With the aviation trust fund dwindling, airport modernizing postponed and infrastructure
As airlines are on a binge to avoid taxes, our airport infrastructure deteriorates. Ranked as the worst airport in America, LaGuardia was cited by Vice President Joe Biden as an example of declining American infrastructure.
projects delayed, it's time to take a closer look at lost tax revenue due to "unbundling" of fares.
The government funds a large portion of the aviation system through a 7.5% tax on the price of commercial airline tickets.
But the Treasury Department considers charges outside the base cost of a ticket to be exempt from that tax. Ancillary fees, otherwise known as nickel and diming and junk fees, are not taxed.
"This is manna from heaven, and a real windfall for the airlines," Rick Seaney, chief executive officer of Dallas-based ticket researcher FareCompare.com, told CNNMoney.
If these fees were included in the base fare, as they were before unbundling, this revenue would be subject to the 7.5% transportation tax, so the rise in fees results in a loss of tax revenue to the government.
Airlines On Tax Holiday
The airlines are enjoying a bonanza by maintaining current ticket prices while escaping paying into the aviation trust fund.
by Dan Woodger
The untaxed fees are slowly starving the system of revenues. Right now, Spirit could charge a $9 airfare, and then tack on $100 in fees to a ticket and the tax would only be paid on the $9. It may be good for Spirit, but hurts the ability to fund the FAA and air-traffic control system.
Congress has a duty to get involved if fair business practices are being compromised. the airlines are tip-toeing gingerly on that line between what is acceptable and what is not.
Airline Ticket Fees Reach $400+Airline fees for everything ranging from booking a trip by phone to checking a bag are up, and four carriers are levying fees of $400 or more a USA Today survey of a dozen U.S. airlines shows.
Delta charges $400 to change a ticket on some international flights. American Airlines charges $450 for an overweight checked bag weighing 71 to 100 pounds for some international flights, while such a bag on United Airlines' international flights and Hawaiian Airlines' Asian flights costs $400.
Fees are a major source of revenue and tax avoidance for the industry.
According to the DOT's Bureau of Transportation Statistics, U.S. airlines reported revenues of $2.6 billion from baggage fees and $2.1 billion from reservation-change fees during the first three quarters of 2013.
Lack of Competition
How do these airlines justify a $400 flight change fee? This is not a service people get to choose. There has to be some kind of control on these fees at some point. The lack of competition with only four large airlines left was the theme of a recent economics report titled: Product Unbundling in the Travel Industry: The Economics of Airline Bag Fees.
"Fees" may be the wrong term. "Fines" is more accurate. "Customers willing to pay fees for 'services'", is also inaccurate. "Customers forced to pay fines or face losing even more money" is more accurate.
So mergers have eliminated the competition and innovation is now the implementation of fees.
Spirit CEO Says Luggage "not Essential"
The CEO of Spirit, Ben Baldanza, testified before the House Committee on Aviation in 2010 that baggage is "not essential" to vacationers, so it's their right to charge extra for that privilege.
Luggage is not essential to someone going somewhere for a week? Yes, and Spirit fails to see how that's a problem at all.
Anyone who's ever flown would likely suggest this is a fundamental misunderstanding of the traveling experience. Of course checked bags are related to the transport of a person! Would any reasonable traveler take a weeklong trip without a few changes of clothes?
Naturally, the airlines oppose taxing fees. Spirit's CEO cleverly told Congress that taxing fees "will ... raise prices for all consumers and thereby dampen travel demand and likely result in less total government excise tax revenue."
The problem is that under the law, (being fought against by airline lobbyists), when you advertise a fare, you must advertise the whole fare, including surcharges.
Since Spirit is primarily an airline that caters to leisure passengers, virtually all of them will need to carry some luggage, either checked or carried on. Therefore, ALL of those passengers are being charged this so-called "optional" fee. Thus, the fares being advertised are not true fares. It is a deceptive and dishonorable practice that is infuriating the flying public.
When 100% of passengers are getting charged an "optional" surcharge, it's just false advertising. And this is why Congress needs to step in and put some limits on what is acceptable.
Another Domino Falls - Frontier
It is amazing that they are in a race with Spirit.
