reporting requirements as airlines. Among the most noteworthy extras: casinos and independent hotels that charge non-negotiable “resort” fees, such as the Golden Nugget Las Vegas, which recently added a mandatory $5 nightly “downtown destination” fee to its room rates.

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Travelers say they’re sick of being nickel-and-dimed. “We’re being fee’d to death,” says Marty Lewis, a minister from Dallas. “Baggage charges, seat charges and so forth — I’m surprised there’s no charge to use airlines’ spacious bathrooms.”

Interestingly, the Federal Trade Commission, which is supposed to protect us from anti-competitive, deceptive or unfair business practices, calls the system of adding fees to your final bill “drip” pricing. It warned several hotels about their pricing earlier this year, although the practice appears to have continued virtually uninterrupted. Like water-drip torture, it may be only a matter of time before travelers snap.

Some are already on the run. “I refuse to stay at places that charge a resort fee,” says Rosheen McGowan, a homemaker from Dumfries, Va. The reason: By definition, the room rate should also cover the resort amenities such as the pool towels, gym and concierge services.

“I always check before I book, and make sure there is no such fee,” she says. “There are too many other places to stay, and I want to give them my vacation money.”

But that isn’t always possible when you’re flying and have only a few choices. How can someone travel without luggage? wonders Savi Mull, a program officer for a non-profit organization based in New Delhi and Washington. Since almost all the airlines now charge for checked luggage, what choice do passengers have but to pay the fees? But her breaking point came when IndiGo Airlines, an India-based discount carrier, asked her to pay extra to reserve a middle seat. “That’s a way to snatch money in the rudest way possible,” she says.

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Travelers have a personal line they won’t cross, whether it’s a reservation fee or a resort surcharge. But is there a point when everyone agrees that enough is enough? In at least one sense, we may have reached that point without even realizing it.

The growth rate for two key airline fees — cancellation and change fees, and baggage fees — has stalled in recent years. From 2011 to 2012, for example, reservation change-related revenue increased by $174 million

industry-wide, from $2.38 billion to $2.55 billion. For baggage fees, it was a $126 million increase, inching from $3.36 billion to $3.48 billion, according to the U.S. Department of Transportation.

But in another sense, travel fees are a “growth” business, says William Maloney, who founded a website called that helps consumers track fees. He says stopping them will require a concerted effort, including pressure from consumers and from large online travel agencies. Until now, those agencies have been complicit in the fee revolution, because they haven’t insisted on full disclosure of fees before booking.

It’s going to get worse before it gets better, he predicts. “Based on the spread of fees in Europe and Asia, I think fees will only get worse here in the United States,” he says.

Until travelers vote with their wallets, companies will continue to push the limits, says Jay Sorensen, president of IdeaWorks. He points out that the most fee-aggressive air carriers, including Air Asia, Ryanair and Spirit Airlines, somehow manage to extract high fees from their passengers and keep them as customers.

“Of course, there is a limit,” he says. “When fees rise too high, traffic will drop, and so will revenue.”

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Who will call an end to this fee madness? Not the government, which has taken a hands-off approach. Not the companies, which can’t resist the revenue fees bring in.

Only one person has the ability to end this revolution: you.

Do you think airline fees should be limited?

View Results

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  • The fees are harsh but with some effort in deal hunting, planning, taking advantage of some frequent flyer miles; it is possible to fly at greatly reduced prices. It is however out of reach for most consumers who are otherwise occupied. To come out ahead of the airlines takes precision planning.

  • $16635417

    I’ll take an airline’s $25 optional checked bag fee over a “resort’s” mandatory resort fee any day.

  • BobChi

    The last thing we need is more government regulation. Adjusted for inflation airfares are historically low. Elliott keeps mixing two completely different issues:

    1) Fees that are for a service that the customer may choose to use or not. Airline baggage fees are an example. Contrary to Elliott’s belief, not all passengers wish to check baggage, and those who do not check it would rather not pay the costs of those who do, in the form of a higher priced ticket.

