Get Ready for More Airline Ticket Fees

Summary

WSJ Your Money Briefing

Episode Title: Get Ready for More Airline Ticket Fees
Date: December 11, 2017
Host: JR Whalen
Guest: Susan Carey, WSJ News Editor (Chicago Bureau)

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Episode Overview

This episode examines the potential rise in airline ticket fees, specifically those driven not by airlines themselves, but by U.S. airports seeking funds for infrastructure improvements. JR Whalen interviews Susan Carey about why these additional fees are being considered, how much they could cost travelers, who benefits, and the broader implications for passengers and the airline industry.

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Key Discussion Points & Insights

Why Airports Want to Raise Fees

• Aging Infrastructure: The average U.S. airport is 40 years old and struggling to accommodate increasing passenger volumes.
• Funding Gap: Airports face substantial infrastructure needs—such as new concourses, refurbishments, and improved roadways—that exceed what federal infrastructure dollars will cover.
• Proposed Solution: Airports seek to increase a special ticket fee to fund these upgrades. (01:01)

"The average age of an airport is 40 years old, and they are contending with exploding numbers of passengers...they are trying to grab onto a fee."
— Susan Carey (01:01)

The Proposed Fee Increase

• Current Fee: Capped at $18 per round trip (max $4.50 per segment, up to four legs).
• Proposed Change: Raise the cap to $26, with the fee for two of the four legs potentially increasing to $8.50 from $4.50. (01:41)
• Limitations: The fee only applies to a maximum of four segments per ticket, regardless of total flights booked (02:10).

"Under the proposal...the fee would go up to a maximum of $26, with two of the four legs increasing to 8.50 from 4.50."
— Susan Carey (01:41)

Airports' Broader Funding & the Push for Speed

• Multiple Income Streams: Airports already receive money from airline landing fees, tenant rents, concessions, and federal grants.
• Urgency: There’s concern that a proposed Republican tax plan could eliminate a tax break airports enjoy, motivating them to secure additional revenue while they can (02:38).

"They are facing such huge infrastructure spending needs that, yes, they are very, very eager...and are lobbying heavily to make it happen."
— Susan Carey (02:50)

Airlines’ and Passenger Groups’ Opposition

• Visibility Problem: Airlines must collect the fee, which makes it appear they're hiking prices, even if they're just passing along costs. (04:01)
• Layered Fees: Airlines already collect numerous government fees, including for TSA, customs, and a 7.5% federal excise tax (04:05).

"Airlines already collect a plethora of fees on behalf of the federal government...this one goes straight to the airports."
— Susan Carey (04:05)

Passenger Experience and Perception

• Opaque Fees: Most passengers aren’t aware of how many government fees are included on tickets or where the money goes (05:19).
• Feeling Singled Out: Passenger advocacy groups say airline travelers are unfairly targeted compared to those traveling by train, bus, or boat. (06:00)
• Comparison to Airline Fees: Airlines also tack on their own charges such as baggage and change fees—raising $7 billion last year alone from those two sources (06:00).

"They think that airline customers are being unfairly singled out...airline passengers tend to be the way of collecting a lot of this money."
— Susan Carey (06:00)

Who Pays for Airport Improvements?

• Renovations: While some airlines fund portions of terminal improvements, mostly local governments (airport owners) issue bonds backed by airport income.
• Tax Law Changes: Pending legislation could remove the tax-exempt status from many of these bonds, increasing costs by forcing airports to sell taxable bonds instead (07:13).

"That's the basic model for how airports pay for this stuff, is they sell bonds."
— Susan Carey (07:13)

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Notable Quotes & Memorable Moments

• On why airports desperately want fee increases:
  "They are facing such huge infrastructure spending needs that, yes, they are very, very eager to see this increase go into effect and they are lobbying heavily to make it happen."
  — Susan Carey (02:50)

• On the hidden nature of ticket fees:
  "You find a fare that you like and you think, oh, this is a smoking deal. And then...there's a whole bunch of other charges that, you know, top it up."
  — Susan Carey (05:19)

• On passenger advocacy group concerns:
  "They think that airline customers are being unfairly singled out…and they do have a point."
  — Susan Carey (06:00)

• Insight on future of funding:
  "Another part of the new legislation would get rid of the tax exempt status on many of the bonds that their government owners now sell, which would force the government owners of the airports to sell taxable bonds instead, which would be more costly."
  — Susan Carey (07:13)

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Timestamps of Key Segments

• 00:41 – Episode introduction and context for the proposed fee increase
• 01:01 – Why airports are seeking extra fees
• 01:41 – Details of the proposed increase and fee structure
• 02:17 – How the fee cap applies to multi-leg itineraries
• 02:38 – Tax break concerns and airports’ urgency
• 04:05 – Airlines’ objections and overview of existing passenger fees
• 05:19 – Passenger perceptions and booking experience
• 06:00 – Passenger advocacy viewpoint and comparison to other transportation
• 07:13 – Who actually funds airport improvements and implications of bond tax changes

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Summary

This episode takes a deep dive into the proposed increase in airport-imposed ticket fees, dissecting the interplay between aging airport infrastructure, urgency from potential tax law changes, opposition from airlines and passenger groups, and the practical impact on travelers. While airports argue the hike is necessary to address massive infrastructure needs, passengers and airlines alike fear increasingly opaque, burdensome travel costs that disproportionately impact air travel over other transportation modes. The pending tax legislation in Washington further complicates the funding picture, potentially making it more expensive for airports to finance improvements.

Useful for:
Travelers, airline customers, and anyone interested in understanding the hidden costs and political wrangling behind the seemingly simple act of booking a flight.

