Recently, both the Department of Transportation (DOT) and Congress have been considering imposing new regulations on airlines that would dictate — among other things — airlines’ pricing models. While the government believes imposing such regulations would help improve affordability, is this something the government would really accomplish?
The answer is: probably not.
Unnecessary regulations set a dangerous precedent. Deregulation has allowed airlines to become fiercely competitive — drastically driving down the cost of airfares. Any effort to stipulate the terms of airlines’ pricing models would stifle competition, undermine this progress and be nothing short of counterproductive.
History offers an important lesson. Before deregulation, flying was viewed as a privilege few could afford, with limited carriers and service in the market. Now, nearly 50 years after the Airline Deregulation Act was signed into law, the average number of airlines competing for a domestic route has dramatically increased. In fact, from 2000 to 2023, analysis of DOT data shows that the number of competitors per domestic trip rose from 3.33 to 3.47. More industry competition has forced airlines to invest in new technology and lower their airfares, with inflation-adjusted domestic airfares 55 percent less expensive compared to 1979.
Unfortunately, several politicians seem eager to ignore these trends and are proposing legislation to limit airline hubs, dictate pricing models and force airlines to provide more compensation for operational challenges outside of their control.
Take the Fair Fees Act introduced by Sens. Richard Blumenthal (D–CT) and Ed Markey (D–MA), which would eliminate “unreasonable or disproportionate” fees. These fees could include cancellation or change fees, checked or carry‐on baggage fees and seat assignment fees.
While well-intentioned, the reality is that there is no such thing as a free lunch: If Congress or the DOT prevents the airlines from charging ancillary fees, it will inevitably push up ticket prices. Charging for services or placing restrictions is an effective way to prevent moral hazards.
Imagine airlines do not restrict the number of luggage you can check or the number of carry-ons you can bring. What is likely going to happen is that passengers check tons of baggage and bring numerous carry-on bags, and those people who board last would be forced to check their baggage. Additionally, this would most certainly lead to increased ticket prices, particularly for those who choose not to check baggage.
Charging for optional add-on services does not constitute a “junk fee,” as some might suggest. In fact, by offering a menu choice of ancillary services, the airline industry allows people on a more limited income to afford a ticket, since it permits lower ticket prices. The vastly different willingness to pay across the industry’s potential customers is one reason why the industry has become increasingly competitive and has driven the entry of many low-cost carriers.
Abolishing fees is not going to benefit consumers. If anything, it is going to make things worse for the majority of people. The current market allows people to pick and choose what they truly want. Removing this would leave us with no choices and would ultimately hurt consumers. People who fly only occasionally would need to pay the higher ticket prices, and those who tend to not pay for preferred seats or checked bags would be worse off.
Abolishing ancillary airline fees and imposing new rules on airline operations that constrain how they operate and organize their business will not save passengers any money. It’s hard to perceive the efforts by the DOT and Congress to micromanage the industry as anything other than a move to garner a short-term political win — regardless of the long-term consequences.
