ECONOMY ... USA
The Airline Industry

Profits Are Sky-High, But Airlines Keep Coming Up With New Ways to Gouge You With Fees ... The tickets themselves may be reasonable, but they'll get you with the fees.

Burgess COMMENTARY

Peter Burgess

ECONOMY Profits Are Sky-High, But Airlines Keep Coming Up With New Ways to Gouge You With Fees The tickets themselves may be reasonable, but they'll get you with the fees. Photo Credit: Milkovasa / Shutterstock

The airline industry is whistling a cheery tune these days, and it sounds suspiciously like “Happy Days Are Here Again.” With gasoline prices at a level not seen in decades, the troubled post-9/11 airline industry seems a distant memory. In its place is an industry awash in profits. Delta Airlines reported $4.5 billion in profits last year. Southwest Airlines’ profits reached over $536 million in the fourth quarter of 2015 alone. United Airlines profits reached $823 million. In all, 25 airlines in the United States reported over $25 billion in profits last year, more than three times the profits of the previous year. Fuel prices, which were a whopping 35% lower last year than the previous year contributed mightily to the airlines’ bottom line, especially since little of those savings were passed on to passengers.

You can excuse passengers for not noticing how well things are going for the airlines. Between less legroom, non-reclining seats, lost baggage, fewer on-board amenities, late flights, and fees, fees, fees, passengers are in no mood to celebrate.

“While consumers are getting less, the airlines continue to see their profits soar,' noted Charles Leocha, chairman of the consumer advocacy group Travelers United. (Indeed, despite growing profits, airlines received over 20,000 formal complaints last year.) And although the cost of the average round trip in the U.S., $210, was at a three-year low in January 2016, that has been made up, and much more, through the bane of the beleaguered airline passengers’ existence, airline fees.

The escalation of airline fees began in 2008, when the cost of fuel doubled to around $4 a gallon. To cover that cost, airlines began charging fees above and beyond the cost of the ticket, for things that used to be free, like drinks and checked bags. Then, in 2009, the IRS made a fateful ruling, that those add-on fees were not subject to the Air Transportation Excise Tax, a 7.5% tax that goes toward improving airline technology and safety. As long as those fees were not included in the actual price of the ticket, the airlines could avoid paying that tax on the revenue. The airlines, thus incentivized by the IRS, were off and running, and the expansion of fees followed quickly. After years of post-9/11 poverty, when some airlines were forced into bankruptcy, and employees were laid off or forced to accept drastic pay and benefit cuts, good times began to roll.

By 2015, airlines were taking in almost $4 billion in baggage fees, and another $3 billion in reservation change fees. Spirit Airlines, one of the worst fee offenders, took in $668 million in non-ticket revenue in 2013, going from an average of about $2 per passenger to an average of $50 per passenger. In all, U.S. airlines pulled in $11 billion in fees last year.

Here are some of the endless ways the airline industry has found to profit off passengers, who have little recourse but to pay up.

1. Checked bag fee. In days past, airlines checked bags for free. No more. Today, the rule, rather than the exception, is to charge for your first checked bag, and then charge you even more for every additional bag. Of our major airline carriers, only Southwest Air gives you a freebie on the first bag. The others will charge anywhere from $25 to $50 for the first bag, and up to $60 for the second bag. Now, some airlines are charging a transfer fee for checked baggage, especially if you bought the tickets separately, an increasingly popular way to save money.

2. Oversize bags fee. Don’t overpack your bag either. Most airlines will charge anywhere from $50 to $100 for a heavy suitcase.

3. Carry-on bag fee. If you think you can avoid the checked bag fee by sticking to a single carry-on bag, think again. Some airlines, like Frontier Airlines and Spirit Airlines, charge you a fee, as much as $100, for carry-on luggage.

4. Overhead compartment fee. Then there is the wily airline that gives you a free carry-on bag, but charges you if you use the overhead storage compartment. Store it under your seat or pay.

