Senate Permanent Subcommittee on Investigations Releases Majority Staff Report Slamming Sky High Airline Junk Fees

[WASHINGTON, DC] – U.S. Senator Richard Blumenthal (D-CT), Chair of the U.S. Senate Permanent Subcommittee on Investigations (PSI), released a Majority staff report today revealing how major airlines have increasingly used ancillary or “junk” fees to boost their revenue, resulting in higher costs and negative experiences for consumers. Today’s report comes as a record-breaking number of Americans prepare to travel for the Thanksgiving holiday. Next week, PSI will hold a hearing with five major airline executives about the rise of junk fees and its impact on consumers.

“Our investigation has exposed new details about airlines exploiting passengers with sky high junk fees,” said Blumenthal. “This report pulls back the curtain on tactics like dynamic pricing that burden travelers and boost airline revenue. 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.”

Last year, PSI launched its investigation into airline junk fees by seeking 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 helped pioneer many of the fee structures now used throughout the industry, including “unbundling” or charging separately for goods and services that were once included in the price of a ticket.

Today’s PSI report details these five airlines’ strategies to grow revenue from ancillary fees, including previously undisclosed data about these practices. A summary of PSI’s key findings is below.

Frontier and Spirit pay incentives to gate agents for bag policy enforcement.

Frontier and Spirit paid $26 million to gate agents and other personnel 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. Frontier personnel can earn as much as $10 for each bag a passenger is forced to check at the gate.

Airlines are increasingly using algorithms to set fees and are investing in ways to target pricing based on customer information.

Airlines leverage advanced technology and specific customer data to set and constantly adjust the prices they charge. This is particularly the case for seat fees, which can vary enormously from flight to flight and customer to customer.

The five airlines are making more money from seat fees than ever before.

As seat fees have grown more expensive and farther-reaching, all five airlines saw seat fee revenue increase in the period studied. Previously undisclosed airline data provided to PSI show that seat fees, which did not exist at most airlines 20 years ago, generated $12.4 billion in revenue for American, Delta, United, Frontier, and Spirit collectively between 2018 and 2023.

The price of ancillary fees at American, Delta, United, Frontier, and Spirit is not tied to each airline’s cost of providing a service.

Each of the five airlines told the Subcommittee that the price of a given fee is not directly tied to the airline’s cost of providing the underlying service, such as transporting checked baggage and assigning seats in advance of a flight and assigning seats in advance of a flight. In fact, when asked to provide the total cost or average cost per passenger incurred by the airline for providing several fee-based services, 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.

Frontier, Spirit, and United appear to avoid the federally mandated transportation excise tax by labeling portions of their charges as nontaxable fees.

Federal law applies a 7.5% tax to passenger air transportation to be remitted by airlines. Some airlines classify certain services as “optional” to avoid the tax on those charges. This creates different tax rates for similar services across airlines. The ambiguity encourages airlines to charge more in non-taxable fees than airfare. Airlines that maximize this strategy gain an advantage attracting price-sensitive customers.

On Wednesday, December 4, 2024, at 10 AM in Dirksen 342, PSI will hold a hearing on “The Sky’s the Limit—New Revelations About Airline Fees,” during which five major airline executives will testify, including:

• Steve Johnson, Vice Chair and Chief Strategy Officer, American Airlines

• Peter Carter, Chief External Affairs Officer, Delta Air Lines

• Andrew Nocella, Executive Vice President and Chief Commercial Officer, United Airlines

• Robert Schroeter, Senior Vice President, Chief Commercial Officer, Frontier Airlines

• Matthew Klein, Executive Vice President and Chief Commercial Officer, Spirit Airlines

The full Majority staff report detailing PSI’s findings is available here.

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