Travelers hate airline fees, whether it’s checked bag fees or change fees, so it’s a great issue for politicians to grandstand on.
Senator Ed Markey (D-MA) and Congressmen Steve Cohen (D-TN) Jesús García (D-IL) have reintroduced the very much non-serious Forbidding Airlines from Imposing Ridiculous (FAIR) Fees Act. It requires that fees – such as change, cancel and bag fees – must be “reasonable and proportional to the costs of the services actually provided.” It also directs the Department of Transportation – which generally has been fine with the fees in place now, which is why they are in place now – to “review any other fees charged by airlines.” (Although oddly Congressman Cohen says it’s the FAA that is going to have to conduct this review.)
To these members of Congress,
- Consumers are surprised by fees, even though they’re clearly posted on airline websites as required by government regulators, and increasingly search tools make it possible to see all-in trip pricing.
- Airlines collect a lot of money in fees, though it’s not clear why that’s bad and they never grapple with unbundling, fares have fallen as fees have risen making travel more affordable than ever.
- Markey says, “It should not cost more to change an airline ticket than the original cost of the ticket, period.”
American Airlines CEO Doug Parker has explained that their business model is predicated on non-refundable tickets. It’s a key way they sell at different prices to business passengers and leisure passengers. And he’s suggested in the past that if legislation limited change fees, they’d have to stop allowing changes to tickets at all (the way they do now with Basic Economy fares).
In fact Congressman Garcia says Basic Economy is exactly what’s wrong, although this bill does nothing about it fares that do not allow advance seat assignments, changes, or upgrades.
During the last several years, the flying public has experienced ever-shrinking airline seats, a new fare called ‘basic economy’ so you can pay more for less, increased baggage fees, and sky-high change and cancellation fees, often in excess of the original ticket cost. The flying public deserves better and the FAIR Fees Act will protect consumers from corporate price gouging that has resulted in record profits.
In fact of course airline profits are very much off of their record highs, especially at American Airlines. And while they say airlines are price gouging none of the airlines have market power vis-a-vis consumers (although they do have market power negotiating credit card deals with banks).
These members of Congress fail to understand that it may not cost much to make a change to a reservation (staff time, computers, electricity) but consumers are getting something of value – flexibility – and airlines are charging for that. The same with seat fees, the best seats on a plane are limited, such as emergency exit rows. Is the only acceptable mechanism to choose who sits there ‘first come first served’? Should the fee for the seat not reflect its value rather than its cost? (They fail to understand the Diamond-Water paradox.)
The simple reason though that this proposal is non-serious is that these fees are encouraged by the tax code and this legislation does nothing about that. The 7.5% excise tax on domestic travel applies to base airfare but not add-on fees. Reform that fails to address this disparate treatment is grandstanding but not tackling the issue. We get high fees because of both price discrimination and taxes. The notion that we can just tell airlines to charge less and expect travel to be cheaper as a result is silly, and the idea that a problem created by legislation needs new legislation to simply ban the bad effects is poor policy making.
The bill is co-sponsored by Senators Richard Blumenthal (D-CT), Sheldon Whitehouse (D-RI), and Ron Wyden (D-OR) and Representatives Albio Sires (D-NJ), Eleanor Holmes Norton (D-DC), Mark Takano (D-CA), Jan Schakowsky (D-IL), Bobby Rush (D-IL), Barbara Lee (D-CA), Rashida Tlaib (D-MI), Bennie Thompson (D-MS), Raúl M. Grijalva (D-AZ), and Gwen Moore (D-WI).