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Airlines on track to collect more than $3 billion for checked luggage this year

August 26, 2010

Thought those reservation change fees I showed you yesterday were shocking? Then check this out.

Here’s what airlines have charged us in baggage fees during the last 20 years. Notice any trends?

From 2007 to 2009, the number jumped from $464 million to an astounding $2.7 billion, according to the Bureau of Transportation Statistics. If the first-quarter number holds for the rest of the year — and that’s a big “if” considering that it continues to go up — then the airline industry will collect more than $3 billion in baggage fees for 2010.

Holy smokes!

Let’s look at some of the biggest beneficiaries.


Delta Air Lines leads the flock, as it did with change fees. That’s some jump in the last two quarters!

American Airlines doesn’t want to get left behind. No worries, boys, you won’t.

Neither does Continental.

Or United.

Even “no-fee” Southwest is helping itself to some of the boo-tay. You might even say it’s an early adopter, when it comes to luggage charges.

Truth is, this is going to continue. The sky is the limit, figuratively speaking, for these luggage fees.

It won’t stop until we say it stops.

Christopher Elliott is the author of Scammed: How to Save Your Money and Find Better Service in a World of Schemes, Swindles, and Shady Deals. Critics have called it “eye-opening” and “inspiring” — it’ll “grab your attention and won’t let go.” Order your copy now on Amazon, Barnes & Noble or iTunes.

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19 comments

  • flutiefan

    and yet the passengers at the Southwest counters still complain and yell about having to pay an overweight fee when their bags are 50+lbs, or when they want to check in 3 bags.
    don’t they get how lucky they are? 2 bags @ 50lbs each for FREE….that’s unheard of these days, as evidenced by your article.

  • Arizona Road Warrior

    As an elite FF with US Airways and a Star Alliance Gold Member, I can check my bags for free on US, CO, UA, etc.

    The fares today are lower than the fares 10, 15 and 20 years ago. If the playing field is level for all airlines, these fees will go away.

  • KathyJ

    Note the difference in scale on the Y-axis (the left one) for Southwest. Less than 10% of United’s & Continental’s, 2% for American, and too small to bother figuring for Delta’s.

  • Steve

    Chris, I have to take issue with the inclusion of Southwest in this post and the implication that they’ve somehow jumped on the baggage fee bandwagon…when (as KathyJ already pointed out) they are collecting a very small fraction of the bag fees that the legacy carriers are collecting. Since their policy is two checked bags under 50 lbs each included in the price of the fare, it’s reasonable to conclude that the fees they collect are from passengers with an abnormal amount of baggage to check. To put it another way: even if you oppose checked bag fees, to criticize Southwest for the ones it collects is to say that you think passengers should be entitled to bring an unlimited amount of luggage with them at no extra cost. I doubt that’s really what you think.

    On the subject of checked bag fees in general, my reaction to the fact that the airlines will collect $3B from them this year is “so what?” It seems reasonable to assume that if they hadn’t unbundled checked bag fees, they would have increased fares. If no airline charged for the first two checked bags and they had instead raised their fares by a collective $3B (to maintain the same amount of revenue), who exactly would be better off. The people who check two bags every flight would be in the same position; the people who don’t check bags or only occasionally check them would be in a worse position.

    @Arizona Road Warrior: You’ve mentioned the lack of a level playing field several times recently in relation to the legacy airlines…can you expand on what you mean by that?

  • http://www.imageswritten.biz susan

    @Steve I am so glad you asked – here is the problem I have with paying for my luggage.

    a) luggage for many is part of the travel experience and it is in my opinion assumed you will travel with something. That said I can pack all I need for a long weekend in small, regulation carry on bag. That said – I think charging extra for checked luggage is a scam and we all know it.

    b) When you make it a service an ala carte service – then you actually have to deliver. When my bag is checked gratis as part of my ticket, I am inclined to be a bit more understanding when it does not make it.

    Charge me a premium fee and that bag had better be there.

    In my opinion, if you pay $50 for the checked bag and it doesn’t get there – the airline should refund you the charge. We all know that doesn’t happen.

