COMMERCIAL
AVIATION
InformationonAirline
FeesforOptional
Services
Accessible Version
ReporttoCongressionalRequesters
September 2017
GAO-17-756
United States Government Accountability Office
United States Government Accountability Office
Highlights of GAO-17-756, a report to
congressional requesters
September 2017
COMMERCIAL AVIATION
Information on Airline Fees for Optional Services
What GAO Found
Since 2010, selected U.S. airlines have introduced a variety of new fees for
optional services and increased some existing fees. For example, each of the 11
U.S. airlines that GAO examined introduced fees for “preferred” seating, which
may include additional legroom or a seat closer to the front of the economy
cabin. Some of these airlines have also introduced new fees for other optional
services, such as fees for carry-on baggage and priority boarding. Since 2010,
many of the selected airlines have also increased existing fees for some optional
services, including fees for checked baggage and for changing or cancelling a
reservation. From 2010 to 2016, U.S. airlines’ revenues from these two fees—
the only optional service fees for which revenues are separately reported to the
Department of Transportation (DOT)—increased from $6.3 billion in 2010 to $7.1
billion in 2016 (in constant 2016 dollars).
Airline officials cited competition from other airlines and customer demand,
among other things, as factors they consider when deciding whether and how
much to charge for optional services. According to officials from 9 of the 10
selected airlines GAO interviewed, the process of “unbundling” allows
passengers to customize their flight by paying for only the services that they
value. Airline officials said that charging fees for optional services allows the
airlines to offer lower base airfares to customers. For customers traveling with
bags, however, GAO’s review of airline-related economic literature showed that
on average customers who paid for at least one checked bag paid more in total
for the airfare and bag fees than they did when airfares included checked
baggage. Officials from the 10 airlines said they also consider customer demand
and willingness to pay when setting prices for optional services, and officials
from 8 of these airlines noted that competitors’ prices for similar services are
another factor used in determining the amount of fees.
Since 2010, DOT has taken or has proposed a range of actions to improve the
transparency of airlines’ fees for optional services. These actions include: (1)
monitoring and enforcing airlines’ compliance with existing transparency
regulations; (2) collecting, reviewing, and responding to consumers’ complaints;
(3) collecting additional data on revenue generated from fees; and (4) educating
airlines and consumers about existing regulations and consumer rights related to
optional service fees. Consumer and industry stakeholders, such as online travel
agents’ representatives, told GAO that DOT’s regulations requiring certain
airlines to disclose optional service fees on their websites have improved
consumer transparency. However, these stakeholders also told GAO that there
are additional transparency challenges, such as when consumers search for and
book flights through online travel agents. Because optional services are not
always available for purchase and because fees for such services are not always
disclosed through online travel agents, these stakeholders argue that consumers
are not always able to determine the full cost of their travel and compare costs
across airlines before they purchase their tickets. While transparency challenges
still exist, DOT has ongoing regulatory proceedings, some in response to prior
GAO recommendations that may resolve some of these issues.
View GAO-17-756. For more information,
contact Gerald Dillingham, Ph.D., (202) 512-
2834 or [email protected].
Why GAO Did This Study
Since 2008, U.S passenger airlines
have increasingly charged fees for
optional services that were previously
included in the price of a ticket, such
as checked baggage or seat selection.
Consumer advocates have raised
questions about the transparency of
these fees and their associated rules.
In April 2011, DOT issued a final rule
requiring, among other things, that
certain U.S. and foreign airlines
disclose information about optional
service fees on their websites.
GAO was asked to review issues
related to optional service fees in the
U.S. aviation industry. This report
describes: (1) how selected U.S.
airlines have modified their offering
and pricing of optional services since
2010, (2) the factors that selected U.S.
airlines consider when determining
whether and how much to charge for
optional services, and (3) actions DOT
has taken since 2010 to improve the
transparency of optional service fees
and views of selected aviation
stakeholders about these actions.
GAO reviewed 2010 and 2017 airline
data on optional services fees charged
by the 11 largest U.S. passenger
airlines; analyzed airline financial data
from 2010 to 2016 reported to DOT;
reviewed economic studies examining
the effects of bag fees on fares; and
reviewed applicable laws. GAO
requested interviews with
representatives of all the 11 selected
U.S. airlines; 10 agreed to be
interviewed and one airline declined.
GAO also interviewed DOT officials,
consumer advocates, and other
aviation industry stakeholders. DOT
reviewed a draft of this report and
provided technical comments that GAO
incorporated as appropriate.
Page i GAO-17-756 Airline Optional Service Fees
Contents
Letter 1
Background 4
Selected Airlines Have Continued to Introduce New Fees for
Optional Services since 2010, while Increasing the Price of
Some Existing Fees 10
Selected Airlines Consider Competition and Customer Demand
Among other Factors When Making Decisions About Optional
Services 19
DOT Has Made Progress in Increasing Transparency of Optional
Service Fees, but Consumer and Industry Groups Raised Some
Challenges 24
Agency Comments 36
Appendix I: Information from Selected Countries on Increasing the Transparency of Airline Optional Service
Fees 37
Appendix II: Objectives, Scope, and Methodology 42
Appendix III: GAO Contact and Staff Acknowledgments 49
Tables
Table 1: Department of Transportation’s Consumer Protection
Regulations Related to Airlines’ Optional Service Fees 8
Table 2: Selected U.S. Airlines’ Approaches to Charging Fees for
Preferred Seating, as of April 1, 2017 12
Table 3: Selected U.S. Airlines’ Fees for Checked Baggage and
Other Optional Services on Domestic Flights, as of July 1,
2010, and April 1, 2017 16
Table 4: Laws with Provisions Related to Optional Service Fees
as Reported by Selected Countries 38
Table 5: List of Aviation Stakeholders GAO Interviewed 45
Figures
Figure 1: Examples of Airline Optional Service Fees 6
Figure 2: Airline Passengers Purchase Optional Services as a
Bundled Package or Individually, or Both 14
Abbreviations
Page ii GAO-17-756 Airline Optional Service Fees
A4A Airlines for America
ACPD Aviation Consumer Protection Division
BTS Bureau of Transportation Statistics
DOT Department of Transportation
EU European Union
FKGL Flesch-Kincaid Grade-Level
GDS global distribution system
IATA International Air Transport Association
OAEP Office of Aviation Enforcement and Proceedings
UK United Kingdom
UK CAA United Kingdom Civil Aviation Authority
This is a work of the U.S. government and is not subject to copyright protection in the
United States. The published product may be reproduced and distributed in its entirety
without further permission from GAO. However, because this work may contain
copyrighted images or other material, permission from the copyright holder may be
necessary if you wish to reproduce this material separately.
Page 1 GAO-17-756 Airline Optional Service Fees
441 G St. N.W.
Washington, DC 20548
Letter
September 20, 2017
The Honorable Bill Nelson
Ranking Member
Committee on Commerce, Science, and Transportation
United States Senate
The Honorable Richard Blumenthal
Ranking Member
Subcommittee on Consumer Protection, Product Safety, Insurance, and
Data Security
Committee on Commerce, Science, and Transportation
United States Senate
The Honorable Edward Markey
United States Senate
Since 2008, U.S. passenger airlines have increasingly “unbundled”
optional services, charging fees for a variety of services that were
previously included in the price of the ticket. For example, optional service
fees can include charges for such things as checked bags, early
boarding, seat selection, meals, or other amenities. In addition to these
services that were previously included in the ticket price, the airline
industry has long charged fees for other optional services, such as
unaccompanied minors, or changing or canceling a reservation. Optional
service fees are an important source of revenue for airlines. According to
the Department of Transportation’s (DOT) Bureau of Transportation
Statistics (BTS), from 2010 to 2016, U.S. airlines generated more than
$44 billion in revenues from baggage fees, reservation-change fees and
cancellation fees alone. Over the same period, the number of passengers
traveling on U.S. airlines increased by 14 percent.
With airlines’ increased practice of charging fees for optional services,
consumer advocacy groups have raised concerns about the lack of
transparency regarding optional service fees and the full price of airline
tickets. In July 2010, we reported that information about airlines’ optional
service fees and their associated rules are not fully disclosed to
consumers, making it difficult for consumers to compare the total cost of
Letter
flights across different airlines.
Page 2 GAO-17-756 Airline Optional Service Fees
1
We made four recommendations to DOT
to improve the transparency of information on airline-imposed fees,
including that DOT require airlines to disclose certain airline-imposed
optional service fees, and disclose applicable government-imposed fees
that may be eligible for refunds on unused nonrefundable tickets. DOT
has implemented both of these recommendations but has not yet
implemented our recommendations to require airlines to disclose
baggage fees and policies along with fare information across all sales
channels used by the airline, and to separately report to DOT the
revenues from all optional service fees paid by passengers.
2
However,
DOT has initiated several rulemakings that may address these open
recommendations.
3
You asked us to review issues related to optional service fees in the U.S.
aviation industry. This report describes: (1) how selected U.S. airlines
have modified their offering and pricing of optional services since 2010;
(2) the factors that selected U.S. airlines consider when determining
whether and how much to charge for optional services; and (3) the
actions DOT has taken since 2010 to improve the transparency of
optional service fees and views of selected aviation stakeholders about
these actions.
To determine how U.S. airlines have modified their offering and pricing of
optional services, we selected the 11 largest U.S. passenger airlines (in
terms of reported revenue and number of passengers) that fly under their
1
GAO, Commercial Aviation: Consumers Could Benefit from Better Information about
Airline-Imposed Fees and Refundability of Government-Imposed Taxes and Fees,
GAO-10-785 (Washington, D.C.: July 14, 2010).
2
In total, we made six recommendations. One recommendation was to the Department of
Homeland Security to issue guidance regarding the refundability of the customs and
immigration inspection fees to U.S. and foreign airlines collecting these fees. Another
recommendation was to the Department of Agriculture to determine whether a passenger
is eligible for a refund of the animal and plant health-inspection fee and convey this
determination to U.S. and foreign airlines collecting these fees. Both of these
recommendations were implemented. We also included a matter for congressional
consideration regarding amending the Internal Revenue Code to make mandatory the
taxation of certain or all airline imposed fees and to require that the revenue be deposited
in the Airport and Airway Trust Fund. Congress has not yet taken action regarding this
matter.
3
Transparency of Airline Ancillary Service Fees, 82 Fed. Reg. 7536 (Jan. 19, 2017) and
Reporting Ancillary Airline Passenger Revenues, 76 Fed. Reg. 41726 (July 15, 2011).
Letter
own brand.
Page 3 GAO-17-756 Airline Optional Service Fees
4
These airlines transported over 80 percent of U.S. domestic
passengers in 2016.
5
We obtained 2010 and 2017 airline data and
analyzed how these fees have changed since 2010. Specifically, we took
screen captures of airlines’ webpages listing optional services and fees
on March 31 and April 1, 2017. We then compared this information to the
2010 optional services and fee information that we collected as part of our
2010 review of airline fees. We requested interviews with representatives
of all the 11 selected U.S. airlines; 10 airlines agreed to be interviewed
and one airline declined.
6
We interviewed these airline officials about their
optional service fees and bundled fare products introduced since 2010
and obtained related documentation.
7
We obtained 2010 through 2016
data from BTS on airlines’ revenues from baggage and reservation
change and cancellation fees and analyzed how this revenue has
changed since 2010. We determined that these data were sufficiently
reliable to report on airlines’ revenues from baggage and reservation-
change fees since 2010 by reviewing quality control documentation and
interviewing BTS officials. We also reviewed available economics
literature on the extent to which baggage fees, introduced by U.S. airlines
around 2008, affected ticket prices.
To determine the main factors that airlines consider when determining
whether and how much to charge for optional services, we asked
representatives from the 10 airlines that agreed to be interviewed about
the factors their airline considers when deciding to charge separately for
an optional service. To determine what actions DOT has taken since
4
We originally selected 12 U.S. passenger airlines for our review: Alaska Airlines (Alaska),
Allegiant Air (Allegiant), American Airlines (American), Delta Air Lines (Delta), Frontier
Airlines (Frontier), Hawaiian Airlines (Hawaiian), JetBlue Airways (JetBlue), MN Airlines
LLC dba Sun Country Airlines (Sun Country), Southwest Airlines (Southwest), Spirit
Airlines (Spirit), United Airlines (United), and Virgin America. During the course of our
audit, Alaska Air Group, which owns Alaska Airlines, purchased Virgin America. As a
result, we eliminated Virgin America from our selection.
5
We used DOT T-100 data on U.S. airlines to determine the share of passengers on the
11 airlines in our selection. The share of passengers on these 11 airlines does not include
passengers who flew on flights marketed by one of the selected airlines but operated by
another airline. For example, SkyWest Airlines, the largest airline excluded from our
selection, flew over 31 million passengers in 2016 on flights marketed by Alaska,
American, Delta, and United.