In yet another step toward an entirely fee-dependent business model, Frontier Airlines announced last Monday that it will start charging passengers for carry-on bags in the overhead bins and reserving seats in advance.
The carrier also eliminated it's lowest tier pricing category, called Classic. Now the lowest fare choice is Classic Plus, which is running at least $100 above the old basic fare.
You ARE Spirit. Frontier unveils its new ultra-low-cost fare strategy.
(Hyoung Chang, The Denver Post)
Frontier was purchased last December by an equity firm called Indigo Partners, the same company that are big investors in low cost carriers Spirit, Tiger Airways and Wizz Air. The company's new president, Barry Biffle, spent almost nine years as the Chief Marketing Officer of Spirit. That should tell you something.
If Spirit's fee-ridden track record is any indication, Frontier might just be headed in an all-fee direction.
William Franke of Indigo, new owners of Frontier, believes that there is a very large percentage of potential travellers who feel "disenfranchised" -that air fares are too high and so they choose not to fly.
The changes since the Indigo purchase are brutal. If you think this is as bad as it gets, you're wrong. Read some of our Spirit horror stories, or give them a try yourself. This is where Frontier is headed.
These two would make powerful merger partners in the future, particularly now that it appears they'll have basically the exact same business model.
Frontier's leadership likes to compare itself to Target, by giving customers 'value'. Except Target doesn't nickel and dime its clientele.
Change is NOT Good
It's sad to see these changes. An email was sent out April 28th to Frontier's frequent flyers, (ironically titled "Change is Good. We've lowered our fares"), but then goes on to describe $25 charges for carry-ons. A carbon copy of Spirit right down to the $9 fare club, called Discount Den (a rose by any other name...).
How long before Frontier takes the next step of ripping out stretch seating and reducing the seat pitch from 30-31 down to 28 just like Spirit to cram as many seats in as possible?
Can you believe Frontier is the ancestor of Midwest Express? An airline which distanced itself for so long by providing extras you'd never expect in a coach cabin.
You can't help but feel bad for Frontier's customer service employees and flight attendants who will bear the brunt of the negative feedback from long-time loyalists who will likely be leaving in droves. Check out the negative complaints on their Facebook page.
Fare thee well Frontier...you were a good airline.
When I read the Flyers Rights newsletter I just cringe at what some people experience. It seems you lump all airlines into one horrible group. Not all air carriers are the same and I would hope you would recognize that there is at least one good one.
I live in Alaska and have a vacation home in Arizona which I fly to several times a year. I fly Alaska Airlines and on the rare occasion when I have had a problem they have always come through with a remedy that has been more than fair. They give Alaska residents two free bags and for all passengers if your luggage is not at baggage claim within 20 minutes of your plane's arrival at the gate, you get a $25 Discount to use on a future Alaska Airlines flight or 2,500 Alaska Airlines Miles. They also offer free juice or soft drinks in flight. Apparently they are the last airline still offering customer service.
Besides Alaska Air we have Delta, American, Jet Blue, US Air and United that fly to US cities from Anchorage. Some airlines offer seasonal flights.
I fly Alaska Air because I feel they care about their passengers, I'm a mileage plan member and they have competitive rates. They have direct flights to several Hawaiian cities (gotta get out of here in the winter) and have seasonal direct flights to Phoenix where I have a vacation home. They offer convenient flights to Seattle, (almost hourly) with connections to all over the country. They guarantee your luggage will be at baggage claim in 20 minutes and they almost always beat that. They take care of their Alaskan customers with Club 49 for residents of Alaska; two free bags when flying to from or within Alaska and offers special discounts.
I have had a couple minor problems when flying Alaska Air over the years but their customer service is tops. I email them and get back a response offering a credit or mileage plan miles. I'm impressed with their customer service.
I have no affiliation with Alaska Air. I'm a radio DJ and they rarely advertise with the station I work for. I appreciate what you do at Flyer Rights but occasionally I would like to see you write something positive about a company that is trying to do things right.
Can This Trip Be Saved?
I wanted to follow up regarding flight itinerary changes and how they effect passengers.
