by Cheryl-Anne Sturken | September 21, 2017
According to a study done by the Government Accountability Office, U.S. airline fees - baggage and ticket-cancellation fees - increased to $7.1 billion in 2016, up from $6.3 billion in 2010. To compile the report, in compliance with a 2011 Department of Transportation ruling requiring transparency of fees charged by U.S. and foreign airlines, the agency reviewed 2010 and 2017 data on optional service fees charged by the 11 largest U.S. passenger airlines.
In addition, the GAO analyzed airline financial data from 2010 and 2016 reported to the DOT, reviewed economic studies examining the effects of bag fees on fares and reviewed applicable laws to come up with its findings. According to the GAO, each of the 11 U.S. airlines introduced new fees for optional services, and some existing fees were increased. New charges included fees for preferred seating, which could include extra leg room or a seat closer to the front of the economy cabin; priority boarding, and fees for carry-on baggage. Existing fees that were increased included some for optional services such as checked baggage, and for changing or cancelling a reservation.
Airline officials cited competition from other carriers and customer demand, among other things, as factors they consider when deciding whether and how much to charge for optional services. According to officials from nine of the 11 selected airlines the GAO interviewed, the process of "unbundling" ticket prices and offering upgrades at a premium allows passengers to customize their flight by paying only for the services they value. Airline officials also said that charging fees for optional services allows them to offer lower base airfares.
For customers traveling with bags, however, GAO's review of airline-related economic literature showed that, on average, customers who paid for at least one checked bag paid more in total for the airfare and bag fees than they did when airfares included checked baggage. Officials from the 10 airlines said they also consider customer demand and willingness to pay when setting prices for optional services, and officials from 8 of these airlines noted that competitors' prices for similar services are another factor used in determining the amount of fees.
The report noted that consumer transparency has improved because the DOT requires airlines to disclose optional services fees on their websites, but challenges remain, particularly for those consumers who book flights through online travel agents, because optional services are not always available for purchase and fees for such services are not always disclosed. As such, consumers are not always able to determine the full cost of their airline ticket, making it hard to compare actual costs across airlines before making their purchase.