Big Profit in Checked Bag Fees: American Airlines Earned $350 million Last Quarter

Though ticket prices may fall, checked bag fees are often seen rising. As passengers have been pushed to carry more bags on board, it has made boarding process slower; this means higher costs for airlines. On the contrary, checked bag fees render a good portion of revenue to airlines. Though they don’t represent a pure increase in revenue, a good portion of the benefit to airlines from checked baggage fees comes from the tax code. A secret but a huge benefit to the airlines from checked baggage fees comes from savings of hundreds of millions of dollars in taxes.

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American Airlines Earned $350M Last Quarter

Revenue from baggage fees has increased consistently since 2008 when it was introduced. American Airlines continues to lead carriers for the most revenue from baggage fees in the second quarter with a whopping $350 million. Delta ranks second with $288 million and the United third with $275 million. According to the U.S. Bureau of Transportation Statistics, airlines combined charged $1.5 billion for baggage in the three-month period. They had increase the bag fees despite flight cancellations owing to the grounding of the Boeing 737 jets. While the American managed to boost its baggage fee revenue by 12%, Delta boosted bag fee revenue by 42% to $288 million during the second quarter.

American Airlines Earned $1.5B Last Quarter

Bag Fees a Major Revenue Source for Airlines

Bag fees has been a major revenue source for airlines and the fee hike last year, it has since been growing. American carriers had been charging for checked baggage since 2008, citing the rising fuel costs. Major airlines like Delta, United and American Airlines charge $25 for the first bag and $35 for the second, as long as they’re both under 50 lbs. Fees charged for additional or oversize bags are much steeper, starting at $75 per heavy bag on Delta. Budget carriers, such as Frontier, Allegiant and Spirit, even charge as much as $55 for carry-on bags. In 2015, baggage fees generated over $3.8 billion revenue for US carriers. All the airlines benefit from fewer checked bags, but there’s one that benefits less. Southwest, which doesn’t charge for customers’ first two checked bags, saw a smaller drop in its departure delay times than did carriers that do charge. In fact, the discount carrier has called its free bag policy a “cornerstone” of customer service and does not view checked bags as a significant detractor from its overall on-time performance.

Checked Bag Fees Slower Boarding, Big Cost for Airlines

Passengers carry on more bags because have to pay to check them. Gate checked bags add a few minutes to the boarding process. Also, passengers spend time trying to find overhead space and when bins are full, they return to the front of the plane to have their bags tagged and taken. Then airline staff have to spend a couple of minutes moving gate-checked bags to the belly of the plane. A minute or two gets added on to deplaning an aircraft, too. This eventually slows down the boarding process. Slower boarding indicates flight delays. Perhaps, this can cost airlines nearly as much as they’re taking in as bag fees. Just a few minutes added onto each flight generates huge costs.

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