In recent years, airlines have increasingly charged fees for optional services. Since the U.S. airline industry was deregulated in 1978, the industry’s earnings have been volatile. In calendar years 2008 and 2009, the U.S. passenger airline industry incurred nearly $4.4 billion in operating losses, due largely to high jet fuel prices—airlines’ biggest operating expense in 2008—combined with a severe economic downturn that reduced passenger traffic. In response to these and other economic challenges, airlines began in 2008 to “unbundle” optional services from the base ticket price, thereby charging separate fees for services that were previously included in the ticket price. Revenues from fees for optional services continue to grow. In fiscal year 2016, airlines reported $200 billion in revenue, about $7.1 billion of it from the two optional services fees for which revenues are separately reported to DOT—$4.2 billion in baggage fee revenue and $2.9 billion from fees for changing reservations. The passenger airline industry is primarily composed of network (or “legacy”), low-cost, and regional airlines. Network airlines were in operation before the Airline Deregulation Act of 1978 and support large, complex hub-and-spoke operations with thousands of employees and hundreds of aircraft. These airlines provide service at various fare levels to a wide variety of domestic and international destinations. Low-cost airlines generally entered the market after deregulation and tend to operate less costly “point-to-point” service using fewer types of aircraft. Regional airlines generally employ much smaller aircraft (up to 100 seats) and provide service under “code-sharing” arrangements with larger network airlines for which they are paid on a cost-plus or fee-for- departure basis to provide network capacity. Both network and low-cost airlines charge fees for a variety of optional services. Regional airlines may also charge optional fees, such as baggage fees; however, those fees are generally determined by the network airline in the code-sharing partner agreement. While charges for some services—such as unaccompanied minors, reservation changes or cancellations, and oversized or overweight baggage—have existed in the airline industry for many years, other services, such as wireless internet access and on- demand entertainment access, are new. See figure 1 for examples of optional service fees. Some optional services can be purchased in advance when booking airline tickets. For example, customers can purchase optional services when booking tickets directly from the airline (i.e., from the airline’s website, by calling the airline’s call center, or from the airline’s ticket counter at the airport). Customers who purchase tickets from third parties, such as online travel agents (e.g., Priceline or Expedia) and traditional or corporate travel agents, may also have the option to purchase some optional services when booking tickets, but this option varies depending on the airline and third party. Customers may also obtain some information about flight schedules, fares, and some optional services from metasearch companies (e.g., Google or Kayak); however, the information on optional services available through these websites varies. Generally, online travel agencies, traditional or corporate travel agents, and metasearch companies obtain airfare and optional service fee information from global distribution systems, which are companies that package airline information so that travel agents can query and “book” (i.e., reserve and purchase) flights for airline customers. DOT has authority to investigate whether a U.S. air carrier, foreign air carrier, or ticket agent has been, or is engaged, in an unfair or deceptive practice or an unfair method of competition in air transportation or the sale of air transportation. Upon finding that a U.S. air carrier, foreign air carrier, or ticket agent is engaged in such a practice or method, DOT has the authority to order the regulated entity to stop the practice or method. Under this authority, in April 2011, DOT issued “Consumer Rule 2” which included several provisions related to increasing the transparency of airfares and optional service fees for consumers. This rule—which became completely in effect in January 2012—requires, among other things, that certain U.S. and foreign air carriers disclose information about their optional service fees on their websites and refund passengers’ baggage fees if their bags are lost. The transparency regulations that went into effect after the issuance of Consumer Rule 2 are summarized in table 1. DOT’s Office of Aviation Enforcement and Proceedings (OAEP), and its Aviation Consumer Protection Division (ACPD), monitor and enforce airline compliance with economic regulations, such as advertising requirements related to the disclosure of airline fares and optional service fees, among others. Consumers may file air-transportation-related complaints with DOT. Consumers may also file air-transportation-related complaints with airlines, and airlines are required to acknowledge and respond to each complaint. Additionally, DOT may require airlines to file reports and keep records. DOT is authorized to inspect regulated