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Are Consumers Smart Enough to Understand Airline Ancillary Fees?

In May, I criticized the Department of Transportation’s opening of a rulemaking on airline ancillary fees (baggage, seat assignments, etc.), noting that the primary motivation appeared to be continued expansion of the department’s unfair and deceptive practices authority. In addition, the department’s apparent opinion that consumers are unable to understand ancillary fees, and compare fares and fees across airlines, is completely unsupported.

Yesterday, I filed comments on behalf of CEI fleshing out some of these objections.

To be sure, no one is advocating that airlines be permitted to deceive and defraud consumers on ancillary fees. The core of the debate is whether or not the current regulations requiring ancillary fee disclosure do too little to protect consumers. Under current regulations, airlines are required to post online comprehensive listings of their fees. Here is the page produced by American Airlines. While the table is certainly lengthy, is it too complicated for the average consumer? I think not.

Some argue that current disclosure requirements make it difficult to quickly compare fares and fees at purchase time. After all, these critics say, having to examine detailed tables such as the American Airlines fee schedule linked above does not lend itself to quick and easy comparisons. But simple breakdowns of airline fees are widely available online from reputable sources. Here’s a page maintained by KAYAK, a meta-search engine that pulls together flight information but doesn’t actually sell tickets. Google Flights, another meta-search site, automatically summarizes baggage fee information as flight segments are selected. Self-styled “consumer advocates” who take issue with unbundling and ancillary fees have a hard time arguing consumers lack access to simple, easy fare and fee comparisons.

The notion that a market failure exists here is simply absurd, which is why it is even more absurd that the Department of Transportation is proposing to bring KAYAK, Google Flights, and other current and future meta-search websites under its regulated “ticket agent” class. Again, these sites don’t sell tickets. But the fact that they are involved in the aggregation, organization, and dissemination of airfare purchase information means they should be treated the same as companies who sell directly to consumers—at least that’s the reasoning of the Department of Transportation.

These latest actions from the department represent a power grab wrapped in old-fashioned nanny statism. The uproar over ancillary fees appears to be largely due to the fact that unbundling is a relatively new phenomenon. Industry analysts have noted that unbundling is a global trend and that consumers should get used to paying for products and services previously bundled into airfares. We should view this as a good thing, as consumers are now given more choice over the products and services they receive in the skies.

Rather than reducing transparency, unbundling has increased air travel cost transparency for consumers. Furthermore, light travelers like me are no longer required to subsidize the airfares of heavy packers. As I noted in our comments, “The Department’s short-sighted proposals contained in the NPRM are solutions in search of problems.”