Two Senators Have Introduced a Bill to Limit The Airline Fees You Pay. Good Idea?

Representative Steven Cohen (D-TN) wanted to regulate seat width and legroom. That went nowhere in the House Transportation Committee, but Senator Chuck Schumer (D-NY) decided it would make a good issue. His office even pitched me on the story after I had already explained why this would be bad for consumers. The Points Guy gave him more sympathetic coverage.

Now Senators Richard Blumenthal (D-CT) and Ed Markey (D-MA) want to limit airline fees

On Tuesday, two U.S. senators introduced a bill that would limit fees tacked onto the price of your airfare that “are not reasonable or proportional to the cost of the service.”

Dubbed the Forbidding Airlines from Imposing Ridiculous Fees Act, or FAIR Fees Act

Fees aren’t just about making money. Spirit Airlines charges fees to incentivize behavior as well, to make passengers act in ways that reduce the airline’s costs. They want customers to do all of their transactions online. They want aircraft to board quickly. They charge fees that discourage the sort of carry on stampede that goes on with other airlines and slows down the boarding process. They charge a penalty rate for customers who aren’t taking care of transactions in advance where it’s cheaper and more efficient for the airline to process.

Consumers certainly have choice. Southwest attempts to differentiate themselves through lack of fees, their marketing slogan is “transfarency” (though perhaps another reason for the lack of fees is the IT investment that would be necessary to implement them).

We often derisively refer to ‘fees’ but another term for the same thing is a price for a service. As long as such prices are clearly spelled out up front, why shouldn’t a business be able to charge them?

It may not ‘cost’ an airline much to assign a seat, but that’s not the point. Some seats are actually better than others. The certainty of where you’re sitting on a plane is important to some people, less important to others. Advance seat assignments, and specific seat assignments, have value. It’s a product the airline is providing, why shouldn’t they get paid for it? And in fact the best seats on a plane are limited, such as emergency exit rows. Is the only acceptable mechanism to choose who sits there ‘first come first served’? Should the fee for the seat not reflect its value rather than its cost?

Why should prices be legally restricted to the cost of providing the service? Should Beyonce’ be limited in what she can charge to the cost of renting a venue and paying for electricity? Because, freedom.

If you limit the fees airlines can charge for ticket changes, why not just make airline tickets completely non-refundable with no residual value? Why should an airline have to spend millions of dollars on planes, commit to the employees that will staff the aircraft, and fill the plane’s gas tank — and not be allowed to build in assurances that customers will show up, or at least be entitled to keep the money for the purchase if they choose not to?

Some airlines have more nuanced change fees, of course, based on how far off in to the future a flight is. But that’s also a competitive differentiator.

Of course, this legislation is going absolutely nowhere.

  • It’s an election year
  • It’s proposed by two Senators whose political party is in the minority in the Senate
  • The Senate could well change hands in the 2016 elections, but the House won’t
  • The House Transportation Committee is chaired by the airline industry lobbyist girlfriend of the member with the committee assignment chaired by a staunch advocate for the airlines.

Look, I have my beefs with airlines. There’s plenty of things to hate about the process of getting from A to B.

But cracking down on fees isn’t going to make things better. If anything, it aims the power of the federal government squarely at the ultra low cost carriers who are precisely the ones driving down the cost of airfare and making travel affordable. Found a cheap ticket on a legacy airline? You probably have an ultra low cost carrier to thank for that too as the majors match their price while providing a couple of extra inches of legroom and not charging for water.

There are policies you could advocate that would make air travel better.

  1. If you want to do something about the spread of fees, push to end the disparate tax treatment of domestic airfare versus ancillary revenue. The former is subject to a 7.5% excise tax, the latter is not. So every dollar airlines can push into fees and out of the base fare isn’t just incremental revenue, it’s tax savings.

  2. If you want to do something about lack of competition, or quality of product, then push to end restrictions on foreign ownership of US airlines. Let Singapore Airlines and Ryanair bring either a quality product or a super low price to US markets.

Serious proposals would bring in competition, and would eliminate the incentives the government creates to add fees. Unserious proposals promise to wave a magic wand and make us feel better.

