The great airline fee grab

by Christopher Elliott on November 13, 2012


Air travel is full of surprises, some good, many not.

Steven Allen says he got a bad one recently when he called to change a United Airlines ticket from San Francisco to Puerto Vallarta, Mexico. To move his return date from Oct. 25 to Oct. 27, the airline wanted him to pay another $300, nearly half the $686 airfare.

Allen, a college instructor in Berkeley, Calif., who like a lot of leisure travelers isn’t fully aware of all the fees that airlines now impose on passengers, says that the surcharge was unreasonable. “It’s disappointing,” he said.

Other passengers are also frustrated by airline fees — specifically, by the fact that fees are often poorly disclosed until it’s time to pay them. (United’s Web site indicates that a fee “may apply” for ticket changes, but it offers no details.)

The domestic airline industry as a whole is in the process of re-imagining its business model, moving away from one in which the price of a ticket covers the basic cost of air transportation to one in which optional fees account for much of its profits.

A new survey underscores air travelers’ dissatisfaction with the change. The poll, conducted by Harris Interactive on behalf of Open Allies for Airfare Transparency, a coalition of online travel agencies and electronic travel distribution companies, suggests that many air travelers are clueless about fees. It found that 94 percent of Americans who’d recently used an online travel company to book their travel said that all airline fee information should be available to travel agents and online travel Web sites, which isn’t the case now.

David Kelly, Open Allies’ executive director, called the results a “wake-up call” and said they prove that passengers want to know exactly what they’ll have to pay before they open their wallets. “The survey data demonstrates that consumers expect airlines to share fees in a transparent and purchasable format in all the channels where they sell their fares,” he added.

Open Allies didn’t order up the survey because it’s opposed to fees. On the contrary, it’s pushing the government to force airlines to disclose fees so that its members can sell the optional extras, sharing in the air carriers’ windfall.

Airlines say that the current rules are sufficient. Transportation Department regulations that took effect earlier this year require air carriers to prominently disclose all optional surcharges on their Web sites and to include any mandatory fees and taxes in quoted fares. “United’s fees are clearly disclosed online, in accordance with federal regulations,” says Charles Hobart, a United spokesman. He adds that United also discloses ticket change fees in the individual reservation, because those fees can vary.

It isn’t just ticket-change fees that irk travelers. Legacy airlines have added a variety of charges for extras such as the first checked bag and seat reservations. Some discount carriers are more aggressive, charging fees for carry-on bags and for the “convenience” of booking through their Web sites.

Together, those fees generated more than $10 billion for the airline industry worldwide in 2011, according to a recent study by the airline consultancy firm IdeaWorks. For many airlines, the fees made the difference between a profit and a loss and in a few instances, they might have made the difference between survival and liquidation.

But at what cost? “From the passenger’s perspective, the price of that $10-plus billion is the truth,” says Charles Leocha, president of the Consumer Travel Alliance and the consumer representative to the DOT’s Advisory Committee for Aviation Consumer Protection. “Somewhere during the booking process, the passengers weren’t told the full cost of air travel.” (Disclosure: I co-founded the Consumer Travel Alliance and serve as its volunteer ombudsman.)

It’s easy to mislead customers, even when you’re complying with government regulations. Airlines do it by not including all charges in the price of a ticket, making the fare seem less than it is. And history lends a hand. Traditionally, making a seat reservation, paying for a ticket by credit card or printing a boarding pass at the airport has been included in the fare price. But now, the airlines have quietly “unbundled” those services while doing little or nothing to inform the public that tickets now don’t include them.

Leocha says that regulators are struggling with how to address what he sees as unfair and deceptive pricing practices. Strictly speaking, the fees now being charged by airlines are completely legal, and their disclosure meets all government standards. Yet many passengers still feel duped when they unexpectedly have to pay extra for something while they’re flying. More than half of the passengers surveyed by Harris said that they’re still being surprised by fees after they buy their airline tickets.

The problem is simple: In deciding to shift to a fee-based system for airline tickets, airlines did their homework, making sure that every step they took was legal, though not necessarily transparent.

The solution won’t be so easy. It will take creative regulations or new legislation to overcome misleading airline ticket prices. And both of those routes mean that consumers won’t see solutions for more than a year.

But a little pressure from the flying public could bring a fix closer. That’s what happened to Allen when he was faced with the change fee from United. He sent a polite e-mail to the airline’s director of customer care and copied me, explaining that he thought the charge was absurd. “Surely,” he wrote, “you can’t believe that anyone who has been charged such a fee would ever fly with United again.”

To his surprise, he received a call a few days later. A United representative reiterated the company’s position that the fee was correct but then added that, as a goodwill gesture, it would waive it.

