The FAA proposed a new rule that would “require U.S. and foreign air carriers to seat children aged 13 and under adjacent to at least one accompanying adult at no additional cost beyond the fare.” This part of the administration’s war on so called ‘junk fees.’

Banning Price Unbundling

Banning price unbundling would hurt poor consumers and curtail their access to services. Currently, domestic airlines charge a separate price for ‘nonessential services’ like food or checked in baggage on short flights. This lets the airline increase its profits and reduces costs for the poor as they are now offered ‘cheaper basic ticket prices.’ Biden’s ban would push poor individuals out of the market entirely and compel individuals to pay for services they don’t want or need.

There is no explicit charge for “sitting next to your child on an air flight” or “a sitting with your kid fee.” However, if families want to guarantee that they will get seats together, they usually have to buy tickets that permit advanced seat selection, ‘pay for seat selection separately’ or simply hope that there are ‘adjacent seats available after check-in.’ The cheapest tickets/fares, usually do not allow seat selection. Banning this ‘fee’ would mean compelling airlines to give preferential treatment to customers who have children younger than 13 for free.

Structuring fees in this manner, provides more opportunities for profit. This allows airlines to charge lower basic airfares. Bureau of Transportation statistics show that revenue from basic airfares has dropped from 88.5% in 1990 to 73.2% of domestic airline revenue. ‘This pricing flexibility allows airlines to run more routes at lower basic prices.’ According to a 2022 Airlines for America survey, this is the most important thing for passengers.

The effect of this policy is to force other passengers to subsidize families with kids as there would be higher basic fares for everyone, in order to make up for the lost revenue. This would be a redistribution of income from one group to another.

The policy would entail higher basic fares for passengers, damage to ultra-low-cost airlines. Ultra-low-cost airlines help keep fares in the industry low by “stripping out perks and using fee revenues to ‘top-up'. Unbundling, gives airlines the change to make a profit on more flights and this spurs them to fly more flights which indirectly boosts competition.

This is far from the only time the Biden administration has sought to use government to use what effectively amounts to price controls. It has previously proposed cracking down on ‘junk fees’ in other areas such as banking...Continue reading at https://t.co/KtWvIDXBAb. https://video.twimg.com/ext_tw_video/1829190678284312576/pu/vid/avc1/720x1280/_fIyVyaEveH9ts_9.mp4?tag=12