In this case the two Senators are just demagoguing the issue and thank goodness these aren’t serious proposals because they’d drive up Spirit’s costs and Allegiant’s costs, make them uncompetitive, and then we’d start to see higher airfares from the majors.

Blumenthal also wants the DOT to take action against airlines over fuel surcharges. Should I be somewhat more sympathetic there?

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

More articles by Gary Leff »

Pingbacks

Comments

  1. Agree with you.

    I would, however, favor the US passing a law similar to Brazil’s in terms of banning fuel surcharges for award tickets.

  2. Yes, you should be more sympathetic when it comes to fuel surcharges. I can buy the argument of a fee as payment for a service (whether or not I think a particular service should be included in the base fare) but surcharges are a scam, pure and simple.

  3. Republicans don’t learn. Laissez Faire doesn’t work. Even after the great recession that was brought about by lax regulation they want less regulation.

    Are republicans dumb or just plain evil?

  4. The aim of this type of legislation is to make customers aware of the TOTAL price they will be charged for a service they are purchasing. When a customer pays for a plane ticket, they expect to not have to pay for any more ‘fees’ to get on the plane. All these fees do is to obfuscate the total price charged, to DISCOURAGE competition. When you have 10 airlines all charging DIFFERENT fees it makes it IMPOSSIBLE for the everyday customer to figure out WHAT they are going to pay. I find it AMAZING that you go on and on about how a customer isn’t there fare, but when we want there to be a FARE you are against it. You want the fare to be a number of fees as well. As a customer, I shouldn’t be fees either. Could you imagine if we let the situation get to this point in other parts of consumer life? Does Walmart charge you a 10c fee for browsing? How about when you JUST want their Milk, and you refuse to purchase their electronics…maybe there should be a fee for that…why not?!

  5. Fuel surcharges are a tax scam in revenue tickets costing the US a ton of money. The issue on award tickets is a byproduct. Eliminating them sounds like a good idea.

  6. Enough with these stupid backronyms on senseless legislation! So I propose the Protecting the Economy from Needless Interventions by Shitheads act.

  7. Beachfan makes a good point. Fees and surcharges which are outside the 7.5% excise tax are effectively a government subsidy on air travel. You know, the kind the US airlines say they don’t get.

  8. The most impressive and cost effective upcharge ever… Firefly between Krabi & Penang. For the approximate sum of $2 they will keep the seat next to you open if it isn’t sold. But only charge you if that actually occurs. I’d gladly choose that option on every flight and airline for 10x the price.

  9. Fees are okay, but what is not okay is the lack of transparency. When you rent a car now the final page displays all of the ridiculous fees so you can get the total price. It would not be difficult for airlines to display all the optional fees in a box next to the fare calculation – they just choose not to do so in order to defeat price comparison. Information is power, particularly for the consumer.

    The interesting thing is that no legislation would be needed for DOT to issue a regulation requiring transparency of fees. But as Gary notes the DOT (and Congress) are slaves to industry lobbyists (as is the case for many other industries) and are loathe to bite their masters. This is why Trump and Sanders are doing so well because the average Joe is fed up with this rigged system.

  10. Any fee that’s unavoidable, should be forced to be included in the fare. The rest I don’t care about. Fuel surcharges are a big one.

  11. Aren’t these fees just an ordinary and relatively common form of differential pricing? If customer 1 is willing to pay X and customer 2 is willing to pay X plus Y, then this allows you to charge what each customer is willing to pay. There is some element of product differentiation in that some customers will view a seat in row 9 as having greater value than a seat in row 23, others will not. I’m having a hard time seeing what is remotely problematic about this practice.

  12. Optional fees should be clearly listed. I often can’t AA to even tell me my baggage allowance due to credit cards, status and class.

    Also, tell AA specific seats have value. They continue to give away/change my seat. When I spend months trying to get the best seat only to have it changed last minute for an inferior seat. They basically believe a seat is a seat when it suits them. I asked what is the point of having status and/or charging for MCE, etc. if they are all the same.

  13. Drip pricing is a scam. Mandatory fees should be included in the first price the customer sees. Period. These include “resort” fees at hotels, mandatory “fuel” surcharges, “carrier” surcharges, and event ticket processing fees.

