Bag fees have pushed up airfares, watchdog finds

WASHINGTON — U.S. travellers who check at least one bag when flying domestically are paying more overall than they did before airlines began unbundling fares in 2008 and charging separately for checked baggage, says a government watchdog.

A report by the U.S. Government Accountability Office said airline officials told GAO investigators that base air fares are now lower than before airlines began separately charging passengers for checked bags, reservation changes, priority boarding and other services. But the GAO’s review of studies that have examined the effect of bag fees on ticket prices shows that charging separately for bags reduced fares by less than the new bag fee itself.

“As a result, customers who paid for checked bags paid more on average for the combined airfare and bag fee than when the airfare and bag fee were bundled together,” the report said. “Conversely, passengers who did not check bags paid less overall.”

One study found that airlines with bag fees lowered fares to appear more competitive and then made up the lost revenue in bag fees. Another study found that declines in airfares amounted to less than the bag fee, so on average the combined total of the fare and bag fee increased.

Airlines collected $7.1 billion US in revenue from checked bag and changed reservations fees in the budget year ending Sept. 30, 2016, the GAO said. Those are the only fee revenues that airlines are required to report to the government.

The Department of Transportation said that airlines collected nearly $1.2 billion in checked bag fees during the second quarter of this year, a new record.