entities’ records and collect transportation information from regulated entities. DOT may assess civil penalties against airlines for violating the statute prohibiting unfair and deceptive practices and unfair methods of competition, and any regulations promulgated under that authority. Since 2010, U.S. airlines have introduced a variety of new optional- service fees and bundled products and increased the price of some existing fees. Some fees for optional services, like first and second checked bag fees on network airlines, have not changed considerably since 2010. However, some airlines increased other fees, such as fees for overweight and oversized bags and reservation changes and cancellations. According to DOT data, from 2010 to 2016, airline revenues from baggage fees and reservation-change and cancellation fees increased as did the number of passengers. Several U.S. airlines have introduced new fees since 2010 for services that used to be included in the ticket price, notably “preferred” seats within the economy cabin. For example, several network airlines—including Alaska, American, and Delta—created fees for upgrading to preferred seats, which are more desirable seats in the economy cabin of the aircraft, such as those located in an exit row, toward the front of the aircraft or with additional legroom. Preferred seats may also include priority boarding or food and beverages, depending on the airline. The characteristics of preferred seats differ among airlines, even when the products’ names sound similar. For example, both American and Hawaiian have a product called Preferred Seating, but American’s product refers to standard legroom in more favorable locations, whereas Hawaiian’s product refers to more legroom and priority boarding, among other things. In addition, some airlines offer more than one type of preferred seat. For example, in addition to its Preferred Seating product, American also offers a product called Main Cabin Extra, which includes additional legroom and priority boarding. As of July 2010, Frontier, JetBlue, and Spirit had already instituted fees for preferred seats, and Allegiant started offering preferred seats to its passengers in 2014. Southwest, however, does not have any assigned seating and therefore does not sell preferred seating. Instead, Southwest allows some customers to pay for early boarding, which increases the customer’s ability to select a desired seat. Table 2 shows airlines’ different approaches to charging fees for preferred seating. The pricing of preferred seats is not always apparent to customers on airlines’ websites, unless the customer selects or begins to book a specific flight. For example, some airlines, like Spirit and United, specify the range of prices, which may vary based on the route. Other airlines, like Alaska and Frontier, provide the minimum possible price but do not specify the maximum a customer might pay for the preferred seat. One of the selected airlines in our review, Delta, did not have preferred-seating prices available to customers browsing the website. All of the selected airlines provide detailed pricing on preferred seats if the customer selects or begins to book a specific flight. From 2010 to 2017, U.S. airlines introduced other new fees such as fees for carry-on bags, beverages, wireless internet access, and priority boarding. For example, three low-cost airlines implemented new fees for carry-on bags. Spirit introduced a fee for bringing a large bag into the cabin in 2010, as did Allegiant in 2012 and Frontier in 2013. None of the network airlines currently charge for carry-on bags. Allegiant and Frontier also began to charge customers for non-alcoholic beverages in 2012 and 2013, respectively, while Spirit already charged for these products. Since 2010, some U.S. airlines began charging for services that were not previously available. For example, Southwest first offered and charged for wireless internet access in 2011, and JetBlue began charging for expedited security screening and early boarding in 2011. While some customers are electing to pay extra for optional services, others are purchasing tickets that are priced lower and include optional service restrictions. For example, since 2015, American, Delta, and United have introduced Basic Economy fares. Passengers choosing to purchase Basic Economy tickets are assigned seats after checking in, meaning that they might not be seated with the rest of their travel group; board the aircraft last; cannot upgrade seats or class of service; and cannot change their flights. In addition, American and United Basic Economy passengers may not stow belongings in overhead compartments and are limited to one carry-on bag that fits under the seat in front of them. In yet another purchasing option, since 2010 several U.S. airlines have introduced packages of optional services that are sold together as a bundle instead of individually and can be purchased on top of or along with the base fare. The contents of these bundles vary greatly among airlines. For example, Frontier has two packages that include carry-on and checked bags, seat selection, and priority boarding; one of the packages also allows customers to change or cancel their tickets for full refunds.