Are airlines profiting at your expense?

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Why are airlines raking in record profits? Maybe they’re monetizing your personal data — selling your name, address and phone numbers to marketing “partners” without your explicit consent.

Then again, maybe it’s the fees. Airline add-ons, which cover “optional” services for everything from reserving a seat to changing a ticket, used to be included in the cost of almost every fare. But over time, airlines began separating them from base fares. They sometimes neglected to mention that little detail, helping them earn more money but frustrating customers, critics say.

George DelMonte didn’t know about the change fees when he booked tickets from Sanford, Fla., to Allentown, Pa., to visit his grandkids in September. When he had to reschedule his trip, he easily canceled his hotel with no penalties. But not his Allegiant Air tickets.

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“They charged me $300 to change my tickets,” says DelMonte, a retired teacher who lives in The Villages, Fla. The airline left him with a credit of just $142, which will expire in a few months.

“Airfares are outlandish, fliers are charged for everything and comfort is a thing of the past,” he says. “How can that be allowed?”

The U.S. Senate is wondering the same thing. Concerned about airline fee transparency and passenger privacy, it has launched an inquiry that could shape aviation policy for next year and beyond. The goal: to determine whether current rules go far enough to protect consumers and, if not, whether new laws are needed.

“These additional fees are separate from base fares for flights and have been a boon to the airlines, raising billions of dollars of revenue for them,” says Sen. John D. Rockefeller IV (D-W.Va.), chairman of the Senate Committee on Commerce, Science and Transportation, which is investigating the matter.

In letters sent to the major airlines this month, Rockefeller has asked for detailed information that could offer valuable insights into an industry that’s having the best year in the history of modern aviation. For example, the Senate wants to know exactly how much airlines earn from checked baggage, advance seat selection fees, preferred-seat fees and trip insurance. Some of this data is already reported to the Transportation Department, but not in detail.

The Senate also wants to know whether the airlines offer passengers the right to access the information maintained about them and, if necessary, to correct it. It has asked airlines to say whether they share or sell information, and, if so, to whom.

The results are likely to show that airlines profit from fees and peddling personal data, and they will probably give passenger advocates enough ammunition to push for tougher consumer-protection laws.

“These fees are contributing to record airline industry profits at a time when consumers’ travel budgets remain strapped due to the sluggish economic recovery,” says Sally Greenberg, the executive director of the National Consumers League. “To make matters worse, many of these fees are poorly disclosed, and the sale of travel insurance and the coverage it provides is deceptively advertised.”

Data privacy advocate Edward Hasbrouck called the inquiry “an important step.”

“It’s the first time anyone in Congress has publicly acknowledged, or expressed interest in, addressing the absence of any federal law protecting air travelers’ privacy,” he says.

Hasbrouck wants congressional hearings on passenger data privacy, but he admits that it will be a long road getting there. He doubts that the airlines will fully disclose their privacy practices in response to Rockefeller’s query, meaning that the committee won’t have the information it needs to do its work.

Airlines insist that the information will vindicate them and their business model. Domestic air carriers are committed to ensuring that customers always know the price of their ticket before they buy, says Victoria Day, a spokeswoman for Airlines for America, a trade organization for major U.S. airlines. They’ve also pledged to protect their customers’ privacy.

What’s more, the a la carte pricing model used by most air carriers works, giving customers choices and keeping fares low, Day says. “Charging customers for services they value and are willing to pay for — which is common in multiple industries globally — has also enabled airlines to provide consumers the ultimate choice and control over what they purchase,” she says.

Responses to the committee are due Sept. 5. Insiders say that the information will be reviewed and could be used for legislation that might be attached to the Federal Aviation Administration reauthorization bill, which is expected next year. It would contrast sharply with the so-called Airfare Transparency Act passed by the House of Representatives, which would allow airlines to disclose taxes and fees separately from the fares they quote. If signed into law, critics say, it would give airlines a license to make money by deceiving customers.

The Senate will soon have enough information to lay the groundwork for a noisy battle between legislative forces that believe the airline industry should operate free of consumer regulations and those who think that America’s air carriers are shamelessly fleecing passengers. You’ll want to put some popcorn in the microwave for this one.

Who is right?

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55 thoughts on “Are airlines profiting at your expense?

