Baggage fees present a very strange alchemy for airlines. Higher baggage charges deliver more revenue - even when fewer passengers check bags as a result of the fee hikes.No doubt recognizing this, the group of big-5 airlines (American, Continental, Delta, United, and US Airways) all boosted baggage fees during January 2010. IdeaWorks estimates these carriers will realize annual baggage fee revenue of $1.76 billion. The “new money” portion of this amount for the group of big-5 carriers exceeds $117 million.
Southwest Airlines, which has positioned itself above the fray by promising “bags fly free,” is a large and vocal holdout. The carrier’s current advertising campaign virtually assures it will remain on the sidelines for some time. But if Southwest achieved Delta’s per passenger result of $7.32 from baggage fees, its 100 million annual passengers would contribute $732 million to the bottom line.
The US airline industry is unlikely to stop this trend and more tweaking of the fee structure can be expected during 2010 and beyond. Vicky Karantzavelou - Friday, January 22, 2010