WASHINGTON (Reuters) - The head of a U.S. Senate panel harshly criticized rising airline fees for luggage and seat assignments, saying carriers are looking for new ways to extract more money from passengers.

Senator Richard Blumenthal, who chairs the Permanent Subcommittee on Investigations, is convening a hearing Wednesday titled "The Sky's the Limit -- New Revelations About Airline Fees" with American Airlines, United Airlines Delta Air Lines, Spirit Airlines and Frontier executives testifying.

"Airlines these days view their customers as little more than walking piggy banks to be shaken down for every possible dime," Blumenthal said in prepared remarks.

A report released by Blumenthal last week disclosed the five airlines collectively earned $12.4 billion in revenue from seat fees between 2018 and 2023.

Blumenthal's panel spent a year investigating, finding carriers are increasingly using algorithms to set fees and said some carriers may be avoiding federal transportation excise taxes by labeling some charges as nontaxable fees.

Carriers are working on customer-specific pricing "to discriminate against passengers, and to raise fares and fees for consumers the airline believes will pay more," Blumenthal said. 

Airlines say the fees are transparent and they need to offer consumers choices while they face rising costs.

American Airlines vice chair Stephen Johnson will tell senators legacy carriers need to "appeal to the most budget-conscious customers ... The intense competition in the industry required us to design our product offerings very deliberately."

Delta executive Peter Carter said in written testimony the airline's goal is "to provide options and value for every customer... Fee practices that erode the trust and loyalty of our customers are not in our best interests."

Blumenthal's committee found budget carriers Frontier and Spirit paid $26 million to gate agents and others between 2022 and 2023 to catch passengers not paying for bag fees or having oversized items.

Frontier personnel can earn $10 for each bag passengers must check at the gate, the report said. Frontier CEO Barry Biffle defended the practice, telling Reuters passengers who were trying to evade paying were shoplifting.

Earlier this year, airlines sued to block the U.S. Transportation Department's new rule on upfront fee disclosure, while carriers in 2018 successfully lobbied against bipartisan legislation to mandate "reasonable and proportional" baggage and change fees.