Airline fees soar

Spectators look at an Airbus A380 airplane flying above them.

Tess Vigeland: This next story comes with a warning: what I'm about to tell you could make your blood boil.

Airline fees are up $22 billion in just the past year.

Maybe that's because you can hardly look at an airplane these days without paying extra. And as Marketplace's Jennifer Collins tells us, more fees are on the way. But you might actually like what you're paying for.

Jennifer Collins: That $22 billion is 60 percent more than airlines collected in 2009. Jay Sorensen is president of IdeaWorks, the consulting firm behind the analysis.

Jay Sorensen: I often get a lot of hate mail for this.

Before you flood his inbox, consider this.

Sorensen: If the airline industry was making buckets of money, I think you could criticize the airline industry for being greedy. That's not the case.

Sorensen says jet fuel is going to cost U.S. airlines $15 billion more this year. And airline profits are relatively flat.

Harlan Platt: But you still hear people screaming at the airport.

Northeastern University finance professor Harlan Platt says that's because the fees are for things that used to be free -- and they're often hidden in the fine print. But some airlines are trying to take out the sting by giving passengers a little perk with their punishment. When you check your bags with Delta, you get access to a service that lets you to track your luggage along the way.

Platt: That's great for all parties concerned -- the airlines getting some money and you have this extra information.

Alaska's offering passengers extra miles or ticket discounts if their bags takes more than 20 minutes to get to the carousel.

But however they're packaged, analysts say airline fees are here to stay.

I'm Jennifer Collins for Marketplace.

About the author

Jennifer Collins is a reporter for the Marketplace portfolio of programs. She is based in Los Angeles, where she covers media, retail, the entertainment industry and the West Coast.
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First, full disclosure: I work for a travel technology firm, Farelogix, based out of Miami, FL.

It is true. The airlines have found a decent revenue stream in the selling of ancillary services. But while some equate this increase in ancillary fee revenue to ‘gouging’ the customer, the truth is quite the opposite. One only has to look to a recent study by the Bureau of Transportation Statistics to see that, in constant dollars, the price of an airline ticket is down almost 20% in the last fifteen years. So now instead of everyone paying for checked bags and meals (included in the price of the ticket then), only consumers who need or get value out of those services pay for them. Plus now there are many other services air travelers can buy (in-flight Wi-Fi, lounge access, priority boarding, etc.) that they believe will add value to their trip.

I think it is fair to say, no matter what the industry, consumers love choice. They love a personalized shopping experience and getting value for their dollar. Today travelers are met with a plethora of new value-added propositions for their trips, and all at a base ticket price that’s nearly 20% lower than fifteen years ago.

It’s also worth noting that airlines operate at a much lower margin than other retailers, say a clothing store. And with the price of fuel and labor continuing to rise, those margins per ticket continue to shrink. Airlines, like any business, are here to make money. And I think it’s only fair that they continue to find additional revenue streams—that add value to their customers—in the presence of shrinking ticket margins.

Part of the reason why we're angry is because the airlines haven't been honest with us as to the actual cost of the flight, until we're at the airport and kind of commited to the flight, and don't have a chance to shop around.

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