Biden’s war on junk fees targets shady airline ticket pricing

Airlines are being forced to disclose their sneaky fees and provide customers with automatic cash refunds
By Sam Bourgi
•
06 May 2024
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The Biden administration is expanding its war on junk fees to shady airline pricing tactics—a move it says could save passengers millions of dollars.

According to the U.S. Department of Transportation, commercial airlines will be subject to new rules—which will be rolled out over a period of six months to two years.

The rules will require greater fee transparency and automatic cash refunds for canceled flights, mishandled baggage claims, or services that were paid for but not delivered.

“Passengers deserve to get their money back when an airline owes them—without headaches or haggling,” said U.S. Transportation Secretary Pete Buttigieg in a statement.

The transparency rule specifically targets “discount bait-and-switch tactics,” as well as “family seating junk fees,” which would guarantee that parents can sit with their children on flights at no extra charge.

According to Secretary Buttigieg, the rules could save travelers up to $500 million annually once they’re implemented.

This isn’t the first time the Biden administration has targeted airlines for their steep fees and opaque terms of service.

In a high-stakes election year, Biden wants to appear tough on corporations that are raking in profits while average Americans struggle with day-to-day expenses.

Americans are “being taken for suckers”

President Biden’s push to crack down on airline fees began in the fall of 2022. Yet, two years later, Americans are still paying more for tickets and checked bags.

In fact, checked bag fees hit new record highs in March, according to WPIX, a New York City TV station,

It now costs $80 to check one bag for a round-trip flight on United Airlines. Baggage fees at American Airlines have increased by $5 for passengers who pay at the airport.

JetBlue also increased its baggage fee to $45 for passengers who check their bags within 24 hours on certain flights. Meanwhile, Delta Airlines maintains a $30 fee for the first checked bag.

Currently, the only major domestic airline that doesn’t charge a checked bag fee is Southwest.

While the new rules don’t eliminate checked bag fees, they require airlines to be more transparent about how their fees are structured.

Policymakers say this will help travelers make more informed decisions about their next trip.

“We know that junk fees resonate with American consumers. They don’t like being taken for suckers,” Lael Brainard, the director of the White House National Economic Council, said of junk fees at airlines and other industries.

“Airlines are raising bag fees in part because of higher labor costs, and in part because they want to—and they can,” Henry Harteveldt, the president of travel industry company Atmosphere Research Group, told CNN.

“Passengers don’t like paying to check bags, but they generally don’t change airlines over the price of the checked bag fee.”

However, there’s another overlooked reason why airlines continue to lean on checked bag fees—and why they’re not going away anytime soon.

The rise of low-cost carriers

Airlines introduced baggage fees in 2008 to combat record fuel prices, but they became fully cemented with the rise of budget carriers like Spirit and Ryanair.

These carriers offer dirt-cheap base fares and charge extra for everything else, including checked bags and carry-ons. Eventually, major airlines adopted similar basic economy fares with separate baggage charges.

Nearly 15 years later, airlines collected a whopping $6.8 billion in baggage fees in 2022, according to the Department of Transportation.

That’s a 17% increase from 2019 and a doubling from 2010.

Airlines love baggage fees because they aren’t subject to a 7.5% federal tax that’s applied to ticket sales. For low-cost carriers, this is an essential source of revenue.

That’s why the call to eliminate bag fees “undermines the business model of ultra-low-cost carriers like Spirit and Frontier that help keep airfare prices at major carriers in check,” said Gary Leff, an airline industry expert and founder of travel firm View from the Wing.

Experts say travelers can expect to see more dynamic pricing in the future where the cost of their plane ticket and bags will vary based on peak travel times.

“It will be standard practice for the vast majority of airlines within three to five years,” Jay Sorensen, president of consulting firm IdeaWorksCompany, told The Wall Street Journal.

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