Government wants to know all the fees airlines charging

Posted July 15, 2011, at 6:59 p.m.

WASHINGTON — Five dollars for a pillow, $10 to jump ahead in the boarding line — all those annoying airline fees can add up.

Now the Department of Transportation is proposing that airlines tell it — and the public — exactly how much they’re making on those fees. And, rule proposed Friday by the department would require airlines to break down those fees by the type of item or service purchased, from pillows and blankets to entertainment and snacks.

Making airlines report more information about the amount and types of fees will make the total cost of flights more clear, Transportation Secretary Ray LaHood said.

“In an era of rising fees, passengers deserve better information about how airlines are performing,” he said in a statement.

The proposed rule would also require airlines report more useful statistics about lost or damaged luggage and mishandled wheelchairs.

Airlines received $3.4 billion from baggage fees and $2.3 billion from reservation change fees in 2010. There is no federal excise tax on those fees, although they are counted when calculating income taxes.

Revenue from seating assignments and on-board sales of food, drinks, pillows, blankets, and entertainment also isn’t subject to excise taxes. Until now, airlines haven’t been required to report revenue from those items separately to the government.

Taxes on airline tickets go toward subsidizing airports and the nation’s air traffic control system. There has been some grumbling in Congress that ancillary fees have enabled airlines to hold down their fares and the taxes they pay to support air transportation.

Steve Lott, a spokesman for the Air Transport Association, which represents major airlines, said the association is reviewing the proposal.

“We support transparency, and believe customers should always know what products and services they are paying for,” Lott said.

“We also believe the airline industry, vital to our economy as a creator of jobs and mover of people and goods, needs to be treated like other global businesses and free from unnecessary regulatory burdens that add complexity and cost without delivering value,” he said.

Under the proposal, airlines would be required to report 16 additional categories of fees in addition to baggage and reservation change fees, the department said.

In April, the department proposed a series of consumer protection regulations, including a requirement that airlines prominently disclose all potential fees on their websites. Airlines will also have to include taxes and government-imposed fees in the fares that they advertise.

Airlines have opposed the tax and fee disclosure requirements, arguing that car dealers and other businesses don’t have to make similar disclosures.

The disclosure requirements are due to go into effect next month, but three domestic airline trade groups have asked the department to delay the rule for six months so that airlines can train employees and update computer systems to comply with the changes.

Also, low-cost carrier Spirit and regional carrier Allegiant Air have asked a federal court to block the new disclosure requirements, as well as several other consumer protections proposed in April. Southwest Airlines, which carries more passengers than any other domestic airline, has asked the court to block the government from requiring airlines to disclose taxes and government-required fees in their airfares. Southwest, which doesn’t charge any ancillary fees, said including government required taxes and fees would force the airline to make complicated adjustments to its frequent flyer rewards program, which is based on airfares.

The proposal announced Friday would also require airlines to report the total number of bags checked. Airlines already report the number of mishandled bags relative to the number of passengers flown. However, more passengers are choosing not to check bags to avoid fees, decreasing the number of checked bags overall.

Reporting all checked bags would allow passengers to compare the number of lost or damaged bags relative to the number of bags handled by the airlines, which is a more useful comparison, the department said.

In 2010, carriers reported a mishandled baggage rate of 3.57 per 1,000 passengers, an improvement over 2009′s rate of 3.99.

The department said it is asking airlines to report mishandled wheelchairs in response to complaints from passengers who say they are reluctant to travel by air because they fear their wheelchairs or scooters will be delayed or the equipment may arrive damaged. The new information will enable passengers to determine which airlines have better records of handling wheelchairs.

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