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DOT: U.S. Airlines Increasingly Dependent on Hidden Charges, Collected Record-Breaking $6B in Fees in 2014

The money U.S. airlines collect from passenger fees is becoming more important than the money the carriers earn by selling tickets.

The U.S. Department of Transportation (DOT) reports domestic carriers pocketed record profits last year in fees associated with checked bags, seat selection and reservation changes. However, as a percentage, less of the revenue airlines reported as net income came from ticket sales in 2014 than ever before.

U.S. airlines collected $3.5 billion in bag fees alone in 2014, up 5 percent year over year. During the same period, airlines also collected a $3 billion in reservation-change fees, up 6 percent from 2014. The record-breaking fees collected were disclosed as part of the DOT’s 2014 Airline Financial Data Report.

Released on Monday, the DOT’s report reveals American Airlines Group — parent company of US Airways and American Airlines — was the top earner last year in terms of revenue, net income and operating profit, with a significant portion of its total income coming from fees.

Southwest Airlines, which has resisted the industry trend towards ever-increasing fees, reported 95 percent of its 2014 net income came from passenger fares. Meanwhile Spirit Airlines, which charges fees for everything from selecting a seat to speaking with a customer service agent, reported that only 63 percent of its income came ticket sales last year.

Record airline profits have consumer advocates calling for an end to the growing trend of using hidden fee revenue sources, AP reports, but at the same time, some admit the airlines may have become too dependent on fees to reverse the trend. Government regulators are currently considering a proposal that would require airlines to more transparently disclose the true cost of fees and how they’re reflected on a customer’s total bill.

[Photo: iStock; Tables: DOT]

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2 Comments
C
chx1975 May 6, 2015

What does percent of revenue from fares mean? For every 100 paid in fares they made 75 cent profits? Also how does the article know "a significant portion of its total income coming from fees"?

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scnzzz May 6, 2015

Fascinating that US Airways - a nominally full service carrier - collects as much in ancillary revenue (as a function of operating revenue) as does Spirit - the ULCC.