Nickel-and-dime charges distort the true cost of a plane ticket

For some time, I’ve been reporting on airline fares as a component of the Bureau of Labor Statistics’ (BLS) Consumer Price Index (CPI). In the February 2023 CPI, “the airline fares index rose 6.4 percent, ending a string of four consecutive declines." Notably, the “fare” as calculated by the BLS is often just the tip of the iceberg, with the full all-in cost coming in much, much higher. 

How BLS measures airline fares in the monthly CPI

This starts out a bit wonkish but my geeking out won't last long, I promise. BLS relies on data from the Department of Transportation, which includes points of origin and destination and fare (First Class, Coach Full Fare, and Coach Discount Fare). From that data, the CPI uses primarily discount fare service: 86 percent of the observations are for discount service, 12 percent are for full coach, and 2 percent are for first class service.

There are normally several discount fares for a given trip. Of the quotes priced for discount service, BLS assigns approximately half for the lowest available discount fare, typically from periodic “fare wars.” The remaining half is for specific discount fares other than the lowest available fare.

The calculations of airline fares include an allowance for checked bag fees but the BLS does not include other ancillary charges which continue to rise and represent an ever-increasing percentage of airlines' overall revenue.

Among the fees the BLS apparently does not take into account are the nickel-and-dime charges (referred to by the airlines as “ancillary revenue” charges) for things like early boarding, preferred seating at a bulkhead or in an exit row, selecting one’s seat in advance, fees for large carry-ons and excess baggage, extra leg room zones, subscription-based benefits, "freeze your price" privileges, and prepaid change flexibility. Some of these are truly optional – like early boarding – but others, like selecting your seat in advance, are simply ways to wring more money from their passengers.

According to the 2022 CarTrawler Yearbook of Ancillary Revenue (available here) three U.S. airlines – Frontier (NASDAQ:ULCC), Spirit (NYSE:SAVE) and Allegiant (NASDAQ:ALGT) – derived more than half their revenue from ancillary charges. Five U.S. carriers – the three above plus Hawaiian (NASDAQ:HA) and United (NASDAQ:UAL) earned more than $50 per passenger in ancillary revenue.

While others and I have (correctly, I believe) been critical of the airline industry for these practices, today’s technology is also partly to blame.

Fares sorted lowest to highest

With so many web sites and search engines returning lists of fares from the lowest to the highest, it is an airline’s interest to present what appears to be a low price so it appears higher in the rankings. Once a customer has decided to make the purchase, the fees start adding up, making the all-in price considerably higher than the quoted “fare”. In the case of the worst-offending U.S. carriers, the actual cost of traveling, after adding all the ancillary charges, may be DOUBLE the so-called fare, or even more, for many travelers.

Averages are of limited value

The ancillary revenue report shows that the ancillary revenue per passenger in 2021 for the Lufthansa Network Airlines was an average of $21.53. However, for my recent trip to Poland aboard Lufthansa, the cost of selecting my seats in advance was $74 each way, or $148 – more than seven times the quoted average.

Adjust your expectations

In the “good, old days,” one could count on the fare being more or less the total cost. No longer. Savvy travelers should not allow themselves to be lured in by what appears to be a low fare to their favorite destination until they’ve looked at all the other things for which they’ll be charged.

For example, we are looking into going to Hawaii in January, traveling first to the Big Island, then to Oahu, and finally back to Seattle. In addition to the fare, Hawaiian Airlines charges per checked bag “for each flight”: $30 from North America; $25 between neighbor islands. While Hawaiian has yet to respond to my email seeking clarification, that could mean $55 for the trip to the Big Island because the flights connect in Honolulu. If so, that’s an additional $110 for the checked bag alone. Even if the fee was only $30, it would still be $85 for the checked bag, round trip.

Then, there’s the cost of selecting our seats.

As of this writing, the fare for the three-legged itinerary is quoted at $600. While there are seats in the center section of the aircraft that can be reserved without charge, window seats are either $23 or $99 (for premium economy) from SEA to HNL, $10 for bulkhead or exit row seating from HNL to ITO, the same for returning from ITO to HNL, and $23 or $100 for window seats to SEA.

So far, that means the $600 ticket could cost more than $900 for the person who checks a bag and opts for more legroom; $800 for one who does not check but likes not being jammed in like a sardine. That totals 33 to 50 percent more than the stated “fare.” As previously noted, other U.S. airlines are even worse.

Call for change

report issued by the Obama Administration's National Economic Council called for the elimination of nickel-and-dime charges across all industries, pointing out that such charges -- which vary considerably -- make comparison shopping difficult to impossible. 

"Transparent and accurate pricing is the foundation of an effective and efficient American economy, allowing consumers to make smart choices and to reward the providers of better goods and services," the report says, adding that "when pricing is unclear, it threatens the competitive process by which consumers make decisions. The growing use of hidden fees and related tactics ... threatens the incentives to create better goods and services."

The airline industry, perhaps the worst offender when it comes to such charges, has been particularly adept at stating – and distorting – its case. For example, when Congress was contemplating giving the FAA the power to dictate minimum seat width and pitch a few years ago, the industry and its trade association successfully argued that “the market should decide.” 

Trouble is, there IS no meaningful difference within the market. No one U.S. airline – save jetBlue (NASDAQ:JBLU) – consistently offers more room than any of the others, and there is so much variation within each carrier’s own fleet that it’s almost impossible to tell what you’re going to get without knowing the make, model and configuration of the plane in which you’ll ride.
Photo courtesy Southwest Airlines

Check out the website and its tables comparing seat width and pitch for short-haul flights at You may be surprised at the wide range of seat width and pitch. For example, American Airlines (NASDAQ:AAL) has seats that range from 16.6 inches wide to 18.5, and pitches from 30 inches to 38, though the upper end represents Premium Economy. 

The airline industry's position regarding ancillary fees is the same: "Let the market decide." My point regarding such fees is also the same: “THERE IS NO MEANINGFUL MARKET DIFFERENCE.” All the players are in lock-step. When one raises baggage fees, starts charging for seat selection or, on the positive side, eliminates change fees, the other players are quick to follow suit.

We consumers need to speak up, petition our elected representatives to tighten regulations around the airlines, and vote with our dollars. While Southwest Airlines (NYSE:LUV) doesn’t offer seats with more space than others on their planes (i.e., no "premium economy" or similar), there are no reserved seats (and therefore no cost for reserving), no baggage charges for the first two bags, no change fees. Perhaps that should become our default airlines when possible, or we should insist that our lawmakers get off their collective duffs and reign in these rapacious airlines.

Or we can get used to being bent over a barrel.

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