Where Did Airline Fees Come From, and How Did They Get So Bad?

By Derek Thompson

Airline fees are an unstoppable menace, rising from $2.45 billion in 2008 to a mind-numbing $27 billion in add-ons around the world, according a new report from IdeaWorks Co. Where did they come from? How did they become utterly unavoidable?

Welcome to Season 2 of Economics in Plain English, our video explainer series. With our next batch, we're focusing on the history behind economic mysteries. Take fees, for example: In the 1960s, the airlines were regulated and practically nobody could afford to fly. But in the last few decades, the real cost of flying has fallen by 50 percent, even after you include the most annoying charges. Intense competition and the quiet power of comparison shopping online have devastated profits, and the airlines have turned to fees to rescue their business. Is this good news for price-sensitive shoppers, or bad news for repeatedly duped flyers? You tell us.

Have a question for Derek? Leave a comment or tweet #EconExplained. Watch previous episodes here.

This article available online at:

http://www.theatlantic.com/business/archive/2013/11/where-did-airline-fees-come-from-and-how-did-they-get-so-bad/281174/