SWA sees fivefold jump in baggage fee revenue, thanks to AirTran--article

General Lee

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Southwest Airlines sees fivefold jump in revenue from baggage fees, thanks to AirTran
By SHERYL JEAN Staff Writer -- Dallas Morning News

Published: 14 May 2013

Southwest Airlines? ?Bags Fly Free? slogan and its overall fee strategy have become sticky issues as the carrier grows and melds with AirTran Airways.

Government statistics released Tuesday show Southwest?s revenue from baggage fees rose nearly fivefold to $144.5 million last year from 2011 ? the biggest jump among the nation?s 15 largest airlines.

It?s a bit of a reporting quirk and a byproduct of the Dallas-based carrier?s purchase of Florida-based AirTran two years ago. Southwest lets passengers check two bags for free, but AirTran charges for bags.

While the two airlines still operate separately, they?re gradually integrating systems and staffs. They began reporting such ancillary fees jointly to the government in the second quarter of 2012.

?As AirTran is integrated more into the company, we?re seeing more?? fee revenue, said Brad Hawkins, a spokesman for Southwest.

When the two airlines are completely integrated by the end of 2014, AirTran?s baggage fees ? and some other AirTran fees ? will disappear.

Overall, U.S. airlines collected a record $6 billion in baggage and reservation change fees in 2012, up 5.2 percent from 2011, according to data released Tuesday by the U.S. Bureau of Transportation Statistics. Baggage fees alone for the 15 largest airlines rose 3.8 percent to $3.5 billion.

Fees have risen steadily since 2008, when airlines began charging passengers for their first checked bag. Passengers typically pay $25 each way to check the first bag, with higher fees per bag thereafter.

Baggage and other fees helped the nation?s 10 largest airlines post a combined net profit of $201 million last year, compared with a net loss of $500,000 in 2011.

Fort Worth-based American Airlines? revenue from bag fees rose 25 percent to $557.4 million last year from 2011. Delta Air Lines had the most bag fee revenue ? $865.8 million, up 32 percent.

Delta also was No. 1 in reservation cancellation and change fees, collecting with $778.4 million. Those fees at American rose 39 percent to $517.7 million.

Southwest does not charge passengers to change tickets, but it reported $32.5 million in reservation cancellation and change fees for 2012 because AirTran charges it. That AirTran fee is scheduled to disappear at the end of 2014.

Southwest?s fees took center stage last month during a conference call with analysts, who grilled chief executive Gary Kelly about new advertisements that don?t mention the airline?s Bags Fly Free policy as in the past.
Analysts wondered if the ads signaled a shift toward charging more fees or of fees playing a larger role in driving revenue.

The intent of the ads, Kelly said, was to promote an array of Southwest features instead of focusing on one.

?There?s just a lot more to Southwest Airlines than not charging for bags,? he said. ?There?s no intent here to change the positioning of Southwest Airlines? brand with this ad campaign.?

Customers like the luggage policy so much that Kelly estimated the airline would lose nearly $1 billion a year in revenue if it began charging for bags.

Southwest posted a net profit of $431.3 million, and revenue rose nearly 4 percent to $24.9 billion in 2012.

That higher revenue stems, in part, from new service, adding seats to planes, flying fuller planes and launching revenue streams.

Southwest, for example, is selling premium boarding positions at airport gates and raised its EarlyBird Check-In charge from $10 to $12.50.

And Kelly left the door open for bag fees. ?I don't want us to be pinned down into perpetuity on what we might or might not do,? he said. ?There is no change that is imminent.?

Follow Sheryl Jean on Twitter at @SherylJ





Bag's fly free, eh?


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redflyer65

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Thanks General. I'm glad your obsession with everything Southwest is alive and well.

PS - I never find myself scouring the internet for article about Delta. Why is that? Maybe because unless it's some major, nationwide news story I really don't care.
 

jonjuan

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Thanks General. I'm glad your obsession with everything Southwest is alive and well.

PS - I never find myself scouring the internet for article about Delta. Why is that? Maybe because unless it's some major, nationwide news story I really don't care.

It's not that of a big deal to him as his mom has high speed Internet in the basement.
 

HowardBorden

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Government statistics released Tuesday show Southwest?s revenue from baggage fees rose nearly fivefold to $144.5 million last year from 2011 ? the biggest jump among the nation?s 15 largest airlines.
STOP THE PRESSES! The airline that doesn't charge for bags has a fivefold increase in baggage fees after purchasing an airline that charges for bags.
 

