Travel junk fees are a virus with no easy fix

By Sam Kemmis | NerdWallet

Getting upset at junk fees is like getting upset at the flu.

Sure, I’m annoyed both when I get sick and when I have to pay $20 for my seat of choice, but it’s pointless to get mad at the viruses or airlines responsible. They’re just doing their jobs: One maximizing self-replication, and the other, profit.

Since budget airlines rose to prominence over a decade ago, airlines have been exploiting a quirk in human purchasing psychology: We’re attracted to low initial prices and tend to overlook high total costs when fees are “dripped” out slowly.

Indeed, it’s been shown that consumers systematically make suboptimal decisions when prices are dripped throughout the checkout process rather than disclosed up front, according to a 2020 study in Harvard Business School’s journal Marketing Science.

Just as a virus will exploit a weakness in the human immune system to reproduce itself, airlines have quickly realized that offering the lowest base fare possible and the highest fees is a great way to increase profit.

A 2023 report from IdeaWorksCompany, an airline industry reporting firm, and CarTrawler, a travel software provider, notes that ancillary revenue (i.e., fees) as a percentage of total revenue more than doubled from 6.7% in 2014 to 14.7% in 2023.

Junk fees exist because they work, and they won’t go away until they stop working.

Recent federal intervention

In April, the U.S. Department of Transportation (DOT) rolled out new consumer protections for air passengers, including rules aimed at stymying junk fees.

Over the next two years, airlines and travel booking platforms must start displaying the cost of baggage and cancellation fees “clearly, conspicuously and accurately.” They must also do away with some funny business, like making seat selection fees appear mandatory when they aren’t — one of my biggest pet peeves.

It’s a step in the right direction and hopefully will save passengers the time and money they would have spent getting flummoxed by these fees. Yet just as viruses mutate, it’s possible that airlines will find workarounds and new fees faster than federal regulators can quash them.

Indeed, airlines are already suing the DOT over its new fee transparency rules, calling them “arbitrary, capricious, an abuse of discretion and otherwise contrary to law,” according to a report from Reuters. So who knows if they’ll ever go into effect.

We need better search tools

In preparation for its new regulations, the DOT held a public hearing to get feedback from affected groups, including the travel booking platforms, earlier this month. One name that jumps out in the summary of these hearings — some 38 times by my count — is “Google.”

Some excerpts from the report:

“Google expressed its view that the Department did not explain how consumers were harmed by not having fee disclosures until the ticket purchase stage of the booking process and that consumers are aware of fees.”
“Some … metasearch entities such as Google stated that the existing marketplace provided transparency and that the rule would diminish consumer choice and competition.”

Basically, Google tried to convince the DOT that the current model, in which search engines like Google Flights display base prices without junk fees, is good enough.

Huh?

Sure, airlines have a vested interest in maintaining the status quo, since it’s making them boatloads of money. But why does Google care? Besides the technical hassle of updating its software to reflect the DOT’s regulations, Google Flights should applaud anything that helps consumers find the lowest-cost airfare.

If Google isn’t going to do it (and it sounds like they won’t), a travel search tool needs to step up and help travelers make sense of add-on fees.

The DOT’s rules are like nutritional information on food: They’re a good first step to helping consumers make better choices. Now, we need the travel shopping equivalent of Whole Foods to actually offer the product that price-conscious travelers are craving.

It’s not complicated. We just want to know how much a flight or hotel room will actually cost. If services like Google won’t figure it out, somebody else (hopefully) will.

Herd junk fee immunity

Halting the junk fee pandemic could also require another change: fed-up consumers.

Although airlines have been racing to the bottom in terms of adding fees, they still differ significantly. According to our recent analysis at NerdWallet, the airlines with the lowest fees are:

Southwest Airlines.
Alaska Airlines.
Hawaiian Airlines.

And the airlines with the highest fees are:

Frontier Airlines.
Spirit Airlines.
United Airlines.

When searching for flights, I usually omit the big offenders altogether, either by filtering them in search results or ignoring their fares.

Do they sometimes offer the best flights at the best prices? Probably. But it’s not worth my time and effort to go through their laborious drip-filled checkout processes to figure out how much I’ll actually pay.

This is a kind of “acquired immunity” to the junk fee virus. I’ve been exposed to these fees often enough (it’s basically my job) that I can either avoid or ignore them.

However, many travelers aren’t on the front lines of junk fee exposure and search for flights only once or twice a year.

It could take years before we reach herd immunity, where the spread of the problem is blocked because enough people are immune. Yet I’m confident that, with a little help from the federal government and innovation from the private sector, we’ll turn the junk fee pandemic into a not-so-fond memory.

Sam Kemmis writes for NerdWallet. Email: [email protected]. Twitter: @samsambutdif.

The article Travel Junk Fees Are a Virus With No Easy Fix originally appeared on NerdWallet.