Friday, July 15, 2011

U.S. Wants to Require Airlines to Report Fee Revenue in Detail

Trying to get a handle on just how much airlines take in each year in so-called ancillary revenue -- that is, fees added to fares -- the U.S. Transportation Department today proposed a new rule that will require airlines to report more information on the amount and types of fees collected from passengers.

The proposal would revise current reporting requirements "to improve data collection on the amount airlines receive from different, specific types of fees," the department said.

Airlines now submit quarterly reports on revenue from baggage fees and reservation change fees to the DOT’s Bureau of Transportation Statistics. Airlines received $3.4 billion from baggage fees and $2.3 billion from reservation change fees in 2010.

The airlines strongly oppose any move by the government to require them to be more specific in accounting for their various fee revenues.

Here's the gist of the issue:

Last year, the usual suspects in the media were falling over themselves reporting that domestic airlines pocketed $7.8 billion in "ancillary fee" revenue in 2009, according to Transportation Department data. For a year, that was the media benchmark number, endlessly repeated, for defining "fee revenue."

But last month, in the new, long-delayed report on annual ancillary fee revenue for 2010, the Transportation Department switched its procedure and reported the figure for 2010 at $5.7 billion. The usual media suspects rushed to report that, without noting the $2.1 billion discrepancy between the 2009 total and the 2010 total -- at a time when it's well known that ancillary fee revenue has been going up, not down.

The Transportation Department noted that the 2010 figure was just for bags and change fees, underlying its frustration with trying to get the airlines to break down their other fee revenues coherently.

The usual media suspects failed to show any curiosity about the difference between the 2009 and 2010 figures, though. The difference is explained by the fact that the Transportation Department's Bureau of Transportation Statistics had been scrambling, unsuccessfully, to try to find a way to more accurately report the wide range of ancillary fee revenue, not just checked bag fees and itinerary-change penalty fees (which were $5.7 billion in 2010), but the wide array of other fees, like charges for priority seating, in-flight meals, standby status, inflight entertainment and the like.

Adding to the confusion was the fact that the annual reported ancillary-fee number included revenue the airlines make from selling frequent-flier miles to credit card companies for resale to customers. That revenue does not reasonably belong in any useful "ancillary fee" category.

In previous years through 2009, some but not all of those fees were included in the "ancillary fee revenue" total along with the much firmer numbers for checked bags and reservations change penalties -- while other fee data were scattered (to the extent that airlines reported them at all) in different categories such as miscellaneous revenue.

Some estimates by industry analysts put the total actual fee-revenue number for 2010 at over $10 billion, once all of the fees are included, and the number for mileage sales is stripped out (and put in a different category).

"Our goal is to improve the quality of data we collect from airlines and make airline pricing more transparent," Transportation Secretary Ray LaHood said today.

Today’s so-called Notice of Proposed Rulemaking is designed to require airlines to report 16 additional categories of fee revenue in addition to the baggage and reservation change fees.

The department said: "Identification of all ancillary fees and the amounts collected by each airline would improve information available to the public and help determine the impact of the increasing use of these fees on the Airport and Airways Trust Fund. Collection of data on fee revenue was recommended by the Government Accountability Office (GAO) in a July 2010 report."

All of which I have pointed out several times in the recent past, by the way.


1 comment:

ChefNick said...

Hmm . . . I don't particularly care what they make or what they lose. However, I'd like to know EXACTLY HOW MUCH I'M PAYING for that advertised ticket with the 5-point type disclaimer below announcing the various taxes and surcharges.

I'm in Canada, so it might be different, but that advertised "$99" fare from Montreal to Toronto, not only just being one way but with the caveat of having to buy a round-trip, will probably end up more like in the $400 range with all the "ancillary" crap.

The airlines have their problems, but we have our problems too. One of them is being continually manipulated, lied to, conned outright and just generally treated like the folks lining up to see Madame Delacroix disappear at the local traveling circus.

If traveling from Montreal to New York is going to cost me $419.93 roundtrip after taxes, wine and tip, I WANT TO KNOW THAT before I apply for the "New York for $99!!!" ad.