The last decade has not bee a particularly profitable one for domestic airlines. From 2001 through 2009, the U.S. airline industry, including air cargo carriers, posted a cumulative net loss of $58.1 billion.
Yearly industry-wide net losses, which were offset by modest profits in 2006-07, were the result of many factors, including the aftermath of the September 11, 2001, terrorist attacks, the SARS epidemic, excess capacity, record oil prices of up to $147 per barrel, and an economic recession.
Starting in 2008, some airlines began to offset these losses by charging for extra checked bags and other services once provided at no charge. Now, a Congressional committee is looking into consumer complaints that it's gone too far.
"Congress, not just DOT, should act now to protect consumers from the ever increasing number and variety of fees imposed on them by the airlines," said Kate Hanni, Executive Director of FlyersRights.org, in prepared testimony before the Aviation subcommittee of the House Committee on Transportation and Infrastructure. "These fees, many of which the airlines do not have to pay taxes on, are simply an effort by the airlines to shift their financial burdens onto American consumers at a time when they can least afford them."
Hanni's group, founded in the aftermath of a lengthy tarmac stranding, says the complexity of the "optional and ancillary fees" now being imposed by most of the major U.S. domestic airlines makes it very difficult for airline passengers to calculate the true cost of a proposed flight.
Comparing costs
As a result, the group says, passengers have a harder time comparing the total costs of flying on competing airlines. FlyersRights.org said it has found that airline fees, which are estimated to generate over $2 billion annually, are often unclear to consumers, applied in a manner that is manipulative and are often excessive and arbitrary.
"Just as they have done with ATMs and credit cards, Congress and the Administration must do more than force airlines to make the fees transparent and easier to understand-they should curtail the imposition of these fees in the first place," said Hanni. "Airlines like imposing fees rather than increasing fares because in most cases they can avoid paying taxes which support the safety and efficiency of our airport system-so consumers are being ripped off and shortchanged at the same time."
Although critics like FlyersRights.org have suggested that ancillary fees are merely a means for airlines to "nickel-and-dime" passengers, the Air Transport Association (ATA), an industry trade group, maintains that ancillary fee policies are beneficial to passengers because such policies allow passengers to pay only for services that they use.
In addition, the ATA says many airlines offer "restricted" tickets, which are less expensive but carry greater fees and penalties for changes to itineraries, as opposed to "full-fare" tickets, which allow changes free of additional charge. ATA argues that this price difference allows the cost of air travel to remain much lower for consumers who do not make changes to their itineraries.
Today's hearing is covering a number of issues pertaining to the trend of unbundling airfares to require passengers to pay for particular services individually. The hearing will also explore requirements for disclosure of fares, taxes, and fees, options for passengers to recover the costs of some fees, and revenue potentially available to the Airport and Airway Trust Fund (Trust Fund) if certain ancillary fees were subject to the federal tax on airline tickets.
