Airports Say They Too Need to Raise Fees
Air travel and fees seem to be inextricably linked these days.
Last week, I heard from the representatives of the nation’s airports, who would like to be able to raise the limit on the $4.50 maximum charge that they can impose on each passenger who comes their way.
Then on Monday, I expected to hear from the Transportation Department about the airlines’ total annual revenue from the array of fees that they have been adding to the price of tickets. But after months of wrangling with the airlines over exactly how they must report their fee revenue, the department basically punted.
In finally releasing fee data for 2010, in a report delayed for over a month, the department said that domestic airlines raised “almost $5.7 billion in fees” last year. But the report included revenue from only two basic categories of fees, checked bag charges (up 24.6 percent from 2009, to about $3.4 billion) and charges for reservations changes (down 3.1 percent, to about $2.3 billion).
But if you want to compare apples to apples, the report does not quite add up. What about that oft-quoted figure of $7.8 billion in so-called ancillary revenue that the department reported for 2009?
Well, the 2009 figure included a wide range of the fees. And so far, the department and airlines have not been able to agree on how the comparable data for 2010 should be reported. The airlines have been insisting that they should not be required to break down ancillary revenue in minute detail, noting that McDonald’s does not account for how many French fries it sells. Airlines also say that fee revenue is now their only toehold on profitability, given high fuel costs.
We’ll let the government and the airlines sort that out. Industry analysts’ estimates for airline ancillary revenue last year put the comparable total at about $10 billion, by the way.
But what about the airports, which have been complaining that they cannot raise their passenger fees even as the airlines raise or impose surcharges at will on everything except the cabin air.
Some airport managers say the current rules hurt them in two ways. First, they say, the $4.50 maximum passenger facility fee is too low, especially since planes are flying fuller than ever, because their costs on things like security are rising. And, they note, the billions of dollars in airline ancillary fees are not subject to the 7.5 percent federal tax imposed on base fares.
Revenue from that tax goes into the government’s Airport and Airway Trust Fund, which covers most of the Federal Aviation Administration’s budget and also pays for some airport capital projects. If those fees were taxed, there would be more money for additional airport projects, the managers argue.
“Airports should be permitted to charge a user fee at whatever level they can charge that would also work in the market,” said Greg Principato, the president of the Airports Council International North America, which represents the nation’s roughly 450 commercial airports.
Mr. Principato knows that air travel fees are a touchy subject for consumers. But, he said, airlines lobby hard to prevent airports from raising the passenger fee ceiling partly because restricting this revenue limits the ability of airports to expand. That can discourage the entry of new airline competition, or the expansion of existing competition.
“The airlines are deregulated and can charge whatever they want,” he said. “But the airports are still regulated as they were in the old days, and cannot charge a fee beyond the $4.50. The airlines like that because it keeps competition out,” he said.
The airlines say that airports are overreaching on this. “Our customers already pay an exorbitant amount of taxes,” said Jean Medina, a spokeswoman for the Air Transport Association, the airline industry trade group. Any increase in the airport passenger fee, which is collected as part of the ticket price, “would raise the cost of travel, which harms consumers and the entire travel and tourism industry,” she said.
Meanwhile, I’ve heard from a few readers complaining that some of the fees they pay on airlines are not reimbursed by their companies. Last weekend, the Business Travel Coalition, which represents corporate travel managers, asked its members about their reimbursements.
In responses from more than 200 managers, almost all said their corporate policies allowed employees to be reimbursed for checked bag fees. But other airline fees were less likely to be approved. About 85 percent said that they would reimburse employees for itinerary change fees. About 74 percent said in-flight meals could be expensed, and 45 percent told the coalition they reimburse in-flight Wi-Fi charges.
And a mere 14 percent said they would approve an expense for a priority coach seat. But that is a perk, typically an aisle seat toward the front of the plane, that business travelers often opt for.
Myself, I don’t check bags, but I do like to buy that aisle seat. Note to accounting: That’s an extra $15. O.K.?