6
Sun Country declined our request for an interview; however, we included relevant
information about Sun Country in parts of the report that relied on publicly available
information, such as information from the airline’s website.
7
Delta provided written responses to our interview questions.
Letter
2010 to improve the transparency of optional service fees, we reviewed
DOT regulations and proposed rules, along with DOT policies, directives,
guidance, and other documentation related to monitoring, investigating,
and enforcing airline compliance with optional service fee regulations. We
interviewed DOT officials and selected aviation stakeholders—including
three airline trade associations, four consumer groups, and six other
industry stakeholders—about DOT’s actions. We interviewed BTS
officials about their guidance and process for collecting optional service
revenue data from airlines. We also discussed DOT’s actions and BTS’s
data collection with officials from the 10 selected airlines that agreed to be
interviewed. In addition, we examined the “contract-of-carriage”
documents from all 11 selected U.S. airlines.
Page 4 GAO-17-756 Airline Optional Service Fees
8
Last, we obtained documents and interviewed officials from four selected
foreign governments (the European Union, Canada, the United Kingdom,
and Malaysia) that have taken actions to improve consumer transparency
related to airline fees; information from these interviews is presented in
appendix I. All information regarding foreign laws, regulations, and cases
is based on responses by the applicable foreign officials to interview
questions. More detailed information on our scope and methodology is
presented in appendix II, including a list of the selected aviation
stakeholders we interviewed and specific information about how we
selected the stakeholders, airlines, and foreign governments for our
review.
We conducted this performance audit from November 2016 to September
2017 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit to
obtain sufficient, appropriate evidence to provide a reasonable basis for
our findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.
Background
In recent years, airlines have increasingly charged fees for optional
services. Since the U.S. airline industry was deregulated in 1978, the
8
A “contract of carriage” is the legal agreement between the passenger and the airline and
typically defines all the contractual rights, liabilities, and duties of the two parties to the
contract.
Letter
industry’s earnings have been volatile. In calendar years 2008 and 2009,
the U.S. passenger airline industry incurred nearly $4.4 billion in
operating losses, due largely to high jet fuel prices—airlines’ biggest
operating expense in 2008—combined with a severe economic downturn
that reduced passenger traffic. In response to these and other economic
challenges, airlines began in 2008 to “unbundle” optional services from
the base ticket price, thereby charging separate fees for services that
were previously included in the ticket price.
Page 5 GAO-17-756 Airline Optional Service Fees
9
Revenues from fees for
optional services continue to grow. In fiscal year 2016, airlines reported
$200 billion in revenue, about $7.1 billion of it from the two optional
services fees for which revenues are separately reported to DOT—$4.2
billion in baggage fee revenue and $2.9 billion from fees for changing
reservations.
The passenger airline industry is primarily composed of network (or
“legacy”), low-cost, and regional airlines. Network airlines were in
operation before the Airline Deregulation Act of 1978 and support large,
complex hub-and-spoke operations with thousands of employees and
hundreds of aircraft. These airlines provide service at various fare levels
to a wide variety of domestic and international destinations.
10
Low-cost
airlines generally entered the market after deregulation and tend to
operate less costly “point-to-point” service using fewer types of aircraft.
11
Regional airlines generally employ much smaller aircraft (up to 100 seats)
and provide service under “code-sharing” arrangements with larger
network airlines for which they are paid on a cost-plus or fee-for-
departure basis to provide network capacity.
12
Both network and low-cost
airlines charge fees for a variety of optional services. Regional airlines
may also charge optional fees, such as baggage fees; however, those
fees are generally determined by the network airline in the code-sharing
partner agreement. While charges for some services—such as
unaccompanied minors, reservation changes or cancellations, and
9
“Unbundling” refers to charging fees or ancillary fees for optional services or offering a la
carte pricing for different services.
10
For purposes of this report, we defined Alaska, American, Delta, Hawaiian, and United
as network airlines.
11
For purposes of this report, we defined Allegiant, Frontier, JetBlue, Southwest, Spirit,
and Sun Country as low-cost airlines.
12
A “code-sharing” arrangement is a marketing arrangement in which an airline places its
“designator code” (e.g., UA for United) on a flight operated by another airline and sells and
issues tickets for that flight.
Letter
oversized or overweight baggage—have existed in the airline industry for
many years, other services, such as wireless internet access and on-
demand entertainment access, are new. See figure 1 for examples of
optional service fees.
Figure 1: Examples of Airline Optional Service Fees
Page 6 GAO-17-756 Airline Optional Service Fees
Some optional services can be purchased in advance when booking
airline tickets. For example, customers can purchase optional services
when booking tickets directly from the airline (i.e., from the airline’s
website, by calling the airline’s call center, or from the airline’s ticket
counter at the airport). Customers who purchase tickets from third parties,
such as online travel agents (e.g., Priceline or Expedia) and traditional or
corporate travel agents, may also have the option to purchase some
optional services when booking tickets, but this option varies depending
on the airline and third party. Customers may also obtain some
Letter
information about flight schedules, fares, and some optional services from
metasearch companies (e.g., Google or Kayak); however, the information
on optional services available through these websites varies.
Page 7 GAO-17-756 Airline Optional Service Fees
13
Generally,
online travel agencies, traditional or corporate travel agents, and
metasearch companies obtain airfare and optional service fee information
from global distribution systems, which are companies that package
airline information so that travel agents can query and “book” (i.e.,
reserve and purchase) flights for airline customers.
14
DOT has authority to investigate whether a U.S. air carrier, foreign air
carrier, or ticket agent has been, or is engaged, in an unfair or deceptive
practice or an unfair method of competition in air transportation or the
sale of air transportation. Upon finding that a U.S. air carrier, foreign air
carrier, or ticket agent is engaged in such a practice or method, DOT has
the authority to order the regulated entity to stop the practice or method.
15
Under this authority, in April 2011, DOT issued “Consumer Rule 2” which
included several provisions related to increasing the transparency of
airfares and optional service fees for consumers.
16
This rule—which
became completely in effect in January 2012—requires, among other
things, that certain U.S. and foreign air carriers disclose information about
their optional service fees on their websites and refund passengers’
13
Metasearch websites provide consumers with information about different airline prices
and schedules to enable customers to comparison shop across multiple airlines and
online travel agent websites. Metasearch websites do not sell tickets but direct customers
to airline or travel agent websites to book their tickets.
14
The three main global distribution system companies are Amadeus, Sabre, and
Travelport. Airlines provide airfare information to the Airline Tariff Publishing Company,
the tariff publishing house, which is owned by a consortium of airlines and which in turn,
provides the fare information to the global distribution system companies. Once an airline
ticket is purchased, the financial transaction is reconciled by the Airlines Reporting
Corporation, another company owned by an airline consortium, which offers payment and
settlement services.
15
49 U.S.C. § 41712(a).
16
Enhancing Airline Passenger Protections (Consumer Rule 2), 76 Fed. Reg. 23110 (Apr.
25, 2011).
Letter
baggage fees if their bags are lost.
Page 8 GAO-17-756 Airline Optional Service Fees
17
The transparency regulations that
went into effect after the issuance of Consumer Rule 2 are summarized in
table 1.
Table 1: Department of Transportation’s Consumer Protection Regulations Related to Airlines’ Optional Service Fees
Regulation
a
Requirements
b
Citation
Full fare price advertising
· Advertisements in the United States by an air carrier or ticket agent for
air transportation within, to, or from the United States must include the
entire price for air transportation, including government taxes and
mandatory fees.
14 C.F.R. § 399.84(a)
Opt-in requirement
· Consumers must affirmatively “opt-in” (i.e., agree) to purchase optional
services before such fees are added to the total price of the air
transportation-related purchase.
14 C.F.R. § 399.84(c)
Disclosure of fees for
optional services
· U.S. and foreign air carriers with websites marketed to U.S. consumers
must promptly and prominently disclose on the homepage of their
website for at least three months after the change becomes effective,
any increase in carry-on or checked baggage fees or change in carry-
on, first, or second checked bag allowances.
14 C.F.R. § 399.85(a)
· U.S. and foreign air carriers and ticket agents with websites marketed to
U.S. consumers must clearly and prominently disclose on the first
screen in which the ticket agent or carrier offers a fare quotation for a
specific itinerary selected by a consumer that additional airline fees for
baggage may apply and where consumers can see these baggage fees.
14 C.F.R. § 399.85(b)
17
76 Fed. Reg. 23110, 23165, 23166-23167 (codified as amended at 14 C.F.R. §§ 259.5,
399.85). As part of this review, we examined optional service fee refund policies of the
airlines in our selection and found that these policies differed across the selected airlines.
Of the airlines we interviewed, 7 of the 10 stated that if an airline cancels a flight, it will
provide an automatic refund of the fare and all fees. Eight out of 10 airlines stated that the
airline will provide a refund if the customer cancels the ticket, but that it depends on the
type of fare purchased by the customer. For example, according to one airline official, if a
customer purchases a refundable ticket, then any optional services that the customer
purchased with the ticket will also be refunded automatically if the customer cancels the
ticket. However, if the customer purchased a non-refundable ticket, then any optional
services purchased with that ticket are also considered non-refundable. In the case of a
late or a lost checked bag, 8 of 10 airlines said that they would refund the baggage fee,
but that the refund is not automatic and the customer would have to request the refund.
The FAA Extension, Safety, and Security Act of 2016 required DOT, by July 17, 2017, to
issue final regulations requiring air carrier or foreign air carriers to promptly provide
passengers with refunds for baggage fees when the passenger’s bag is not delivered
within specified time periods after arrival of the flight. Pub. L. No. 114-190, § 2305, 130
Stat. 615, 640 (2016). In October 2016, in response to this mandate, DOT issued an
advance notice of proposed rulemaking seeking comment on the appropriate length of
delay, within the statutory parameters, that would trigger the refund requirement, among
other things. See Refunding Baggage Fees for Delayed Checked Bags, 81 Fed. Reg.
75347 (Oct. 31, 2016).
Letter
Page 9 GAO-17-756 Airline Optional Service Fees
Regulation
a
Requirements
b
Citation
· U.S. and foreign air carriers and ticket agents that advertise or sell air
transportation in the United States must include information about the
free baggage allowance, and/or applicable fees for the first and second
checked bag and carry-on baggage, on the e-ticket confirmation
provided to the customer for air transportation within, to or from the
United States. The baggage fee information must be expressed as
specific charges.
14 C.F.R. § 399.85(c)
· U.S. and foreign air carriers with websites marketed to U.S. consumers
must prominently disclose fees for all optional services—including
baggage charges and items such as upgrades, meals, and drinks—in a
single place, accessible through a conspicuous link on the home page
of the website. Fees for particular services may be expressed in ranges,
except for baggage fees which must be expressed as a specific charge.
14 C.F.R. § 399.85(d)
· For air transportation within, to or from the United States, a carrier
marketing a flight under its identity that is operated by a different carrier
(also known as a code-share flight), must disclose on its website any
differences between its optional services and related fees and those of
the carrier operating the flight.
14 C.F.R. § 399.85(e)
Prohibition on post-purchase
price increases for airfare and
baggage
· Any seller of scheduled air transportation within, to or from the United
States cannot increase the price of airfare or baggage if the consumer
has already paid the full amount, except in the case of an increase in a
government-imposed tax or fee. However, post purchase price
increases for government-imposed taxes or fees are only allowed if the
seller notifies the consumer of the potential for such an increase and
obtains the consumer’s written consent to the potential for such increase
prior to the purchase of the air transportation. Additionally, any seller of
scheduled air transportation within, to or from the United States must
notify a consumer of the potential for a price increase that could take
place prior to the time that the full amount has been paid by the
consumer and must obtain the consumer’s written consent to the
potential for such an increase prior to accepting any payment for the air
transportation.
14 C.F.R. §§ 399.88,
399.89
Refunding fees for optional
services
· When a consumer is voluntarily or involuntarily denied boarding, the
carrier must refund all optional service fees paid for by the consumer
that are not available on the alternative flight. The carrier must also
refund passengers the baggage fee if the bag is lost.
14 C.F.R §§ 250.5(f),
259.5(b)(3), (b)(5)
Source: GAO review of DOT regulations | GAO-17-756.
a
The regulation column does not reflect the title provided in the Code of Federal Regulations. Instead,
we included the name by which DOT commonly refers to the regulations.
b
The requirements column for each regulation is a summary based on both the regulatory text of the
citation provided, and DOT’s guidance provided in its “Answers to Frequently Asked Questions
Concerning the Enforcement of the Second Final Rule on Enhancing Airline Passenger Protections
(EAPP #2),” most recently revised on December 12, 2016.
DOT’s Office of Aviation Enforcement and Proceedings (OAEP), and its
Aviation Consumer Protection Division (ACPD), monitor and enforce
airline compliance with economic regulations, such as advertising
requirements related to the disclosure of airline fares and optional service
Letter
fees, among others.
Page 10 GAO-17-756 Airline Optional Service Fees
18
Consumers may file air-transportation-related
complaints with DOT.
