Airline fees under microscope in federal study

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Airlines’ growing use of fees tacked onto air fares is the focus of a newly-released study by the U.S. Government Accountability Office.

The report notes that U.S. airlines’ revenue from fees for checked baggage and change or cancellation fees increased to $7.1 billion in 2016, and many airlines have also increased fees charged for overweight and oversized bags.

Among the ways carriers including Atlanta-based Delta Air Lines are “unbundling” air fares are through “basic economy” fares, which are bare-bones reservations that don’t include things like advanced seat selection and don’t allow changes to the itinerary.

The GAO report says basic economy fares are an issue the DOT is focusing on.

“According to DOT officials, they have monitored Delta’s introduction of Basic Economy and contacted American and United to get information about the airline’s plans to inform consumers about these fares and restrictions,” the GAO report says. “DOT officials told us that going forward, they intend to monitor complaints related to Basic Economy fares to determine if consumers are experiencing any issues associated with these tickets.”

Different types of fare tiers such as basic economy or preferred seats offer different perks depending on the carrier, which can cause confusion for some passengers. And airlines have different prices for various extras.

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When it comes to checked bag fees, several studies found that fares have reduced by less than the new bag fees, according to the GAO. The end result is that those who pay for checked bags pay more on average than when the fare included checked bags, while those who do not pay for checked bags pay  less overall.

About 5 percent of the 17,904 complaints filed with the U.S. Department of Transportation in 2016 dealt with airline fees for optional services, according to the GAO. Passengers complained that fees for cancellations or changes, baggage and seat selection were too high “or that information about these fees was not transparent or fully disclosed to the customer.”

Based on interviews with officials from 10 U.S. airlines, the important factors they use to determine the amount of a fee customer demand and the price customers are willing to pay. Some said the cost of providing the service is not a factor in determining how much to charge for the fee.

A new DOT regulation that took effect in 2012 requires certain airlines to disclose information about their optional service fees on their websites and refund passengers’ baggage fees if their bags are lost.

But an ongoing fight centers around whether airlines should be required to give information on fees to online travel agents and other third-party distributors.  Those distributors say that will make it easier for travelers to comparison shop. The DOT in March 2017 indefinitely suspended public comment on a proposed rule on the matter while the president’s appointees review it.

The GAO report also raised issues with airlines’ complex contracts of carriage that outline the airline’s policies and rules. GAO staff tested 11 contract of carriage documents with a readability test “and found they require a reading level of someone with a college graduate degree.”

The DOT said its advisory committee for aviation consumer protection recommended airlines be required to simplify their contracts of carriage, but the DOT “did not want to get involved in contracts between airlines and passengers.” The agency instead worked with industry group Airlines for America, which said its members committed to reviewing their contracts of carriage to see if they can be simplified.

The GAO report notes that most revenue from optional service fees is not subject to excise taxes that go into a federal fund to help pay for the Federal Aviation Administration and the air traffic control system. The issue “remains relevant as the amount of airline revenue generated by optional service fees increases,” the report says.

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MORE:

Delta: ‘Up-sell’ fare strategy working well

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Delta aims to bring in more cash from extras

Feds will require airline baggage fee refunds when bags are delayed

Obama rule sparks baggage fee fight


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