The House Aviation Subcommittee begins hearings today on the proposed merger of Continental and United Airlines, a partnership that would significantly further the trend of industry consolidation.
One argument we've heard for such consolidation is the reduction in airfares in recent years. On an industry-wide basis, prices have declined, though the impetus has been from low-cost carriers such as Southwest and newer players such as JetBlue, not from legacy carriers such as United and Continental.
However, there's another component that is often overlooked. During the last two years we've also witnessed a new type of fare increase: Add-on charges for everything from telephoning reservations to selecting preferred seats, from requesting a pillow to ordering a soft drink, and from checking bags to bringing aboard carry-on bags.
The airline industry calls this "ancillary revenue," and it's quickly become a big business.
According to a report issued in May by the U.S. Department of Transportation, last year the domestic airline industry collected $7.8 billion in revenue from such fees, an increase of 42 percent over 2008. Baggage fees alone totaled $2.7 billion in 2009.
Airline pricing, add-on fees, and the effects of industry consolidation will all be discussed at today's hearing. I'll be among the speakers, representing Consumers Union's concerns about the merger, as I did earlier this month before the Senate Judiciary Committee.
Further details about the hearing are available at transportation.house.gov.—William J. McGee