Government seeks disclosure of airline fees

The U.S. Department of Transportation proposes to require airlines to disclose how much revenue they get from a wide range of fees — everything from seat assignments to food for sale.

Delta collected $952 million in baggage fees last year, far more than any other airline. American Airlines came in second with $581 million. AirTran was sixth with $152 million; Southwest, which acquired AirTran and is in the process of merging the carrier’s operations, was 14th with $30 million.

DOT Secretary Ray LaHood said the goal is to make airline pricing more transparent.

“In an era of rising fees, passengers deserve better information about how airlines are performing, particularly when it comes to fees, baggage and accommodating passengers in wheelchairs,” he wrote.

The measure would not affect the way airlines show fares and fees at the point of purchase — carriers have been required since late August to “prominently disclose” ancillary fees on their websites. But the DOT says it could be used to show broader trends and average costs of travel.

“Presently, it is difficult if not impossible to determine the average total cost of air travel to consumers,” the DOT’s notice on the proposed new requirement said.

Another issue is that airlines don’t pay excise taxes on some of the fees, a fact brought up in a report last year by the Government Accountability Office, which also said consumers could benefit from better information about airline fees.

The carriers pay a 7.5 percent excise tax on airline tickets and any fees required for domestic air transportation, such as reservation change fees, cancellation fees and fuel surcharges. That tax goes to fund the Airport and Airway Trust Fund that helps fund the Federal Aviation Administration.

But airlines don’t pay excise taxes on fees for optional services such as checking bags, early boarding, phone reservations and on-board meals.

“Airlines have been able to lower airfares while increasing overall revenues with the a la carte pricing and new services,” the DOT’s notice said. “At the same time, revenues to the Airport and Airway Trust Fund have slightly decreased.”

Members of Congress have proposed bills to impose taxes on various airline services, the notice adds, but the GAO has not been able to accurately forecast how much revenue the taxes would bring in because airlines are not required to report all of them separately.

The DOT proposes to require a detailed breakout of as many as 19 different charges, including for booking fees, priority check-in and security screening, baggage, in-flight medical equipment, in-flight entertainment or Internet access, sleep sets, in-flight food and drinks, pets, seating assignments, reservation cancellation and change fees, unaccompanied minor fees, travel insurance, duty-free sales, one-time lounge access and other services.

Currently, revenue from many of those fees is lumped into a category such as “miscellaneous,” that can include revenues from other sources that are not passenger fees, according to the GAO report.

Getting that information broken down can give the government “a better picture of tax revenue being lost to the airlines,” according to the DOT. “It also will better enable the government to understand how ticket prices have really been changing over time, taking into account those fees that no longer are included in the ticket prices.”

Delta, in a joint reply with American, United and US Airways, called the proposal “unduly burdensome, complex and unjustified.” The airlines said it would cost one carrier $1 million for the programming to report one of the 19 line items. They also said that they “strongly oppose the need for new taxes” on airlines.

Southwest Airlines, now the parent of AirTran Airways, urged the DOT to cut proposed reporting categories to six but said it believes the public “would benefit from more accurate, comprehensive, and transparent information” on ancillary fees.

FlyersRights.org founder Kate Hanni supports the proposed requirements, according to her comments submitted to the DOT.

“The hidden fees are a deceptive way for airlines to give passengers the illusion of a lower fare, hide the truth of the total cost of a flight and avoid paying the 7.5 percent excise tax” on those fees, according to Hanni. She added that “surprise” fees can “become a major travel obstacle” for people like students who travel without extra cash or a credit card.