5. Food/snack/drink fee. Once upon a time, airlines served meals on long flights. Not necessarily good meals, mind you, but at least you knew that a long five- or six-hour flight across the country didn’t include a grumbling stomach. Most airlines today have eliminated full meals on domestic flights. In their stead, the airlines (though not all of them) provide tiny bags of peanuts or pretzels. If you’re lucky you will get a free non-alcoholic beverage. Don’t push it, though. If you want more peanuts or pretzels, or another Coke, it might cost you anywhere from $3 to $10. An alcoholic drink will set you back $6 to $10.

6. Blanket fee. Remember when you could get a blanket and pillow to make yourself more comfortable? Now JetBlue will charge you $7 for a set, but hey, you get to keep it.

7. Reservation fee. If you have long legs and prefer an exit aisle for the additional legroom, or need an aisle seat because you like to get up and stretch during a flight, be prepared to pay for the privilege. Where once you could reserve your seat in advance, many airlines now charge you for the privilege of avoiding the dreaded middle seat. Seats designated as “preferred” can now cost an extra fee of as much as $299 (looking at you, United Airlines).

If you are traveling with your family, or a group of friends, and you want to sit together, don’t assume you will be able to. At least not for free. Unless you are a member of the airline’s 'loyalty' program, the airline decides where you sit. If you insist on making sure you are together with your loved ones, you will need to reserve in advance…for a fee of course, upward of $50.

8. Priority-seating fee. If you are traveling with children and want to get them settled in their seats early, or you wish to avoid the mad stampede to the gate, priority seating is for you. Just be ready to pay up to $40 extra for the benefit. (Even a well-ranked airlines like Southwest charges $15.)

9. Booking fee. If you book your flight online, chances are there is no fee for doing so. But woe to you if you book by phone, or in some cases, even in person. That sin will cost you anywhere from $25 to $35.

10. Change/cancellation fee. Unexpectedly have to cancel or change your flight? Unless it is within 24 hours of the booking, it will probably cost you up to $200 to cancel or change the reservation. Airlines will even charge you to change to an earlier flight if you arrive at the airport early, there is an earlier flight to the same place, and there are unsold tickets on that flight.

11. Wifi fee. Wifi for your iPad or laptop will probably cost you up to $20. (They will also probably charge you for the ear buds just to listen to music, so make sure you bring your own.)

12. Pet fee. Not all airlines will accommodate pets, but if they do, they are considered passengers and it will cost you. If your pet is small enough to fit in a carrier under your seat, look for fees anywhere from $95 to $175. If your pet is larger and you need to store your animal pal in cargo, it will cost from $100 to $225.

The Ridiculous Fee Act

With money pouring into airline coffers, and most of it not making it back into consumer pockets, Congress has taken interest in addressing the problem. Aiming to eliminate fees, “that are unreasonable or disproportional to the costs incurred by the air carrier,” senators Ed Markey and Richard Blumenthal introduced the Forbidding Airlines from Imposing Ridiculous Fees Act (or the FAIR Fees Act) this year.

“Airlines fees are as high as the planes passengers are traveling on, and it’s time to stop their rapid ascent,” Senator Markey proclaimed. Baggage fees and change/cancellation fees are specifically targeted in the proposed law, but other fees would be looked at also. George Slover, senior policy counsel at Consumers Union noted that, “Many add-on fees have reached a point where they are essentially a back-door fare increase. This legislation aims to put some reasonable standards in place for these kinds of fees.”

In 2015, the new airline GLO opened for business, and one of its main calling cards is no add-on fees. No baggage fees, no seat reservation fees, no food fees. Airline founder Trey Fayard told USA Today, 'We didn't think nickel-and-diming for something like bags was the way to go.' Although GLO is just a small regional carrier, should it succeed, it may open up possibilities for future similar efforts.

Meanwhile, look for transparency. Although it is difficult to avoid the most egregious airline fees, like baggage fees and reservation fees, educating yourself before booking your flight can almost certainly save you money. If your ticket price is too good to believe, make sure that isn’t because the add-on fees are too high to be believed.

Larry Schwartz is a Brooklyn-based freelance writer with a focus on health, science and American history.