    Optional fees are OK if and only if they are prominently disclosed and included in the very first price displayed to the customer. Show the customer a range of prices for optional fees to alert the customer that the price can be higher than the lowest quote.

  14. That’s exactly my feeling nsx. If the fee is optional, no problem with it (whether that’s baggage or change). It allows airlines to compete in different ways (for example, I book any flight I’m not sure on with Southwest thanks to their no change fee), and it’s something I can avoid if needed. But stuff like fuel surcharges that aren’t optional should not be considered a “fee”. If it shows up as part of the cost on a search on ITA or kayak then it’s not a fee, it’s part of the fare.

  15. First they consolidated the number of airlines and now they want to charge you for everything that are supposed to be included in the price. There should be a legislation for this kind of fees to be stopped. I wish I don’t have to see anymore of the Fuel charges, resort fees, cancellation, change etc.

    Things change in life and there has to be a reasonable charge for it.Not ripoff the customers just because you can. Especially in an industry where only couple of players are involved or at a max dozen players.

    You book an appointment for a car service or with a doctor appointment, would you be okay if they charge you a cancellation fee of $200 or a change fee of $200???

    Because they are only dozen airlines and because they can do whatever they can, they co-ordinate and do things in a such a way, almost all of them have more or less similar charges. Only way to stop them is to bring a law.

    What would you do if all grocery chains start charging you $5 for parking, $5 for Store fees, $5 for A/C and $5 for keeping fruits and or vegetables cold, $5 to go to a cashier instead of self checkout?? Would you be okay??? People will think this as crazy and cant happen just like how people would have never thought about airline charging for bags, check-in, seats etc in 90’s or in 2000

    Because there are few people like us who can game the system does not mean all have to suffer. Government must step in and stop those greedy airlines..

  16. I agree about keeping Government regulation out of airline fees. However, if they ever start charging a fee for lavatory use, then I’m all in with the Government getting tough. There is a line that the airlines must never cross….

  17. I think you all are forgetting something. Never had to pay any of these fees years ago. Didn’t need to get better seats because all of them had decent seat pitch and width. You got fed on every flight and the meals were pretty good. You got service with a smile. You got assigned seats with no issues of keeping families together. You got free checked bags, free carry-ons. Ticket prices weren’t ridiculous. You could change your ticket and no fee assessed. Then airlines got greedy and no one stepped in to stop them.

  18. @BlackHill introduction of most fees predated consolidation and are greatest in the ultra low cost carrier sector which hasn’t consolidated.

  19. @Shirley: Sorry, but you’re wrong. Yes, lots of stuff was included in the fares, but the food was bad and the tickets cost significantly more (airfares have dropped by over 50% since 1980).

    If you’re willing to spend the same number of inflation-adjusted dollars for a ticket as you did in the “good old days” you can have the same experience today including all the bells and whistles. You’ll just be sitting in Premium Economy or Business instead of Coach.

    The problem is everyone wants Singapore service at Ryanair prices!

  20. @gary so what you are saying is that because we let someone lie and make up pricing by drip pricing, EVERYONE should be allowed to drip price, and thus no one should know their fare? How about regulation that makes it ILLEGAL to drip price, where you can ONLY charge for services not deemed as “part of a regular flight” (excess baggage, first class seating, etc). Because in your world where we end up is a fee for ANYTHING AND EVERYTHING, and even things that aren’t things, so that we can live in a world of $0.01 fares from EVERYONE but you NEVER get out with paying that. The job of good regulation is to reign in just this type of free market ridiculousness, and to protect consumers.

  21. @Gary Does not matter when it was started, but charges have gone to a level where its pure greed. We need legislation to stop this greed.

    @Arcanum, If you are one of those who blindly depend on the internet to say prices have dropped over 50% since 80’s then you are completely wrong. I could buy a ticket NYC to LA for $600 20 mins before the flight. Is it possible now? I could carry N number of bags, you heard it right “N”(no limit). Show me a ticket that comes with that privilege..My economy seat was as big as today’s business class seat. Airlines served real meals.

    Also not to forget only 20% of the american took flight during those days compared to 60% now. Airlines reduced cost by not printing paper tickets anymore, by reducing baggage handlers, check-in agents etc.