19
Consumers may also file air-transportation-related
complaints with airlines, and airlines are required to acknowledge and
respond to each complaint.
20
Additionally, DOT may require airlines to file
reports and keep records.
21
DOT is authorized to inspect regulated
entities’ records and collect transportation information from regulated
entities.
22
DOT may assess civil penalties against airlines for violating the
statute prohibiting unfair and deceptive practices and unfair methods of
competition, and any regulations promulgated under that authority.
23
SelectedAirlinesHaveContinuedtoIntroduce
NewFeesforOptionalServicessince2010,
whileIncreasingthePriceofSomeExisting
Fees
Since 2010, U.S. airlines have introduced a variety of new optional-
service fees and bundled products and increased the price of some
existing fees. Some fees for optional services, like first and second
checked bag fees on network airlines, have not changed considerably
since 2010. However, some airlines increased other fees, such as fees
for overweight and oversized bags and reservation changes and
cancellations. According to DOT data, from 2010 to 2016, airline
revenues from baggage fees and reservation-change and cancellation
fees increased as did the number of passengers.
18
Both OAEP and ACPD are housed within the Office of the Secretary of the Department
of Transportation.
19
49 U.S.C § 46101(a).
20
14 C.F.R. § 259.7(c).
21
49 U.S.C. §§ 41708, 41709 (a).
22
49 U.S.C. §§ 329 (a), 41709(b).
23
49 U.S.C. § 46301(a).
Letter
U.S.AirlinesHaveIntroducedNewFeesandProductsfor
Page 11 GAO-17-756 Airline Optional Service Fees
OptionalServicessince2010
Several U.S. airlines have introduced new fees since 2010 for services
that used to be included in the ticket price, notably “preferred” seats within
the economy cabin. For example, several network airlines—including
Alaska, American, and Delta—created fees for upgrading to preferred
seats, which are more desirable seats in the economy cabin of the
aircraft, such as those located in an exit row, toward the front of the
aircraft or with additional legroom.
24
Preferred seats may also include
priority boarding or food and beverages, depending on the airline. The
characteristics of preferred seats differ among airlines, even when the
products’ names sound similar. For example, both American and
Hawaiian have a product called Preferred Seating, but American’s
product refers to standard legroom in more favorable locations, whereas
Hawaiian’s product refers to more legroom and priority boarding, among
other things. In addition, some airlines offer more than one type of
preferred seat. For example, in addition to its Preferred Seating product,
American also offers a product called Main Cabin Extra, which includes
additional legroom and priority boarding. As of July 2010, Frontier,
JetBlue, and Spirit had already instituted fees for preferred seats, and
Allegiant started offering preferred seats to its passengers in 2014.
Southwest, however, does not have any assigned seating and therefore
does not sell preferred seating. Instead, Southwest allows some
customers to pay for early boarding, which increases the customer’s
ability to select a desired seat. Table 2 shows airlines’ different
approaches to charging fees for preferred seating.
24
Some airlines, including Delta, place preferred seats in a separate cabin, as opposed to
designated areas within the economy cabin.
Letter
Table 2: Selected U.S. Airlines’ Approaches to Charging Fees for Preferred Seating, as of April 1, 2017
Page 12 GAO-17-756 Airline Optional Service Fees
Airline
Product
Description
Alaska
Premium Class
3-4 inches more legroom than standard seats, priority boarding, and
complimentary beverage
Seats with more legroom
4-9 inches more legroom than standard seats
Allegiant
Legroom+
More legroom than standard seats
Giant Seats
Wider seats and more legroom than standard seats
American
Main Cabin Extra
3-5 inches more legroom than standard seats and priority boarding
Preferred
Standard legroom in more favorable locations of the aircraft
Delta
Comfort+
1-4 inches more legroom than standard seats, priority boarding, and
complimentary food and beverages
Preferred
Standard legroom in more favorable locations of the aircraft
Frontier
Stretch seats
5-10 inches more legroom than standard seats
Hawaiian
Extra Comfort
More legroom than standard seats, priority boarding and security
screening, entertainment pack, and use of pillow and blanket
Preferred
More legroom than standard seats and priority boarding
JetBlue
Even More Space
More legroom than standard seats and priority boarding
Southwest
Upgraded Boarding
Allows passengers to board earlier and select a more desirable seat
Spirit
Big Front Seats
Larger seat with more legroom than standard seats
Sun Country
Preferred
Seats located in the front of the coach cabin
United
Economy Plus
3-8 inches more legroom than standard seats
Source: GAO analysis of selected airline websites | GAO-17-756
Notes: With preferred economy seating, a customer may pay to reserve a more desirable seat, such
as a seat toward the front of the aircraft or with extra legroom. More legroom refers to increased seat
pitch, which is defined as the distance between a point on a seat and the corresponding point on the
seat in front of or behind it.
The pricing of preferred seats is not always apparent to customers on
airlines’ websites, unless the customer selects or begins to book a
specific flight. For example, some airlines, like Spirit and United, specify
the range of prices, which may vary based on the route. Other airlines,
like Alaska and Frontier, provide the minimum possible price but do not
specify the maximum a customer might pay for the preferred seat. One of
the selected airlines in our review, Delta, did not have preferred-seating
prices available to customers browsing the website. All of the selected
airlines provide detailed pricing on preferred seats if the customer selects
or begins to book a specific flight.
25
25
Although Southwest’s Upgraded Boarding is not available for purchase until the day of
travel, its website states that the fee is either $30 or $40 depending on the flight.
Letter
From 2010 to 2017, U.S. airlines introduced other new fees such as fees
for carry-on bags, beverages, wireless internet access, and priority
boarding. For example, three low-cost airlines implemented new fees for
carry-on bags. Spirit introduced a fee for bringing a large bag into the
cabin in 2010, as did Allegiant in 2012 and Frontier in 2013. None of the
network airlines currently charge for carry-on bags. Allegiant and Frontier
also began to charge customers for non-alcoholic beverages in 2012 and
2013, respectively, while Spirit already charged for these products. Since
2010, some U.S. airlines began charging for services that were not
previously available. For example, Southwest first offered and charged for
wireless internet access in 2011, and JetBlue began charging for
expedited security screening and early boarding in 2011.
While some customers are electing to pay extra for optional services,
others are purchasing tickets that are priced lower and include optional
service restrictions. For example, since 2015, American, Delta, and
United have introduced Basic Economy fares. Passengers choosing to
purchase Basic Economy tickets are assigned seats after checking in,
meaning that they might not be seated with the rest of their travel group;
board the aircraft last; cannot upgrade seats or class of service; and
cannot change their flights. In addition, American and United Basic
Economy passengers may not stow belongings in overhead
compartments and are limited to one carry-on bag that fits under the seat
in front of them.
In yet another purchasing option, since 2010 several U.S. airlines have
introduced packages of optional services that are sold together as a
bundle instead of individually and can be purchased on top of or along
with the base fare. The contents of these bundles vary greatly among
airlines. For example, Frontier has two packages that include carry-on
and checked bags, seat selection, and priority boarding; one of the
packages also allows customers to change or cancel their tickets for full
refunds. Other airlines’ bundles include the base ticket as well as other
optional services, such as JetBlue’s “Blue Plus” that adds one checked
bag to the basic fare. On some airlines, bundled packages also overlap
with preferred seating; for example, on Hawaiian, an Extra Comfort seat
provides a seat with additional legroom, priority boarding and security
screening, entertainment pack, and the use of a pillow and a blanket.
Figure 2 illustrates different ways that airline passengers can elect to
purchase optional services, depending on the airline.
Page 13 GAO-17-756 Airline Optional Service Fees
Letter
Figure 2: Airline Passengers Purchase Optional Services as a Bundled Package or Individually, or Both
Page 14 GAO-17-756 Airline Optional Service Fees
Letter
NetworkAirlinesHaveGenerallyNotIncreasedBaggage
Page 15 GAO-17-756 Airline Optional Service Fees
Fees,butSomeFeesforOtherOptionalServicesHave
Increasedsince2010
From 2010 to 2017, fees for first and second checked bags on U.S.
network airlines generally remained unchanged, while low-cost airlines
generally increased these fees (see table 3).
26
Among the five network
airlines in our selection, only Alaska increased its first bag fee—from $20
to $25, which is the same price charged by other network airlines.
27
Delta
and Hawaiian did not increase their fee for first and second checked
bags; however, they eliminated a $3 discount that was previously
available for paying bag fees online in advance of a flight. Among low-
cost U.S. airlines with which we spoke, Allegiant, Frontier, and Spirit each
increased the fee range for the first and second checked bags from 2010
to 2017. These three airlines charge varying baggage fees based on
when the passenger pays the fee; specifically, paying a bag fee online
and in advance of the flight is less expensive than paying the bag fee at
the airport on the day of travel. Southwest does not charge for a first or
second checked bag, opting to use “bags fly free” as part of its marketing
strategy.
26
The fees detailed in this section only apply to U.S. domestic flights. Fees on
international flights may be higher or lower depending on the airline and destination and
origin countries. We examined these seven fees in our prior report in 2010, which allowed
us to compare prices from 2010 and 2017 in this report.
27
All of the network airlines in our selection allow several groups of passengers to check
bags at no cost, including passengers with certain frequent-flyer statuses, passengers
who booked tickets with airline-branded credit cards, U.S. military members, and first- and
business-class passengers.
Letter
Table 3: Selected U.S. Airlines’ Fees for Checked Baggage and Other Optional Services on Domestic Flights, as of July 1,
Page 16 GAO-17-756 Airline Optional Service Fees
2010, and April 1, 2017
Year
First
bag
Second
bag
Overweight
bags
Oversized
bags
Reservation
change or
cancellation
Unaccompanied
minor
Pet in
cabin
Network
airlines
Alaska
2010
$20
$20
$50
$50-75
$75-100
$25-50
a
$100
2017
$25
$25
$75
$75
$125
$25-50
a
$100
American
2010
$25
$35
$50-100
$150
$150
$100
$100
2017
$25
$35
$100-200
$200
$200
$150
$125
Delta
2010
$23-
25
$32-35
$90-175
$175-300
$150
$100
$125
2017
$25
$35
$100-200
$200
$200 (each
way)
$150
$125
Hawaiian
2010
$23-
25
$32-35
$50
$100
$150
$100
$175
2017
$25
$35
$50-200
$100
$200
$100
$175
United
2010
$25
$35
$100
$100
$150
$99
$125
2017
$25
$35
$100-200
$200
$200
$150
$125
Low-cost
airlines
Allegiant
2010
$15-
35
$25-35
$50-100
$35
$50 (per
segment)
n/a
n/a
2017
$18-
50
$18-50
$50-75
$75
$75 (per
segment)
n/a
$100
Frontier
2010
$20
$20
$75
$75
$50-100
$50-100
a
$75
2017
$30-
40
$40-45
$75
$75
$99
$110
$75
JetBlue
2010
$0
$30
$50-100
$75
$100
$75
$100
2017
$25
$35
$100
$100
$75-150
$100
$100
Southwest
2010
$0
$0
$50
$50
$0
$50
$75
2017
$0
$0
$75
$75
$0
$50
$95
Spirit
2010
$19-
25
$25
$50-100
$100-150
$100-110
$100
$100
2017
$25-
50
b
$35-60
b
$30-100
$100-150
$90-100
$100
$110
Sun Country
2010
$20-
25
$30-35
$75
$75
$75
$75
$100
2017
$25
$35
$75
$75
$50
$75
$125-
199
Source: GAO analysis of airline information. | GAO-17-756
Notes: n/a = service not available on this airline. This table includes fees for passengers in economy
cabins; optional services for passengers who are in first class or business class, have certain
frequent-flyer statuses, booked tickets with airline-branded credit cards, or are members of the U.S.
military may have different fees. This table excludes intra-Hawaii and intra-Alaska flights for Hawaiian
and Alaska, respectively. All fees except reservation change and cancellation fees apply to one-way
trips. Reservation change and cancellation fees apply to entire booking unless otherwise indicated.
Letter
a
The fee for unaccompanied minors is higher if the trip includes connecting flights than if the trip is
direct or non-stop.
b
Spirit’s first and second bag fees may be up to $9 lower if the customer has joined the airline’s
membership program for an annual charge.
Fees for other optional services—namely, fees for overweight and
oversized bags, reservation changes and cancellations, and
unaccompanied minors—generally increased from 2010 to 2017 on both
network and low-cost U.S. airlines, as shown in table 3. Notably, roughly
half of the airlines in our selection increased the overweight bag and
unaccompanied minor fees, while a majority of the airlines in our selection
increased reservation change or cancellation fees. Specifically, from 2010
to 2017, 7 of the 11 selected airlines increased their fees for checking
overweight bags. In 2010, overweight bag fees ranged from $50 to $175,
and in 2017, they ranged from $30 to $200.
