The paradox of airline baggage fees: Higher charges, lower profits

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Checked baggage fee revenues alone have increased by 50% in the past year and U.S. airlines collected more than $2.5 billion in baggage fees in the 12 months ending September 30, 2009 according to U.S. Department of Transportation (DOT) data. Now, just a few weeks into this new year, most airlines have raised checked baggage fees once more.


Yet, even after collecting those many billions of dollars in surcharges for services that were once standard, the five major network or "legacy" airlines (American, Continental, Delta/Northwest, United, and US Airways) still managed to lose a combined $3.8 billion in 2009. Of course, those losses would be substantially higher without ancillary fees, but it is doubtful that these new baggage fee increases, or any other new or hiked ancillary fees, will return the network airlines to profitability again.


While the big five network airlines all lost money in 2009, low-cost carriers (LCCs) like AirTran, Allegiant, jetBlue and Southwest reported profits. Those airlines also benefitted from ancillary fees — little Allegiant Air leads all other airlines worldwide with ancillary fees reaching 30% of total revenue, according to the Centre for Asia Pacific Aviation— but most U.S.-based LCCs depend far less on ancillary revenue than the network carriers.

http://www.usatoday.com/travel/columnist/grossman/2010-02-09-ancillary-fees_N.htm