Airlines: Bag fees earn less revenue, but other fees are climbing

Airlines' bag fees reaped 4 percent less in 2013 than in the prior year. Because of change in mix of passengers on US airlines, bag fees have leveled off, an analyst says.

Airlines are taking in less money from bag fees than they did two years ago, but they are making up for it by adding charges for a slew of extras, including getting a decent seat.

The government reported Monday that US airlines raised $3.35 billion from bag fees in 2013, down 4 percent from 2012. That is the biggest decline since fees to check a bag or two took off in 2008.

Some passengers avoid bag fees — usually $25 to $35 for domestic flights on the biggest airlines — by using airline credit cards or earning elite-level frequent-flier status. Others carry their bag on board and fight for space in the overhead bins.

The bag-fee figure was part of information released by the U.S. Department of Transportation, which said that airlines earned $7.3 billion in the fourth quarter of last year, reversing a loss of $188 million in the same period of 2012.

The airlines also raised $2.81 billion last year from fees for changing a reservation or ticket, a 10 percent increase over 2012. Fees on checked bags, reservation changes and other services have become a larger share of airline revenue and a big reason why the carriers are making money.

Airline revenue from bag fees — much of it for large or overweight bags — was modest during most of the last decade. In 2008, financially strapped American Airlines expanded the fees to checking a regular bag or two, and other carriers soon matched the move. That year, the industry's revenue from bag fees more than doubled, then doubled again the next year, and rose again in 2010.

After a 1 percent decline in 2011, bag-fee revenue peaked at $3.49 billion in 2012 before falling last year. The most recent figures include 16 leading airlines that report the information to the government.

Robert Mann, a former American Airlines executive and now an aviation consultant, said money from bag fees has leveled off because the mix of passengers has changed — by the airlines' design.

"You have more people exempt (from the fee) because they use the right credit card or they get status in the airline's loyalty program," he said. "The passenger who gets whacked by the bag fee is the infrequent flier," and he thinks more of them are traveling by car, bus, or Amtrak to save money.

Mann believes that many airlines are intentionally making basic economy uncomfortable to pressure customers to pay extra for a better seat, maybe one with more legroom or early-boarding privileges.

Delta Air Lines again led the pack in bag fees, raising $833 million last year. United was next at $625 million, followed by US Airways at $528 million, and American Airlines at $506 million. Delta also led in change fees, at $840 million.

Among the seven biggest recipients of bag fees, only three — US Airways, Spirit Airlines and Allegiant Air — raised more in 2013 than the year before. Spirit and Allegiant charge for many extras that other airlines put in the ticket price — including carry-on bags — but say that this lets them offer lower fares.

As bag-fee revenue levels off, airlines are already looking for new sources of money. Delta said recently that what it calls "merchandising" — other fees such as charging extra for priority boarding, economy seats with more legroom, and upselling to first-class — grew to $165 million in the first quarter of 2014, a 20 percent increase in one year.

Delta President Ed Bastian said the airline believes it can boost that figure to $500 million a year in the next three years.

At Dallas-Fort Worth International Airport, some passengers game the bag-fee system by rolling their bag through security to the gate, then checking it there, where there is usually no fee. Others no longer fight back.

Lou Guyton of Mansfield, Texas, who works for a national animal-protection group and was returning from a trip to New Mexico, said she always checks her bag — on her last flight, she checked two.

"I really don't like to go through security, where you have to take out all your stuff," she said, "and then you have to try to find overhead bin space."

Jim Weck, a telecommunications company program manager from Atlanta, thinks it's time for the now-prosperous airline industry to give passengers a break from all kinds of fees, which took off when the carriers were losing billions of dollars during a period of recession and rising fuel prices.

"We helped you in your hour of need; now it's time to give back," Weck said, sitting next to a baggage carousel at Dallas-Fort Worth International Airport. "No matter what industry you're in, people don't like being nickel-and-dimed."