Page 17 GAO-17-756 Airline Optional Service Fees
28
In addition, 6 of the selected
airlines increased oversized bag fees, while the rest of the selected
airlines either narrowed the cost of checking an oversized bag (e.g., Delta
charged from $175 to $300 in 2010, but later switched to a flat $200 fee)
or did not change the fees.
29
In 2010, oversized bag fees ranged from
$35 to $300, and in 2017, they ranged from $75 to $200. Six of the 10
selected airlines that charged reservation change and cancellation fees
increased those fees from 2010 to 2017. (Southwest does not charge a
reservation change or cancellation fee.) In 2010, the selected airlines
charged from $50 to $150 to change or cancel a domestic reservation; in
2017, this fee ranged from $50 to $200.
30
Five of the 11 airlines increased
unaccompanied minor fees.
TotalRevenuefromFeesIncreasedastheNumberof
PassengersAlsoIncreased
According to airline financial data submitted to BTS, U.S. airline revenues
from baggage fees and reservation change and cancellation fees—the
28
Nine of the selected airlines charged overweight fees for bags over 50 pounds, while
Allegiant and Spirit charged for bags weighing more than 40 pounds.
29
Most of the selected airlines charge oversized bag fees for bags that are greater than 62
or 63 linear inches, which is the sum of the width, depth, and height of the item. Some of
these airlines charge set fees for specialty items, such as sporting equipment; fees for
specialty items are not included in this report.
30
Reservation change and cancellation fees generally apply to entire booking, but some of
the selected airlines charge for each segment or each direction of a trip. Customers who
purchase refundable tickets are generally exempt from reservation change and
cancellation fees.
Letter
only fees for which revenues are separately reported—increased from a
total of $6.3 billion in 2010 to $7.1 billion in 2016 in constant 2016 dollars.
Specifically, revenues from baggage fees rose from $3.7 billion in 2010 to
$4.2 billion in 2016 in constant 2016 dollars, an increase of nearly 12
percent. Similarly, revenues from reservation change and cancellation
fees increased from $2.5 billion in 2010 to $2.9 billion in 2016 in constant
2016 dollars, an increase of more than 14 percent. Combined revenue
from bag and reservation change and cancellation fees made up 3.3
percent of airlines’ operating revenues in 2010 and 3.5 percent of
operating revenues in 2016.
While revenue from baggage and reservation change and cancellation
fees has increased, so has the number of passengers traveling on U.S.
airlines. From 2010 to 2016, the number of passenger enplanements and
the revenue from these optional services increased at similar rates. As
discussed earlier, total enplanements on U.S. airlines increased by about
14 percent, from about 721 million in 2010 to 825 million in 2016. It is
worth noting that, unlike the revenues from domestic airfares, revenues
from most optional service fees are not subject to the excise tax that
helps fund the Airport and Airway Trust Fund, which partially supports the
Federal Aviation Administration and the operation of the air traffic control
system.
Page 18 GAO-17-756 Airline Optional Service Fees
31
This issue was discussed in depth in our 2010 report and
31
The Internal Revenue Code imposes a 7.5-percent excise tax on amounts paid for the
taxable transportation of any person by air, the revenue from which is deposited into the
Airport and Airway Trust Fund. Additionally, Treasury regulations and Internal Revenue
Service guidance set parameters for which airline-imposed fees are subject to the 7.5-
percent excise tax; generally, all mandatory charges necessary to transport passengers
are taxed but fees for optional services are not. Treasury regulations have specifically
exempted payments for baggage fees from the tax. If baggage fees in 2016 had been
subject to the 7.5-percent excise tax, we estimate that up to approximately $309 million in
excise taxes would have been credited to the Airport and Airway Trust Fund. This amount
is approximately 2.1 percent of the approximately $14.4 billion in revenue that the Trust
Fund received during fiscal year 2016. For this analysis, we are making the simplifying
assumption that the additional tax due would not have caused any passengers to choose
not to purchase tickets. Any such reduction in purchases presumably would have been
small and would have had the effect of making the increase in potential taxes collected a
little smaller than our estimate. This figure is also based on total baggage fee revenues,
including international baggage fees that would presumably not be subject to the 7.5-
percent excise tax. The reported data do not allow us to identify the portion of baggage
fee revenues collected on international flights. Moreover, we also note that airline officials
stated that the introduction of separate fees for optional services have enabled them to
lower base airfares. If this trend continues, it would continue to erode the base to which
the 7.5-percent excise tax is applied.
Letter
remains relevant as the amount of airline revenue generated by optional
service fees increases.
Page 19 GAO-17-756 Airline Optional Service Fees
32
SelectedAirlinesConsiderCompetitionand
CustomerDemandAmongotherFactorsWhen
MakingDecisionsAboutOptionalServices
AirlinesSaidThatTheyChargeSeparatelyforOptional
ServicestoCompetewithOtherAirlinesandRespondto
CustomerDemand
Airline officials said that airlines charge separately for optional services to
better compete with other airlines. Officials from 9 of the 10 airlines with
whom we spoke said that selling optional services separately from the
base fare allows airlines to reduce the base ticket price. One airline
official explained that customers make purchasing decisions based
primarily on the base ticket price—the cost of flying from one point to
another. According to this airline official, lowering the base fare therefore
helps an airline compete with other airlines. Some airline officials cited
other ways in which unbundling can lower ticket prices. For example, one
airline official said that baggage fees have prompted customers to travel
with fewer bags or no bags. As a result, the plane weighs less, which
reduces fuel costs and, in turn, can allow the airline to reduce the base
ticket price. Four other airline officials said that the lower base fares
resulting from unbundling optional services have made flying more
affordable to more people, thereby increasing the number of people who
decide to travel by air.
Officials from two airlines said that airfares have decreased over time,
and an official from Airlines for America (A4A)—the U.S. airline trade
association—cited BTS data during a May 2017 congressional hearing to
show that consumers are paying less for airfare than they had previously;
however, these data have some limitations. Data compiled by BTS
indicate that the average domestic airfare decreased from $370 in 2010
32
GAO-10-785.
Letter
to $349 in 2016 in constant 2016 dollars, a decrease of 5.6 percent.
Page 20 GAO-17-756 Airline Optional Service Fees
33
But,
the fares include only base fares plus applicable government taxes and
do not include all optional service fees. As a result, they do not represent
the total amount that some customers may be paying to travel. In
addition, according to DOT officials, DOT does not weight one-way tickets
differently than round-trip tickets when calculating the average fares. DOT
officials told us that customers are more likely to purchase one-way
tickets now than they were 10 years ago because airlines no longer
charge a premium for one-way tickets. As a result, a higher share of one-
way tickets would result in lower average fares. Lastly, it is difficult to
determine all the factors that could have caused this decrease in airfare,
as several economy-wide changes, including those in energy prices,
affect fares.
However, some studies have examined the effect bag fees may have had
on ticket prices. To examine this issue, we conducted an economic
literature search for any published, peer-reviewed studies that examined
the introduction of bag fees by U.S. airlines and the effect on fare prices.
The three studies that met our criteria (as described in appendix II) found
that although the introduction of bag fees may have led to a decrease in
average fares, the total price paid by customers who checked a bag may
not have decreased on average. Specifically, these studies found that
charging separately for bags reduced fares by less than the new bag fee
itself. As a result, customers who paid for checked bags paid more on
average for the combined airfare and bag fee than when the airfare and
bag fee were bundled together. Conversely, passengers who did not
check bags paid less overall. The results of these three studies are
summarized below.
· The authors of a 2012 study measured the impact of baggage fees on
airline fares using DOT data from 2006 to 2009.
34
They noted that
airlines introduced bag fees to generate additional revenues without
increasing fares, which would adversely affect demand. They found
33
Average domestic fares, as reported by BTS, are based on the total ticket value and
include round-trip fares unless the customer did not purchase a return trip, in which case
the one-way fare is included. These data are available at
https://www.rita.dot.gov/bts/airfares/programs/economics_and_finance/air_travel_price_in
dex/html/AnnualFares.html.
34
Kevin E. Henrickson and John Scott, “Baggage Fees and Changes in Airline Ticket
Prices,” in Pricing Behavior and Non-Price Characteristics in the Airline Industry
(Advances in Airline Economics, Volume 3), ed. James H. Peoples, Jr, (Emerald Group
Publishing Limited, 2012), 177–192.
Letter
that for an airline charging a bag fee, a one-dollar increase in those
fees resulted in a $0.24 decrease in fares, which means that a
passenger checking one bag, would pay $0.76 more on these airlines.
According to the authors, these results imply that airlines with bag
fees lower fares to appear more competitive and then make up the
lost revenue when passengers pay to check bags.
· In a 2015 study, the authors analyzed DOT quarterly data from 2008
to 2009 and found that adoption of a bag fee resulted in about a 3
percent reduction in average airfares.
Page 21 GAO-17-756 Airline Optional Service Fees
35
Analyzing non-stop flights and
those with connections separately, they found that a bag fee led to a
2.7 percent and a 2.4 percent average-fare reduction for non-stop and
connecting flights, respectively. The authors pointed out that, since
these declines translated into an amount that was less than the bag
fee, on average the combined total of the fare and bag fee
increased.
36
However, according to the authors, the decline could be
greater than the bag fee for some passengers because the decline in
average fare varies with route characteristics.
· In another 2015 study, the authors studied a sample of U.S. domestic
routes over the period 2007–2010, which covers the period when bag
fees were first introduced (in 2008) and when many carriers increased
bag fees (in 2010).
37
To analyze the effect of bag fees on passenger
demand and fares, the authors focused on a set of domestic airport-
to-airport routes where passengers could choose between airlines
that charged fees for checked baggage and Southwest, which allowed
passengers one or two “free” checked bags. The authors found that a
one-dollar increase in bag fees led to an $0.11 reduction in fares and
a loss of 0.6 passengers. On the other hand, they found that a one-
dollar fare increase resulted in a loss of seven passengers. Thus, they
determined that bag fees allowed airlines to increase their revenues
with a much lower reduction in passenger demand than a fare
35
The authors analyzed DOT’s Origin and Destination Survey data, which include fare and
itinerary information on every tenth airline ticket sold. Jan K. Brueckner, Darin N. Lee,
Pierre M. Picard, and Ethan Singer, “Product Unbundling in the Travel Industry: The
Economics of Airline Bag Fees,” Journal of Economics & Management Strategy, vol. 24,
no. 3 (2015).
36
The authors calculated that average one-way, non-stop fare on a network airline was
$196; therefore, the 2.7 percent reduction translates into a non-stop fare decrease of
$5.30. They also calculated that average one-way, connecting flight on a network airline
was $229; therefore, the 2.4-percent reduction translates into a fare decrease of $5.50.
37
Davide Scotti and Martin Dresner, “The Impact of Baggage Fees on Passenger Demand
on US Air Routes,” Transport Policy, vol. 43 (2015): 4–10.
Letter
increase. Finally, their evidence suggests that there is an overall
increase in total fares for passengers checking bags.
Airline officials also said they charge separately for optional services to
meet the needs of their customers. According to officials from 9 of the 10
selected airlines we interviewed, unbundling allows passengers to
customize their flights by paying for only the services that they value—a
benefit that one official cited as the overriding impetus for unbundling.
That official described unbundling as an effort to make the airline’s entire
product line of services available to customers and provide passengers
with the ability to tailor their travel experience. Similarly, another airline
official explained that they aim to cater to a broad range of customers and
unbundling allows passengers to decide on the price and service level
that is right for them.
AirlinesCitedManyFactorsThatAffectHowTheyPrice
Page 22 GAO-17-756 Airline Optional Service Fees
OptionalServices
Airline officials from the 10 U.S. airlines that we interviewed cited various
factors that contribute to their decisions about how to price optional
services.
· Customer demand and willingness to pay: Officials from all 10
airlines that we interviewed said that customer demand and the price
that customers are willing to pay for an optional service are important
factors in pricing an optional service. Customers’ willingness to pay
varies. Hence, when the price rises, some consumers who are not
willing to pay a higher price stop purchasing, resulting in some loss of
demand. Higher prices may thus result in higher or lower revenue
depending on the extent to which the demand is reduced. For
example, one airline official described how the airline would consider
increasing the price for a preferred seat if the demand were high
enough, indicating that there may be some customers willing to pay
more for a preferred seat. An official from a different airline said that it
conducts market testing to determine what optional services
customers are interested in, and it may test products at different
prices to determine the optimal price.
· Competitors’ prices for similar services: Officials from 8 of the 10
airlines that we interviewed said that they consider competitors’
pricing for similar services when they set fees for optional services, to
ensure that their own product is priced competitively. One airline
official said that because commercial aviation is a highly competitive
industry, the official’s company closely monitors the market and
Letter
makes adjustments to the price of services, as needed. Industry
stakeholders with whom we spoke, as well as consumer advocates,
believed that competition is a key factor in how airlines set fees for
optional services.