    To @Arizona’s point – airlines have reached a point where they cannot make money (now before we buy into the crying poor routine – I will say my husband is a pilot and well – certain ppl get paid really well, whilst crying poor)

    I take the level playing field to be – let’s charge ticket prices – which fairly represent what it actual costs to provide a standard level of safe and reasonable service. There have been times where the cost of a ticket – does not cover the actual costs of fuel, labor and maintenance

    The American public has an appetite for cheap. The problem is cheap has lead us to fee insanity, lack of what I deem reasonable service and I will say it, I am increasing concerned about safety. Every time my husband lands on the ground, I am thankful. I wonder just what corner will cut next in the name of providing cheap airfares. It just takes one corner too many…

  • Arizona Road Warrior

    @ Steve: It isn’t a level playing field…the playing field is slanted to the discounters like Southwest Airlines, Jet Blue, etc. based upon their business model (point to point versus hub and spoke) that they adapted. If I was starting up an airline, I will do the same thing that Southwest, JetBlue, etc. have done because it will be very difficult for the legacy airlines to change their business model (more about this later).

    Southwest and the other discounters have ‘cherry-picked’ their routes…choosing the most popular routes to fly. The 69 airports that Southwest serves…all of them are in the top 200 airports in regards to passengers’ traffic. There are 599 airports certificated to serve commercial air carrier aircraft with nine or more seats and there is of total of 18,000 airports in the US.

    The legacy airlines fly to the medium and small markets. I have been told by two different airline executives for two separate airlines that the popular routes ‘subsidizes’ the flights to the medium and small markets. I don’t know if this is true or not but let’s make the assumption that these airline executives didn’t lie to me.

    When Southwest expanded outside of Texas, they started to addservices for the popular routes. In order to compete with Southwest and the other discounters that came on the scene, the legacy airlines had to slash the fares on the popular routes to compete. With less revenue on the popular routes, the airlines started to lose money.

    The reality is that fares are lower today than what they were 10, 15 and 20 years ago. My first flight was in 1984 on US Airways between IND and LGA. I still have the receipt for that ticket. The fare was $ 325 (it was purchased three weeks before departure). On June 28, 2010, I did a quick fare search on Orbitz (departing on 7/19 and returning on 7/22) and the fares were:

    Delta: $ 185
    US: $ 186
    Air Tran: $ 192
    CO: $ 223
    UA: $ 223
    AA: $ 332
    Midwest: $ 333
    Frontier: $ 389
    Southwest: $ 445.80 (see note)

    Note: I went to the Southwest website since Southwest does NOT allow its fares to be included in most if not all of these fare search engines, the cheapest fare was $ $445.80.

    Since 1984, inflation was been 85% based upon the consumer price index (Source: http://www.inflationdata.com). The $ 325 fare should be $ 601.25 (325 x 1.85) today. It is my guess that these $ 185 and $ 186 flights from Delta and US Airways are at least 95% capacity if not more. If these flights were priced at $ 600, it is my guess that these flights will not be a full capacity as well as some people will be driving to New York from Indiana as well as not having 9 airlines servicing this destination\route.

    In 1984, US Airways was making money when the fare was $ 325 ($ 601 in 2010 dollars). How can Delta, CO, US, UA, etc. be making money when the fares are $ 185 to $ 225 without having these various fees?

    People like to say that the legacy airlines should emulate Southwest. IMHO, the public will be up in arms if the legacy airlines emulated Southwest. There will be congressional hearings.

    The first step for the legacies will be 1) raise the fares to these medium and small markets to cover their costs as well as a marginal ROI or 2) stop flying to these medium and small airports. Someone will say that the legacies could reduce service but to have only one plane type like Southwest in order to have lower maintenance costs, a 737 or A319\320\321 can’t land at these small market airports.

    The people living in these medium and small markets will be upset with the higher fares. On the other hand, if the legacy airlines stop flying, they will have to sell of their smaller aircrafts, layoff people off, etc. Again, the public will be upset; the labor unions will be upset, etc.

    For decades, the legacy airlines have invested in their hub and spoke infrastructure (people, equipment, airport improvements, etc.) and it is hard for them to change this model without people being upset with no service or much higher fare.

    To level the playing field, legislation\regulation\etc. should be passed that will tax or penalize the airlines that don’t serve an airport. A few months ago, I flew into the Tri-City Airport (PSC) in Pasco, WA. This airport is served by Allegiant, Delta, Horizon and United plus code share flights by AA, CO and US Airways. These airlines should receive a credit. Airlines such as Southwest, JetBlue, AirTran, etc. that doesn’t fly to PSC should be taxed. Something similar to the salary caps in professional sports, teams that go over the salary caps are ‘taxed’.

