Airline Bag Fees Reach New High, Marking Sixth Straight Quarter Above $1 Billion

With airlines collecting a record high $1.2 billion in baggage fees in the third quarter of 2017, the American Association of Airport Executives (AAAE) once again called on the U.S. airline industry to drop their opposition to a pending bipartisan proposal in Congress to modernize 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.

“Yes, Virginia, there is a Santa Claus and he just delivered a billion dollar bag fee present under the Christmas tree for the airlines. Wonder how much of that will be used to build infrastructure and how much will go straight to their bottom line?” asked Todd Hauptli, President and CEO of AAAE. He continued, “On the other hand, with an increase in the Passenger Facility Charge program, every nickel that airports receive will be used for the betterment of the aviation system and to increase competition throughout the country. Maybe that’s why the airlines would rather see Congress give airports a lump of coal this Christmas.”

According to data released today by the U.S. Department of Transportation’s Bureau of Transportation Statistics, airlines collected more than $1.2 billion in baggage fees during the third quarter of 2017, a new record and the sixth consecutive quarter that bag fees exceeded the billion-dollar threshold. Airlines collected another $720 million in reservation change and cancellation fees during the third quarter, bringing ancillary fee collections to nearly $2 billion over the three-month period.

At the same time the airlines are collecting record baggage fees from their customers, they continue to oppose a modest bipartisan proposal to update the federal cap on local PFCs to $8.50 for originating passengers that was included in the annual funding bill for DOT (S. 1655). That measure, which is strongly supported by AAAE, was approved by the Senate Appropriations Committee July 27 on a unanimous 31-0 vote.

Bag and Ticket Fee Facts

Airlines have collected more than $3.4 billion in bag fees and nearly $2.2 billion in reservation change and cancellation fees through the three quarters of 2017 – an average of more than $20.5 million per day in combined ancillary fees.

Airlines charged a record $4.2 billion in bag fees and $2.9 billion in ticket fees in 2016, an astounding $7.1 billion total.

Since 2008, airlines have charged flyers more than $57.5 billion in bag and ticket change fees.

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 $313 million in foregone revenue in 2016 alone. Since 2008, the $32.4 billion in bag fees that are not taxed have cost the Trust Fund more than $2.4 billion in lost revenue. Those are funds that could have otherwise been spent on needed airport and air traffic control upgrades.

PFC Facts

While airlines raked in more than $7 billion from bag and ticket fees last year, airports collectively received less than $3.2 billion from the PFC in 2016.

Airlines charged more bag and ticket fees in the first half of 2017 than airports collected via the PFC in all of 2016.

The PFC is a user charge that must be justified locally, collected locally and used locally on projects approved by DOT to enhance safety, security, or capacity; reduce noise; or increase airline competition. Despite inaccurate airline claims, the PFC is not a tax and never goes to the federal Treasury, a fact that has been validated by the non-partisan Congressional Research Service.

The federal cap on the PFC has not been adjusted since 2000. The last time the federal cap on local PFCs was increased, approximately 35 percent of Americans owned a cell phone and Facebook would not be founded for another four years.