May 15, 2013

Airlines flying high on fees for bags, changes

The $6.1 billion they took in last year was crucial to their profitability, and that doesn't count other fees.

The Associated Press

NEW YORK - U.S. airlines collected more than $6 billion in baggage and reservation-change fees from passengers last year, the highest amount since the fees became common five years ago.

And passengers shouldn't expect a break anytime soon. Those fees -- along with extra charges for boarding early or picking prime seats -- have helped return the industry to profitability.

Airlines started charging for a first checked suitcase in 2008, and the fees have climbed since. Airlines typically charge $25 each way for the first checked bag, $35 for the second bag and then various extra amounts for overweight or oversized bags.

The nation's 15 largest carriers collected a combined $3.5 billion in bag fees in 2012, up 3.8 percent from 2011, according to the Bureau of Transportation Statistics. Fees for changing a reservation totaled $2.6 billion, up 7.3 percent.

The airlines took in $159.5 billion in revenue last year and had expenses of $153.6 billion, according to the government. That 3.7 percent profit margin comes entirely from the baggage and change fees.

Delta Air Lines once again took in the most fees -- $865.9 million from baggage alone -- but it also carried more passengers than any other airline. Delta collected an average of $7.44 per passenger, about average for the industry.

Low-cost carrier Spirit Airlines collected the most, an average of $19.99 per passenger in baggage fees last year.

Passengers can expect to pay even more this summer. American Airlines, Delta, United Airlines and US Airways all recently raised the fee for changing a domestic flight reservation from $150 to $200.

Even Southwest Airlines, which promotes its lack of change fees and "bags fly free" policy, recently announced a new policy on no-shows. Passengers who buy the cheapest tickets will have to cancel a reservation before departure; otherwise they won't be able to apply credit from the missed flight toward a later trip.

Many fees were first introduced to allow airlines to offset rising fuel costs. In 2008, jet fuel prices spiked 46 percent to an average $3.06 per gallon as the price of oil hit an all-time high.

Airfares also have climbed in recent years, and jet fuel remains costly -- in 2012, the airlines paid an average of $2.96 a gallon.

Passengers have shown reluctance to book tickets if the base fare is too high, hence the introduction of more fees -- collectively referred to in the industry as ancillary revenue.

Besides baggage and change fees, airlines are charging fees for extra legroom, the ability to skip security lines and for premium meals.

But the airlines are being aggressive about expanding those fees. United recently said in an internal newsletter that it hopes to collect $19.29 in average ancillary revenue per passenger by the end of 2013, up 9.1 percent from the amount it collected last year.

JetBlue, which doesn't charge for the first checked bag, took in a record $22 per passenger in other fees in the first quarter, up 3 percent from the year-ago quarter.

Airlines are also increasing certain fees depending on demand.

Thanks to a computer upgrade, United can now charge passengers different prices to upgrade to an Economy Plus seat, which has more legroom, depending on the route, day of the week, time of day and the location of the seat.

The airline said it increased the dollar value of those seats by 25 percent in 2012.

 

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