U.S. Sen. Richard Blumenthal, D-Conn., issued a report Tuesday criticizing airlines for their reliance on “unpredictable” ancillary fees related to seat assignments and baggage policies that have resulted in billions of dollars in revenue for major companies.
As chairman of the Permanent Subcommittee on Investigations, Blumenthal’s report detailed how five airlines profit through these fees, alleging they do so at the expense of travelers by unbundling certain services and charging separately for options that used to be included in ticket prices. The investigation examines the practices of three major companies — American, Delta and United — and low-cost airlines Spirit and Frontier.
The 53-page report from the Democratic majority of the Senate Homeland Security’s subcommittee comes as millions of people are set to travel this week for the Thanksgiving holiday. And more recently, Congress and the Biden administration have sought to prioritize addressing “junk fees” in various industries, including for travel.
In response to the findings from the yearlong investigation, executives from all five airlines are scheduled to testify on Dec. 4 before Blumenthal’s panel where they are likely to field questions over their pricing structure, revenues and taxes on fees.
“Our investigation has exposed new details about airlines exploiting passengers with sky high junk fees,” Blumenthal said in a statement. “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,” he added. “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.”
Airlines have profited more from fees associated with seating — options like choosing a seat in a specific part of the plane or selecting options with more legroom — in recent years, according to the report. Between 2018 and 2023, the five companies generated a combined revenue of $12.4 billion.
But the report noted that the rising prices of these fees are not connected to the costs for providing services like checking luggage or assigning seats by the companies. And it also found that the ancillary fees are set by algorithmic pricing and vary by airline.
The investigation also highlighted a practice from Spirit and Frontier that incentivized employees to enforce the baggage policy and get customers to pay to check a bag if they did not comply. The report found that Frontier and Spirit paid a combined $26 million to gate agents between 2022 and 2023. For Frontier, personnel could earn up to $10 for each bag checked at the gate. And Spirit gate agents could earn $5 for each bag.
In a statement responding to the report and commissions for gate agents, Frontier Airlines said it helps “to incentivize our team members to ensure compliance with bag size requirements so that all customers are treated equally and fairly, including the majority who comply with the rules.”
Blumenthal’s report also alleged that Spirit, Frontier and United made certain services optional, allowing them to avoid taxes on some of those fees. Airlines are required under federal law to pay a 7.5% excise tax on air transportation.
A statement from Frontier said it complies with IRS rules and applies that tax on non-optional products and services. And Spirit said in a statement that the company is “transparent about our products and pricing.” United Airlines declined to comment.
Airlines for America, a trade association representing nearly a dozen airlines including American, Delta and United, criticized the findings in the report, arguing customers have more options to choose how they want to travel and at the price point they want.
The statement included a chart showing that in 2023, ancillary revenues were a small fraction of the average price for a domestic roundtrip ticket and accounted for less than taxes imposed under federal law. It also noted that revenues generated from changing a travel reservation declined between 2022 and 2023 as more companies got rid of change fees.
“We are deeply disappointed in Senator Blumenthal’s PSI Majority Report. The report demonstrates a clear failure by the subcommittee to understand the value the highly competitive U.S. airline industry brings to customers and employees. Rather, the report serves as just another holiday travel talking point,” Airlines for America said. “The subcommittee clearly lacks appreciation for the fact that air travel today is democratized, allowing Americans across all income levels to fly.”
Executives from each of the airlines will testify next Wednesday at 10 a.m. before Blumenthal’s panel. The witnesses include Steve Johnson, vice chair and chief strategy officer for American; Peter Carter, chief external affairs officer for Delta; Andrew Nocella, executive vice president and chief commercial officer for United; Robert Schroeter, senior vice president and chief commercial officer for Frontier; and Matthew Klein, executive vice president and chief commercial officer for Spirit.
“We respectfully disagree with numerous statements and conclusions contained in the report,” Spirit Airlines said in a statement. “With that in mind, we believe it’s time to come together and discuss meaningful initiatives that would even the playing field between larger and smaller airlines to benefit all travelers, including those who rely on airlines like Spirit. We look forward to explaining our position at a scheduled hearing on Dec. 4.”
Blumenthal’s report offers several recommendations, including that Congress require airlines to provide fee data to the U.S. Department of Transportation and enact stronger fee disclosures for customers. It also suggests DOT investigate the use of incentives to gate agents related to baggage policy enforcement. And if they are deemed unfair or deceptive practices, the report says DOT should consider civil penalties in response and ban them.
And when it comes to taxes, it also suggests that the U.S. Treasury Department look into whether airlines comply with the rules and regulations of the transportation tax.
The Blumenthal-led report concludes that these add-ons and fees make booking air travel “more complicated” and “less bearable” for those customers seeking the cheapest flights. And while some travelers can get those fees waived through credit card loyalty programs, the airlines are also relying more on those, which can “drive multiple sources of revenue for legacy carriers.”
“The result is that the markers of ‘class’ that airlines once adopted have gone
far beyond first, business, and coach,” the report noted, “and there is no indication that airlines have any plans to stop.”