    IMHO, this will allow reasonable fares on the popular routes\flights while keeping airline services to the medium and small airports and keeping the fares reasonable. Someone will argue that the government should subsidize the fares…first, we are broke and don’t have the money; second, the people who are flying should pay with the higher fares since the airlines will push the ‘tax’ onto the consumer…not the people who don’t fly; third, government is already subsidizing the airlines that fly into the super small airports (i.e. 600 to 18,000)

    I am no fan of the legacy airlines. I think that the corporate culture at the legacy airlines have been polluted when the airline industry was regulated. I think that the management of these legacy airlines has made several bad decisions over the years. I think that the unions at these legacy airlines have made too many demands. I think that the business models of the legacy airlines are wrong. However, I think it is unfair to expect a legacy airline like AA, CO, DL, UA and US to have super low fares for flights to Ten Buck Two so that people in these small markets as well as the politicians won’t get upset as well as having super low fares on the popular flights to compete with the discounters.

  • Liz

    I’d like to see a graph of revenues from ticket sales over these same time periods.

    I’m not fan of “unbundling” and would just rather see higher fares, but if you should probably tell the whole story here.

  • Steve

    @Susan: I’m in complete agreement with you that if the airline fails to get your luggage to you immediately at your destination, the baggage fee should be refunded. Charging a separate fee for baggage certainly makes lost/delayed luggage even more unacceptable. Beyond that, I still feel that I’d rather have the option of paying a bag fee if I check a bag rather than pay a higher base fare whether or not I need to check a bag (sometimes I do, sometimes I don’t).

    @Arizona Road Warrior: you’ve raised a number of interesting points. I think you and I have both been beating a dead horse with our discussion of Southwest’s fares, so suffice it to say that I agree that they’re not always the cheapest but I disagree with your opinion that they’re rarely the cheapest.

    Beyond that, I have a hard time understanding why government intervention into the free market (taxing airlines who choose not to service smaller-market airports) would be a good thing for most passengers. I think that part of the problem with air travel these days (and certainly a big part of the problem with delays) is that there are too many flights. That’s not exclusively due to the number of small-market airports, since it’s become a trend for airlines to use small regional jets even on heavily traveled routes, to squeeze in more flights per day and thus more scheduling options. You mentioned that there are roughly 600 airports that are capable of handling commercial traffic. While I can see the justification for a small-market airport that is a significant distance away from a larger airport, I have a much harder time justifying the existance of commercial service from one that is an hour or less away from a larger airport.

    You also briefly alluded to the fact that the government already partially subsidizes service to small airports (via the Essential Air Service program). According to Wikipedia, that subsidy amounts to an average of $74 per passenger – and that number is much higher for some flights. I don’t doubt that the legacy airlines still find those routes to be among the least profitable, but let’s not forget that they’re already receiving government help in order to run them. If your suggestion of taxing airlines that don’t service a particular airport was to be implemented, I’d argue that prior to that, any and all subsidies to airlines that service small airports should be ended. (Moreover, should that tax apply also to large airports? By your statistics, for example, Southwest does not serve 131 of the 200 largest airports in the country. Should they be penalized for that, as well as penalized for not serving small airports? If so, why?) Your proposal would also be a barrier to any new airlines, regardless of whether they were discount airlines or not, since I doubt any new airline would be able to serve small markets right out of the gate.

    Finally, your comment that the legacy carriers could not convert to a single type of aircraft like the 737 or A320 family is correct, but it’s not primarily because the small-to-medium market airports they service could not handle those planes; it’s because the *passenger volume* at those airports could not justify them. Many small airports have at least one runway that could accommodate a plane like the 737/A320.

  • Tom

    I would like to thank all those who insist on bringing your entire wardrobe for a weekend getaway for helping to keep my airfare affordable.

  • Arizona Road Warrior

    @ Steve – “You also briefly alluded to the fact that the government already partially subsidizes service to small airports (via the Essential Air Service program). I don’t doubt that the legacy airlines still find those routes to be among the least profitable, but let’s not forget that they’re already receiving government help in order to run them.”
    - – - – - – — – - – -
    The EAS program are for the super small airports. According to the data that I have, none of the legacy airlines received any money from the EAS program…most if not all of the EAS money goes to small airlines.

    @ Steve – “Finally, your comment that the legacy carriers could not convert to a single type of aircraft like the 737 or A320 family is correct, but it’s not primarily because the small-to-medium market airports they service could not handle those planes; it’s because the *passenger volume* at those airports could not justify them.”
    - – - – - –
    This is correct…I assumed this was a given so I didn’t include it. I have been to several airports that flights have been ‘weight restricted’ for CRJs, Dash-4s and Dash-8s.

