More Disclosure on Airline Fees on the Way

And eventually, Uncle Sam will demand a share of the fees by taxing them.

A bolder-than-planned rule to force airlines to disclose add-on airline fees is now likely to emerge from the U.S. Department of Transportation (DOT) by year-end. The DOT had been working on a regulation that would require airlines to post fee information on their Web sites so consumers could do more comparison shopping for tickets. But it now appears likely that the department will go even further and require that the information be made available to travel agents and online airline reservation systems such as Amadeus.

The so-called unbundling of services, previously included in the price of a ticket, has resulted in a growing list of add-on fees, for everything from checked baggage to pillows to early boarding. “Unbundling without disclosure threatens to catapult us out of the 21st century and back into an opaque Stone Age where a telephone, calculator, pen and paper and a lot of unproductive time were needed to figure out how to compare airline services,” says Kevin Mitchell of the Business Travel Coalition (opens in new tab), which represents mostly large businesses.

Corporate travel managers, as well as road warriors themselves, are pushing for more disclosure of these fees. A recent survey by the Travel Coalition found that all of the corporate managers surveyed said unbundling and extra fees have caused serious problems for their managed travel programs. Furthermore, 86% said they believe that, without government rules, the airlines will not make “fair, adequate and readily accessible disclosure of the add-on fees.”

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Next up, Congress will move to recapture the tax from these fees. When the fees were part of fares, the 7.5% ticket tax applied, but once separated from fares, they are not subject to the tax. As a consequence, about $8 billion in revenue from the fees from 2008 and 2009 was not taxed. Baggage fees alone totaled $2.5 billion last year. If they had been taxed, $186 million would have gone into the Airline Trust Fund, which is used to finance airport improvements and other services, concludes a recent report on the fees (opens in new tab) by the Government Accountability Office.

Action by Congress won’t come anytime soon. The carriers will vigorously fight any effort to tax these fees. But with Congress desperate for funds, revenue from airline fees is just too big a target to ignore.

Martha Lynn Craver
Associate Editor, The Kiplinger Letter