US airlines to disclose extra fees

Last updated 09:20 22/05/2014

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Passengers love the idea, but airlines hate it.

The US government wants to require that travellers be told upfront about basic services that aren't included in the price of a ticket and how much extra they'll cost.

The Transportation Department has proposed that passengers be provided detailed information on fees for a first checked bag, a second checked bag, advance seat assignments and carry-on bags.

The rules would apply whether passengers bought tickets on the phone, in person or online - and not just from airline websites.

Airlines that want their tickets to remain available through travel agents and online ticketing services would have to provide them information on fees for basic services, too, something most have been reluctant to do.

The idea is to prevent consumers from being lured by low advertised airfares, only to be surprised later by high fees for services once considered part of the ticket price.

Airlines currently are required to disclose only bag fees, and even then they don't have to provide an exact price. Some provide a wide range of possible fees in complex charts.

"A customer can buy a ticket for $200 and find themselves with a hidden $100 baggage fee, and they might have turned down a $250 ticket with no baggage fee but the customer was never able to make that choice," Transportation Secretary Anthony Foxx said in an interview.

But adopting the changes would be the wrong choice, said a trade association for the airline industry. The "proposal overreaches and limits how free markets work," Airlines for America said in a statement. And it predicted "negative consequences."

Under the proposal, fees would have to be specific to the advertised airfare. Any frequent-flier privileges would also have to be factored into the price if the airfare is advertised on an airline website and the passenger supplies identifying information.

The proposal would prohibit "unfair and deceptive" practices by airfare search tools, such as ranking flights by some airlines ahead of others without disclosing that bias to consumers.

The rule doesn't cover fees for early boarding, curbside check-in and other services regarded as optional.

The government also wants to expand its definition of a "ticket agent" so that consumer protection rules also apply to online flight search tools like Kayak and Google's Flight Search, even though they don't actually sell tickets.

Many consumers are unable to determine the true cost of a ticket because fees are often hard to find or decipher, the government says.

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"The more you arm the consumer with information, the better the consumer's position to make choices," said Foxx.

The public has 90 days to comment on the proposal. Foxx said he hopes the rule will become final within the next year.

In the meantime, however, airlines in the US have taken their case to Congress. A House committee recently approved a bill that would effectively nullify the rule and allow airlines to return to displaying base fares and adding in taxes and fees later.

The government effort is partly a response to changes in industry business strategy since 2008, when carriers started unbundling their services, beginning with checked bags.

More recently, some airlines have begun offering consumers not only a stripped-down "base" airfare, but also a choice of several packages with some of the once-free services added back into the cost of a ticket but at higher prices.

With packages and a la carte fees multiplying, comparison shopping for airfares is becoming more difficult, consumer advocates say.

Charlie Leocha, who lobbies for passenger rights on behalf of the Consumer Travel Alliance, welcomed the proposal for changes. "We are getting most of what consumers have been requesting for more than five years," he said.

But the airlines trade group protested: "The government does not prescriptively tell other industries - hotels, computer makers, rental car companies - how they should sell their products, and we believe consumers are best served when the companies they do business with are able to tailor products and services to their customers,"

The Transportation Department also proposes expanding the pool of airlines required to report performance measures such as late flights, lost bags and passengers bounced from flights due to overbooking.

Currently, only airlines that account for at least 1 per cent of the market must report those measures, which the department posts online in its Air Travel Consumer Report. The proposed regulations would include carriers that account for little as 0.5 per cent of the market. That would bring in discount carriers like Spirit and Allegiant airlines and many regional air carriers.

Major carriers would also have to include the performance of their regional airline partners when reporting their own. That means the on-time and lost bag records for major carriers may take a nose dive, since regional carriers tend to perform more poorly in those areas.

The proposed rules are the Obama administration's third wave for airline passengers.

The effort began with a ban on tarmac strandings in which passengers can be cooped up in planes for hours, sometimes in miserable conditions. Facing the prospect of fines of as much as US$27,500 (NZ$32,099) per passenger, airlines have nearly eliminated such incidents by cancelling flights in advance of severe weather.

Here are some common questions regarding the plethora of fees that fliers face today:

Q: When was the first checked bag fee?

A: American Airlines in May 2008 became the first major US carrier to charge a fee for checking a suitcase. (Discount airlines like Allegiant and Spirit already had such a fee.) The other large airlines quickly followed.

Q: Why did they do it?

A: In 2004, US airlines were paying an average of US$1.15 a gallon (3.79 litres) for jet fuel. By May of 2008, the cost had nearly tripled to US$3.23 a gallon. Airlines that year burned through nearly 18 billion gallons of fuel. Passengers make decisions whether to fly based on price, and the bag fees were a way for airlines to collect more money without jacking up ticket prices and scaring away customers.

Q: How much money does that bring in for the airlines?

A: The typical bag fee is US$25 for the first checked suitcase, US$35 for the second. That added up to US$3.4 billion last year. Airlines collected another US$2.8 billion from flight change fees, typically US$200.

Q: Are there other fees?

A: Yes, too many to easily count. Most airlines offer early boarding, priority security screening and extra legroom for a fee. Some airlines charge for any advance seat assignment. Others charge to place a bag in the overhead bin. Some charge extra for water or soda.

Q: Don't consumers know about these fees prior to booking?

A: Most fliers now know that airlines charge some type of fee for checking luggage. The other fees are often a surprise. Airlines are required to post charts with all their fees on their websites, but they can often be hard to find, and confusing.

For instance, United Airlines charges US$9 to US$299 for extra legroom, the price fluctuating depending on length of the trip and demand for that flight. Passengers booking tickets through Expedia or Orbitz, or searching on sites like Kayak aren't given the same details.

Q: How would this latest proposed rule change that?

A: The third-party sites and airfare search aggregators would, for the first time, have to disclose the fees. Additionally, airlines would have to calculate fees for a passenger's specific flight, factoring in any elite status.

Q: What about taxes and government fees?

A: Two years ago, the US Department of Transportation required airlines to include taxes and related government fees in the price shown for flights, including all advertisements.

Previously, airlines would only display the base fare, often giving passengers sticker shock when they booked.

The airlines are now going to Congress to try and reverse that rule saying it's not fair. Department stores, they argue, don't have to include sales tax in the advertised price of a pair of jeans.

The bill even has its own Orwellian doublespeak name: the Transparent Airfares Act.

- AP

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