Transcript

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[WSJ Promo Announcer]

this Is yous Money Matters from the Wall Street Journal.

[JR Whalen]

Welcome to youo Money Matters. I'm JR Whalen in New York. The price of a round trip airline ticket could be on the rise, but don't blame the airlines this time. Blame the airports. Wall Street Journal news editor Susan Carey joins us from our Chicago bureau to explain. So, Susan, why do the airports want to add to airline ticket fees?

[Susan Carey]

We have many, many old airports in the U.S. the average age of an airport is 40 years old, and they are contending with exploding numbers of passengers. And therefore, the airports need to, you know, build new concourses and refurbish things and improve the roadways and all of these things. And they don't, they don't see federal infrastructure dollars paying for everything. So they are trying to grab onto a fee.

[JR Whalen]

Okay, and how much of a fee are we talking about in this proposal that could be added onto tickets?

[Susan Carey]

Well, currently this fee is capped at $18, and that would include a $4.50 fee for four legs of a journey. Under the proposal that is not yet certain that it will end up being the law, the fee would go up to a maximum of $26, with two of the four legs increasing to 850 from 450.

[JR Whalen]

So it really depends upon how many segments of a trip a passenger has, and that's how much money the airport would collect.

[Susan Carey]

No, the maximum they can this particular charge is allowed is on four segments on an itinerary. So it could only be on four flights. If you're going on 10 flights on one itinerary, you're only going to be paying this fee on four of those flights.

[JR Whalen]

And the airports are concerned that a tax break they currently enjoy could go away under the Republican tax proposal. So they're trying to see if they can collect this additional money as quickly as they can.

[Susan Carey]

Yes, they've been pushing for an increase in this particular charge for years, and this would be the first time it was raised in 17 years. Airports obviously get a lot of revenue in other ways. They get revenue from airlines, landing fees and airline office rents in their buildings. They get money from restaurants and shop concessions. They get a slice of that piece. They get some funding from the Federal Aviation Administration for a grant program that helps them improve airports. And they also get a fair chunk of change from this particular fee. But because they are facing such huge infrastructure spending needs that, yes, they are very, very eager to see this increase go into effect and they are lobbying heavily to make it happen. The airlines, however, are lobbying just as heavily that it not be enacted because they are the toll takers. They have to put these charges on the ticket. Therefore, it makes their fares look like they're going up.

[JR Whalen]

That's right. And they're going to be seen as the bad guy, even though they're not the ones technically collecting this fee.

[Susan Carey]

Right. Airlines already collect a plethora of fees on behalf of the federal government. This is just one of many. This one goes straight to the airports. Many of the other fees go to pay for TSA and security or help their budget. Other fees go to customs. Other fees go to. There's a lot of fees. I guess the most pernicious fee that airlines have to collect is the 7.5% federal excise tax on tickets. So if you have a domestic ticket and it costs $300, you're going to pay $17 in federal excise taxes.

[JR Whalen]

Definitely a lot of taxes and fees that pile up on tickets. We're speaking with the Wall Street Journal's Susan Carey about possible fees from airports being added to airline tickets. And you're listening to your Money Matters from the Wall Street Journal. Welcome back, everybody. So, Susan, the airlines are against this fee proposed by the airports, as you just pointed out. And needless to say, passenger groups and passengers themselves are not very thrilled by this idea either.

[Susan Carey]

I don't think the average passenger knows exactly how many fees and taxes that they pay on their ticket. But you know, when you go and book a flight online at the airline's website or at Expedia, you find a fee that a fair that you like and you think, oh, this is a smoking deal. And then when you want to go buy it, there's a whole bunch of other charges that, you know, top it up. So I think people are aware that they're paying some extra fees. I'm not sure they understand which fees they're paying and where the money goes.

[JR Whalen]

And you spoke to a representative of a passengers group in your story in the Wall Street Journal. And they voiced opposition to this, didn't they?

[Susan Carey]

They think that airline customers are being unfairly singled out. And they do have a point. If you are arriving by train or by boat or by bus, you don't have to pay the 911 security fee and you don't have to pay an immigration fee if you're coming across on a train from Canada. So airline passengers tend to be the way of collecting a lot of this money, which you know, the airlines don't favor. Now, on the other hand, the airlines also have raise their fees for checked luggage or started charging for checked luggage. And they also charge quite a bit for if you want to change your ticket. You know, they raised $7 billion last year just in those two charges which don't show up when you're booking your flight. They only show up later when you're about to check in or you are at the airport and you want to change your plans.

[JR Whalen]

And you spoke to folks who question the amount of overall money that airports need for improvements. Because in a lot of the airlines themselves pay for renovations at their terminals at the airports.

[Susan Carey]

Well, they do. They pay some airlines because they're so flush they're actually able to build a terminal without having to touch the, you know, tap the local government which owns the airport. That's not the preponderance of where the money comes from. Airport owners, local governments sell bonds that are collateralized by the income that's going to come in. And that's the basic model for how airports pay for this stuff, is they sell bonds. Another part of the new legislation would get rid of the tax exempt status on many of the bonds that their government owners now sell, which would force the government owners of the airports to sell taxable bonds instead, which would be more costly.

[JR Whalen]

A lot of intricacies in the Republican tax proposal. We'll see what items survive as the Senate and the House work out details to come up with a final tax plan. That's the Wall Street Journal's Susan Carey joining us from our Chicago bureau. Susan, thanks for being with us.

[Susan Carey]

Thanks for having me.

[JR Whalen]

And thank you for listening to your money matters. I'm JR Whalen in New York for the Wall Street Journal.

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