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GAO Official Report: Airline Fees Are Misleading

Airlines & Airports, Budget Travel — on July 15, 2010 12:25 pm

GAO Reports on Misleading Airline FeesThe growing number of airline fees is confusing and misleading for consumers said a new report released by the Government’s Accountability Office (GAO), on Wednesday.

Congress’ financial watchdog, the GAO recommended that airlines be more upfront about the “true” prices of their tickets. Airlines have been tagging on fees for optional services such as meals, blankets, early boarding and seat selection, said the GAO.

These fees, however, were not disclosed at the time of booking, prompting the GAO to recommend that the government step in to improve the disclosure of airline fees, not only for the airlines, but also for travel booking services.

According to the report, it should be a requirement for airlines, travel agents, online travel services, and other ticket distribution channels to show all fees and services in a clear and consistent manner.

The report also points out that the airlines have becoming increasingly reliant on fee revenues. Since most of these fees are not related to the transportation a person, the fees reduce the proportion of total passenger revenue that is taxed to help fund FAA.

Plane flying overheadThe IRS currently taxes the airlines a 7.5 percent excise tax on domestic air transportation. But while the actual ticket is taxed, the fee for a checked-in bag or a sandwich is not.

Therefore, the GAO report says that the IRS is getting much less in taxes from the airlines than they used to thanks to the new fees.

According to the GOA, if the 7.5 percent tax on airline tickets were applied to fees, the government could have raised $186 million last year just from checked bags fees.

Not surprisingly, the report’s findings have many in Congress and the Department of Transportation considering new rules that would change how airlines charge for baggage, blankets, drinks, luggage, and just about everything else the airlines have tagged fees on.

The new announcement could be bad news for the airlines, which have used fees to improve their bottom lines in a tough economy. Last budget year, the top 10 domestic airlines collected $7.8 billion in fees.

By Adriana Padilla for PeterGreenberg.com.

Related Links: Associated Press, GAO Report, USA Today

Related Links at PeterGreenberg.com:

  • http://www.compareairlinefees.com Steven Hall

    Great article. Airline fees are hard to follow and the fee amounts and rules are changing all the time. We have tried to make it simple for consumers since 2008 by providing an easy to use airline fee comparison chart with all the fee details consumers need at http://www.compareairlinefees.com

    Steven Hall, Founder CompareAirlineFees.com

  • Rrunablu

    +I flew from Seattle to Amsterdam using miles on Delta. They gave me a horrible schedule. I left Seattle at 12:50 AM to arrive in Minneapolis at 6:30 AM and had a nine hour layover and left for Amsterdam at 3:30 PM and arrived in Amsterdam at 6:30 AM. I called Delta three times and requested a 8:00 flight out of Seattle and was denied each time. My husband is 81 and roam,ing an airport for nine hours is not a good idea to maintain good health on a long trip. We boarded Celebrity’s Constellation and he became very ill with Noro Virus and missed three days of the cruise. St. Petersburg and Tallin were the ports missed. The highlights of the cruise to say the least. I became sick and missed one day. Celebrity gave us two certificates for $190.00 each for our next cruise on Celebrity Cruise line. A rather poor offer for missing three days of a cruise that we paid $200 per day to cruise in a very small balcony cabin. They also added to our table two couple that did not speak English. The one gentleman of the four did speak English and the poor man spent most of dinner translating Spanish to English or visa versa. The positive is they did not charge for doctor services and the three cruises in a row had sick passengers. I estimate that there were over half of the passengers sick!

  • Ben

    Adirana / Peter: You missed one very, very important point. The IRS does not “tax airlines a 7.5% excise tax”. The IRS taxes the PASSENGER a 7.5% excise tax (among other fees and taxes). The proposal to tax fees will only result in higher costs to the passenger, not the airline. Why does everyone miss this point in the press?

  • Ben

    So what, exactly, does this have to do with the taxation of airline fees?

  • BW

    This posting was a waste of my time. Go somewhere else.