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United Chief Says Extra Fees Are Here to Stay: 'It's What Businesses Do'

The chairman of United Airlines says add-on fees for checking bags and other services are here to stay.
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Airlines fees = profits

July 13, 201501:58

NEW YORK - Still hoping for the day airlines let all customers check bags and make reservation changes for free?

Forget it, said United Continental Holdings Inc.'s Chief Executive Jeff Smisek at an industry lunch on Thursday, defending airlines even as they reap billions in profit and face federal probes into pricing practices.

Some travelers are "having difficulty recognizing that we're now a business," Smisek told attendees, recalling the bankruptcies and mergers that reshaped the loss-making industry in the decade after the attacks of Sept. 11, 2001. "They criticize us if we charge for more legroom. Let me tell you though: That's what businesses do."

We apologize, this video has expired.

Airlines fees = profits

July 13, 201501:58

Smisek, who took the helm of the merged United and Continental in 2010, said customers should not expect services such as checked bags to be bundled cheaply into airfares, as they were in the past, but priced on a sliding scale as extras, as in other industries.

"If you want more data on your data plan so you can watch faster, better cat videos, you call AT&T, and they're happy to increase your data plan," said Smisek. "And they charge you for it. That's what businesses do."

Smisek's comments come at a sensitive time for airlines. Last week, the U.S. Transportation Department opened an investigation into whether airlines gouged customers in the Northeast to take advantage of a train-service closure after an Amtrak accident in Philadelphia in May.

Just weeks before that, the U.S. Justice Department began investigating whether carriers have colluded on pricing by signaling plans to limit flights. Airlines have said they are confident the probes will reveal no wrongdoing.

Smisek said inflation-adjusted airfares in 2015 are lower than they were in 2000. At the same time, recent billion-dollar profits have allowed carriers to improve service, raise employee wages and return cash to shareholders, he added.

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He made the remarks before saying that unfairly subsidized competition from Emirates, Etihad Airways and Qatar Airways could spoil the picture. Those carriers deny they are subsidized.

Some consumer advocates say a lack of transparency into ancillary fees, which cannot easily be compared across airlines when booking on travel websites, concerns them more than the fees themselves. The Transportation Department is considering a rule to require airlines to disclose ancillary fees at all points of sale.

"Now they're rich," said Charlie Leocha, chairman of consumer advocacy group Travelers United. "They can afford to be nice to us and at least put some competition back into the system." Leocha was not at the lunch.

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