With the U.S. Department of Transportation (DOT) today reporting more than $3.5 billion in baggage and reservation change fees flowing to airlines in the first half of 2016, the American Association of Airport Executives (AAAE) once again questioned the continued opposition of U.S. airlines to updating an optional local airport user fee known as the Passenger Facility Charge (PFC) that finances the construction of terminal projects, new runways and other airport improvements.
“The autumn leaves may be starting to fall, but the astounding bag fee collections from the airline industry continue to defy gravity,” AAAE President and CEO Todd Hauptli said today. “What defies not only gravity, but also logic, is their increasing addiction to bag fees and ancillary revenues (the primary purpose of which seems to be to support their ever-soaring profits) while continuing to vigorously oppose a modest increase in the airport Passenger Facility Charge program (the primary purpose of which is to build and improve facilities, promote competition and enhance the experience of the traveling public). AAAE renews its call on Congress to see past the self-serving airline rhetoric and act in the public interest by modernizing the PFC as soon as possible.”
According to data released today by the DOT’s Bureau of Transportation Statistics, airlines collected more than $1 billion in baggage fees in the second quarter of 2016 – a new record. The carriers also raked in more than $755 million in reservation change and cancellation fees in the second quarter, one of the highest collections for a quarter. Those gains are on top of the record-level $3.8 billion in bag fees and $3 billion in reservation cancellation and change fees that the airlines collected in 2015.
Since 2008, airlines have collected more than $26.8 billion in baggage fees and more than $21.5 billion extra in ticket change and cancellation fees. That total of nearly $50 billion in baggage and ticket change fees does not include other airline ancillary charges such as pet transportation, sale of frequent flyer award miles to airline business partners and standby passenger fees.
In comparison, last year airports collectively received about $3 billion from the PFC, which is an optional charge 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. The $3.8 billion in bag fees airlines collected in 2015 also exceeds the $3.35 billion the federal government provided for airport grants at all eligible airports across the country in FY 2016 through the Airport Improvement Program.
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 $153 million in just the first half of 2016. Since 2008, the $26.8 billion in bag fees that are not taxed have cost the Trust Fund more than $2 billion in foregone revenue – money that could have paid for airport capital projects and air traffic control modernization efforts.