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Baggage Fees

In first three months of 2010 airlines raked in $769M in baggage fees

Sherry Mazzocchi  Jun 29, 2010

Checked baggage fees are really adding up – into a bundle of revenue for the airline industry.

Revenues from checked baggage rose by 33% in the first three months of this year (as compared to the first three months of last year), reports USA Today. The airline industry made $769 million on baggage fees, compared with $578 during the same period last year, according to the Transportation Department. Baggage fees are the largest part of revenue from ‘ancillary’ services.

Airlines also pocketed $554 million from fees associated with changing reservations. And they made $534 million from other services, such as sales of frequent flier miles and costs associated with flying pets, though this number was flat as compared to last year.

So what’s the grand total? The airlines raked in $1.86 billion from these ancillary services in the first quarter – and this figure doesn’t include revenue from food, drinks, pillows, blankets and or seat assignment fees.

Regardless of customers’ displeasure, airlines are unlikely to give up the increasing revenue stream.

“This has become a billion-dollar industry,” Anne Banas, executive editor of Smarter Travel, told USA Today. “This is clearly working for the airlines. And they’re not going away anytime soon.”

Travelers, she told the paper, will pay for essentials like checking a bag, but won’t usually pay more for conveniences like re-arranging a flight schedule.

The largest carrier, Delta made $592 million from ancillary services in the first quarter. Spirit, the airline that initiated the baggage fee, proportionately benefitted the most, taking in the highest percentage of their operating income from ancillary services – more than one fifth, or 21.7% - than any other airline.

Fees are boosting the overall industry. Delta reported the most operating profit, $107 million. Southwest, which allows passengers to check up to two bags for free, posted an operating profit of $54 million.

In a move to increase the revenue stream, airlines are packaging new services like ‘free’ bag checks combined with early boarding for a fee.

“They just keep finding more and more things to pay for,” Banas told USA Today, “and packaging it more creatively now.”

In first three months of 2010 airlines raked in $769M in baggage fees
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