· Customer service and satisfaction: Officials from 5 of the 10
airlines we interviewed said that customer service and satisfaction are
factors in how they set prices. Officials from one airline stated that
they try to keep optional service fees relatively low to prevent
passengers from feeling overcharged. In at least one case, an airline
official told us that this airline sets the price of one type of fee to
prevent too many people from purchasing the service. For example,
this airline official told us they set the price for wireless internet access
high enough so that relatively few passengers will pay for it because
too many users can affect the speed and quality of the service.
Officials from 6 airlines said that they conduct customer surveys and
adjust the price of optional services based on survey feedback.
· Cost: Officials from 3 of the 10 airlines that we interviewed said that
the airlines’ cost to deliver a service is a major factor in how they
charge for that service. One of these officials said that this airline
conducts a business case analysis when developing a new product to
ensure that the revenues from the new optional service exceed its
cost. Officials from 3 additional airlines cited cost as a minor factor.
Officials from 2 of these airlines said they incorporate cost into
optional service pricing only for products for which cost is relatively
easy to measure, such as food and beverages. Conversely, officials
from 4 airlines did not cite cost as a factor in pricing optional services.
Even airline officials who said that cost factors into their pricing
decisions highlighted the complexity of calculating the precise cost of
delivering many services. For example, one airline official explained
that calculating the cost of cancelling a reservation requires
consideration of the cost of the reservation system, corporate
overhead, and possibly opportunity costs if the seat could not be re-
sold. Another official from the same airline said that they closely track
costs but do not necessarily have the ability to assign a specific cost
to the provision of an optional service. This comment was echoed by
several airline officials who said that calculating the cost of checking
baggage, for example, requires consideration of a multitude of factors,
including labor, ground infrastructure, and fuel costs.
In addition, one airline official said that the airline does not always
incur costs when offering some optional services, for example
allowing a passenger to select a seat in a preferred location, such as
a window seat or toward the front of a cabin, but the airline will sell the
Page 23 GAO-17-756 Airline Optional Service Fees
Letter
service because customers value it enough to pay for it. Industry
stakeholders echoed the view that the cost of delivering optional
services plays a minimal role in airlines’ pricing decision of optional
services. One industry stakeholder we spoke with agreed and stated
that the competitors’ prices and what customers are willing to pay are
more important factors in how airlines set prices for optional services
than the cost of delivering a product; this stakeholder said that the
pricing of optional services is ultimately based on what will deliver the
most revenue to the airline.
DOTHasMadeProgressinIncreasing
Page 24 GAO-17-756 Airline Optional Service Fees
TransparencyofOptionalServiceFees,but
ConsumerandIndustryGroupsRaisedSome
Challenges
DOTHasMonitoredandEnforcedCompliancewith
TransparencyRegulations,CollectedConsumer
Complaints,andProvidedGuidanceandInformationto
AirlinesandConsumers
DOT has taken a range of actions to improve transparency of U.S. airline
fees for optional services since 2010, as described below.
Monitoring and Enforcing Compliance with Transparency
Regulations
DOT conducts different compliance inspections of U.S. airlines to monitor
compliance with its regulations on a variety of consumer traveler issues,
including issues related to transparency of optional service fees.
· Since 2012, DOT has completed 19 compliance inspections of U.S.
and foreign airlines according to documentation the department
provided to us. DOT inspections are conducted on an ongoing basis,
and according to DOT officials, have included repeated inspections of
certain U.S. airlines that account for a significant percentage of U.S.
enplanements. As part of these inspections, DOT inspectors review
records onsite at airlines’ headquarters as well as information on
airlines’ websites. As part of the website review, DOT verifies, among
other things, that the website provides adequate information about
optional service fees, that consumers are provided an opportunity to
Letter
knowingly and voluntarily “opt-in” to purchase optional services, and
that the airline posts its current contract of carriage on its website in
an easily accessible form per DOT regulations.
Page 25 GAO-17-756 Airline Optional Service Fees
38
· DOT also conducts additional targeted inspections to specifically
assess airlines’ compliance with DOT’s consumer transparency
regulations. For example, according to DOT documentation and
officials, in 2012 DOT inspected 113 websites of U.S airlines, foreign
airlines, and ticket agents (websites that were marketed to U.S.
consumers) to monitor compliance with specific provisions of the 2011
Consumer Rule 2. DOT found that most of the websites generally
complied with Consumer Rule 2 provisions; however, 10 airlines and
1 ticket agent faced enforcement actions for violations.
According to DOT officials, the department documents any violations
identified during inspections and contacts the airline to correct the
violation. If the violation is long-standing and severe, DOT may take
enforcement action, including imposing civil penalties.
In other instances, airlines may receive a warning that enforcement action
may be taken in the future if the violations are not corrected. According to
DOT officials, in 2016, DOT issued 22 consent orders against airlines
related to aviation consumer rule violations
39
and assessed $5,955,000 in
civil penalties.
40
38
With opt-in services, the customer is offered and can take action to purchase a service.
This process differs from an opt-out scenario, where the service would be automatically
included unless the customer takes action to decline the service.
39
A “consent order” is a type of settlement in which DOT may require air carriers to pay
civil penalties or complete specified corrective actions in order to avoid future litigation.
According to DOT, this number does not include orders resulting from reporting or
licensing violations because such infractions do not result in a direct harm to individual
consumers. A reporting failure is a failure to accurately or timely report data that the airline
is required to report. Licensing violations occur when airlines operate outside of their
economic authority or fail to provide advance notice prior to ceasing a particular operation.
40
According to DOT, of this amount, $2,700,000 was paid as a condition of settlement.
Offsets that reflect money and vouchers already paid directly to consumers amounted to
$1,307,000. An additional $137,500 of fines that were suspended pending further
violations were subsequently paid due to carriers violating provisions of their consent
orders.
Letter
Collecting, Reviewing, and Responding to Consumer Complaints
Page 26 GAO-17-756 Airline Optional Service Fees
DOT also analyzes and investigates passenger complaints about optional
service fees that it receives via its website, mail, and telephone hotline.
41
In 2014, DOT established a separate complaint category for optional
service fees and began tracking the number of these complaints. DOT
receives fewer complaints related to optional service fees than other
topics, according to DOT officials. For example, DOT officials told us that
they received in 2016, a total of 17,904 complaints of which 862—about 5
percent—were regarding airline fees for optional services. According to
DOT officials, the two largest complaint categories that DOT receives are
regarding flight problems (e.g., delayed flights) and baggage problems
(e.g., lost or damaged bags). We requested and reviewed a selection of
2016 complaints related to optional service fees and found that
complaints included concerns that fees for changing or cancelling
reservations, transporting bags, and selecting seats were too high or that
information about these fees was not transparent or fully disclosed to the
customer.
DOT analyzes passenger complaint data to identify trends and investigate
possible violations of DOT regulations. According to DOT officials, under
DOT’s process for handling complaints, when a complaint is received, a
DOT official will review and categorize the information by type of
complaint. DOT reviews the complaint to see whether a regulation applies
and, regardless whether it does, forwards all complaints to the applicable
airline for the airline to respond to the consumer. Airlines are required to
acknowledge each complaint within 30 days of receipt and provide a
substantive written response to each complainant within 60 days of
receipt.
42
After receiving and reviewing the complaint, if DOT determines
the airline is in fact violating a regulation, DOT will ask for a copy of the
airline’s correspondence with the complainant. According to DOT officials,
airlines generally respond to these requests in a timely fashion. A
consumer complaint regarding compliance issues with an existing
regulation can trigger an investigation in which DOT looks for egregious
or repeated violations; a pattern of violations can lead to enforcement
action. For example, in 2016, DOT issued a consent order against
VivaAerobus, a foreign airline, after DOT found that the airline was not
41
Passengers can also file complaints about optional service fees with airlines. The
Federal Aviation Administration reviews complaints related to safety or security issues.
42
14 C.F.R. § 259.7(c).
Letter
disclosing baggage and other optional service fees in accordance with
regulations.
Page 27 GAO-17-756 Airline Optional Service Fees
43
The airline was fined $150,000 in civil penalties.
Collecting Data on Revenue Generated from Fees
DOT requires that U.S. airlines report revenues from optional service fees
to BTS, which helps increase transparency regarding the amount of
revenues generated from these fees. Currently, U.S. airlines are required
to report this revenue in one of four separate accounts: baggage fees,
reservation change and cancellation fees, other transport-related fees,
and miscellaneous fees. Because revenues from baggage fees and
reservation change and cancellation fees have their own accounts, the
revenues from these particular fees can be tracked. However, according
to DOT documentation, revenues from other optional service fees are
reported either in the transport-related or miscellaneous fees accounts,
which include revenue from optional services as well as from other
sources. For example, according to DOT guidance, the transport-related
revenue category includes not only revenue from all onboard sales (such
as, food, drink, entertainment, and wireless internet access) but also
revenue from fuel or airplane parts sold to other airlines.
44
Similarly,
according to DOT’s guidance, the miscellaneous category includes, for
example, revenue for transporting unaccompanied minors and pets, as
well as revenue from sales of miles to airlines, credit card companies,
hotels, rental cars, or other business partners that are frequent flyer
partners. From 2010 to 2016, revenue for the transport-related account
increased by 10 percent, from $36.5 billion to $40.1 billion in constant
2016 dollars. At the same time, revenue from the miscellaneous account
increased by 87 percent, from $3.3 billion to $6.2 billion in constant 2016
dollars; this 87 percent increase was the largest increase of all four
accounts. Over the same years, U.S. airlines’ total operating revenues
increased from $192.3 billion to $200.4 billion in constant 2016 dollars.
Because the DOT data do not separate the revenue reported from
optional service fees from the other types of revenues that are reported in
the transport-related and miscellaneous fees accounts, we could not
determine how much of the total revenue reported in these accounts
should be attributed to optional service fees.
43
Aeroenlaces Nacionales, S.A. de C.V., t/a VivaAerobus (May 5, 2016). DOT found
VivaAerobus violated 49 U.S.C. § 41712,14 C.F.R. §§ 399.84(a), 399.84(c), 399.85(d).
44
Department of Transportation, Research and Innovative Technology Administration
Bureau of Transportation Statistics Accounting and Reporting Directive, No. 289,
Reporting Ancillary Revenue on Form 41, February 20, 2009.
Letter
In 2010, we reported on this issue and stated that without complete data it
is difficult for policy makers and regulators to determine total revenues
from optional service fees and the fees’ effect on the industry.
Page 28 GAO-17-756 Airline Optional Service Fees
45
We
concluded that without collecting revenue from optional service fees in a
separate account, it was difficult to determine the amount of total optional
service fee revenues that airlines collect. We recommended that DOT
require airlines to report all optional service fees paid by passengers
related to their trip into a separate category, exclusive of baggage fees
and reservation change and cancellation fees (for which separate
categories already exist). Citing our recommendation, DOT initiated a
rulemaking in 2011 that proposed requiring airlines to report optional
service fee revenues in 23 separate categories.
46
However, the final rule
has not yet been published and DOT has not taken any recent action on
this rulemaking. According to DOT officials, DOT rulemakings are
currently being evaluated in accordance with Executive Orders 13771
47
and 13777;
48
thus, the schedules for many ongoing rulemakings are still
to be determined.
In our 2010 review we also found differences in how airlines report some
optional services fee revenues.
49
More specifically, in 2010, we found that
airlines were reporting revenues from the same optional service fees into
different accounts. Based on responses from our selected airlines, this
issue persists. For example, we found that some airlines accounted for
revenues from unaccompanied minor fees as transport-related revenue
while others reported them as miscellaneous operating revenue, and two
airlines reported fees for unaccompanied minors as revenue from
reservation cancellation fees. We also found differences in how airlines
reported revenue from preferred seating, upgraded seats, seat selection,
and priority security screening. In some cases, we found airlines reported
fees inaccurately despite guidance, and in others, it was not clear from
DOT’s guidance how certain fees should be categorized. DOT’s guidance
has not been updated since 2009, and according to officials, there are no
45
GAO-10-785.
46
76 Fed. Reg. 41726, 41730 (July 15, 2011).
47
Exec. Order No. 13771, “Reducing Regulation and Controlling Regulatory Costs” (Jan.
30, 2017), 82 Fed. Reg. 9339 (Feb. 3, 2017).
48
Exec. Order No. 13777, “Enforcing the Regulatory Reform Agenda” (Feb. 24, 2017), 82
Fed. Reg. 12285 (Mar. 1, 2017).
49
GAO-10-785.
Letter
current plans to do so. As previously discussed, since 2010 airlines have
introduced a number of new fees and products for optional services, and
determining how to report revenue from these fees into the existing four
accounts may not be clear. However, even if DOT were to revise its
guidance and provide more detailed information on how to categorize
different fees, it would still not be possible to understand how much
revenue is generated just from optional service fees because airlines
would still be required to report this information in accounts that include
revenue from other non-fee sources. Implementation of our 2010
recommendation that DOT require airlines to report all optional service
fees, exclusive of baggage fees and reservation-change and cancellation
fees, into a separate category would provide airlines with a clearer
understanding of how to report revenue from specific optional service
fees and provide the missing data on how much revenue is generated
from optional service fees.
