Commercial Aviation: Consumers Could Benefit from Better Information about Airline-Imposed Fees and Refundability of Government-Imposed Taxes and Fees

Highlights

To supplement fare revenues, airlines are increasingly charging fees for optional passenger services, notably for checked baggage, for which separate charges did not previously exist. While air fares are subject to a 7.5 percent excise tax that funds the Airport and Airway Trust Fund, which helps fund the Federal Aviation Administration (FAA), many new optional fees are not. As requested, this report addresses (1) the nature, relationship to cost, and disclosure of airline fees, (2) the potential impact of such fees on the Airport and Airway Trust Fund, (3) checked and mishandled baggage issues; and (4) the process, if any, for refunding government-imposed taxes and fees when passengers do not use nonrefundable tickets. To perform this work, GAO analyzed financial data; reviewed applicable laws and regulations; and interviewed airline and government officials.

Recommendations

Matter for Congressional Consideration

Matter	Status	Comments
If Congress determines that the benefit of added revenue to the Airport and Airway Trust Fund from taxation of optional airline service fees, such as baggage fees, is of importance, then it may wish to consider amending the Internal Revenue Code to make mandatory the taxation of certain or all airline imposed fees and to require that the revenue be deposited in the Airport and Airway Trust Fund.	Closed – Not Implemented	We continue to believe this matter has merit. However, our report on Airline-Imposed Fees was completed over 8 years ago. Additionally, given the recently-passed FAA Reauthorization Act of 2018 did not include any provisions related to the Internal Revenue Service amending the Internal Revenue Code, this matter is being closed as not implemented.

