Baggage Fees Hurting Airlines Bottom Line

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The truth, however, is exactly the opposite. Airlines collecting baggage fees suffered catastrophic overall revenue declines in the second quarter.

American Airlines, for example, generated an industry-leading $118.4 million in bag fees during the second quarter, a 219 percent year-over-year jump, says the BTS. Yet its total revenue in the second quarter dropped 20.9 percent to $4.88 billion from $6.17 billion in 2008's second quarter. The newly merged Delta ($118 million in bag fees) and Northwest ($67 million) reported a staggering 25 percent decline in combined passenger revenue during the second quarter. United's second-quarter revenue dropped 24.6 percent. Continental's total revenue plunged 22.7 percent, followed by AirTran (18.5 percent) and US Airways (18.4 percent). Alaska Air and its Horizon Air commuter subsidiary shed 12.3 percent of its second-quarter passenger revenue.

Just as in the first quarter, the only carriers to keep their second-quarter revenue declines in single digits were the two airlines that still permit free checked bags. Southwest was down 8.8 percent, and JetBlue's operating revenue declined by 6 percent.

Although it is impossible to generalize about airline revenue trends since the entire industry has contracted due to a number of circumstances in the last two years, the trend lines are undeniable. The carriers that try to generate cash by charging fliers for baggage are the same airlines being penalized most severely by passengers.

If there's any doubt that travelers absolutely despise baggage fees, check out the results of a new flash poll conducted by the Triangle Business Journal. More than half of the participants fingered bag fees as the current airline item they most want eliminated. And their unprompted comments about the fees are withering.

Of course, the nation's revenue-bleeding airlines don't see it that way. They've put their faith in the same bean counters who are blindly "growing" revenue with new fees. In recent weeks, they've begun to charge as much as $50 to check a second bag on many international flights. Last week, the legacy carriers invented a totally new surcharge: $10 if you fly on three traditionally busy days (November 29 and January 2 and 3) during the upcoming holidays.

And British Airways has created an unprecedented category of ancillary revenue: fees on premium-class fliers. Effective October 7, it will charge most U.S. business-class customers $90 a flight for the privilege of choosing a seat in business class more than 24 hours before departure. For U.S. fliers connecting through BA's global hub at London's Heathrow Airport, that means a startling $360 roundtrip in new fees atop business-class fares that already cost as much as $16,000.

Makes you wonder what third-quarter revenue figures are going to look like.

The Fine Print… Can't figure out which airline is charging how much for baggage? Try this chart produced by Orbitz.com, the online travel agency. And remember: most full-fare coach, business-class, and first-class travel is exempt from bag fees. You may also get a fee waiver if you are an elite member of the airline's frequent-flier program.

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