    2) Fees that are really a lie about prices. Hotel “resort fees” are an example of that. If you cannot escape a fee by not using the service, it is not a “fee” but a part of the price of staying at the hotel.

    If Elliott wants to fight fraudulent “resort fees” I will march with him side by side. If he is whining that the airlines are actually improving their profitability by charging for things that some people want and others don’t, count me out of that battle.

  • Bob, we’re pretty close to agreeing on this one.

    The only difference is that what you consider “mandatory” and what I consider “mandatory” are slightly different.

    Many inexperienced passengers have no choice but to pony up the cash for their first checked bag — and airlines know it. The only beneficiaries of this avaricious, customer-hostile practice are elite-level or very experienced single airline travelers — and, of course, airlines.

    As a consumer advocate, I can’t split hairs on this issue. These fees are all bad for passengers, on balance. I’m waiting for some airline apologist to whine about “subsidizing” their airfare. I will have more on that faulty logic in a future column.

  • Kairho

    Chris, you say: “Only one person has the ability to end this revolution: you.” Yet the voting option which supports this says the government needs to step in. The people and the government, in matters such as this, are two different things.

    The last thing we need is more regulation. The free market has always, in the long run, been the best way to resolve issues such as these. Maintain competition (are you listening, government?) and let the airlines learn just how far they can go before they come crashing to the ground (figuratively, of course).

  • The poll question and the story don’t always match. This one is meant to start a discussion, which it looks as if it has.

  • Raven_Altosk

    Normally I don’t want the government in my business, but given that the airlines are horrible these days…

    Hey, I want regulation back.

    Seriously. I rarely pay for my own tickets, so I could care less if the cost goes up there. But at least the airlines would have to find ways to be competitive in the service end of it.

  • Michael__K

    Just eliminate the passenger ticket tax exemption for add-on fees, and require that fees for commonly used add-on services (say, a confirmed seat, printing a boarding pass, carrying on a bag, checked baggage at least for long haul trips) be shown in the quoted fare UNLESS the customer explicitly opts out of those services, and I bet the problem mostly goes away.

  • Michael__K

    Adjusted for inflation airfares are historically low

    Adjusted for inflation AND add-on fees and reductions in what’s actually included in the airfare, apples-to-apples costs per passenger are not historically low relative to the past couple of decades.

  • chickadee

    I think the consumers who are hit hardest with the checked-baggage fees are those whom the airlines have the least interest in planting—the once- or twice-a-year family-trip passengers who cannot feasibly fit everything in carryons and who aren’t traveling at someone else’s expense.

  • sirwired

    Back when the baggage fees started, they were only on a single airline (Delta? I can’t remember.) People clearly didn’t care as much as they claimed to in surveys, as the other airlines did not see bookings shift towards them away from Delta. (At least, not enough to make up for the revenue they were leaving on the table.)

  • JenniferFinger

    I voted no because I think everyone needs to vote with their wallets. For each of us, the “uncrossable line” is in a different place, and the government just isn’t going to step in.

  • jen

    I dislike these fee’s as much as the next person but the thought of the government regulating and sticking their big noses into this is just to much; I’d rather pay the fee. For now I’m just going to be choosy where and how i spend my travel dollars and fly fee free if I can.

  • bknewyork

    As others have said, there is WAY too much government involvement in the airline industry. Fares would plunge if we didn’t have so much govt. Here’s an example of govt interference practiced throughout the world: prohibiting foreign carriers to operate domestically. If I travel to New Zealand on a NZ carrier from NY and stop in LA on the way to pick up west coast passengers, the NY to LA leg will be half empty. That’s because of govt laws restricting foreign carriers to operate domestically. Fix THAT problem, and don’t worry about checked luggage fees.
    And stop the dept of justice from interfering in mergers. These two airlines are on their last legs. If they go bankrupt, which seems likely without the merger, there will be even less competition.

  • EdB

    “The free market has always, in the long run, been the best way to resolve issues such as these.”

    That’s true, when there is a choice. When all the airlines, or the only airlines available for your trip, has the luggage fee, there is no free market. You can’t vote one airline over another with your wallet because they all have the fee. Free market works when you have options.