General Lee

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STOP THE PRESSES! The airline that doesn't charge for bags has a fivefold increase in baggage fees after purchasing an airline that charges for bags.

Sorry, it's just classic that an airline that doesn't believe in bag fees itself, keeps them at a subsidiary. Funny stuff.


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HowardBorden

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Sorry, it's just classic that an airline that doesn't believe in bag fees itself, keeps them at a subsidiary. Funny stuff.
Southwest has a very profitable business model that does not rely on baggage fees to generate revenue. Conversely, the wholly owned subsidiary relies substantially on baggage fees to remain profitable.
 

jonjuan

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Sorry, it's just classic that an airline that doesn't believe in bag fees itself, keeps them at a subsidiary. Funny stuff.


Bye Bye---General Lee

General, shouldn't you be in Europe drinking beer on a Saturday instead of hanging out in an Internet cafe? Please tell us you're not at home posting 96 times in one day on a Saturday.
 

zippy32

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I don't know what the big deal is. I really don't think anyone actually believes that SWA won't be charging for bags when Amadeus comes on line.
 

General Lee

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General, shouldn't you be in Europe drinking beer on a Saturday instead of hanging out in an Internet cafe? Please tell us you're not at home posting 96 times in one day on a Saturday.

I have weekends off mostly, unless I can get a Greensliip, which pays me double to drink beer over in Europe. Also, a lot of you guys don't seem to understand that you can use a smartphone and look at FI from almost anywhere, including Europe for me, and Midland for you. Invest in the future, buy a smartphone. Good luck Jonny!


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freightdogfred

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Southwest has a very profitable business model that does not rely on baggage fees to generate revenue. Conversely, the wholly owned subsidiary relies substantially on baggage fees to remain profitable.

Au contrare, Pierre...As the wholly owned subsidiary is now operated by remote from the mothership, revenue generated per aircraft is higher for the subsidiary than a Southwest aircraft. Southwest controls all ticket pricing and associated costs for operation, yet realizes greater yield due to lower costs and increased revenue from the bag fees.
 

General Lee

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I don't know what the big deal is. I really don't think anyone actually believes that SWA won't be charging for bags when Amadeus comes on line.

Oh yeah? Welcome to becoming a legacy. Spirit is the new low cost King, and GK doesn't like that.


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General Lee

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Yep-Like button + a million.

You and DCA320 should go punch each other's buttons in a hotel room somewhere. You guys could be "real" friends together. That's "hot dog awesome!" You two have fun...


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DCAA320

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Also, a lot of you guys don't seem to understand that you can use a smartphone and look at FI from almost anywhere, including Europe for me, and Midland for you. Invest in the future, buy a smartphone. Good luck Jonny!

Bye Bye---General Lee

You are in Europe and you are trolling on FI on an iPhone? Loser.

I just left Athens, FI was the last thing on my mind.
 

General Lee

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You are in Europe and you are trolling on FI on an iPhone? Loser.

I just left Athens, FI was the last thing on my mind.

Was JonJuan on your mind? You made a response, so you were obviously on FI. (remember your + 1 million response? Really clever) See, even you can't resist........don't fib....

And, as I stated to Jonny, your buddy, I usually don't fly on Weekends, unless it's for double pay. Bye!


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DCAA320

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Was JonJuan on your mind? You made a response, so you were obviously on FI. (remember your + 1 million response? Really clever) See, even you can't resist........don't fib....

And, as I stated to Jonny, your buddy, I usually don't fly on Weekends, unless it's for double pay. Bye!


Bye Bye---General Lee

Hey dip$hit, you are losing it. I have never in my life posted on FI from Europe as you imply, and I made no + 1 million response. I am now calling you a stupid loser.
 

waveflyer

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STOP THE PRESSES! The airline that doesn't charge for bags has a fivefold increase in baggage fees after purchasing an airline that charges for bags.

This^^^

You have to admit general- the premise of the headline is pretty damn funny.

Next headline:

"Delta realizes 100 million times more revenue from RJs than SWA"

Do the math- the headline wouldn't be wrong.
Surely a sign of southwest's demise
 
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Sorry, it's just classic that an airline that doesn't believe in bag fees itself, keeps them at a subsidiary. Funny stuff.


Bye Bye---General Lee

dude, or girl, whichever it is, you really do need help. seriously, get some.
 

Scoot 11

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AWESOME! Another SW vs. DL thread. You guys rock!
 
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