Airline fees, once merely irritating, have blossomed into a major source of airline profits and a growing headache for travelers.
Passengers have grudgingly paid for checked baggage, ticket changes and onboard meals. But fees to board early, access a wireless Internet connection in-flight, or fly on standby have emerged recently. And over the next 18 months, airline consultants say carriers are likely to start selling new conveniences and comforts to passengers.
“We’ve not even begun to touch the bottom of the barrel with airline service fees,” said Stuart Klaskin, a Miami-based airline consultant.
Already exposed to more than a dozen fees, fliers may soon pony up for shortened security lines, premium baggage handling and trip protection that would let them dodge costly ticket change fees, Klaskin said.
Some fliers will welcome these options, gladly paying for a hassle-free travel experience. Others are sure to be frustrated by what they perceive as nickel-and-diming tactics. Many passengers already find it difficult to comparison shop and figure out the total cost of flying.
Consumers today should realize that the airline fare is only a starting point for what you’ll spend to get from destination A to destination B.
“It’s a down payment,” said Michael Boyd, president of The Boyd Group in Golden, Co.
The airline fee revolution was nearly a decade in the making.
Carriers have felt financial pressures since the terrorist attacks on Sept. 11, 2001. But most fare increases failed. Record-high fuel prices in 2008 prompted airlines to begin charging passengers for checked baggage. They added fees for other services to off-set losses from weakened travel demand.
It didn’t take long before carriers recognized the potential for building a new, more lucrative industry model. They began charging passengers on an a la carte basis for services and perks once included in the ticket price. Then, they quietly raised the fees in various categories. Today, while fares are down after adjusting for inflation over the past 30 years, major airlines charge passengers as much as $25 each way to check their first piece of luggage to a destination.
By steering clear of across-the-board fare increases, airlines have enticed passengers to keep flying and have avoided financial ruin that could have collapsed the U.S. airline industry, experts say. Fees also enable customers to pay only for the services they want or need, without subsidizing the cost of others.
“It’s a successful formula for restoring airlines to profitability,” said George Hobica, founder of Airfarewatchdog.com. “If they hadn’t done it, we would have had fewer airlines.”
In 2008 and 2009, U.S. airlines collectively reported operating losses of $4.4 billion, U.S. Department of Transportation data show. During the same period, carriers reported about $7.9 billion in revenues from baggage fees and reservation change and cancellation fees.
What’s unknown is how much they earned from other fee categories such as meals, pillows/blankets and seat selection. Airlines aren’t required to disclose these to the U.S. Department of Transportation.
Miramar-based Spirit Airlines has led the U.S. airline industry in adopting an unbundled business model. In August, the carrier charted new territory by charging passengers $30 each way for carry-on bags that do not fit under the airplane seat.
“When Spirit unbundles, we introduce another option of choice for our customers and at the same time lower our fares even further as opposed to the nickel-and-diming done by other airlines when they simply add a new fee on top of already higher fares,” spokeswoman Misty Pinson said.
The carry-on bag fee — which has been criticized and praised — allowed Spirit to reduce its lowest fare by more than $40 each way, the company said.
No airline earned a greater share of its revenue from fees last year than Spirit $146 million or 20 percent of its 2009 revenue, according to data released in May by the DOT.
Consumer advocates argue that airline fees mislead passengers, especially because they’re not fully disclosed through all ticket purchase channels.
“Grandma and grandpa, they get burned the worst,” said Boyd.
A couple of Web sites, such as kayak.com and farecompare.com, offer online tools to help consumers compare airline fares and fees to find the best deal overall. Some online air travel sellers have published comprehensive fee guides that breakdown airline fees by carrier and category.
Passengers can avoid checked baggage fees altogether by packing a light carry-on bag. Flying Southwest Airlines is another option.
Each Southwest passenger can check two bags for free, and there’s no charge for ticket changes. Still, consumers should compare the carrier’s fares against the total price (bag fees and all) at other discount carriers to make sure they’re getting the best deal.
The U.S. Government Accountability Office in July issued a report that illuminated problems with how the airlines disclose add-on charges.
Government regulators are considering issuing a new rule to clarify how airlines disclose fees.
Kate Hanni, founder of the airline passenger organization flyersrights.org wants the DOT to issue a rule requiring airlines to publish on their Web sites a comprehensive fee guide that is accessible to consumers before they enter the personal information required to purchase a ticket.
“At least then you’ll be able to compare airlines,” she said.
Most airline analysts predict add-on charges are a permanent part of flying.
Klaskin said the old practice of including services in the cost was a loser for the airlines. Consumers didn’t benefit much either because the so-called free services were included in the higher airfares, he and others say.
“The average consumer doesn’t expect to get anything for free,” Klaskin said.
The problem is airlines haven’t done a good job of explaining this to the flying public, Boyd said. The message airlines are sending is “unless you want to be very, very uncomfortable you have to pay more,” he said.
“Any fee that the consumer doesn’t revolt over is going to stay,” Boyd said.
There hasn’t been such a fee — yet.
But if airlines roll out more fees without explanation or begin selling options that don’t offer significant benefit then all bets are off, Boyd said.
“At some point, the consumer is going to blow,” he said.