  1. I actually enjoy the unbundling airlines have done. It allows me to determine what what value those items and services had, and I don’t end up subsidizing a benefit for someone else. You know who are the biggest whiners about unbundling “families”. They want those things that use to come with tickets because they used them, and the rest of us helped pay for them. Those dinky pillows and light blankets, get rid of them I wore clothes and brought a jacket. Moms and kids do, because their kids get cold and they didn’t pack right. I don’t need to check two bags, because I don’t pack like i’m going an an expedition, and I didn’t bring a bunch of kids who basically need “everything”. I need my my laptop, iPad, my iPhone, a change of shirt, socks and underwear. I don’t need some crummy microwaved processed meal, I pick up a bottle of water and a sandwich in the airport, but Im not little junior who’s going to get all whiney because he can’t control his blood sugar and he wants a juice box. I don’t need a little 7 inch screen on my seat, I have movies and ebooks on my iPad to entertain me, and I can also do this thing called “sleeping”, no your little spawn cant sleep at 2am in the morning they have to stand on their chair and click the light on and off. The only thing I need is drink service on a plane and what I drink comes in little bottles at $7-$9 each.
    I don’t need to “reserve” a seat in advance because any seat for me is just like any other seat, if you and your little spawn want to sit together pay for it, just like everything else. I’m tired of having to subsidize other peoples choice in reproducing.

    Want to make air travel more civilized, they only need to do one thing and thats kick the kids and their epic failure of parents who can’t control their children off the plane. What we really need are “adults only” flights.

    1. Unbundling is awesome so maybe we should do more of it. If we can persuade passengers to bring their own seatbelts and cushions, then those can be optional, and then the savings will really pile up. Or carry your own life vests — why are those included with each seat for free, anyway? You know, I’m beginning to see the benefits of this “freedom” to choose that the airline industry has been talking about. How could I have been so wrong?

        1. Don’t laugh. Ryan Air wanted to sell “Standing Room Only” seats. And Airbus applied for a patent on an airline seat that looks more like it belongs on a bicycle than an airplane.

    2. Will the TSA allow me to bring my own oxygen bottle and mask aboard when airline unbundling leads to hugs fees being charged for the use of the emergency system built into the aircraft?

    3. To be fair, the vast majority of parents aren’t the type that think the world owes them something because they have kids. There’s one in every office, and apparently one on most of your flights.

      But, seriously, with an attitude like that karma will get you.

      1. I think he’s bitter. I always bring blankets and pillows…

        Edit: but now I see they are saying we bring too much? Okay geniuses… we are forced to bring stuff BECAUSE of unbundling!

        Im actually a light packer though. I can travel for weeks on a small carry on.

    4. Ah another miserable business traveler. You mom obviously didn’t hug you enough as a child.

      Let’s be serious, who does not at least have one bag? Oh yeah the gate lice that hang out by the jetway waiting to shove their oversized carry on with their change of shirt, socks, and underwear over someone else’s seat!

      You make some valid points about families who overpack and bring too much crap on board. But seriously, the unbundling is garbage. Many of the fees are a joke. It’s like going to a restaurant and being charged for silverware. I can hear the restaurant owners now “we know that some people like to eat with their hands and don’t want to force those who do to subsidize those who want the upgraded experience of a fork.”

      There should be basic things included, such as one carry on (up yours Spirit Airlines), one checked bag, and enough leg room so that a person over 5’5″ does not get blood clots in their legs because of no room.

      1. I am so picturing those a**es stuffing their giant bags ten rows away from their seat, making no room for the rest of us. And then nearly having a panic attack if someone won’t move over from “their” aisle seat. Once, I had a seat assignment in an aisle (travelling alone) and a man who was assigned to the middle seat refused to move without 3 flight attendants getting involved. It was a very long 4 hours, but I fought on principle! I actually started only carrying a bag that fits under the seat. Takes away all that hassle and I don’t need much more than a nook and a snack…..

    5. I can bring my own blanket, pillow, oxygen and food…by gum – give me a 2 x 2 area in cargo at a low price and I’m good!

    6. If you think you have saved money as a result of nickle and diming, you aren’t very good at math. Airfares have gone up along with additional fees. Airlines are more profitable than before. You are paying more, whether you need additional services or not.

