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Baggage Fees Making Airlines Rich


NEW YORK (MainStreet) — By now, we’ve all heard about the wide variety of new airline fees cropping up all over the place, whether it’s charging extra to sit in seats with more legroom, to rent a blanket or pillow, or just to borrow a pair of headphones during the flight.

Airlines have relied more and more on these fees in recent years, and in the process, they have gone from losing billions in 2009 to earning a net profit of about $4 billion in 2010, with some $4.3 billion of their revenue coming from ancillary fees in the first three quarters of the year.

The most lucrative fees–by far–have not been the random new ones, though, but rather increased charges for an old staple: baggage fees. According to data from popular travel website HipMunk (see graphic below), the major domestic airlines earned more than $2.5 billion from baggage fees in the first three quarters of 2010, or more than half of the total generated from fees.

In 2009, airlines earned $2.7 billion from baggage fees for the entire year. Yet, just one year earlier, in 2008, airlines earned less than half of that amount from baggage fees, about $1.15 billion, and the drop is even more significant when you go back further. In 2000, airlines took in $209 million from baggage fees, and in 1990 they took in $119 million.

Now, unless the number of airline passengers has increased tenfold in the last decade, the increased profits must be the result of higher fees. Indeed, as HipMunk’s data shows, most of the major airlines including Delta (Stock Quote: DAL), American (Stock Quote: AMR) and United (Stock Quote: UAL) now charge $50 for the first checked bag, $120 for the second and more than $300 for the third, with comparable charges for overweight luggage and additional checked baggage. Meanwhile, one airline, Spirit, has even gone so far as to start charging for carry-on luggage in addition to checked baggage.

It’s not hard to see the incentive for airlines to tack on these previously unheard-of fees: Not only do they net huge profits, but as HipMunk points out, the revenue airlines earn from baggage fees is not even taxed.

This means that airlines can quite literally screw you over without the slightest penalty, except, of course, retaliation from customers who switch to domestic airlines like Southwest (Stock Quote: LUV) and JetBlue (Stock Quote: JBLU) that are more reasonable with their fees.

[To zoom in on the graphic below, you can view the original on Hipmunk's website.]

Baggage Fees Making Airlines Rich

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