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Why Airlines Charge Crazy Fees

Forbes logo Forbes 1/05/2017 Geoffrey Morrison

© Provided by Forbes Media LLC Checked bags. Food. Drinks. Choosing your seat. Checking in at the airport. It seems like anything involving flying these days has an additional fee. There were rumours (jokes, it turned out) that some airlines would start charging to use the bathroom.

So why do airlines charge insane fees? Because all they care about is making money, right? Well, yes, that’s certainly part of it. But that, in itself, isn’t the whole story.

Making Money

Airlines are not a charity. They are, with a few exceptions, for-profit corporations. In the case of the oft-derided American carriers, these are publicly traded companies that have a fiduciary responsibility to their shareholders to make as much profit as possible. We can debate the pros and cons of that all we want, but that’s the fact of the airline business right now.

So the question is, are these fees just a money-grab by the airlines to squeeze tremendous profits out of your wallet? Not exactly.

The Race To Zero

The thing is, it’s our fault. We all want the cheapest airfares possible. Not unreasonable, of course, but to do that, most of us use websites like Expedia, Kayak, Google Flights, and so on, to find the cheapest fare possible. In this race toward zero, airlines know that they need the lowest fare possible to sell tickets.

The thing is, there’s a limit in how low they can go, and how low depends on a lot of factors. I could go into it, but Wendover Productions has a brilliant video about it that’s well worth watching.

One of the ways to make airfares look as cheap as possible is to strip away things that you expect to get for free as a part of that fare, like food, seat selection, and checked luggage. This lets them offer lower fares to everyone, with a percentage of people paying more than that “base” rate for these items that not everyone wants/needs.

That’s the best way to look at it, the number you see on Expedia et al. is just the “base” rate, with sometimes-necessary add-ons being tacked on later. You may balk about having to pay $50 for luggage, but I’m perfectly happy not spending that and having a cheaper ticket (also, , but ).

Budget airlines do this to the greatest extent, for better or worse, which ties into another of Wendover’s videos, in case you’re interested.

A Better, But Impossible, Solution

There is a better way.

Everyone hates fees. Everyone loves discounts. The better way for the airline industry to engender love from their customers is to invert their current pricing strategy. They should say the cost of the ticket is X, then let you subtract all the things you don’t need. As in, say the ticket is $500, but then you can take off $20 if you don’t care where you sit, $50 if you don’t have checked luggage, $20 if you check-on online, $10 if you don’t eat, etc. Then we’d feel like we’re saving money as the primary emotion, not being forced to pay more for something we expected. Now it’s “I saved $90!” instead of “Ugh, I have to pay more than $400?”

This will never happen, of course. Any airline that did this would have the highest fares on the travel websites, and never sell tickets.

Sort of. Some of the higher-end airlines don’t discount their fares. They include all of these things, and they do have higher fares. It works for them (apparently). That won’t work for the big US carriers, and not for most airlines.

Still, it’d be neat.

Landing

Which is all to say, yes, the airlines are charging you fees to extract profit from you. Of course they are, that’s their job, but it’s not because that original “base” fare you found was (*ahem*) soaring with profit.

Almost. One last thing. As mentioned in the video earlier, airfares today are among the lowest they’ve ever been, even when you consider the fees. You can fly to across the ocean to a different continent for a few hundred dollars. That’s nothing short of amazing.

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