Educating Airlines and Consumers
Page 29 GAO-17-756 Airline Optional Service Fees
DOT has taken several actions to educate airlines and consumers about
existing regulations and consumer rights related to optional service fees,
for example:
· In 2011, after the issuance of Consumer Rule 2, DOT conducted
informational sessions with the airlines about the requirements of the
new regulations. Additionally, DOT developed and issued guidance
that provided answers to frequently asked questions regarding the
new regulations.
50
· DOT provides consumers with information about their rights related to
optional services through various publications available on its website.
For example, DOT publishes “Fly Rights: A Consumer Guide to Air
Travel” which provides information on a range of topics including
airline fees, general refund policies, and information about DOT
regulations.
51
50
Department of Transportation, Answers to Frequently Asked Questions Concerning the
Enforcement of the Second Final Rule on Enhancing Airline Passenger Protections,
August 19, 2011, accessed December 20, 2016.
https://www.transportation.gov/airconsumer/faq-rule2-enhancing-airline-passenger-
protections.
51
Department of Transportation, Fly Rights: A Consumer Guide to Air Travel, last updated
December 7, 2015, accessed July 12, 2017,
https://www.transportation.gov/airconsumer/fly-rights.
Letter
· DOT has a webpage, “Air Travel Tips,” where it publishes a collection
of tips and information to help airline passengers. These airline tips
cover a wide range of topics, including information on how to file a
complaint, DOT’s 24-hour refund policy,
Page 30 GAO-17-756 Airline Optional Service Fees
52
and airline fees.
53
· DOT also publishes a monthly “Air Travel Consumer Report.” This
report provides consumers with information on a range of topics, such
as information about aviation consumer complaints filed with DOT.
According to DOT officials, these monthly consumer reports present
information in which customers are most interested.
52
DOT requires airlines to either hold a reservation at the quoted fare for 24 hours without
payment or refund a paid ticket if the customer cancels the ticket within 24 hours of
purchase if the ticket was purchased 7 days or more before the flight. 14 C.F.R. §
259.5(b)(4).
53
Department of Transportation, Air Travel Tips, last updated August 8, 2017, accessed
August 22, 2017, https://www.transportation.gov/airconsumer/air-travel-tips.
Letter
ConsumerandIndustryGroupsRecognizedDOT’s
Page 31 GAO-17-756 Airline Optional Service Fees
ProgressRelatedtoIncreasingTransparencyofOptional
ServiceFeesbutIdentifiedOtherTransparency
Challenges
Representatives from consumer advocacy organizations and industry
groups representing global distribution system (GDS) companies, the
online travel agent industry, and metasearch companies told us that
DOT’s 2011 regulations have had a positive impact such as increased
transparency regarding optional service fees. In particular, three
consumer groups told us that the Full Fare Price Advertising regulation
has resulted in more transparent pricing of airfares across the industry
and has reduced instances of misleading airfare advertising.
54
Three
consumer and two industry groups also told us that DOT’s regulation
requiring airlines to disclose all optional service fee information on their
websites has been a positive step for the industry and has increased
consumers’ understanding of how they may be charged for different
services. While consumer groups recognized DOT’s progress in this area,
they also reported a range of issues, discussed below, that persist related
to the transparency of fees for optional services. Industry officials shared
similar views. DOT has initiated several rulemakings in this area that
might address these issues, but these rulemakings are still ongoing.
Indirect Distribution Channels Do Not Always Have Optional
Service Fee Information or Purchase Options
While consumers are often able to obtain information about optional
services and then purchase them directly from an airline’s website,
information about these services and the ability to purchase these
services is not always available from indirect sources, such as online
travel agents. According to various estimates, about 50 percent of airline
ticket sales occur through indirect sources. All four consumer advocacy
groups that we spoke with told us that not being able to obtain information
about optional services and purchase optional services from indirect
sources at the time of booking decreases consumers’ ability to determine
the full cost of their travel. A representative from one consumer advocacy
54
The Full Fare Price Advertising regulation requires that advertisements in the United
States by an air carrier or ticket agent for air transportation within, to, or from the United
States must include the entire price for air transportation, including government taxes and
mandatory fees. 14 C.F.R. § 399.84(a).
Letter
group stated that having optional service fee information displayed
alongside the airfare on online travel sites is important because it allows
consumers to better compare different fares at the onset of their
purchasing process. Two industry officials we spoke with agreed that not
being able to purchase optional services through third parties decreases
consumer transparency. One of these officials said that some basic
optional services—seat selection in particular—are important to
consumers, who prefer to be able to purchase these services when they
purchase their tickets.
In our interviews with airlines, officials from 8 of the 10 airlines we spoke
with said that they make information about optional services, such as
baggage fees, available to third parties, but that the level of information
available about these fees varies across online travel agents. In addition,
officials from 3 of the 10 airlines that we interviewed told us that they
make optional services available for purchase through indirect channels.
According to these officials, the type of optional services available for
purchase differs by airline and by distribution channel. Officials from the
remaining 6 airlines told us that they sell products primarily through direct
channels (i.e., their own websites or customer service) because (1) they
have more control over how those products are marketed to consumers
and (2) the third-party websites have technical limitations in how they can
display and sell optional service products. For example, one airline official
stated that his airline can better differentiate its products from other
airline’s products on its own website than on an online travel agency or
metasearch company site. In addition, officials from the International Air
Transport Association (IATA) told us that the industry as a whole is taking
steps to develop standards and capabilities for optional services to be
more widely available for purchase through GDSs and online travel
agencies.
Page 32 GAO-17-756 Airline Optional Service Fees
55
In 2010, we recommended that DOT require airlines to disclose baggage
fees and policies along with fare information across all sales channels
used by the airline.
56
In 2017, DOT issued a Supplemental Notice of
55
IATA is a trade association representing approximately 275 airlines or 83 percent of total
air traffic. According to IATA officials, more and more airlines are incorporating IATA’s
New Distribution Capability—a travel industry-supported program launched by IATA for
the development and adoption of a common XML-based data transmission standard. This
standard would enable airlines to more easily sell optional services through travel agents
and would make it easier for consumers to compare competing airlines’ fares and optional
service products across multiple distribution channels.
56
GAO-10-785.
Letter
Proposed Rulemaking
Page 33 GAO-17-756 Airline Optional Service Fees
57
and a Request for Information
58
related to how
information about optional service fees would be distributed to ticket
agents, including GDSs, online travel agents, and metasearch
companies, that may address our recommendation. However, in March
2017, DOT indefinitely suspended the public comment period for the
proposed rule and information request to allow the President’s appointees
the opportunity to review and consider the actions.
59
In addition, this rule
and information request may address some of the issues raised by
consumer and industry groups that we interviewed, but not all. For
example, while the Supplemental Notice of Proposed Rulemaking
proposes requiring covered carriers to provide baggage fee information to
all ticket agents that distribute fare and schedule information, it does not
require that the information be made transactable (i.e., to require that
airlines permit online travel agencies to sell these optional services). In
addition, the proposed rulemaking would only require that information
about baggage fees be made available, not other types of optional
service fees. The Request for Information asks for comments from
interested parties on whether airline restrictions on the distribution or
display of airline flight information harm consumers and constitute an
unfair and deceptive business practice or an unfair method of
competition, among other questions. As previously mentioned, according
to DOT officials, this rulemaking and request for information are currently
being evaluated in accordance with Executive Orders 13771 and 13777,
and the schedules for many ongoing rulemakings are still to be
determined.
57
In January 2017, DOT issued a Supplemental Notice of Proposed Rulemaking
proposing to require covered carriers to provide useable, current, and accurate (but not
transactable) baggage fee information to all ticket agents that receive and distribute the
carrier’s fare and schedule information, including GDSs and metasearch companies. See
Transparency of Airline Ancillary Service Fees, 82 Fed. Reg. 7536 (Jan. 19, 2017).
58
Exploring Industry Practices on Distribution and Display of Airline Fare, Schedule, and
Availability Information, 81 Fed. Reg. 75481 (Oct. 31, 2016). In December 2016, DOT
published a notice in the Federal Register extending the response deadline and clarifying
certain statements in the Request for Information. See 81 Fed. Reg. 94021 (Dec. 22,
2016).
59
See 82 Fed. Reg. 13572 (Mar. 14, 2017) and . 82 Fed. Reg. 13375 (Mar. 10, 2017).
Letter
The Variety of New Optional Services and Products Has Made it
Page 34 GAO-17-756 Airline Optional Service Fees
Difficult for Consumers to Compare Prices
Representatives from the four consumer groups and three industry
groups we spoke with also noted that as a result of the variety of new
optional service fees, bundled products, and fares that airlines now offer,
it has become increasingly difficult for consumers to compare airfare
ticket prices, fees, and associated rules, and understand what is included
in their purchases. As previously discussed, airlines have increased the
number of fees for optional services and have begun introducing different
optional service bundles and fares. Representatives from two consumer
groups whom we interviewed said that even though airlines are required
to have a “static page” on their website listing all optional service fees,
these lists can be lengthy and can include several different fees with
different associated rules that the consumer would need to interpret and
understand. One consumer group representative stated that for
consumers, comparing fares and optional service fees across multiple
airlines can be challenging and time-intensive. Representatives from four
consumer groups also noted that with the emergence of different fare
products, there is greater potential that consumers might not fully
understand what they are purchasing and what is included in the fare.
According to one consumer advocate, when a single airline is offering
three different economy products, consumers may not understand how
these products differ, and this lack of clarity is even more acute on third-
party websites.
According to DOT officials, they contact airline officials for additional
information when airlines introduce new products that DOT believes will
significantly affect consumers. DOT’s goal is to ensure that relevant
information about conditions and restrictions of new products is
accurately disclosed to consumers in a timely manner. For example, as
discussed earlier in this report, since 2015, American, Delta, and United
have introduced new Basic Economy fares. The key features of these
fares are restrictions related to among other things, advanced seat
selection, and, in the case of American and United, personal carry-on
bags. According to DOT officials, they have monitored Delta’s introduction
of Basic Economy and contacted American and United to get information
about the airline’s plans to inform consumers about these fares and
restrictions. DOT officials told us that going forward, they intend to
monitor complaints related to Basic Economy fares to determine if
consumers are experiencing any issues associated with these tickets.
Letter
Contract-of-Carriage Documents Are Generally Lengthy and
Page 35 GAO-17-756 Airline Optional Service Fees
Difficult to Understand
While airlines are required to provide customers with a contract-of-
carriage document, which generally includes information about an
airline’s optional service fees and policies, consumer advocates have
raised concerns that these documents are often lengthy and difficult to
understand. Each airline has its own contract of carriage, which is the
legally binding contract between the airline and its passengers. These
documents are important because they provide useful information to
consumers about the individual airline’s contract terms, policies, and rules
related to different services such as check-in deadlines, responsibility for
delayed flights, and optional service refund policies—all of which can vary
across airlines.
60
Any term or condition of this contract is legally binding
on the airline and the passenger and may be enforced in court. However,
according to three consumer advocates we spoke with these documents
are often lengthy and can be filled with legal jargon, making the
documents difficult to understand. We reviewed contracts of carriage for
the 11 selected airlines and found that they ranged from approximately 17
to 74 pages, with an approximate average length of 40 pages.
61
In
addition, we tested the 11 contract-of-carriage documents with an
automated grade-level readability test and found they require a reading
level of someone with a college graduate degree.
62
According to DOT
officials, the DOT Advisory Committee for Aviation Consumer Protection
had recommended that DOT take steps to require airlines to simplify
language in their contract-of-carriage documents. DOT officials stated
that the department opted to not take specific action in this area because
it did not want to get involved in contracts between airlines and
passengers. However, the DOT Advisory Committee for Aviation
60
In addition to the contract of carriage, information about optional service fee rules may
be described in an airline’s ticket terms and restrictions.
61
The word count for these documents ranged from approximately 8,252 to 37,141 words
per document with an approximate average word count of 19,790. To estimate the
approximate page length, we assumed a word count of 500 per page.
62
To assess the readability of the contract-of-carriage documents, we selected and used
an automated readability tool—the Flesch-Kincaid Grade-Level (FKGL) test. The FKGL
tool was developed by the U.S. Navy based on the Flesch Reading Ease test. The FKGL
tool was developed primarily for adults and has been tested extensively on adult
materials. It uses core measures of word length and sentence length to estimate the grade
level at which the content is written. The version we used was included in the word
processing software Microsoft Word.
Letter
Consumer Protection subsequently recommended in 2012 that DOT work
with the airlines to survey how they define certain terms frequently used
in their contracts of carriage and customer service plans. The department
worked with A4A to develop such a document, which DOT then placed on
its web site to assist consumers with understanding the terms and
conditions of their travel.
