Major US airlines have used extra fees, often called “junk” fees, to boost profits, leading to higher prices for travelers, according to a Senate subcommittee report.
The report, which was released by US Senator Richard Blumenthal, Chair of the US Senate Permanent Subcommittee on Investigations (PSI), on November 26, 2024, indicates that airlines are “increasingly using algorithms to set fees and are investing in ways to target pricing based on customer information.”
This means they leverage advanced technology and specific customer data to set and frequently change the prices they charge. This is particularly the case for seat fees.
“This report pulls back the curtain on tactics like dynamic pricing that burden travelers and boost airline revenue,” said Blumenthal. “I will be asking airlines to justify these practices when they testify on December 4th before my Permanent Subcommittee on Investigations. As we head into the Thanksgiving weekend, we regret that travelers will be charged millions of dollars in fees that have no basis in cost to the airlines but simply fatten their bottom lines.”
The PSI report details information from three major airlines – American Airlines, Delta Air Lines, and United Airlines – as well as two ultra-low-cost carriers, Frontier Airlines and Spirit Airlines.
Frontier and Spirit paid $26 million to gate agents and other staff between 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 report also says that Frontier staff can earn as much as $10 for each bag a passenger is required to check at the gate.
Additionally, all five airlines experienced an increase in revenue from seat fees during the period studied. Previously hidden data provided to the PSI indicates that seat fees generated $12.4 billion in total revenue for American, Delta, United, Frontier, and Spirit collectively between 2018 and 2023.
Each of the five airlines informed the Subcommittee that the fees they charge are not directly linked to the costs of services like checked baggage transport and advance seat assignments.
When asked to provide the total cost or average cost per passenger, each of the five airlines told the Subcommittee that, in the regular course of their business, they “do not track or maintain cost information with sufficient granularity to know how much it costs to provide each underlying service.”
Lastly, Frontier, Spirit, and United “appear to avoid” the federal transportation excise tax by labeling portions of their charges as nontaxable fees. According to the report, federal law imposes a 7.5% tax on passenger air travel, which airlines must pay. However, some of them label certain services as “optional” to avoid this tax.
Executives from the five major US airlines will testify at a Senate hearing conducted by the PSI on December 4, 2024.