I have a job coming up and just found out that Delta has changed the itinerary on me. I am traveling for Hilton Hotels to Myrtle Beach for a photo shoot. When I booked my flight I selected Delta for two reasons: they offer a media baggage rate and their planes could accommodate my equipment.
I found out today, 12 days before my trip, that they have switched the itinerary and we now leave earlier in the day and arrive later. But we are also now on Canadair metal. What does this mean? It means I can not get my camera gear on the plane because the overhead bins are too small. It also now means I'm on a Delta Express flight which means I can not check as many bags. I have to be able to check 12 bags and I have to get my cameras on the plane.
I am utterly frustrated. I paid extra for the metal I booked and to now be switched to a different metal really messes up this job. And at 12 days before the trip I doubt my client will want to pay to change carriers.
Thanks for listening,
Contact them again, mention that you are a FlyersRights.org member and you want compensation for the extra charges you paid originally.
File a complaint with DOT's Aviation Consumer Protection Division (ACPD). You can call, write or use their web form. Send a copy to FlyersRights.
Or, phone the ACPD 24 hours a day at 202-366-2220 (TTY 202-366-0511) to record your complaint. Calls are returned Monday through Friday, generally between 7:30 am and 5:00 pm Eastern time.
Or, write a letter to:
Aviation Consumer Protection Division, C-75
U.S. Department of Transportation
1200 New Jersey Ave, S.E.
Washington, D.C. 20590
These complaints are reviewed to determine the extent to which carriers are in compliance with federal aviation consumer protection regulations.
Usually filing a complaint results in a the airline emailing you with an offer of a voucher for future travel.
Dear FlyersRights: We changed our flight to a much earlier flight on Delta which I was able to find on a 727. Thank goodness. I know you like to get this type of info for reference material, so thought I'd share why it was so important to me that airlines not change itineraries once flights are sold.
I know for many travelers, the metal they fly isn't as important as who tickets the flight. For us, the metal is imperative because of the baggage we check and fees associated plus allowances and bin sizes. We just returned from France. I booked 17 flights on a variety of airlines. We had four six flight itineraries changed by the airline, one flight cancelled altogether with no options offered of an alternate flight (Lufthansa pilot strike where they suggested the train as alternate means of transport from Charleston SC to Lyon France), and ended up paying double for baggage fees on BA because we had a 12 hour layover with a change of airport from Gatwick to Heathrow. When your baggage fees are $2500, paying double is pretty pricey!
We are commited to solutions for promoting airline passenger policies that forward first and foremost the safety of all passengers while not imposing unrealistic economic burdens that adversely affect airline profitability or create exhorbitant ticket price increases.
All American air carriers shall abide by the following standards to ensure the safety, security and comfort of their passengers:
Establish procedures to respond to all passenger complaints within 24 hours and with appropriate resolution within 2 weeks.
Notify passengers within ten minutes of a delay of known diversions, delays and cancellations via airport overhead announcement, on aircraft announcement, and posting on airport television monitors.
Establish procedures for returning passengers to terminal gate when delays occur so that no plane sits on the tarmac for longer than three hours without connecting to a gate.
Provide for the essential needs of passengers during air- or ground-based delays of longer than 3 hours, including food, water, sanitary facilities, and access to medical attention.
Provide for the needs of disabled, elderly and special needs passengers by establishing procedures for assisting with the moving and retrieving of baggage, and the moving of passengers from one area of airport to another at all times by airline personnel.
Publish and update monthly on the company’s public web site a list of chronically delayed flights, meaning those flight delayed thirty minutes or more, at least forty percent of the time, during a single month.
Compensate “bumped” passengers or passengers delayed due to flight cancellations or postponements of over 12 hours by refund of 150% of ticket price.
The formal implementation of a Passenger Review Committee, made up of non-airline executives and employees but rather passengers and consumers – that would have the formal ability to review and investigate complaints.
Make lowest fare information, schedules and itineraries, cancellation policies and frequent flyer program requirements available in an easily accessed location and updated in real-time.
Ensure that baggage is handled without delay or injury; if baggage is lost or misplaced, the airline shall notify customer of baggage status within 12 hours and provide compensation equal to current market value of baggage and its contents.
Require that these rights apply equally to all airline code-share partners including international partners.