Airlines Won the Legal Battle on Fee Disclosure. The Economic Question Remains Unanswered.
U.S. airlines just secured a court victory blocking a federal rule that would have required them to display baggage and other fees upfront when passengers first see ticket prices. Their argument: showing these fees at the start of the booking process would cause "irreparable harm." But the airlines also claim this fee information is already available to consumers. The contradiction at the heart of this legal fight reveals something the industry would rather not discuss: a $7 billion annual revenue stream that depends not on whether fees are disclosed, but precisely when and how they appear during the booking process.
The 5th U.S. Circuit Court of Appeals halted the Biden administration's fee transparency regulation in early 2025, with judges noting the rule "likely exceeds DOT's authority and will irreparably harm airlines," according to The Points Guy. The court's decision addressed procedural questions about regulatory overreach. What it did not address is whether the current system serves consumers or merely protects a pricing model built on strategic information timing. Six major carriers, including American, Delta, United, JetBlue, and Alaska Airlines, joined Airlines for America, the industry's lobbying group, in challenging the regulation, per PBS.
The Mechanism: How Drip Pricing Protects Profit Margins
Understanding why airlines fought this rule so aggressively requires understanding how modern airline pricing actually works. Under current practice, airlines display base fares prominently in search results, the number that captures consumer attention and wins clicks. Fees for checked bags, carry-on bags, seat selection, and changes appear later in the booking process, often after a passenger has invested time comparing options and mentally committed to a flight. This sequencing is not accidental. The Transportation Department's rule would have required airlines and third-party ticket sellers to immediately disclose ancillary charges the first time a flight's price is displayed, according to The Points Guy. Airlines would have been required to disclose charges for full-size carry-on bags, first and second checked bags, and change and cancellation fees at the initial search stage.
The industry's response to this requirement is revealing. Airlines called the regulation a "bad solution in search of a problem" and argued it would "confuse customers," as reported by The Points Guy. They maintained that the administration "hasn't shown that consumers can't get information about fees already," per PBS. But the DOT estimated the rule would save consumers more than $500 million annually, according to PBS. If fees are already easily accessible and consumers can already comparison shop effectively, where does that half-billion dollars in savings come from? The answer lies in the difference between information that technically exists somewhere in a booking flow and information presented at the moment when it would actually influence purchasing decisions.
"The airline industry lobby is trying to tie this up with lawsuits, but we will not back down from protecting passengers," Transportation Secretary Pete Buttigieg stated, according to The Points Guy. "Airlines are simply wrong to argue that merely having to disclose their fees would irreparably harm them."
The $7 Billion Revenue Stream at Stake
The financial stakes behind this legal battle are substantial. U.S. airlines collectively made more than $7 billion in 2023 just from checked baggage, according to The Points Guy. This figure represents pure ancillary revenue, fees layered on top of ticket prices that have become a critical profit center for the industry. Most major U.S. airlines hiked checked bag fees during the first half of 2024, per The Points Guy, suggesting the revenue model is not merely being protected but actively expanded. The timing of these increases, coming as the industry fought transparency requirements, illustrates the tension between airlines' public messaging about consumer access to information and their business practices.
The Transportation Department framed its rule as part of a broader fight against "junk fees," a term the Biden administration applied to charges across multiple industries that consumers struggle to anticipate or compare. "We will vigorously defend our rule protecting people from hidden junk fees and ensuring travelers can see the full price of a flight before they purchase a ticket," the department stated, according to PBS. "Many air travelers will be disappointed to learn that the airline lobby is suing to stop these common-sense protections."
Airlines countered that the agency was going beyond its authority by attempting "to regulate private business operations in a thriving marketplace," PBS reported. The phrase "thriving marketplace" is technically accurate; airlines are profitable, and consumers continue to fly in record numbers. But a marketplace can thrive for sellers while simultaneously disadvantaging buyers through information asymmetries. The court's ruling addressed only whether the DOT had the statutory authority to impose this particular remedy, not whether the underlying consumer protection concern was legitimate.