  • Kevin M

    If I read the charts above correctly, the “spike” in Southwest’s baggage fees, compared to the other airlines, occurred much earlier, about the time that Southwest went to charging for a passenger’s third checked bag and (slightly later) for bags between 50 and 70 lbs. The original limit was 3 bags at 70 lbs each. I believe that was before most of the other airlines started charging for the second checked bag, and long before any of them started charging for the first. As others have commented, to lump them into the “bag fee grab” airlines is very misleading.

    AZ RW, you’ve trotted out that single IND-LGA example over and over again, and it’s not that I doubt that particular comparison, but I can assure you out of long experience, on many if not most flights, in many markets, Southwest is the least expensive, even before baggage fees are added in for the legacy carriers. Yes, they only fly to 69 airports, but those are not the 69 largest markets (in some cases, they fly to more than one airport in a “market”, such as the SF Bay area and in the LAX/Burbank area).

    They have made a business decision to offer service in areas where it makes financial sense to do so, much as any other business does. Should Macy’s be penalized for not having a story in every town that might want to shop there, regardless of whether it can profitably operate in so small a market?

    For years, people understood a basic tradeoff between big-city and rural life (and all the intermediate types of living along the continuum – small cities, suburbs, small towns, etc.). The bigger the city, the more amenities were available but less space and quiet; certain things (namely, commodity items) were cheaper in big cities because of competition and economies of scale; other things (real estate) were more costly because of limited supply and high demand. Somewhere along the way, people got a sense of entitlement and broke with that understanding, insisting that you should be able to live 3 hours from a major city but still have all the amenities of big cities.

    People in Pasco, WA have no inherent “right” to cheap airfares. Perhaps Frontier or Airtran, if not Southwest, will target that airport for expansion at some point, perhaps not. But to penalize a company for trying to bring some semblance of order and sense to air travel is beyond stupid.

  • Steve

    @Arizona Road Warrior: “The EAS program are for the super small airports. According to the data that I have, none of the legacy airlines received any money from the EAS program…most if not all of the EAS money goes to small airlines.” If you don’t define subsidiaries of the legacy carriers as legacy carriers, then you’re right (and in any case, you’re right that much of the money goes to very small airlines that are in no way affiliated with the legacy carriers). I assumed from your Pasco, WA example (which, to be clear, does *not* receive EAS money) that for the purpose of this discussion, United Express, American Eagle, etc, are considered “legacy carriers.”

    Anyway, if I’m opposed to some kind of subsidy for service to very small airports (be it a government subsidy or a tax on other carriers), I’m doubly opposed to any kind of subsidy for service to mid-sized airports…particularly those for which there are other good options within a relatively short distance. My local airport (MSN) is what I’d call a mid-sized airport, and while it’s a nice enough airport, it’s best suited for business travelers who absolutely need to fly out of Madison. In general, the fares from here to anywhere are higher than the fares from ORD, MKE, or MDW (and only 12 cities can be reached nonstop). So for the most part, I travel the 1.5-2.5 hours by car to get to a bigger airport and fly out of there; even with gas and higher parking, the fare is often cheaper and the extra time spent is minimal since it often eliminates a connection. I don’t see why carriers who don’t service MSN should be penalized for choosing not to, especially if that penalty would mean they’d have to increase fares on more heavily traveled routes.

  • Scott

    Wow. Most of you want to have your cake and eat it too.

    @ Steve: Point of Clarification. “United Express” and “American Eagle” are not carriers. “United Express”, for example, is simply a term that explains when another carrier is operating a flight for United. There are approximately 9 carriers that fly (some of the time) as “United Express” and this changes periodically. SkyWest is one airline that flies as “United Express.” That does not make SkyWest a legacy carrier. In fact, SkyWest also operates some flights as “Delta Connection.”

    These airlines are NOT subsidiaries of legacy carriers. They are independent airlines that contract to provide a service. And nowhere in AZ’s example of Pasco did he talk about these carriers. You have been mixing your arguments.

    People are going to fly who they want to fly. If you liek Southwest, great. If you fly legacy carriers, fine. These “discussions” are not going to change anybody’s minds.

    What has happened is very simple. Deregulation, low cost carriers and American’s people demand for low fares (along with the technology to provide it) have all conspired to keep fares in actual dollars lower than they were 30 years ago when deregulation happened. Everything in the world has gone up in price. Airfares have not.