Page 36 GAO-17-756 Airline Optional Service Fees
63
We reviewed this document and found that it
provides an explanation of frequently used terminology in the airline
industry and provides links to information about DOT’s consumer
protection regulations, such as regulations related to baggage fee and
code-share disclosures, and denied-boarding compensation
requirements. According to a representative from A4A, airlines have
committed to reviewing their contracts of carriage to see if they can be
simplified to improve transparency.
AgencyComments
We provided a draft of this report to DOT for review and comment. DOT
officials provided technical comments that we incorporated as
appropriate.
We are sending copies of this report to the appropriate congressional
committees, the Secretary of the Department of Transportation, and other
interested parties. In addition, the report is available at no charge on the
GAO website at http://www.gao.gov.
If you or your staff have any questions about this report, please contact
me at (202) 512-2834 or [email protected]. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff who made key contributions to this
report are listed in appendix III.
Gerald L. Dillingham, Ph.D.
Director, Physical Infrastructure Issues
63
Department of Transportation, Common Terms in Air Travel, accessed July 27, 2017,
https://www.transportation.gov/airconsumer/common-terms-air-travel.
Appendix I: Information from Selected
Countries on Increasing the Transparency of
Airline Optional Service Fees
Page 37 GAO-17-756 Airline Optional Service Fees
AppendixI:Informationfrom
SelectedCountriesonIncreasing
theTransparencyofAirlineOptional
ServiceFees
Other countries have taken similar actions to the United States to
increase consumer transparency of airline optional service fees.
Specifically, the European Union (EU), Canada, Malaysia, and the United
Kingdom (UK) have all enacted laws that include provisions related to
increasing the transparency of airline optional service fees. For example,
in 2008, the EU enacted Regulation (EC) No 1008/2008 on Common
Rules for the Operation of Air Services in the Community, which
established, among other things, specific requirements related to
disclosing information about airline optional service fees.
1
The law
requires that airlines display the final price of a ticket, inclusive of all
applicable taxes, charges, surcharges and fees unavoidable and
foreseeable at the time of publication. The law also requires that the final
price is disclosed at all times during the booking process and that the
applicable conditions are published. In addition, airlines must disclose
optional service fees in a clear, transparent, and unambiguous way at the
start of the booking process, such as through a separate link on the
airline’s website, and airlines must ensure that optional services are only
offered on an “opt-in” basis. As shown in table 4, other countries have
implemented similar laws. In addition, in 2017, Canada introduced
consumer protection legislation related to air transportation that would
require, among other things, that the Canadian Transportation Agency
promulgate regulations establishing air passenger rights.
2
1
Commission Regulation 1008/2008, 2008 J.O. (293) 3.
2
Transportation Modernization Act, Bill C-49, 1st Sess, 42nd Parl, 2017, (First reading,
May 16, 2017).
Appendix I: Information from Selected
Countries on Increasing the Transparency of
Airline Optional Service Fees
Table 4: Laws with Provisions Related to Optional Service Fees as Reported by Selected Countries
Page 38 GAO-17-756 Airline Optional Service Fees
Region or Country
Law
Provisions related to optional service fees
European Union (EU) and
United Kingdom(UK)
a
Regulation (EC) No 1008/2008
on common rules for the
operation of air services in the
community
· Requires the final price to be indicated at all times during the
booking process and the applicable conditions to be published.
· Requires that displayed flight prices include all unavoidable and
foreseeable taxes, charges, surcharges, and fees.
· Requires that optional service fees are communicated in a clear,
transparent, and unambiguous way at the start of the booking
process.
· Prohibits airlines from automatically adding optional services to a
customers’ ticket and requires that optional services be offered
to consumers on an “opt-in” basis.
· Requires EU member countries to ensure compliance with the
regulation and lay down penalties for infringements that are
effective, proportionate, and dissuasive.
Canada
Canada’s Air Transportation
Regulations
Canadian Transportation
Agency Decision No. 144-A-
2014 (April 15, 2014)
· Requires that all airlines that travel to from and within Canada
have a tariff—a contract-of-carriage agreement—that sets out,
among other things, fares, rates, charges and information on
optional service fees.
· Requires the advertised price of an airline ticket to include the
total price of the fare, inclusive of all taxes, fees, and charges
that a consumer must pay to obtain the air service.
Advertisements must also include all optional services offered,
as well as their price or range of prices, including applicable
taxes and fees.
· Requires that when passengers are participating in an interline
itinerary issued on a ticket whose origin or ultimate destination
point is Canada, a single set of baggage rules must be applied to
the entire itinerary, and the baggage rules must be disclosed to
the passenger.
Appendix I: Information from Selected
Countries on Increasing the Transparency of
Airline Optional Service Fees
Page 39 GAO-17-756 Airline Optional Service Fees
Region or Country
Law
Provisions related to optional service fees
Malaysia
Malaysian Aviation Consumer
Protection Code 2016
· Requires airlines to disclose the full airfare, which must include
any government imposed taxes and fees, and other charges that
are unavoidable and foreseeable.
· Requires airlines to communicate to the customer the cost of any
optional service at the time of booking.
· Prohibits airlines from automatically adding optional services to a
customer’s ticket and requires that optional services be offered
to consumers on an “opt-in” basis.
· Requires an airline to disclose all terms and conditions of the
contract of carriage to the consumer before the purchase of a
ticket.
· The contract of carriage must be incorporated in the ticket or
boarding pass and must include, among other things, information
on baggage allowance policies. Incorporation could include
stating that the complete terms and conditions are available on
the website.
Source: GAO summary of laws and information obtained from selected foreign governments as described in our scope and methodology | GAO-17-756
a
As a current member of the EU, airlines in the UK are required to also follow Regulation (EC) No
1008/2008 on common rules for the operation of air services in the community. The UK also has two
separate laws, the Operation of Air Services in the Community (Pricing) Regulation 2013 and the
2002 Enterprise Act, which together provide the UK Civil Aviation Authority with authority to enforce
Article 23 of Regulation (EC) No 1008/2008.
There are some differences between the U.S. and foreign laws. For
example, Part V, Division III of Canada’s Air Transportation Regulations
requires advertisements of air services to specify all optional services
offered, as well as their price or range of prices, including applicable
taxes and fees charged by government or public authority. In addition, the
regulations prohibit information being provided in an advertisement in a
manner that would interfere with the ability of anyone to readily determine
the price for the air service, including for any optional incidental service.
The Canadian law does not otherwise impose specific requirements as to
how this information is to be made available to consumers. According to
officials from Canadian Transportation Agency, airlines can decide how
they want to communicate this information to the consumer. Also,
according to officials from the European Commission, a 2014 European
Court of Justice decision determined that airlines cannot charge for
bringing hand bags or carry-on luggage into the plane’s cabin.
3
According
to officials, the court’s rationale for the decision was that airlines do not
provide the passenger any services regarding carry-ons, as passengers
carry their own bags.
3
Case C-487/12, Vueling Airlines SA v. Instituto Galego de Consumo de la Xunta de
Galicia (2014).
Appendix I: Information from Selected
Countries on Increasing the Transparency of
Airline Optional Service Fees
Officials from the regulatory bodies that we interviewed said that they
monitor airline compliance with consumer transparency laws through
various methods. For example, according to a European Commission
official, the European Commission and the authorities of EU member
states (countries) monitor airline compliance with consumer transparency
laws and have carried out several reviews to determine the level of
compliance with Regulation (EC) No 1008/2008 in different EU countries.
Page 40 GAO-17-756 Airline Optional Service Fees
4
According to documentation provided by the European Commission, in
2013, the European Commission, in conjunction with national authorities,
initiated reviews of 552 websites and found that 382 websites were not
compliant with the EU consumer transparency law. One problem they
found was that optional services, including fees for baggage, insurance,
and priority boarding, were not being offered on an “opt-in” basis. In
addition, the European Commission conducted a “fitness check” of
aviation regulations in 2013 to determine whether the airline consumer
transparency laws and other consumer protection laws, were meeting
their objective and whether any changes to these laws were needed.
According to documentation provided by the European Commission, the
review found that the laws were meeting their objectives, but that EU
member states faced some challenges with enforcing these laws and
could benefit from further coordination and sharing of best practices in
this area. According to an official from the European Commission, it has
also recently begun an evaluation of Regulation (EC) No 1008/2008 to
determine whether there are any areas of the law that could be improved.
Similarly, officials from the UK and Canada have taken actions to assess
compliance with existing consumer transparency laws. Officials from the
United Kingdom’s Civil Aviation Authority (UK CAA) told us that in 2010
and 2011 they reviewed the websites of the top 20 airlines flying from the
UK and two smaller UK airlines to assess compliance with Regulation
(EC) No 1008/2008. According to UK CAA officials, at that time, they
discovered that most airlines were not in compliance and all the airlines
had to make some changes to their websites. Issues included failing to
include unavoidable taxes, fees and charges in the headline price, pre-
selecting optional extras and not separately disclosing information about
optional service fees. UK CAA officials notified airlines that were not in
compliance and provided them with information on the steps that the
airlines needed to take to ensure that their advertisements met the
4
However, the EU member states are ultimately responsible for enforcement of the pricing
provisions of Regulation (EC) No 1008/2008.
Appendix I: Information from Selected
Countries on Increasing the Transparency of
Airline Optional Service Fees
requirements of the law. According to UK CAA officials, most of the
airlines agreed to amend their websites; however, there were three
airlines where the UK CAA had to take enforcement action to achieve
compliance. According to UK CAA officials, compliance with the EU law
has improved since 2010, and most airlines now have a link posted early
in the booking process to baggage fees and other optional service fees.
The UK CAA has also completed reviews of travel agents’ websites to
assess compliance with Regulation (EC) No 1008/2008, according to UK
CAA officials. Canadian officials told us that the Canadian Transportation
Agency monitors and enforces airline compliance with consumer
transparency laws. To do so, they conduct periodic carrier inspections to
assess compliance with Canada’s Air Transportation Regulations and
conduct targeted investigations when needed. The Canadian
Transportation Agency also reviews international tariffs to determine
whether they set out all the information required by regulation and to
assess whether airline policies with regard to optional service fees are
clear, reasonable and not unduly discriminatory, according to Canadian
officials. Malaysian officials that we spoke with stated that they are in the
process of developing processes for monitoring and enforcing compliance
with Malaysia’s consumer protection code.
Officials from some of the regulatory bodies whom we interviewed said
that they have taken other actions to educate airline consumers about
consumer transparency laws related to optional service fees. For
example, the UK CAA posts information on its website about existing
optional service fees for the 20 largest airlines that travel to and from the
UK, and the document is updated twice a year. According to UK CAA
officials, they make this information available on their website to inform
UK consumers about these fees and help consumers compare different
optional service fees across different airlines. Similarly, the Malaysian
Aviation Commission has a “Know Your Rights, Before You Fly”
webpage, where, according to Malaysian officials, they post information
for consumers, including their rights related to airline optional service
fees.
Page 41 GAO-17-756 Airline Optional Service Fees
Appendix II: Objectives, Scope, and
Methodology
Page 42 GAO-17-756 Airline Optional Service Fees
AppendixII:Objectives,Scope,and
Methodology
Our objectives for this report were to describe: (1) how selected U.S.
airlines have modified their offering and pricing of optional services since
2010, (2) the factors that selected U.S. airlines consider when
determining whether and how much to charge for optional services, and
(3) the actions the Department of Transportation (DOT) has taken since
2010 to improve the transparency of optional service fees and views of
selected aviation stakeholders about these actions. We also described
the actions taken by selected regions or countries to improve consumer
transparency related to airline optional service fees and presented this
information in appendix I.
To identify the ways in which selected U.S. airlines modified their offering
and pricing of optional services since 2010, we first selected U.S.
passenger airlines to examine. We used data from DOT’s Bureau of
Transportation Statistics (BTS) on passenger enplanements and airline
operating revenues. For the passenger data, we used the T-100
database, which includes traffic data for U.S. airlines traveling to and from
the United States. These data represent a 100 percent census of all
traffic. For the financial data, we used Form 41 quarterly financial filings to
BTS, specifically Schedule P-1.2. We relied on the most recent available
BTS data at the time we developed our airline selection. To assess the
reliability of the BTS enplanements and operating revenue data, we
reviewed documentation about the quality control procedures applied by
BTS; analyzed the summary data for obvious errors; and interviewed BTS
officials about how the data are collected, validated, stored, and
protected. We determined that the data were sufficiently reliable for the
purposes of identifying airlines to include in our selection for this audit
work. We selected U.S. passenger airlines that: (1) reported annual
operating revenues of at least $20 million in calendar year 2015, (2) had 1
million or more domestic passengers in calendar year 2015, (3) had at
least 1,000 scheduled passengers in the third quarter of 2016, and (4)
operate under their own brand. This selection process resulted in a list of
12 U.S. passenger airlines: Alaska Airlines, Allegiant Air, American
Airlines, Delta Air Lines, Frontier Airlines, Hawaiian Airlines, JetBlue
Airways, Sun Country Airlines, Southwest Airlines, Spirit Airlines, United
Airlines, and Virgin America. Collectively, the selected airlines transported
81.15 percent of U.S. domestic passengers in 2016 and accounted for
99.88 percent of baggage fees and 99.98 percent of rebooking and
Appendix II: Objectives, Scope, and
Methodology
cancellation fees charged by all U.S. airlines in 2016. During the course
of our review, Alaska Air Group, which owns Alaska Airlines, purchased
Virgin America. As a result, we eliminated Virgin America from our
selection of airlines mid-way through our review and report on 11 selected
airlines.