  • TonyA_says

    Would you rather the airlines just charge higher fares and you pay tax on the whole amount? I don’t think so. I understand the fees and I’m ready to play the game. There’s 2 kinds of travelers. Those who know how to avoid fees and use schemes to lower them; and those who don’t. The later want the government to force the former to become like them. Learn to play the game and stop complaining.

  • TonyA_says

    Interestingly, NZ flies between LON and LAX. And you can buy a ticket FRA-LAX-AKL from them as far as I know.

  • Carver Clark Farrow

    That brings up an interesting question. If you don’t pay fees because you either don’t use the goods and services which have a fee or you are exempted from fees, I suspect that the historically low argument becomes truer.

    The other interesting thing is that the more expensive the fare, the lower the percentage that ancilliary fees make up of the total fare.

  • Carver Clark Farrow

    Of course there are options. Trains, buses, automobiles, less direct flights or just don’t go. Granted, most of those options suck.

    If there is a luggage fee, do you really need everything that you are traveling with. Perhaps. Perhaps not.

    When I was a younger traveler, I took about 50lbs of luggage for a weekend trip. Today, its closer to a single 20lbs carry on (of which the bag is 12lbs). Nothing cures you of overpacking than having to lug a ton of crap up and down stairs all over Europe.

  • California_Dave

    Kairho, I agree with you 100%. There are already startup companies that are providing a service to ship your bags from door to door and have them at you hotel when you arrive. There are companies that will provide a custom meal and deliver it to you at the gate prior to boarding. You can buy snack boxes and bottles of water prior to boarding, and can bring on your own portable entertainment. Once more people start using alternatives to avoid these fees, the airlines will have to come up with other ways to get our money.

  • Goldie

    That is not the situation bknewyork is describing. If the route had 2 US cities, say FRA-DEN-LAX-AKL, you would not be able to purchase a DEN-LAX ticket on NZ. One of the ends of a ticket would have to be outside the US.

  • TonyA_says

    Yes I know. I was sarcastically pointing out how absurd the stupid US cabotage laws are for US consumers and great for US airlines.

  • EdB

    Can you tell me what train, bus, or road goes from New York to Moscow?

    Yes, there are other choices in transportation mode. But there is no choice within the one type, flying, with a choice on the luggage fee.

  • Thomas Ralph

    I am quite happy with the current situation whereby well-informed, well-prepared passengers are rewarded for the time they invest in preparation and research by lower fares.

  • Fishplate

    Most international flights include at least one free checked bag.

  • Carver Clark Farrow

    Perhaps you missed option 4: less direct routing, and option 5:don’t go. Many frequent fliers opt for option 4, and during the worse of the recession many businesses took option 5 preferring electronic meetings.

    At the end of the day, it’s still a red herring. Consumers complain bitterly about the fees, yet in voting with their wallets purchased tickets with the lowest base fare that is presented.

  • Michael__K

    Sure, if some passengers see an impact worse than average then there are necessarily other passengers who see an impact better than average.

    Keep in mind that the passengers who are “exempt” from fees, are not generally getting their exemptions for free: they pay annual fees for affinity cards and they pass on benefits that they could be getting from other cards; or they occasionally pay higher fares or choose less convenient itineraries to maintain their elite status.

    Another interesting point is that whenever add-on fees have been introduced, very rarely have base fares been lowered at the same time.

  • Carver Clark Farrow

    I’m not convinced about the statement that passengers choose inconvenient routings to obtain elite status. I would expect that most “elite” level passengers have picked an airline based on their travel patterns and inconvenient routings only occur after status has been achieved to take advantage of elite bennies.
    I’ve maintained elite status with American airlines since 1999. I fly one inconvenient routing twice a year, not to maintain status, but because by doing so I can easily fly first class.
    Regarding add-on fees, I generally see them as a different form of a price increase, much in the same way that a retailer might make a package smaller. Of course, I’d prefer to see a $25 luggage fee which I might avoid, rather than a $25 fare increase which I can’t do much about.