  22. @Blackhill
    Thank you for responding to Arcanum re the oft-repeated canard re airfares.

    Here’s another one I’m sick of, “people want Singapore service at Spirit pricing.” I can’t speak for all “people” but I just want to be treated humanely and not like (worse than) cattle.

  23. Classical economics would agree with you, Gary, if there was sufficient competition to make the market responsive to competitive behavior. The air travel industry is not sufficiently competitive to do so, especially after the DOJ wimped out on its challenge to the AA-US merger.

    When there is insufficient competition to compel marketplace responses, regulation becomes necessary.

  24. I would rather they focus on resort fees. They are ridiculous and not disclosed a lot of the time until you arrive. These are worse than what the airlines do. One place put on their resort fee it was for faxes, and use of the property. The property had nothing to use, no pool, fitness center etc.. Then you are stuck. Even on awards/comps. Some places charge resorts fee s of $35/night and includes next to nothing and things that should be in it arent. Why pay for use of the business center where the use is simply to log in, printing costs extra but they then charge $25/day more, not included in the resort fee, to use the gym. Those fees are not counted on points for stays. it seems to be getting worse. Once motel had a rate of $45/night and a resort fee of $19. ??? the rate wasnt a special as the highest price was $70

  25. @BlackHill – First of all, $600 in the 80s is over $1000 today adjusted for inflation ($600 in 1980 = about $1700 in 2016). Walk-up fares are unquestionably much lower today. You can buy NYC-LAX fares for immediate departure for about $500 in coach (even less if you’re willing to take a connection), $900 in the premium cabin (business or first). I’m not aware that in the 1980s you could check an unlimited number of bags on major carriers (I do remember when two bags were free) but even if that’s true is that a major benefit to most travelers? And no your economy seat back then was definitely not as big as today’s business-class seat. They might have had a couple of inches of legroom, but the seats were generally the same width as they put the same number of seats in a row (3-3 in coach on narrowbody planes) as they do today, with the exception of the trend of squeezing in 10 instead of 9 in the 777. For domestic travel these days you can buy an extra-space economy seat or even business or first for less than what people paid for a regular economy seat in the 1980s. There’s plenty to not like about the travel experience but we unquestionably get more value these days than we did 30 years ago.

  26. @Gary, Based on your article and comments, you seems to be more worried about $25 extra resort fees per night but you continently ignore $600 fuel surcharges or carrier charges for a FREE reward tickets. I have a feeling MAYBE You don’t care about airline fees as your elite status covers those fees but your hotel elite status does nothing resort fees so you feel betrayed/ angry/ disappointed. All those fees that cannot be avoided and totally unreasonable should be legislated and government should go after the airlines/ hotels/ car rental.

    With those fees they are not just cheating on customers but also on government.

  27. I lived in Connecticut for 22 years up until about a year ago. Blumenthal was the Attorney General for many, many years, before he took over Chris Dodd’s Senate seat. He was a big-time consumer advocate. Remember when store gift cards started to lose value if you didn’t use them and that doesn’t happen any more? Thank Dick Blumenthal. He was at the front of the pack of Attorneys General that sued the tobacco companies, too. I don’t know if anyone has a full count of all the little problems he solved for people every day when he was AG.

    This is the kind of thing that is in his wheel house. You should send him your post. He is very approachable and really does listen to reason. Give him your phone number. I wouldn’t be surprised if someone on his staff calls you to pick your brain.

    I live in PA now and love a lot of things about it. One thing I miss about CT is the accessibility of the Federal reps. CT is so small, we saw our Senators and US Rep often – as in several times a year. So far, I’ve never laid eyes on any of my current PA Federal reps.

  28. I am certain it is not unusual that a ticket purchased for a discount carrier ends up costing as much or more than a legacy carrier’s ticket with all of the add-ons. The only people who truly can benefit from discount airlines are those that know the story and do nothing to incur fees after purchasing their ticket. Personally, I would prefer to pay a bit more and have a seat that does not make me feel like a sardine and have at least a soft drink provided. I guess I am spoiled having begun to fly commercially in the 1960’s..

  29. Ryanair bringing a quality product? What? Are you aware you that’s the lowest quality European airline in existence?

Leave a Reply

Your email address will not be published. Required fields are marked *