  2. Well… I can accept the concept of bundling, though I think it has gone to absurd lengths in many cases.

    What bothers me is that the unbundling is another form of a corporate tax dodge. What used to be part of an airfare was also taxed as such — but these fees are not taxed in the same way. Require the airlines to report (one of the side effects of taxation is better transparency) these fees and pay taxes.

      1. Maybe. maybe not. Price setting is not so simple.

        I suspect they’ve set fees at the point to maximize revenue — and while taxes will have an effect, it may not result in a fee increase, if the airlines believe the increase would result in a greater loss of revenue.

        1. There are probably fees that would take an increase, some would remain the same. The airline’s goal would likely be the total fees collected (after tax) to be the same or greater than now, with us footing the bill on the tax.

          1. At least the gubmint will get its slice, so it can distribute the wealth even further…..

  3. I have mixed feelings about unbundling. I personally agree that there are some things that should be part of basic airfare, particularly one checked bag. I also think the fees that are charged are way out of line with reality. If you want to charge a fee to choose a seat, okay but keep it reasonable. When I flew Norwegian last year, it was about $7 and I really didn’t mind that. (And rainbows and unicorns guy, I do agree with you in that if I as a solo flyer have to pay to reserve a seat, then everybody does – no “family discount” and no whining about unfairness. If you want to talk about unfair, we can discuss how expensive it is to be single.) And $300 change fees are ridiculous. I think it should be sliding scale depending on how far in advance you change your reservation – if it’s several months out, I’m not convinced that seat can’t be resold, and I’m really sure it doesn’t cost $300 in overhead to make the change. In regards to the man whose $300 change fee pretty much ate up the value of his travel voucher, he sounds like he doesn’t travel much, but perhaps another reform could be that the change fees can’t exceed a certain percentage of the ticket price.

    1. These days, you can go to almost any hotel or car rental site and find regular prices discounted by 10-15% if you want to make your purchase non-refundable. Refundable air tickets cost 300 to 500% more than non-refundable ones. Hotel rooms and car rental days are just as perishable as airplane seats. Except for the fact that there are far fewer airlines competing for business than there were several years ago, there is no justification for the airlines charging so much more for refundable tickets.

      1. there is no justification for the airlines charging so much more for refundable tickets.

        Yes, there is justification. We keep paying it.

      2. Another approach is, they can just raise the non-refundable fare to be in line with a 10-15% discount off the refundable fare.

        1. They could do that, but many non-business flyers would then not be able to afford to fly. The airlines would then be left with low passenger loads and huge financial losses. Even though the airlines show a lot of animosity toward those flying on heavily discounted coach fares, they need those customers to survive.

  4. I’d much rather be traveling with an airline that is making money than with one that isn’t, I feel much safer that way for many reasons including mechanical safety, morale of crew, etc. Also air fares are much cheaper today than they used to be for the average refundable ticket, even businesses benefit from this too (which I don’t think they should).

  5. US flag airlines have shown time and again that most of them have no respect for their customers, and will skewer them as much as possible.

    I hope the gubmint DOES go after them and TAX their un-reported profits. Remember that Untied, after telling their employees that the employees could “buy the company” with an ESOP – NOT BUYING, NOT SEATS ON THE BOARD, shifted their pension responsibilities to the taxpayer [lowering the pensions drastically in the process] and another airline tried to pull the same stunt but was told it ain’t gonna happen again. They are leeches compared with many foreign-flag lines. Peace on them!

    I think they should be re-regulated INTENSELY. At a minimum, the nit-picking of the bovine gubmint regulators would be appropriate punishment for their treatment of their customers.

    1. No they are not but some of the fees charged by airlines fail to have any valid relationship to cost plus a fair margin. Bottom line, fees are just a means to mask the cost of airfares.

  6. Wonder why you might get so many credit card pre-approval letters? The credit bureaus sell the information they gather to marketers. Yes, you can opt out of these credit card solicitations, but only if you know about it. Otherwise you are ripe for identity theft if someone finds one of your unshreded and unused credit applications.

    Privacy is a weak leg to stand on, as everyone is mining for personal data. The large on-line retail sites literally know everything about you, and you told them by what your ordered, what and to whom you sent gifts, what holidays you celebrate, what you do in your bedroom, your diet, your entertainment preferences, your hobbies, your work, and so on. Privacy left? Hah!

