Airline tickets* for sale! (*Seats cost extra).
Major U.S. airlines brought in an extra $12 billion during 2018-2023 by charging seat fees, a Gotcha Capitalism practice that deserves its own wing in the Hidden Fee Hall of Fame. I’m sorry for those of you traveling this busy week, but it’s our reality, and it will be our reality until our society sticks up to gigantic corporations and puts some kind of floor underneath these how-low-can-you-go practices.
Airline seat fees are just the most obvious example of an abhorrent practice U.S. companies have come to embrace — find a pain point among consumers and squeeze them for all they are worth. Most fliers just want a reasonable-enough experience getting home, or to their vacation, or to their company-mandated business trip spot. Instead, buying plane tickets is a now video game where consumers must first price out their trip, then work their way through a purchase, only to discover that the price they’ve been offered only applies to one middle seat in the back of the plane where people stack up to use the bathroom.
Or, fliers simply can’t pick a seat at all. The latest development I’ve noticed is the proliferation of “economy” fares which don’t allow seat selection unless consumers pay $100 or even $200 extra per leg. If you’ve ever been bumped from a flight at an inopportune moment, that’s a risk most fliers just can’t afford to take.
This isn’t competition. It’s extortion. And it’s what I have long called the “Death of the Price Tag.” It’s nearly impossible to compare airline flights because you need worksheets that feel like real estate documents to forge your way to an apples-to-apples comparison. Without real price tags, comparison shopping dies, and with it, free market economics.
Airlines also engage in what I believe is consumer manipulation when they show seat selection maps to fliers. Many seats are labeled off-limits to economy ticket holders — say with an X over them — while others come with a higher price tag. This gives the impression that the plane is nearly full, and fliers better pick a seat or else. But passengers knew the plane was not very crowded, they wouldn’t mind skipping seat selection during purchase and just take whatever chair is offered for free at check-in. The information disadvantage in this situation is entirely in favor of the airline, and decidedly the opposite of what anyone might describe as a free market.
None of this would be possible if American consumers enjoyed true competition in flying Instead, years of mergers leave most passengers with only 2 or 3 or even a single option for the flights they need to take, and that means consumers can’t punish airlines that misbehave. Don’t believe me? If you care at all about this topic, you should be familiar with the work of Bill McGee, who has written about airline issues for decades. He wrote this earlier this year:
“In March, I detailed in ProMarket how the United States’ airline industry has never been more consolidated, with the fewest scheduled passenger carriers ever (12); a 14 year gap (2007-2021) with no new-entrants at all; and an oligopoly at the top with the Big Four (American, Delta, Southwest, and United) controlling 80% of the market.
Some coverage of the Senate report I’ve read explains that airlines charge these fees for “extra legroom” or “preferred locations.” Makes it sound like the fees buy passengers first class! In fact, the fees merely give fliers a shot at a humane trip.
Squeezing consumers who are stuck is not a new trick; the real problem is that supercomputers have now supercharged these Gotcha designs with evil precision. Algorithms design tack-on fees to kick in precisely when things fliers have the fewest choices — when booking flights to see family at the holidays, for example.
I think we all need to understand that there is no bottom to this race-to-the-bottom. At least not unless we make one. That will require regulatory changes. The only thing standing between us and standing-room-only flights is rules which prevent that — for now.
And if you look around at industry after industry in America, you’ll see many of these same tendencies. Consolidation, a race to the bottom, algorithmic pricing, hidden fees and Gotchas, and a whole heap of human frustration. The Biden administration made a very public push to highlight Gotcha Capitalism and what it calls “junk fees” over the past four years. The attention was good, but the results are surely lacking — evidence for that is all around us. We should all hope the incoming administration continues this work, but does much more. Nothing less than American capitalism is at stake.
Meanwhile, if you are curious how to fix American airlines, you should read Bill McGee’s full essay. And here’s another good piece, explaining how Congress could fix some of these issues with a simple tax code fix (Airlines don’t pay the same taxes on seat fees that they pay on fares!).
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