Page 43 GAO-17-756 Airline Optional Service Fees
1
We identified the types of optional services offered by the 11 selected
airlines by reviewing webpages on airlines’ websites, which are required
to prominently display optional services and fees. We accessed the
airlines websites and took screen captures of the webpages with optional
service fee information on March 31 and April 1, 2017, so that our
analyses of the website content would be as comparable as possible. We
also returned to airlines’ websites at later points to collect additional
information. We compared the optional service fee information that we
gathered from our review of airlines’ websites to optional service fee
information that we collected as part of our 2010 review of airline fees to
assess how these fees had changed since 2010.
2
We corroborated information obtained from our review of airline’s
websites through interviews with officials from 10 of the 11 selected
airlines. We requested interviews with representatives from all 11
selected airlines but one airline declined to be interviewed.
3
As a result
we interviewed officials from 10 of the 11 selected airlines.
4
In
interviewing the airline officials, we used a semi-structured interview
instrument, which contained questions pertaining to the types of optional
service fees and bundled fare products that airlines have introduced since
2010, the factors that airlines consider when setting fees, and airlines’
views on advantages and disadvantages to consumers of unbundling
optional services. During our interviews, we also asked airlines if they
1
Excluding Virgin America, the remaining 11 airlines transported 80.18 percent of U.S.
domestic passengers on U.S. airlines in 2016 and accounted for 98.34 percent of
baggage fees and 98.79 percent of rebooking and cancellation fees charged by all U.S.
airlines in 2016.
2
GAO, Commercial Aviation: Consumers Could Benefit from Better Information about
Airline-Imposed Fees and Refundability of Government-Imposed Taxes and Fees,
GAO-10-785 (Washington, D.C.: July 14, 2010). The 11 airlines that we selected for this
review were also part of our 2010 review.
3
While Sun Country Airlines declined to participate in our review, we included relevant
information about Sun Country in the aspects of our report that relied on publicly available
information, which we obtained from the airline’s website.
4
One of the 10, Delta provided written responses to our interview questions.
Appendix II: Objectives, Scope, and
Methodology
would be willing to share cost information on optional services with us,
and all 10 airlines declined to provide us with such proprietary
information; or said that they do not collect specific cost information on
optional services; or said that they collect cost information only in limited
circumstances, such as food and beverage costs, which would not have
been useful for this report. In addition to answering our interview
questions, we asked the 10 airlines to provide information on when they
first began charging for specific optional services, how much those fees
were at the time that they were first introduced, and how revenue from
those fees are categorized and reported to BTS. Nine of the 10 airlines
that we interviewed provided this information.
Page 44 GAO-17-756 Airline Optional Service Fees
5
One of the responsive
airlines did not provide a complete response, but the overall responses
were sufficiently detailed to address our objective.
In addition to obtaining fee information, we analyzed airline financial
information reported to BTS by airlines from calendar year 2010 through
calendar year 2016—the most recent available—to analyze how revenue
generated from optional service fees had changed from 2010 to 2016. We
analyzed revenue data from baggage fees and reservation-change and
cancellation fees, which are the two types of optional service-fee
revenues that airlines are required to report to BTS in separate accounts.
All other optional service-fee revenue is reported in accounts that include
other airline revenue sources. We assessed the reliability of the BTS’s
operating revenue data as discussed above and determined that they
were reliable for the purpose of reporting overall trends in revenue from
baggage and reservation-change and cancellation fees for 2010 through
2016.
To identify the factors that airlines consider when setting optional service
fees, we interviewed officials from the 10 selected U.S. airlines that
agreed to speak with us about the factors airlines consider when deciding
whether to separate optional service fees from the base fare price and
determining how much to charge for a given optional service. We also
interviewed selected aviation stakeholders that included three airline
trade associations; four consumer groups; three global distribution
systems (GDS) companies; a travel trade association representing GDSs,
online travel agents, and metasearch companies; and two other industry
stakeholders to obtain their views on factors that airlines consider when
setting fees (see table 5). We selected the three airline trade associations
5
Spirit Airlines declined to provide this information but otherwise participated in the review.
Appendix II: Objectives, Scope, and
Methodology
that represent different airlines (i.e., domestic airlines, international
airlines, and regional airlines). We selected four consumer group
associations that represent a range of types of airline consumers (i.e.,
business travelers and leisure travelers) and that recently published
articles on consumer transparency issues related to optional service fees.
With regard to the GDSs, we selected the three largest GDS companies
in the United States. To obtain the perspective of companies that provide
information or sell airline tickets through indirect distribution methods, we
also selected the travel trade association which represents GDSs, online
travel agents, and metasearch companies. Finally, we selected two
industry stakeholders because they have observed how the airline
industry has changed since 2010 and cover the breadth of the airline
industry.
Table 5: List of Aviation Stakeholders GAO Interviewed
Page 45 GAO-17-756 Airline Optional Service Fees
Category
Organization
Airline associations
Airlines for America (A4A)
International Air Transport Association (IATA)
Regional Airline Association
Consumer advocate organizations
Business Travel Coalition
Consumers Union
FlyersRights.org
Travelers United
Global Distribution System (GDS) companies
Amadeus
Sabre
Travelport
Travel trade association representing GDSs, online travel
agents and metasearch companies
Travel Technology Association
Other aviation industry stakeholders
Airline Tariff Publishing Company
IdeaWorksCompany
Source: GAO. | GAO-17-756
We also conducted an economic literature search for studies that have
examined the effect of baggage fees on base ticket prices. The literature
search was performed in March 2017, using keyword and controlled-
vocabulary searches in bibliographic databases including Transportation
Research International Documentation, Academic OneFile, Scopus, and
WorldCat. The terms included, but were not limited to, keywords such as
“airline” or “air carrier,” “baggage fees” or “ancillary fees,” “unbundling” or
“de-bundling,” combined with “impact” or “affect” or “effect” and “ticket
price” or “base fare” or “airline pricing.” We limited our search to studies
Appendix II: Objectives, Scope, and
Methodology
published after 2010 because baggage fees were first introduced in 2008.
The literature search generated 11 initial results. We vetted this initial list
by examining the abstracts for those that addressed our objectives and by
determining which studies had appeared in peer-reviewed journals. We
identified 5 studies that met these criteria. After performing a secondary
review of these studies to assess the soundness of the studies’
methodologies and to confirm the relevance to our objectives, we
excluded 2 of these studies. This resulted in the following 3 studies being
included in our report.
· Henrickson, Kevin E. and John Scott, 2012, “Baggage Fees and
Changes in Airline Ticket Prices,” in James Peoples (ed.), Pricing
Behavior and Non-Price Characteristics in the Airline Industry
(Advances in Airline Economics, Volume 3) Emerald Group Publishing
Limited, 177–192.
· Brueckner, Jan K., Darin N. Lee, Pierre M. Picard, and Ethan Singer,
2015, “Product Unbundling in the Travel Industry: The Economics of
Airline Bag Fees,” Journal of Economics & Management Strategy 24
(3): 457.
· Scotti, D. and M. Dresner, 2015, “The Impact of Baggage Fees on
Passenger Demand on US Air Routes,” Transport Policy 43: 4–10.
We also conducted several literature searches using online resources to
identify reports, studies, articles, or other publications that discussed the
use of optional service fees in the airline industry.
To determine what actions DOT has taken since 2010 to improve the
transparency of optional service fees, we reviewed DOT regulations
promulgated since 2010, such as regulations that establish requirements
on the disclosure of optional service fees,
Page 46 GAO-17-756 Airline Optional Service Fees
6
the refunding policies of
optional service fees,
7
and post-purchase price increase limitations on
baggage fees.
8
In addition, we identified four DOT proposed rules
9
and
one request for information
10
related to transparency of optional service
6
14 C.F.R. § 399.85.
7
14 C.F.R. §§ 250.5(f), 259.5(b)(3), (b)(5).
8
14 C.F.R. §§ 399.88, 399.89.
9
82 Fed. Reg. 7536 (Jan.19, 2017); 81 Fed. Reg. 75347 (Oct. 31, 2016); 79 Fed. Reg.
29970 (May 23, 2014); 76 Fed. Reg. 41726 (July 15, 2011).
10
81 Fed. Reg. 75481 (Oct. 31, 2016).
Appendix II: Objectives, Scope, and
Methodology
fees and followed up with DOT regarding the status of these ongoing
rulemakings and request for information. We also reviewed DOT
guidance, directives, policies, and other documentation clarifying the
requirements of various regulations and describing the roles and
responsibilities of DOT’s Office of Aviation Enforcement and Proceedings
(OAEP) and Aviation Consumer Protection Division (ACPD) related to
monitoring, investigating, and enforcing airline compliance with
regulations related to airline optional service fees. To understand how
OAEP and ACPD monitor compliance with existing optional service fee
regulations and respond to consumer complaints about optional service
fees, we interviewed officials from OAEP and ACPD about existing
regulations; the policies, compliance, and enforcement activities
undertaken by these offices; and the process for responding to
complaints. In addition, we also interviewed officials from BTS about their
guidance and process for collecting optional service fee revenue data
from airlines. As described above, we asked officials from the 10 airlines
that agreed to be interviewed about how they report revenue from certain
optional service fees to DOT’s BTS. We summarized this information and
identified fees that airlines commonly reported in different categories. To
understand how different stakeholders view actions DOT has taken to
improve transparency of optional service fees, we interviewed
stakeholders described in table 5. In addition, during our interviews with
officials from the 10 selected U.S. airlines that agreed to speak with us,
we obtained their views on DOT’s actions and obtained information about
how their airlines comply with DOT regulations related to optional service
fees. We also conducted an analysis of the contracts of carriage for all
the 11 airlines in our selection. This helped us to corroborate information
we obtained from our interviews with airline officials about their optional
service refund policies. These contracts of carriage were all accessed
and downloaded on March 14, 2017, so that our analyses of the contract-
of-carriage content would be as comparable as possible. To assess the
readability of the contracts of carriage, we converted the files to Microsoft
Word documents and ran the Flesch-Kincaid Grade-Level test, which is
included in the Microsoft Word software.
Page 47 GAO-17-756 Airline Optional Service Fees
11
11
To assess the readability of the contract-of-carriage documents, we selected and used
an automated readability tool—the Flesch-Kincaid Grade-Level (FKGL) test. The FKGL
tool was developed by the U.S. Navy based on the Flesch Reading Ease test. The FKGL
tool was developed primarily for adults and has been tested extensively on adult
materials. It uses core measures of word length and sentence length to estimate the grade
level at which the content is written. The version we used was included in the word
processing software Microsoft Word
Appendix II: Objectives, Scope, and
Methodology
Finally, we reviewed documents and interviewed officials from four
selected foreign governments—the European Union, Canada, the United
Kingdom, and Malaysia—that have taken actions to improve consumer
transparency related to airline optional service fees. Specifically, we
interviewed officials from the European Commission, Canadian
Transportation Agency, United Kingdom Civil Aviation Authority, and the
Malaysian Aviation Commission. We based our selection of foreign
governments on various factors including whether the region or country
has implemented or is considering implementing laws related to
increasing consumer transparency of airline’s optional service fees, and
recommendations from our interviews with DOT and industry officials and
stakeholders. We interviewed officials about existing laws related to
consumer transparency of optional service fees, how these laws are
monitored and enforced, and the effects of these laws on the airline
industry and airline consumers. In addition, we used these interviews to
corroborate information obtained from our document reviews.
We conducted this performance audit from November 2016 to September
2017 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit to
obtain sufficient, appropriate evidence to provide a reasonable basis for
our findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.
Page 48 GAO-17-756 Airline Optional Service Fees
Appendix III: GAO Contact and Staff
Acknowledgments
Page 49 GAO-17-756 Airline Optional Service Fees
AppendixIII:GAOContactandStaff
Acknowledgments
GAOContact
Gerald L. Dillingham, Ph.D., (202) 512-2834, or [email protected]
StaffAcknowledgments
In addition to the contact named above, Faye Morrison (Assistant
Director), Maria Mercado (Analyst in Charge), Namita Bhatia-Sabharwal,
Lacey Coppage, Leia Dickerson, Michele Fejfar, Hannah Laufe, Malika
Rice, Amy Rosewarne, and Eric Warren made key contributions to this
report.
(101233)
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