Airlines to passengers: Get used to bag fees
Why have charges for extra luggage spiked recently?
With fuel prices up dramatically in the past few years, airlines have struggled to maintain profit margins without raising ticket prices so high that passengers are scared away.
According to report released by the Bureau of Transport Statistics, U.S. airlines added more than $1.7 billion in baggage fees to their coffers, the most ever received in the first six months of a year.
In the first quarter of 2012, America's 15 largest airlines collected $816 million. The number grew to $932 million in the second quarter.
Leading the way is Delta Air Lines (DAL), with $231 million in the second quarter, while United Airlines (UAL) was second with $195 million. American, US Airways (LCC) and Southwest (LUV) rounded out the top five. (Southwest does not charge for the first checked bag, but its subsidiary AirTran Airways does.)
Baggage fees were introduced in 2008 and have gone up since, as as Scott Mayerowitz of AP points out:
Many of these fees were first introduced to allow airlines to offset rising fuel costs. In 2007, the airlines paid an average of $2.09 a gallon for jet fuel. The next year, prices spiked 46% to $3.06. During the first seven months of this year, airlines have paid an average of $2.96 a gallon.
Airfares have climbed in recent years but not as fast as the cost of fuel. Passengers have shown reluctance to book tickets if the base fare is too high, hence the introduction of the fees.
The increase in baggage fees is also a part of the overarching story of how airlines have been increasingly dependent on ancillary revenue since the industry was deregulated in the 1970s.
When low-cost competitors such as Southwest, Spirit Airlines (SAVE) and JetBlue (JBLU) entered the market, offering low airfares by cutting perks, legacy carriers like Delta and United had to go in the same direction as well.
In the past, the cost of meals, checked baggage and the use of reservation agents were built into air tickets, which were priced higher. Customers who didn't check baggage in were in effect subsidizing those who did.
These days, you pay a low price for your ticket and decide whether or not you want to forgo the frills (although some people would argue the first checked bag isn't a frill).
Airlines have become increasingly dependent on ancillary revenue like baggage fees and reservation-change fees. In 2005, ancillary revenue represented 7.1% of United's total revenue. In 2010, that rose to 9.3%. Delta experienced a rise from 8.3% to 13.0% in the same time frame.
While passengers may have the choice of deciding whether to pay and check in baggage, they increasing do not have choices in other areas of air travel. In the same report, the BTS notes that as US airlines continue to consolidate in a tumultuous industry, passengers "can expect fewer carriers to choose from (and) fewer flights to smaller cities."
More from Minyanville
- Embedded at Occupy Wall Street
- The 10 Smallest Cap Stocks With the Largest Institutional Investment
- Has the Innovation Curve Come and Gone for Apple?
Now that I'm retiring, I hope to never take a US flight again. I agree with Garys1216 and havasu46. Air travel is deplorable -- cramped seats, people carrying on the kitchen sink, and nonexistent service -- EXCEPT, KLM, Air France, and Lufthansa.
THEY know how to treat people.
I miss the days of peanuts, a deck of cards, plastic wings, saying hi to the captain, low security, smoking, a pillow, a blanket, and a complete hot meal. I don't like "Flight Attendent". I would rather roll it back in time. Anyone have a time machine?
I fly Southwest, and love them fiercely.
Please, never change.
I fly EVERY week for the last 9 years. I have seen it all...Yes some of the flight crews are mean but the general population is also pretty mean as well. Nobody will accept being told anything, most don’t follow the rules or think it applies to them. People bring way too much stuff with them. Do you realize a flight attendants does not get paid until the door closes AFTER boarding? TO me that sucks and I would not put up with any s%^t if I was not getting paid either. Also, most of these airlines have gone broke at one point or another (bankruptcy restructure) so a ton of these employees have lost pay or pensions = bad attitude. In the 9 years I have been flying weekly (Ugh) I have seen things get worse on both sides. One thing that I do know is once u get status like I have on these airlines, they treat u much differently. I won’t deal with a "regular" boarding person...I go to the airline club and when they see my status their attitude changes dramatically...I usually get upgraded to 1st class, but it blows me away the difference in the flying experience. If you can afford it...1st class is the way to get treated like a half way decent person. I long for the day when i dont have to fly...if I never flew again it would not break my heart. Good Luck to all of you, see you in the air!
Oh for the days of western air lines and PSA. Those were better times.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
Stocks drift lower and bonds are hit as investors await the Fed. Prepare for higher volatility this week.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.