That's How They Getcha: Airlines Extract $6 Billion in Fees From Americans

By Derek Thompson

What's the true price of flying? It's much more than the price of a ticket. And it has been for a long time.

Last year, Americans likely spent more than $6 billion in baggage, cancellation, and change fees, on top of their ticket price, in 2012. The Bureau of Transportation only has data through the first nine months of last year, but total fees are up about 4 percent over previous years.

Here's a look at total fees by airline:

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And here's the baggage fee data as a pie chart, if you prefer that sort of thing. Delta, United, and American account for about 60 percent of total baggage fees.

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And finally, here are those fees graphed against each airline's market share in domestic and international passenger miles, also according to the Bureau of Transportation. This is really the key look.

Screen Shot 2013-01-10 at 10.14.01 AM.pngWhat conclusions can we draw from these graphs, in particular the last one?

(1) Delta and US Airways are the worst. Maybe you knew that already.

(2) But don't be too hard on them. Generally speaking, the airlines that fly the furthest have the most fees, since people are much more likely to check bags and pay more per ticket for international flights.

(3) Airlines with mostly domestic routes have the fewest fees, for the same reason.

Fees annoy customers for the perfectly sensible reason that they seem like surprising tricks, since the true cost of flying isn't shown on their ticket. But the "true cost of flying," if such a thing were measurable, could scarcely be represented on a uniform ticket because it costs varying amounts to fly various passengers on the same plane.

Imagine if there were no baggage fees and everybody's ticket were the same price. A child that weighs 40 pounds without bags would be considerably quicker to load, cheaper to accommodate, and easier to transport than a larger fellow with three checked bags that require sorting, tagging, and carrying, plus two carry-ons that add to the boarding time. As you can see, a little price discrimination through fees is sensible and defensible.

But why stop at sensible? Airlines are the economy's most notorious wizards of price discrimination. Ticket prices do roller-coaster loop-de-loops in the weeks before the flight to tease discriminating buyers. Then prices rise dramatically at the end to take advantage of desperate flyers, who are often business travelers who are less price sensitive since they can pass along the cost of their ticket to the company.

The industry's reliance on absurd fees makes it a target of loud customer service complaints -- like, carry-on fees, really? -- but the bottom line for casual passengers isn't as bad as it seems. A mix of competition and price management have pushed down airfares by half since 1978, according to Eduardo Porter's book The Price of Everything. The more airlines can rely on fees and hold down the price of a simple ticket, the better things get for savvy carry-on-only customers.

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