Airlines are exploring ways to implement customer specific pricing using AI and algorithms, meaning everyone would pay a different price for the same seats on the same flight. The revelation was made during a Senate hearing on the multibillion-dollar business of fees, which Senators contend are misleading and deceptive to customers.
“They are piggy banks to be shaken down by these skyrocketing fees that seem to have no connection to any costs that the airlines incur,” Sen. Richard Blumenthal, D-Conn., said. “In fact, our investigation shows they have no connection to actual costs that the airlines are bearing.”
From 2018 to 2023, five of the nation’s largest airlines made $12.4 billion from seat fees.
Over the last six years they made $25.3 billion on bag fees.
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“I mean, you guys do appreciate that flying on your Airlines is a disaster, don’t you?” Sen. Josh Hawley, R-Mo., said.
Some airlines have offered incentives for employees to charge customers. In 2022 and 2023, budget airlines Frontier and Spirit paid $26 million in bonuses to gate agents who charged customers bag fees. Frontier paid agents $10 for every extra carry-on.
Robert Schroeter, Frontier’s Chief Commercial Officer, said the program is meant to enhance compliance with Frontier’s carry on bag policy.
“This in turn enhances cabin safety and boarding efficiency and ensures that all passengers are treated equally,” Schroeter said.
The committee also said the way fees are applied may break federal law. Senators contend hidden fees may violate consumer protection laws through deceptive practices. They also accused airlines of charging fees that are non-taxable to avoid excise taxes, an allegation United denied.
“United has always paid the seven and a half percent transportation tax on all seat fees, but it’s not displayed in the booking path because United pays this directly to the Treasury,” Andrew Nocella, United Chief Commercial Officer, said.
Overall, the airlines defended their pricing with corporate speak like, “it’s a business model consistent with market demands” and “It’s never been more affordable to fly.”
But it’s clear senators want to tighten the rules so at a minimum the prices are more transparent.
Schroeter said their base airfares are on average 77% lower than legacy carriers and 64% lower even when the fees are included.