The Legal Victory and Its Limits
The 5th U.S. Circuit Court of Appeals' decision to halt the regulation represents a significant win for the airline industry on procedural grounds. American, Delta, United and three other carriers sued the Transportation Department in a federal appeals court, according to PBS. The International Air Transport Association also joined the lawsuit, per The Points Guy, indicating the global aviation industry's interest in the outcome. The court found the DOT likely exceeded its regulatory authority, a determination that could shape future attempts at fee transparency rules.
But the ruling's scope is narrower than the industry's celebration might suggest. The judges did not find that consumers have adequate access to fee information. They did not determine that the current pricing system serves the public interest. They found that this particular rule, as written, likely overstepped the agency's legal boundaries. The distinction matters because it leaves open the possibility of revised regulations that address the authority concerns while still pursuing transparency goals. The DOT rolled out a dashboard in 2022 that transparently displays guarantees airlines have made to passengers, according to The Points Guy, demonstrating the agency's ongoing interest in consumer information access through various mechanisms.
The regulation was first unveiled in April 2024, with new guidelines set to take effect in late April 2025, The Points Guy reported. The Transportation Department announced the rule on April 24, 2024, per PBS. The DOT also issued stricter refund rules that were codified in the Federal Aviation Administration reauthorization bill passed by Congress in May 2024, according to The Points Guy, showing that some consumer protection measures have advanced through legislative rather than regulatory channels.
Industry Responses: Voluntary Transparency Remains Rare
While the industry collectively fought mandatory disclosure, individual carriers have made selective moves toward transparency, though these remain exceptions rather than the rule. JetBlue announced it would allow basic economy customers to bring a full-size carry-on bag on board with no extra charge, according to The Points Guy. Frontier Airlines ditched change and cancellation fees for most tickets and announced sweeping changes to how it presents fees, fares and ancillary bundles, per The Points Guy. These voluntary changes suggest some carriers see competitive advantage in clearer pricing, but they remain isolated decisions rather than industry-wide shifts.
The rule would have required airlines to use DOT boilerplate language to ensure passengers understand they're entitled to a seat on a flight, according to The Points Guy. This provision addressed a separate but related concern: that the proliferation of fare classes and add-on fees has made it unclear to some consumers what they're actually purchasing when they buy a ticket. Airlines must show the fees on the first website page where they quote a price for a flight under the halted rule, PBS reported. The rule would have required disclosure of charges for canceling or changing a reservation, per PBS, standardizing information that currently varies widely in how and when it's presented across different carriers.
What Happens Next
The court's decision does not permanently invalidate the fee transparency rule; it halts implementation while legal challenges proceed. The DOT could revise its approach to address the authority concerns the court identified, potentially pursuing similar goals through different regulatory mechanisms. Congress could also act, as it did with refund rules, to establish transparency requirements through legislation rather than agency rulemaking. The question of whether airlines should be required to show total prices upfront remains unresolved, merely deferred.
For travelers, the practical impact is that the current system continues. A family searching for flights will see base fares in search results, then discover at checkout that four checked bags add $140 or more to their total cost. By that point, they've already invested time in comparing options based on incomplete price information, making it psychologically harder to restart the search. The $500 million in annual consumer savings the DOT projected represents the aggregate cost of this information timing across millions of transactions.
Transportation Secretary Buttigieg vowed to continue the DOT's push for price transparency changes, according to The Points Guy. Whether that push succeeds will depend on finding regulatory approaches that survive legal scrutiny or building congressional support for legislative solutions. The airlines won this round by convincing a court that the DOT overstepped its authority. They have not yet had to defend, in any forum, the proposition that consumers benefit from seeing fees only after they've selected a flight. That argument, the economic and ethical case for strategic fee timing, remains untested. And as long as the industry can keep the fight focused on regulatory procedure rather than consumer impact, it may never have to make it.