Airline Fees

Air travel has undergone a dramatic transformation over the decades - not just in technology and convenience but also in how passengers are charged. The increasing prevalence of airline fees has been a significant shift in the industry.

In the early days of commercial aviation, air travel was an exclusive luxury. Ticket prices were high, reflecting the premium nature of the service and the limited competition among airlines. For instance, in the 1950s, flying was a glamorous experience, complete with gourmet meals, ample legroom, and personalized service. However, only a small fraction of the population could afford it.

Then, in 1978, the Airline Deregulation Act marked a turning point: it removed government control over fares, routes, and market entry, leading to a surge in competition. Airlines began competing aggressively on price, which brought air travel within reach of the middle class. Ticket prices steadily declined, especially with the rise of low-cost carriers in the 1990s and 2000s. However, this increased affordability came with trade-offs in service quality.

"Unbundling" - separating services that were once included in the base ticket price - emerged as a major strategy in the mid-2000s. Struggling with rising fuel costs and economic downturns, the airlines sought new revenue streams without raising ticket prices directly. So instead of increasing base fares, they began charging for extras that were once free.

Airlines are now adding fees to the base fare for things that used to be included in the price of the ticket. We are getting used to baggage fees but that is only one example of fees. You can now be charged for food and beverages, getting an advance seating assignment, reserving a premium seat (not just first class - a window or aisle seat may incur a fee), early boarding, a second carry on, and even to have services of the airport ticket agent to do things like print the boarding pass for you.

While unbundling allows airlines to offer lower base fares, the overall cost of travel often rises once additional services are factored in. For budget-conscious travelers, this can be a double-edged sword. A ticket that initially seems affordable can balloon in price if a passenger requires extras like extra legroom, checked bags, or early boarding.

Last month, the majority staff of the Senate Permanent Subcommittee on Investigations released its findings after a year-long inquiry into five U.S. airlines' ancillary fees, which the report said have led to higher costs and worse experiences for consumers and, in some cases, tax avoidance by the airlines. While these ancillary fees are meant to be optional, the report suggests that some fees are charged for aspects of travel that are "not reasonably avoidable," such as families that include minors sitting together or low-fare passengers having any carry-on baggage.

In some cases, ancillary fees appear to be used by airlines to avoid a federal aviation transportation excise tax of 7.5% of the "amount paid for taxable transportation." (The tax helps to fund the Airport and Airway Trust Fund.) Airlines are exempt from paying the tax on separable and nontransportation charges, but different airlines differ on what they consider to be nontaxable charges, resulting in a significant shortfall for the trust fund. Nontaxable charges, however, are meant to fulfill three criteria: that they are "not reasonably necessary to the air transportation itself," are "optional," and that the amount charged "bears a reasonable relation to the cost of providing the service." The report alleges that some airlines charge ancillary fees that do not meet these criteria while also not paying the transportation tax on them.

The report also detailed measures some airlines took to ensure passengers pay for carry-on bags. It stated that ultra-low-cost carriers Frontier and Spirit paid out $26 million in incentives to encourage agents in 2022 and 2023 "to catch passengers allegedly not following airline bag policies, often forcing those passengers to pay a bag fee or miss their flight."

The rise of airline fees reflects broader trends in the travel industry, where flexibility and customization come at a price. As technology advances, the unbundling trend shows no signs of slowing down. For better or worse, the days of all-inclusive airline tickets are long gone. Airlines continue experimenting with dynamic pricing models, subscription-based services, and even auction-style bidding for upgrades. Travelers must adapt to this new reality by staying informed; understanding the true cost of a flight now requires careful attention to detail. Reading the fine print, comparing total costs (not just base fares), and planning ahead are essential to avoid unexpected expenses.