Frontier Airlines booked more than $900 million in revenue in the second quarter of 2022, about half of which came from fees. In its earnings report, it bragged about being able to squeeze out an extra $75 per passenger in "ancillary" charges, a 33 percent increase from the same quarter pre-pandemic. Its net income was $13 million. Sit for a second on what that math means.
"They'd be hugely unprofitable without the fees," said George Ferguson, a senior aerospace, defense, and airline analyst at Bloomberg Intelligence. On average, he estimates that budget airlines Frontier and Spirit double their base ticket price with fees for baggage, service, and more. "But even Delta's trying to do that with people," he added.
If you've had to book a flight lately, or really over the past 15 years, you've absolutely noticed the proliferation of fees.
When you start shopping for flights on a website like Expedia or Kayak, you see one price at the start, and by the time you've gotten out your credit card, you're paying tens and even hundreds more dollars than that initial number. Or you go directly to an airline's homepage to buy and you're immediately presented with multiple levels of tickets that you can't quite decipher. Sure, you get what basic economy means (you are cheap and will be treated as such) and what first class is (you're a big spender and also will be treated as such), but there are options in the middle that are totally unclear. Maybe you opt for one, trying to ensure yourself a better experience, and still you wind up coughing up $40 to pick your seat and $50 to check a bag.
"Too often, people aren't certain what's in their cart, they're often not certain what they've purchased, they're not sure what they haven't purchased, and too many consumers are confused by it all," said Jay Sorensen, president of IdeaWorks, a travel consultancy.
To be an airline passenger today is to feel like an extra dollar is being wrung out of you at every turn. Things that used to be free or just the luck of the draw — whether you get a window seat, if there's some extra legroom — have been stripped out of ticket prices and are now being sold back separately instead. The airline offering has been unbundled, and it costs a pretty penny to put the bundle back together again.
"It's a behavioral economics question — airlines try to figure out how people are going to behave, and they have policies and prices that respond to that," said Bob Mann, an aviation analyst. "It's a game." And an annoying one at that. It's not just that fees add onto the final price tag; they can also warp travel in other ways, making the experience more miserable, however much money passengers fork over.
Frontier didn't respond to a request for comment, and Spirit declined to go on record. In July, JetBlue announced plans to buy Spirit, though it's still unclear whether regulators will allow the deal to go through.
The story of the airline fee starts with baggage
For decades, it was free on major airlines to check at least one bag (some discount airlines got a head start on charging). But in 2008, amid rising fuel prices and economic turmoil, that started to charge. Airlines such as American and United began tacking on a $15 charge to get your bag checked to your destination.
"With record-breaking fuel prices, we must pursue new revenue opportunities, while continuing to offer competitive fares, by tailoring our products and services around what our customers value most and are willing to pay for," said John Tague, then the chief operating officer of United, in a statement at the time.
It proved to be a profitable endeavor: The airline industry made over $1 billion on excess baggage fees that year.
It's all sort of snowballed from there. Airlines figured out how to strip down their offerings to get passengers from A to B (the basic economy fee, or the budget airline fare) and then upcharge for the many things thereafter. It's a lucrative deal for them — today, airlines make tens of billions on extra fees.
"Airlines charge these fees because the revenue they generate from either charging the fees or selling the optional products is really where airlines make their money," said Henry Harteveldt, president of Atmosphere Research, a travel industry research firm. "These fees not only exist, but they seem to be multiplying like rabbits."
More options are nice for passengers in theory, not always in practice
Customers have, in a certain sense, rewarded airlines — including low-cost carriers — for their practices, Sorenson said. Consumers theoretically like choice, and they're price-sensitive, so it's not a terrible idea to let people decide what they do and don't want to pay for. For people who get really anxious about travel, the ability to choose their seat ahead of time and sit by the people they're traveling with may feel infinitely worth it. For others, not so much.
The problem is, the fees system is often confusing to navigate and at least modestly predatory (see: charging to print a boarding pass). Airlines can lure people in with one price, and then they pile on fees at the back end to drive up costs. And a lot of what they're charging for isn't entirely optional.
"In some industries, you disaggregate things so that customers can come in and pick what matters to them and use it," Ferguson said. "In the airline, it's a little funky, because you usually need most of those things."
If you are one of those people who can put everything you'll need for a three-day trip in your pockets, bless, but most people are not you, and they need luggage that gets either checked or carried on the plane. Sometimes, you don't know what you'll wind up needing — say, to change a flight — until the moment arrives. It's also worth noting that most people don't fly more than once or twice a year, making the fee situation even more stressful.
"The pressure is on travelers to really anticipate what their needs are going to be in advance, and that is part of the challenge right now," said Melanie Lieberman, senior global features editor at The Points Guy. "Travelers need to do more forward planning than ever before."
That means seriously trying to think ahead, reading the fine print, and being pretty skeptical about that initial price you're shown. Mann noted that some airline co-branded credit cards offer freebies such as checked bags, seat selection, and club entry at the airport. "Basically it is a case of looking at which relationships with the airline have the desired benefits, and seeing whether those relationships are less expensive (some are 'free') than paying the fees," he said. On some search websites, you can also filter to see only options where carry-on bags are allowed.
Beyond the actual cost, fees have distorted travel in other ways — again, really, this starts with baggage. Mann recalled talking to the CEO of a major airline in 2008 about baggage fees and warning him it would probably cause a bunch of flight delays. People were going to try to bring on board the bags they'd previously checked, the planes were going to run out of storage space, and loading and unloading the plane was going to take more time. "He said, 'Well, yeah, that's probably right,'" Mann said. Indeed, it was.
Airlines might soon have to be a bit more upfront about money
In September, the White House and the Transportation Department announced a proposed new rule that would make airlines and travel websites disclose fees upfront. The minute the airfare is displayed, they would have to detail extra charges for things such as sitting with your child, canceling a flight, or checking a bag. In a statement at the time, Transportation Secretary Pete Buttigieg said the rule was intended to "help travelers make informed decisions and save money."
If implemented, the new requirements would be a big deal. "This will be huge in terms of forcing airlines and third-party travel sites to disclose fees," Lieberman said. The airlines seem to know it. Airlines for America, the lobbying group that represents major airlines in North America, said at the time that its member airlines are "fierce competitors" that "already offer transparency to consumers from first search to touchdown."
DoT is currently collecting comments on the fees rule. It is also working to tighten other guidelines around when consumers are refunded for delayed and canceled flights and getting consumers their money back when they pay for a service they aren't provided (as in, broken in-flight wifi).
Sorensen, who's generally friendly to the airlines, isn't in love with the fees rule — he doesn't think it's "practical or possible" to implement. But given what the fees have done to the customer experience, he's well aware why the airlines have invited the "wrath of the government" upon them. "The industry deserves the scrutiny of the government at this point," he said.
Not to mention that taxpayers just spent billions of dollars bailing out the airlines because of Covid. It's good the entire industry didn't go bankrupt during the pandemic, but it's also hard not to ask whether the industry needs to go on like this.
"The government gave the US airline industry $54 billion in grants and wage subsidies, and what do we get for it?" Harteveldt said. "The ability to complain that the airlines are still around to charge these fees."
