Airlines post sizeable profits, draw attention for extra fees
It’s hardly a trend, but American airline companies are well into the black for 2010 as second-quarter earnings reports show substantial profits for major airlines and discount carriers. The nine largest airlines together made $1.86 billion in profits on $31.7 billion in revenue during the three-month quarter that ended June 30, according to airlinefinancials.com. Delta led all carriers, posting $467 million in profit, its biggest quarterly profit in a decade, while United Airlines posted its best quarter in almost three years. Low-cost carrier Southwest Airlines reported a $112 million profit for spring and early summer. Only one of the nine largest airlines did not earn a profit for the quarter: American Airlines, which was second in revenue at $5.67 billion.
Some of the profit is due to a 15 percent increase in average fares at the beginning of the summer travel season. Other profits stem from additional airline fees for everything from checked bags to on-board meals to seat upgrades. Alaska Airlines reported an $84 million profit in the second quarter, the largest in its history. Baggage fees accounted for $25 million in revenue during the quarter, says Brandon Pederson, chief financial officer of Alaska Air Group, the airline’s parent company.
Some customers complain that they’re unaware of some fees tacked onto their bills. In response, the Government Accountability Office (GAO) released a report last month recommending that the Department of Transportation (DOT) “require airlines to consistently disclose optional fees.” The report says the “information about the fees is not fully disclosed through all ticket distribution channels used by consumers, making it difficult for them to compare the total cost of flights offered by different carriers.” Airlines currently do not have to divulge all fees, apart from those for checked luggage, but searching and booking systems capable of cataloguing all the fares and fees are in place, reports the GAO; the DOT just needs to require the carriers to release the data.
The agency also recommends extending its 7.5 percent excise tax on airfares to ancillary fees as well. On checked bag fees alone, the government could have netted $186 million last year, the study calculates. Another issue plaguing airline passengers: pre-checking. Third-party booking sites such as Orbitz or Travelocity sometimes pre-check a box on extra fees such as travel insurance, automatically signing the customer up for such services. “I think it’s unethical. And obnoxious,” Lauren Bloom, a business ethicist based in Springfield, Va., told The Washington Post. The practice could even be illegal, according to the Post’s story.
Given airlines’ second-quarter earnings results, fees for extra services are unlikely to go away, especially in an industry that has lost nearly $60 billion for domestic travel since 2000. Instead, some of the responsibility is now put on the consumer to look for hidden fees and factor in the additional expected fees for airline tickets before booking flights. The GAO has compiled a chart of current airline fees as of July 1.