  • Michael__K

    Sure, a $25 luggage fee that affects (say) 30% of journeys is obviously preferable to a $25 fare increase that affects 100% of journeys. Although that’s not usually the actual trade-off. The actual trade-off is between a $25 luggage fee and a smaller base fare increase (maybe something like $8 for a route where 30% of passengers will check bags).

    And even so, I agree that the $25 luggage fee — in principle — could be preferable to the $8 base fare increase. Because baggage service has direct additional costs (e.g. hiring baggage handlers and infrastructure). And if that cost is borne by the people who use the service, then in theory that will better align the supply of baggage handling personnel and infrastructure with actual consumer demand for it.

    What I have trouble with is:

    (a) when these fees make it much more complicated to compare total travel costs between vendors (and this is still a major problem IMO, in spite of the recent mandates for improved disclosure)

    (b) fees that are predatory, deceptive and/or bear no relation to the cost of the service provided (e.g. boarding pass fees; carry-on fees that exceed checked baggage fees).

  • GG

    And while at fees, how do you justify the fees they charge you for the luggage carts at the Airport? Yes, that’s not an airline fee, but an airport fee. Still…

    Only in the US of A. The rest of the world, they are free.

    Chris, you need to do a piece on Airports (or whatever passes off as a sorry excuse for an airport).

  • bodega3

    If you think baggage fees, onboard food fees have kept fares low, you are terribly mistaken. We are paying more for less now thanks to bottom feeders who ‘don’t want to pay for what I don’t use’ mentality. Now cruises have not gone up in price like airline tickets have even though you get less for your money today than you did 30 years ago.

  • Carver Clark Farrow

    Preaching to the choir :)

  • Ace

    The ‘free market’ has never solved anything. That is just a line sold to you by people hoping to make a bit more money out of you, and an excuse used by business to avoid being regulated. The ‘free market’ is the reason for the economic mess that is USA. The ‘free market’ is why is little consistency, no fairness, and extremely patchy services across the market. It is clear that the ‘free market’ is a race to the bottom – who can deliver the least amount of service for the most money. ie: I could sell you what was a $100 service for $90 while stripping of $25 of value from the service, and people would still say ‘it’s cheaper’. It’s why people buy lotto tickets – they simply can’t do the math.

  • Ace

    So, you’d get Chinese and Indian airlines operating domestically in the US using non-American staff. Sure, the US would have to find jobs for 600,000 people, but a least you’d be able to fly somewhere really cheap, and probably even get there most of the time. I saw a 777 almost land at San Fran the other day, and one guy even managed to walk off with his luggage! You couldn’t complain about level of service, surely!

  • PsyGuy

    Companies that are in business for the money only limit their profit options when they are forced too.

  • Kevin Mathews

    Education sometimes costs money… I’m not an overly experienced Air Traveler. I might fly once or twice a year at most. But I never check a bag. Funny enough, it has nothing to do with the fees either. It has more to do with the fact that I don’t trust the airlines to get my stuff from A to B… So personally, I’m glad that I don’t have to pay for the airlines to handle other people’s bags…
    But these fees have been around long enough now, that people really shouldn’t be shocked by them. They can plan in advance and figure out how to avoid them, or offset them somehow. It’s the people that don’t pay attention, then get caught, that are the ones that complain about baggage fees now.

  • Nathan Witt

    My issue with fees is merely one of presentation. What it says is, “You’re a mark, and we’re gonna get as much money from you as we can.” The fact that businesses across the board no longer care that we feel this way is a testament to the limitless tolerance of the consumer for this kind of nonsense.
    It is, of course, perfectly possible to price products such that the business makes a profit without alienating your customers. Imagine if, being conscious of consumer preferences and psychology, the airlines had said, “NYC > LAX is $550 RT, but if you don’t check a bag, we’ll give you a $50 discount. If you don’t want the meal, we’ll drop off another $10.” This way, I feel like I’m getting some savings passed on to me, and that original ticket price can be set to the current fare + baggage fees + meal.

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