The recent release of a report by the U.S. Senate takes a hard look at the practices of major U.S. airlines, showing that the implementation and adjustment of fees is increasingly geared towards profit-enhancing tactics. The report, edited by Richard Blumenthal, chairman of the Permanent Subcommittee on Investigations, sheds light on how airlines are using modern technology and customer data to set and adjust fees - with the clear intention of maximizing their profits. These findings, released on November 26, 2024, come at the right time: Thanksgiving weekend, one of the busiest travel times of the year, when many passengers are affected by the fees.
The study reveals that airlines are using advanced algorithms to control and dynamically adjust their pricing. The techniques, often referred to as "junk" fees, include additional costs for seat reservations, baggage and other services that were traditionally included in the ticket price. These fees often appear in a hidden form on travelers' bills and contribute significantly to the overall passenger burden.
Blumenthal, who called the airlines' practices unethical and problematic, said, "This report lifts the curtain on tactics like dynamic pricing that burden travelers and increase airline revenues." He announced that executives of the affected airlines will have to appear before the committee on December 4 to justify the practice of charging fees.
The practice of fees as a source of income
The five major U.S. airlines, including American Airlines, Delta Air Lines, United Airlines, and ultra-low-cost carriers Frontier Airlines and Spirit Airlines, saw a notable increase in revenue from seat fees between 2018 and 2023. During this period, they collectively generated about $12,4 billion in additional revenue. These fees are charged by airlines without any direct link to the actual cost of the services provided, such as checked baggage or pre-allocation of seats.
Although airlines confirmed that they do not keep detailed records of the cost of individual services, they often argue that the fees cover operating costs and help improve service. But critics, including consumer advocates and aviation law experts, question the justification for the fees charged and how transparent the pricing really is for passengers.
The question of tax avoidance
Another concern raised by the report is the potential tax avoidance by some airlines. Frontier, Spirit and United are said to have intentionally designated portions of their fees as non-taxable in order to avoid the mandatory 7,5% federal excise tax on passenger flights. By declaring certain services as "optional," airlines can avoid this tax and thus further maximize their profits. These practices raise questions about the ethical standards and fairness of pricing.
Preparation for the hearing
On December 4, 2024, the U.S. Senate subcommittee will hold a hearing where executives from the five major airlines will have to answer the allegations. The public and the media are eagerly awaiting this hearing, which will examine the justification for the additional fees and their impact on passengers. The airlines' responses could not only affect their reputation, but also reshape U.S. policy on regulating aviation fees.
Reactions and outlook
The airlines have so far said little about the allegations. However, critics are calling for more comprehensive regulation and more transparency to give passengers a clear overview of the true costs of their air travel. Consumer advocates warn that these unclear and often hidden fees mislead travelers. Pressure is growing on the government and the airlines to create fairer and more understandable pricing structures.
It remains to be seen whether the Senate report and the upcoming hearing will lead to a lasting change in airline practices or whether the current practice of maximizing fees will continue. Consumers, who are increasingly exhausted by the lack of transparency of costs, are hoping for stronger regulation and fairer ticket pricing.
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