    There was a reason Homeland Security wanted to get access to your library records. Now the private sector selling cheap digital books has that same info, and it’s used to tailor not only marketing, but pricing as well.

    Transparent pricing is absolutely necessary, but don’t go overboard on this privacy issue. The cows left the barnyard, and they ain’t coming home. There are more important issues than what they do with information on passengers, and the credit bureaus and credit card companies are using that transportation info already.

    1. I save those postage-paid envelopes from those credit-card come-ons, and stuff them full of newspaper and junk mail, and then drop the postage-paid envelope in the mailbox.

      1. A friend claimed he got a bunch of postage paid envelopes from the Ted Kennedy campaign years ago and was able tape a brick to each one. I don’t know if it’s true or how many “a bunch” was, but it made for a good story when he told it.

        1. After getting weekly credit card solicitations from the same FUMDUK bank and marking them NO! STOP SENDING! in BIG RED LETTERS and sending ’em back in THEIR postage-paid envelopes, I had had enough. I finally went out to the yard and scooped up about a ½ pound of rocks, put ’em in the envelope with the NO! note, and mailed it off. I was gonna try the brick stunt on the next one, but, gee, I’m so lonely! The missives have ceased! They don’t love me anymore!

  7. I’m still in favor of paying for what you use. But the change fees are just plain awful. You should be able to change your flight on your computer for a nominal charge of $10-25 before a deadline so the airline can re-sell your seat. I’d like to see the government go after this kind of flat-out gouging.

  8. 20 years ago, a cheap return airfare from Australia to UK cost AUD$2000. Now 20 years on, you can get a cheap fare for only AUD$1500, even with massive increases in costs of fuel, salaries, red tape, & that joke called security.
    People want low fares en masse.

  9. Although there have been many annoying and objectionable things happening in the airline industry, it is in everyone’s interest to have a profitable industry.
    I would be far more concerned about the seats being too close together than a fee for seat selection.
    That said, there is some adjustment in the way fees are being charged and how that equates to benefit received. However, I am not happy that more discussion regarding seat spacing is not on the table. That, to me is an issue.

  10. What about a door that can only be opened by electronic code at 10,000 feet or lower and parachutes for everyone?
    This airline could support the cost by getting rid of attendants, food and drink service except for water and all entertainment services.

  11. ” … says Sen. John D. Rockefeller IV (D-W.Va.), chairman of the Senate Committee on Commerce, Science and Transportation, which is investigating the matter.”

    Dear Sen. Rockefeller, instead of wasting time and money with trying to tweak the actions to take in order to “protect the citizens”, how about giving choices to those same citizens you seem to be so concerned about? You know? Going from St. Louis to Chicago doesn’t necessarily need to mean a flight on American, Delta or United.

    – You could decide to finally finish, 60 years after its inception (and untold money wasted into it), the project Interstate System as it was meant to be – to give us highway system matching the one in Germany. Then we could drive from St. Louis to Chicago in LESS TIME THAN IT TAKES TO FLY WITH DIRECT FLIGHT. No, it’s not BS. 45 minutes average drive to the nearest airport + 1 hour in advance you need to be there + 1 1/2 hour airline will take gate-to-gate + 30 minutes to get bags and and get rental car = 3 hours and 45 minutes. 300 miles road distance can be covered in 3 hours in a civilized country like Germany with today’s cars. Don’t ask how I know, it will only make me depressed again.

    – You could decide to finally allow some competition and let at least carriers already associated with US carriers into alliances to fly internal flight on their planes, with their crews and their prices.

    – You could also decide that a proper and REAL high-speed train is not something that exists only in communist countries like France, Germany and Japan but that U.S. could benefit from that choice of transportation as well. The same St.Louis – Chicago route could be traveled in 3 hours (and less, easily) with a true high-speed rail.

    You only need to give us choices, you will see then just how quickly will airlines start treating customers like royalty without a single piece of paper produced by Congressional Committee and not a single minute spent in the hearing in the front of said committee.

  12. “Are airlines profiting at your expense?”

    Yes. Or at least I hope they are, or we won’t have airlines soon.

    This is the very nature of what a for profit business is. They profit at the expense of their customers.

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