It’s not news that ancillary fees are a major revenue source for global carriers. In 2023, airlines earned $33 billion from baggage fees alone. This includes fees for checked luggage, overweight bags, and sometimes larger carry-on items.
And not for the first time, the practice of charging so-called junk fees is coming under scrutiny.
A recent report by a U.S. Senate subcommittee sheds light on the issue and ignited a fierce debate over the fairness and transparency of airline pricing. (No doubt Canada’s self-appointed champion of passenger rights, Gabor Lukacs, is paying close attention…)
The Unveiling of Junk Fees
The Senate Permanent Subcommittee on Investigations, led by Senator Richard Blumenthal, has targeted five airlines: industry giants American Airlines, Delta Air Lines, and United Airlines, along with budget carriers Frontier Airlines and Spirit Airlines.
The findings suggest airlines have been charging passengers exorbitant fees that some argue are disconnected from the actual cost of the services provided.
Baggage Fees and Policy Enforcement
One of the most striking revelations of the report is the extent to which airlines have monetized baggage policies. Both Frontier and Spirit have been known to enforce strict baggage rules, and they even incentivize their gate agents to do so.
According to simpleflying.com, they spent USD$26 million on these incentives in 2022 and 2023, with agents earning bonuses for each bag checked at the gate. This practice raises questions about the fairness of the system, especially for travellers who might find themselves hit with unexpected fees at the last minute.
In a Reuters story posted on the Globe and Mail website, Frontier officials said the commission for gate agents "is simply designed to incentivize our team members to ensure compliance with bag size requirements so that all customers are treated equally and fairly.”
Blumenthal said Congress should require airlines to provide more detailed fee disclosures and that the US Department of Transportation should investigate potential abuses in incentive-based collection of fees. The Reuters story also noted that airlines sued to block the department's new rules on upfront disclosure of airline fees.
Seat Selection: A Lucrative Revenue Stream
The investigation also highlighted how airlines profit from seat selection fees. From 2018 to 2023, the five airlines combined raked in an astonishing USD$12.4 billion from these charges. Price tags for extra legroom seats can soar to $319 on United or $299 on Spirit, while budget carriers like Frontier and American also command hefty fees for preferred seating.
A dynamic pricing strategy, where airlines use algorithms to adjust fees based on demand and customer data, means that travellers can end up paying vastly different amounts for the same service.
Both Frontier and Spirit employ a "dynamic" pricing model that can lead to passengers paying different rates for the same type of luggage, depending on various factors like time of booking or demand. Critics say the reliance on data-driven decision-making raises concerns about transparency, as customers may struggle to understand how fees are determined.
Extra Leg Room Fees
The website aviationa2z.com reports that the big five US airlines collectively earned a staggering $12 billion by charging passengers for pre-booking their preferred seats, with extra legroom seats being the most lucrative of them all. Their story didn't state the period of time that those extra fees were charged.
United Airlines (UA) charged the highest with fares going as high as $319, whereas its competing careers, Delta Air Lines (DL) and American Airlines (AA) capped off at $264 and $140 respectively, the website said.
Industry Response
The airline industry is pushing back against the report. Airlines for America—an advocacy group for major US carriers—argues that the findings overlook the value airlines provide to both employees and travellers. They dismissed the report as merely a talking point for holiday travel discussions.
Spirit Airlines, in particular, defended its practices, asserting that they maintain transparency in their pricing and adhere to all regulations. They argued that measures like incentivizing gate agents are in place to ensure compliance with baggage rules, ultimately benefiting all passengers.
Upcoming US Senate Hearing, and Canadian Government Action
To further explore these issues, a Senate hearing is scheduled for 04DEC, where executives from the five airlines will testify. The lineup includes high-ranking officials from American, Delta, United, Frontier, and Spirit, all of whom will face questions about their pricing strategies and the implications for consumers.
As previously reported by Open Jaw, a similar debate is taking place in Canada, where the Liberal government also has proposed new rules on junk fees. Ottawa earlier this year said it's trying to "strengthen transparency of optional fees charged by airlines, for everything from baggage to seat selection to in-flight meals."
Andy Gibbons, Vice President External Affairs for WestJet, took a similar tack to the US airline approach and argued the moves could increase the cost of travel.
"To preserve affordable air travel, Canadians require the choice to opt into the products they require for their journey beyond their seat, to avoid subsidizing for a service that does not fulfill their individual needs," Gibbons said.
The Bigger Picture
As air travel becomes increasingly central to holiday plans, the debate over airline fees is more relevant than ever. With travellers looking for the best deals, the hidden costs associated with flying can turn what seems like an affordable ticket into a much larger expense. As this issue unfolds in the public eye, consumers will undoubtedly be paying closer attention to the full cost of air travel; not just the price of the ticket but the myriad of additional fees.
In the end, it’s clear that the conversation around airline pricing is far from over. With lawmakers stepping in to demand accountability, the future may hold changes that could reshape how airlines communicate costs to passengers. As the holiday rush continues, travellers may want to keep a keen eye on their flight costs to avoid unwelcome surprises at the airport.
Meanwhile, in Europe ...
The Guardian is reporting that the head of easyJet has denounced fines handed out in Spain to budget carriers for charging passengers for hand luggage and seat reservations as “illegal” and warned the decision will make it more expensive to fly.
EasyJet was given a penalty of USD$30.6 million by Spain’s consumer rights ministry earlier this month along with Ryanair, which received the largest fine of USD$114 million, and other airlines including Vueling, Norwegian and Volotea.
“We’re offering people the choices to do and get what they pay for. One-third of our customers do not choose any ancillaries whatsoever,” easyJet CEO Johan Lundgren told BBC Radio 4’s Today program.
Lundgren said imposing the fines will "increase the underlying fare. It’s going to make it more expensive to fly and travel for people who don’t want to have this type of product.”
