Extra fees have conquered the airline industry. But there may be fewer going forward.
Extra fees have conquered the airline industry. But there may be fewer going forward.
Extra fees for everything have basically become a given in air travel. But starting in March, United Airlines announced it won’t be charging passengers traveling with children under 12 to book seats next to each other.
This comes as the Biden administration proposes legislation that would restrict airlines charging for these types of extras.
In the past few decades, the average airfare has actually gone down by more than $180, adjusted for inflation. But airfare doesn’t technically include all of the fees for luggage, seat assignments and priority boarding.
Robert Mann, an airline industry analyst, said those extras started to pop up in the ’90s at the same time as the web.
“Suddenly airlines had an option,” Mann said. “They could build their own websites. They could sell directly via those websites. And they could sell certain things that they previously could not sell.”
“Unbundling” is what the industry calls it. It started as a marketing method for low-cost carriers like RyanAir in Europe and Spirit Airlines in the U.S.
The rest of the industry started following suit in 2008 when fuel prices broke records — the more weight a plane carries, the more fuel it needs.
“So airlines attempted to get people essentially to leave stuff at home,” Mann said. “Their motivation and their lever to do that was to charge you $50 to charge a bag. And from that point, it was kind of open season on fees at least at big airlines.”
Mann said today, U.S. carriers make around $30 billion a year in fees, and they prefer them to upping ticket prices because fees are not subject to federal taxes.
“So it’s an accounting play,” said Henry Harteveldt, a travel industry analyst at Atmosphere Research Group.
It’s also now a marketing play because add-ons have become a way for airlines to get people to enroll in loyalty programs and credit cards.
It also turns out most customers prefer fees since they feel like they get more value and have more choice.
But Jay Sorensen, president of airline consulting firm IdeaWorksCompany, said fees have become so common that some airlines are getting rid of a few to stand out.
“The distinction between low-cost carriers and global network airlines has become less defined,” Sorenson said. “And I think the airline industry made a mistake by allowing it to get to this level.”
Sorensen thinks more airlines will start dropping fees that stress people out — like charging families for seat assignments. But he doubts those lucrative baggage add-ons are going anywhere soon.
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