That decision, as I noted a few days ago on my customer-service blog, gives me hope that airlines will see that fees — and the way they’re being charged — are not an effective long-term business model. And it makes me think that airlines can find a smarter way of making money long before any government action is taken.

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  • DrV

    Regulation or De-regulation?

    Welcome to de-regulation, folks! We’re still seeing the so-called benefits years after it began.

    If this isn’t the best argument for re-regulating the airlines, I don’t know what is. While we’re at it, it’s time to regulate minimum seat width and pitch. The flying public deserves better seating in coach than cattle-car seating.

  • Loie

    It’s a shame that someone like Allen must rely on a 3d party arbitrator (thank you CT). But that’s one person and one “beneficent” fee waiver, not customer service. And I agree with the previous comment; de-regulation was a terrible mistake,

  • John L

    I don’t see the $300 as excessive, and I think United was wrong to waive it. At the time of booking, the traveler specifically chose the lowest fare available. Expanding the fare rules before purchasing does allow him to see the $150 fee, and he checks a box confirming he has read the terms and conditions. At the time of purchase, the trip he bought was $686, but the alternative itinerary with the later return could already have been $836, which is a $150 fare difference and a $150 change fee, making $300. $150 has been a standard change fee for legacy carriers for around 4 years now. He may say he won’t be flying UA again, but AA, DL, US would all have been at least $150, and probably also close to $300 or more to make that same change. With the exception of Southwest, even the smallest airlines have change fees, and even when changing a Southwest flight, a fare difference of $300 would not be that unusual, if someone had bought a Wanna-get-away fare and at the time of change there were only Anytime fares left. One other note, if this traveler had flown outbound to Puerto Vallarta and changed his return from there, chances are quite good that the change could have been made for just $150.

  • DCTA

    I don’t see the $300 as excessive given that the rules are the rules – the change fee is $150 plus the difference between the original fare and the new fare. I’ve been a Travel Agent since 1996 and since that time, the rule has been the fee plus the fare difference. Now I have to be honest and disclose that in 1996, I think I remember the change fee being $35 but I’m not positive. Now do I think it doesn’t cost the airline nearly $150 to make a change? Yes, that is what I think, but those fees are disclosed at point of purchase – at least they are every time I quote a fare. I believe they’re not that hidden on the airline sites and OTAs either – one only need to click on the link provided to expand the info when offered.

  • janice

    I’m with DCTA and John L here, the rules are you can’t change a return ticket until you’ve flown the outboudn, but those rules are disclosed. Of course, maybe he booked online and didn’t read them. A good travel agent will tell them. I get people all the time who want to make ” a simple” change and are appalled because they think the airline should only charge them 150, even if it’s last minute or the flight is nearly full. Try to explain that if you could make changes for a flat $150 people would book cheap random dates and change at will.

  • Anonymous

    Leocha says that regulators are struggling with how to address what he sees as unfair and deceptive pricing practices
    **********************************************************
    To quote Charlie’s tired old rant regarding the $300 fee shows how much travel writer don’t know or don’t understand what they are writing about and this is just annoying!
    Chris, when you make a change to the return flight, not only will there be a change fee, but if your ‘class of service’ orginally booked in isn’t available then the next highest fare is priced. ALL fare rules state this.
    Please consult with Janice, your travel writing partner on this website BEFORE posting about airfares so she can assist you will understanding what you wish to help people with.

  • Anonymous

    No, no a thousand times no! Under regulation airfares were far higher than they are now. Deregulation has been wonderful for the consumer. Choices are good. Government dictates are bad.

  • Anonymous

    I was starting to go through withdrawal waiting for the latest Leocha/Elliott rant on fees. It’s been a couple of weeks now, I think, since the last time they wrote this retread article. I for one like a fee based system in which I can choose which services I want, and avoid the fees for the ones that don’t matter enough to me. Just about every choice we make in our economic life involves a basic purchase at a lower cost or a purchase with more features at a higher cost. Air travel is no exception, except to those who want everyone else to pay for the features they want.

  • Matthew in NYC

    We all know that a fully refundable, flexible fare in economy is a very expensive commodity, that’s why most of us prefer to buy advanced purchase, non-refundable fares. Most tickets I buy have conditions like, non-refundable, non-endorseable, valid one airline only, change fee applies. You need to read the conditions on what your buying. If changing a ticket return date sounds like something you might want to do, you need to prepare for that eventuality. Ticket prices follow a curve that rises sharply the closer you get to departure date, especially if the flight is filling up. This guy was a college instructor in Berkeley CA, so he’s no dummy, not much sympathy for him from me.

  • DCTA

    Good for you Matthew!!! You are an INFORMED consumer, which we all should be.

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