With airlines collecting nearly $5 billion in baggage fees in 2018 along with billions more in other ancillary charges – record highs – the American Association of Airport Executives (AAAE) called on Congress to update the U.S. tax code and the federal cap on local airport user fees to reflect the airlines’ increased focus on bag fees and ancillary revenue and spur needed investments in the nation’s airports.
“While airlines pile up record fee collections from passengers for so-called ‘optional’ services like taking a bag for a trip, they vigorously fight modest proposals that would upgrade airports and other aviation infrastructure,” AAAE President and CEO Todd Hauptli noted in response to the 2018 data released today by the U.S. Department of Transportation and the airlines’ continued opposition to bipartisan calls to adjust a local airport user fee known as the Passenger Facility Charge (PFC) that finances the construction of new runways, terminals, gates and other airport improvements that directly benefit passengers and increase airline competition.
“We can’t meet today’s needs, let alone tomorrow’s, while maintaining a system that fails to take into account changed airline business practices and an airport financing model last updated decades ago,” Hauptli added. “It’s past time for Congress to look past self-serving airline rhetoric and make meaningful changes to boost airport infrastructure investments that directly benefit the traveling public.”
According to data released today by DOT’s Bureau of Transportation Statistics, airlines collected more than $1.2 billion in baggage fees during the fourth quarter of 2018, bringing total bag fee collections for the year to $4.9 billion. Airlines collected another $2.7 billion in reservation change and cancellation fees during 2018, for a total of $7.6 billion in ancillary fees their passengers paid last year.
Although airlines have increased their bag fees and collect record amounts from their customers, they continue to oppose adjusting the federal cap on local PFCs, a user fee that must be justified locally, imposed locally and used locally on FAA-approved projects that enhance local airport facilities. The federal cap on the local PFC has not been adjusted since 2000. Despite misleading airline arguments, the PFC is not a tax and never goes to the federal Treasury, a fact verified by the non-partisan Congressional Research Service.
Bag and Ticket Fee Facts
Airlines collected a total of $7.6 billion in baggage and reservation change fees in 2018 – an average of more than $20 million every day in combined ancillary fees.
Total airline bag and reservation fee collections have increased every single year for more than a decade.
The record in fee collections last year follows an astounding $7.4 billion in bag and ticket fees in 2017.
Since 2008, airlines have charged flyers $67 billion in bag and ticket change fees. Bag fees have now exceeded $1 billion every quarter for nearly three years.
Because bag fees are not taxed at the same 7.5 percent excise tax rate applied to base airline tickets, the Airport and Airway Trust Fund lost more than $367 million in foregone revenue in 2018 alone. Since 2008, the $38.5 billion in bag fees that are not taxed have cost the Trust Fund nearly $2.9 billion in lost revenue. Those are funds that could have otherwise been spent on needed airport and air traffic control upgrades.
While airlines raked in $7.6 billion from bag and ticket fees last year, airports collectively received $3.5 billion from the PFC in 2018.
Airlines charged more bag and ticket fees last year than airports collected via the PFC in 2017 and 2018 combined.
The federal cap on the PFC has not been adjusted since 2000 – more than 19 years ago. The last time Congress increased the PFC cap, Coca-Cola was still selling New Coke, roughly half of U.S. adults used the internet, and Ericsson became the first company to sell a new device it called a “smartphone.”