Airline Baggage Fees : The Airline Industry’s Financial Salvation?
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13/05/2009 – Airline Baggage Fees : The Airline Industry’s Financial Salvation?
Throughout the past year airlines have suffered massive financial losses due to record high fuel prices, a weakening global economy and declining demand for airline seats.
In an attempt to increase their financial stability many airlines in the United States, and around the world, turned to the ancillary revenue generated by charging passengers for their baggage. As angered as passenger have been regarding the checked baggage fees they have helped major airlines in the United States collect more than US$1,145,385,850 in revenue during 2008…and baggage fees weren’t even initiated by most airlines in the United States until the middle of the second fiscal quarter of 2008.
The fourth fiscal quarter of 2008 saw airlines pull in US$498,600,000 alone!
Checked baggage fees have always provided a significant revenue source for airlines, however prior to the past year this revenue was for excess baggage and overweight baggage. Airlines that do not allow any free-checked baggage, such as American Airlines, now consider all baggage on domestic flights to be ‘excess baggage.’
Airlines that allow passengers to check baggage at no fee, such as Southwest Airline and its policy to allow up to two pieces of baggage at no charge, still generate financial benefits of excess baggage fees. Southwest Airlines raked in US$25,226,000 in baggage fees during 2008, or approximately US$69,112.32 per day.
American Airlines, the first ‘Legacy’ airline to begin charging for all checked baggage brought in US$ 277,991,000 in baggage fees in 2008. To break this down, American Airlines’ baggage fees bring in approximately US$761,619.17 daily from passengers checking bags.
Two months ago I addressed baggage fees here, 28/03/2009 – Checked Baggage Fees : Will They Go Away? Can You Avoid Them? , and stated I that I thought baggage fees were here to stay. Looking at the overall baggage free revenue break down I am now absolutely sure these fees are here to stay.
Wonder how much your airline earned in 2008 collecting baggage fees? Check out the info below from the US Bureau of Transportation Statistics.
American Airlines (AA): US $ 277,991,000
US Airways (US) : US$ 187,081,940
Delta Air Lines (DL)** : US$177,063,000
United Air Lines (UA) : US$132,994,000
Northwest Airlines (NW)** : US$121,599,000
Continental Air Lines (CO) : US$99,315,000
JetBlue Airways (B6) : US$35,307,650
AirTran Airways (FL) : US$29,400,960
Southwest Airlines (WN) : US$25,226,000
Alaska Airlines (AS) : US$24,773,000
Frontier Airlines (F9) : US$15,155,820
Hawaiian Airlines (HA) : US$11,627,180
Midwest Airline (YX) : US$3,977,840
Virgin America (VA) : US$ 2,568,560
Sun Country Airlines (SY) : US$1,304,900
**Delta Airlines & Northwest Airlines are now one airline, operating as Delta Air Lines, under the airline designator “DL”
With airlines earning roughly US$3,138,043.42 daily from baggage fees, do you think we’ll see them go away any time soon?
Happy Flying!
The fees are definitely here to stay. There is no competitive reason today for any of the airlines to cut the fees. Even with Southwest not charging the fees and jetBlue only charging for the second bag the other carriers are not seeing a hit in their booking numbers – at least not one that they can discern and blame on the fees – and walking away from a few million dollars is not something they can or should do.
I don’t like the fees, and I rarely have to pay them thanks to elite status, but it would be foolish for the carriers to forgo that revenue if it isn’t hurting their other performance.
Of course, there are rumors swirling that the GDS networks are eventually going to upgrade and be able to provide details on many of the fees associated with flying a ticket during the booking process. That might eventually introduce the competitive detail needed to make the fees an issue, but until then not likely.
Oh, and DL/NW are each still operating on their own FAA certificate and have really only been combined financially since the end of last October. So while their numbers will combine this year and going forward the operating certificates will too, the numbers will continue to be reported separately for now.
[...] Back in May 2009 I wrote about how airlines were using ancillary revenue, primarily from checked bag…. Many were astonished to find out on that in the fourth quarter of 2008 airlines in the United States had netted US$498,600,000. [...]