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Baggage fees

Airline bag fees face uncertain future  Aug 04, 2008

CHARLOTTE, N.C. - Large airlines are reporting millions of dollars of new revenue from recently introduced bag-checking fees, but whether the practice can continue remains an open question.

While the fees have benefited the carriers where they've been implemented, two members of the group have been strongly opposed to the move. One is Southwest, the world's biggest airline by passenger count. The other is Delta, which is poised to become the largest carrier in terms of revenue passenger miles after it merges with Northwest.

Perhaps the most telling comment on the charge was offered by Southwest CEO Gary Kelly during last week's earnings conference call. He said reservations agents tell him the first question they routinely hear from customers is, "Do you charge to check a bag?"

Because Southwest doesn't, it's gaining passengers, Kelly says. "We never had thoughts that we would charge to check a bag," he says. "We carry more passengers than anybody in the world, and we would probably have a customer revolt on our hands."

In fact, soon after American Airlines parent AMR introduced its concept of charging for the first bag in May, Southwest unveiled a new marketing campaign that proclaimed "Fees Don't Fly With Us" and "Bags Fly Free."

Delta has not been quite so blunt, but its lack of enthusiasm is quite clear. Asked about the first bag fee on the carrier's earnings conference call two weeks ago, President Ed Bastian responded: "We will continue to study it, but we have no plans to implement it at this point."

Last week, Delta took a step that led not so subtly to the conclusion that it has no interest in the first bag fee, saying it will charge an industry-high $50 for the second bag, twice what most others demand, and reiterating it will not charge for the first bag.

"While we need to help offset the unprecedented spike in fuel costs, we believe customers should be allowed to check a bag and [also] carry on a bag and a personal item free of charge," says spokeswoman Betsy Talton. In general, airlines say, about 50% of passengers check a first bag. Talton said fewer than 20% of Delta customers check a second bag.

At the moment, the first bag fee is in place at four of the seven biggest carriers. In mid-July, Northwest became the fourth to impose it, joining American, United and US Airways.

However, Continental remains a holdout while it continues to evaluate the charge.

"We watch customer reaction," said CEO Larry Kellner, on an earnings conference call this month. In particular, he said, the carrier wants to see if travelers "don't distinguish between carriers charging and not charging," or if they book away from carriers who have a first bag fee.

If the former is true, "we can't afford a $30 fare differential," Kellner said, speaking of the round-trip implication of a $15 fee."Economically, that will put a lot of pressure on us." But if customers look elsewhere, then the charge could be doomed. Continental might choose not to impose one, and the Northwest experiment would likely conclude at some point after the merger with Delta is complete. In that case, it would be tough for just three airlines to retain it.

Kellner also said a first bag charge involves "operational challenges." At US Airways, which imposed the charge for tickets purchased on and after July 9, the extent of the challenges remains unclear. Airline spokesman Morgan Durrant says that so far, the carrier has not seen any noticeable change in passenger behavior, but it expects to as more fliers are affected. US Airways plans to train airport agents to manage those changes.

However, Mike Flores, president of the US Airways chapter of the Association of Flight Attendants, says disruptions are already occurring.

"We are seeing people bring more and bigger carry-on items on board, or bring two Rollaboards," Flores says. "Obviously, they won't all fit in the bins, so they pile up on the floor. That forces flight attendants to be bag police, and it causes delays when agents have to come to the airplanes and write tags."

Airline bag fees face uncertain future

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