    Studies are conclusive that the vast majority of consumers will pay the absolute cheapest fare they can find, regardless of carrier. So with the cutthroat competition created between LCCs and legacies, that effectively eliminates the opportunities to raise airfares to “appropriate” levels. People can whine all they want about bundling/unbundling and paying one price, but the American public has spoken with their wallets and it ain’t gonna change.

    So, instead of paying a $600-1000 airfare, you buy a $300 ticket and deal with baggage fees and change fees and other fees. Sometimes it works out, and sometimes it doesn’t. But airlines have to make money from somewhere, and the reality is that despite all the whining about fees, THIS IS WHAT PEOPLE BUY. It’s like women who say they want nice guys and date “bad boys”! ;-) It doesn’t matter what people say (and here on this blog is clearly a MINORITY) but it is what they DO that counts.

    Fees are nothing more than raised airfares that sometimes you can avoid. It really isn’t complicated. Things change. You just have to adjust and deal with it.

  • Lola

    I wonder if or when the airlines will start giving frequent flier miles for checked-in luggage fees??

  • flutiefan

    thanks for that, Scott. i completely agree with you, consumers vote with their wallets time and time again. they truly want their cake and to eat it, too.

  • Mary Graham

    “It won’t stop until we say it stops.” So happy to see this statement as it’s my feeling exactly. So how can we make it stop? Only one way I can think of and that’s just to stop flying unless we really have to. Hit them ALL where it hurts. I just wrote a note to a venue for a concert. They advertised one price for lawn seats, then tacked on $6.00 in “fees” THEN wanted to charge an additional $2.50 to print the ticket on MY computer, using MY ink! I told them they lost the sale, that we are disgusted and tired of being ripped off. How can we make a stand other than not give them our business?

  • Steve

    @Scott: You’re right; “subsidiaries” was the wrong word to use because those flights are operated by entirely separate companies. However, they’re relevant to the discussion of PSC because the only United/Delta-branded flights from there are operated by regional carriers. There is no mainline United/Delta service to that airport, so since Arizona Road Warrior was bringing up PSC as an example of an airport served by legacy carriers, I assumed for this discussion we were including those types of flights.

    From the customer’s standpoint, I don’t think the distinction matters much anyway. If I have a bad experience on a flight that’s operated by one of the regional carriers, I’m going to blame the legacy carrier whose name is painted on the plane and from whom I bought my ticket.

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  • JohnnyRebel

    I can remember when the airlines allowed passengers three (3) checked bags @ 70 lbs. max weight each. In my mind, charging for each checked bag “is” and “always will be” a form of “chiseling.” I don’t care about how air fares are supposedly lower today than they were before deregulation in 1978. I am like most all Americans. I expect companies to figure out how to do things well at a lower cost. I expect better service and lower prices. Lately, the airline industry is bucking the trend seen throughout many parts of our economy. The consumer is paying more for less.

    Here are some real world economics: Computers are lower in cost today than they were ten years ago and the companies that build them still make money. The truth of the matter is that “economies of scale” don’t apply to large airlines. The reverse is actually true. The bigger the airline is; the lower the operating efficiency and the higher the cost of operations. Airlines could operate “profitably” on a smaller scale, with greater efficiency, and offer lower ticket prices. They wouldn’t need to nickel and dime us to death with extra fees. Unfortunately for us, the airlines have tasted “blood” and they like it.

    This mess all started with “reservation change fees” and mushroomed from there. The money captured from baggage and other creative fees is “pure profit.” Fixed and variable costs have already been absorbed. The airline shareholders love these creative fees. The bottom line gets better and better with each new fee that is added.

    Personally, I am tired of subsidizing the large airlines with these extra creative fees. We might as well “bend over and grab our ankles.” As long as large airlines are allowed to merge, consolidate and join a strategic oligopolistic alliance, seat capacity will drop and the consumer will get screwed. The lack of real competition always leads to higher prices, unless you are a govenment regulated utility.

    When airline deregulation first happened; new carriers kept entering the market, fostering competition and holding prices in check. In today’s world, very few start-up air carriers enter the market place. If that period of time from 1978 until 2009 represents “the good” in airline ticket pricing; we are about to see the “bad” and the ugly in the not too distant future.

    As I see it, the mantra of the airline industry, in general, is this: “we charge you more for crappy service because we can. Learn to live with it.”

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