Airlines bag $1 billion for luggage

  • Article by: MARY JANE CREDEUR
  • Bloomberg News
  • May 11, 2009 - 9:53 PM

American Airlines and US Airways led U.S. carriers in pocketing a collective record $1.1 billion in bag fees in 2008 as they began charging to check luggage to defray jet-fuel costs.

Industrywide collections more than doubled from 2007, when the fees were levied chiefly on fliers who had heavy baggage or checked more than two pieces, the U.S. Transportation Department said. Last year's total was the most since the agency started keeping track in 1990.

Eagan-based Northwest Airlines reported collecting $121.6 million in bag fees in 2008. Delta Air Lines, which acquired Northwest in October, reported $177.1 million.

Monday's data gave the first glimpse of U.S. carriers' extra revenue, because they didn't detail the baggage money in year-end earnings releases. With jet fuel retreating from 2008's peak, the cash is helping soften the blow from a plunge in travel.

"These small fees really add up," said Matthew Jacob, a Majestic Research analyst in New York. "It helps, when you're in a competitive industry and demand is under pressure, to be able to squeeze revenues out of part of your business where you couldn't previously."

A 61 percent surge in jet-fuel prices last year through July 3 spurred carriers to abandon the long-standing practice of checking two bags for free.

United Airlines announced a $25 fee for a second piece of checked luggage in February 2008, becoming the first U.S. carrier with that charge, and most competitors followed.

American, the world's second-largest carrier after Delta Air Lines, ramped up pressure on competitors in May when it said it would add a $15 fee for the first bag, setting an industry standard. American collected $278 million in bag fees.

US Airways, the smallest of the full-fare airlines, trailed only American in baggage-fee collections. Tempe, Ariz.-based US Airways has made so-called a la carte pricing a centerpiece of its strategy, charging passengers only for services they use. The airline collected $187.1 million in bag fees.

Southwest Airlines, the biggest low-fare carrier, doesn't charge to check the first two bags, and Chief Executive Gary Kelly has said it helps win passengers. Southwest reported $25.2 million in bag fees.

© 2018 Star Tribune