Recommendations for Executive Action

Agency Affected	Recommendation	Status
Department of Transportation	To improve the transparency of information on airline-imposed fees and government-imposed taxes and fees for consumers and improve airlines' reporting of fee revenues to the Department of Transportation, the Secretary of Transportation should improve the disclosure of baggage fees and policies to passengers, in accordance with DOT guidance, by requiring that U.S. airlines and foreign airlines that fly within or to or from the United States disclose baggage fees and policies along with fare information such that this information can be consistently disclosed across all distribution channels used by the airline.	Closed – Not Implemented We continue to believe this recommendation has merit. However, our report on Airline-Imposed Fees was completed over 8 years ago and DOT has informed us that the department will not be taking any further action to address our recommendation. Additionally, given the recently-passed FAA Reauthorization Act of 2018 did not include any provisions related to DOT taking actions on airline fees and no requirement for GAO to conduct a study to revisit this issue, this recommendation is being closed as not implemented.
Department of Transportation	To improve the transparency of information on airline-imposed fees and government-imposed taxes and fees for consumers and improve airlines' reporting of fee revenues to the Department of Transportation, the Secretary of Transportation should require U.S. airlines and foreign airlines that fly within or to or from the United States to disclose all airline-imposed optional fees that it deems important to passengers to know and further require that this information be consistently disclosed across all distribution channels used by the airline.	Closed – Implemented In 2010, we reported that airlines have imposed a variety of fees for optional services, such as checked and carry-on bags, meals, blankets, early boarding, and seat selection. According to airline officials, the fees are based on a combination of factors, including the cost of providing the service, competition, and consumer demand. However, we found that the fees are not fully disclosed through all ticket distribution channels used by consumers, making it hard for consumers to compare prices when shopping for air travel. Therefore, we recommended that the Department of Transportation require airlines to disclose all optional fees through all distribution channels used by the airline. In 2011, the Department issued a rule that requires airlines to disclose their baggage and other fees on their website and that the airline and travel agent disclose to consumers where they can go to find these fees on their websites. In May 2014, the Department proposed a rule requiring airlines to disclose all fee information to all ticket agents. Together, these two rules, once in place, will allow consumers to compare the entire cost of air travel across airlines.
Department of Transportation	To improve the transparency of information on airline-imposed fees and government-imposed taxes and fees for consumers and improve airlines' reporting of fee revenues to the Department of Transportation, the Secretary of Transportation should require that U.S. passenger airlines and foreign airlines that fly within or to or from the United States consistently disclose to passengers, applicable government-imposed fees on unused nonrefundable tickets that may be eligible for refunds once these determinations are made by relevant agencies.	Closed – Implemented In 2010, we found that consumers are entitled to a refund of their customs and immigration fee and possibly their agriculture air passenger inspection fee on unused nonrefundable airline tickets. However, we found that the Department of Homeland Security had not provided guidance to airlines regarding the refundability of the customs and immigration fee and that USDA had not clarified or provided guidance in regards whether the agriculture inspection fee was refundable. In response to our report and its recommendations, both Departments issued guidance that these fees are refundable on unused nonrefundable tickets. We also recommended that the Department of Transportation ensure that airlines disclose to passengers that these two government fees are refundable. In 2011, the Department issued rules requiring airlines to provide prompt refunds to passengers, including fees where those refunds are due. In May 2014, the Department proposed rules the same rules apply to large ticket agents. Once in place, this new rule will provide consumers with better information about their rights and ensure that consumers are given refunds to which they are entitled
Department of Transportation	To improve the transparency of information on airline-imposed fees and government-imposed taxes and fees for consumers and improve airlines' reporting of fee revenues to the Department of Transportation, the Secretary of Transportation should require U.S. passenger airlines to report to DOT all optional fees paid by passengers related to their trip in a separate account, exclusive of baggage fees and reservation change and cancellation fees.	Closed – Not Implemented We continue to believe this recommendation has merit. U.S. airlines are required to report revenue in one of four separate accounts: baggage fees, reservation change and cancellation fees, other transport-related fees, and miscellaneous fees. So, while it may be true that airlines already report significant amounts of data on air carrier ancillary fee revenue, the data are not separated enough to provide more detailed information on the specific sources of the revenue. Furthermore, the DOT BTS reporting requirements have not been changed since 2009. However, our report on Airline-Imposed Fees was completed over 8 years ago and DOT has informed us that the department will not be taking any further action to address our recommendation. Additionally, given the recently-passed FAA Reauthorization Act of 2018 did not include any provisions related to DOT taking actions on airline fees and no requirement for GAO to conduct a study to revisit this issue, this recommendation is being closed as not implemented.
Department of Homeland Security	To eliminate the ambiguity regarding the refund of government-imposed fees to purchasers of unused nonrefundable tickets, the Secretary of Homeland Security should issue guidance regarding the refundability of the customs and immigration inspection fees to U.S. and foreign airlines collecting these fees.	Closed – Implemented We found that the Department of Homeland Security's (DHS) Customs and Border Patrol's relevant statutes and regulations authorize the agency, via the airlines, to refund its customs and immigration fees on unused nonrefundable tickets. However, DHS has not issued any policy or guidance that clarifies this. We recommended that DHS issue guidance to airlines collecting these fees. In response, DHS issued guidance in October 2010 regarding the refundability of these fees and the refund process. DHS also provided the guidance to the Air Transport Association of America and the International Air Transport Association to distribute to its member airlines. As a result, the ambiguity regarding the refund of customs and immigration fees has been clarified.
Department of Agriculture	To eliminate the ambiguity regarding government-imposed fees that are eligible for refund to purchasers of unused nonrefundable tickets, the Secretary of Agriculture should determine whether a passenger is eligible for a refund of the animal and plant heath inspection fee and convey this determination to U.S. and foreign airlines collecting these fees.	Closed – Implemented We found that the US Department of Agriculture's (USDA) relevant statutes and regulations are unclear whether they authorize the agency, via the airlines, to refund its animal and plant health inspection fee on unused nonrefundable tickets. We thus recommended that USDA determine whether its fee is refundable and convey this to airlines collecting these fees. In response, USDA determined that its fee is refundable on nonrefundable tickets and notified the Department of Transportation to this effect. As a result, the ambiguity regarding the refund of the animal and plant health inspection fee has been clarified.