Baggage fees boosted U.S. airline revenue by $3.5B

The 27 U.S.-based passenger airlines collected $3.5 billion US in baggage fees and $3 billion in reservation-change fees from passengers in 2014.

The figures released Monday by the U.S. Department of Transportation show an increasing reliance on passenger fees for revenue among U.S. airlines.

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In 2008, U.S. airlines collected $1.1 billion in baggage fees, so they have more than tripled in the intervening six years. The cash collected through fees is up five per cent in the last year alone.

Fees for reservation changes have doubled from $1.6 billion in 2008 and are up six per cent from last year.

Other fees, such as revenue from seating assignments and onboard sales of food, beverages, pillows, blankets and entertainment are not included in those numbers and not counted separately by the airlines.

But the category the federal agency calls "other revenue," which may include pet transport, services to other businesses and passenger food, is up by 13 per cent in the year to over $4 billion.

Baggage fees made up about 2.1 per cent of total operating revenue, while fares were 75 per cent of revenue. Fees for reservation changes were about 1.8 per cent of the revenue stream.

The report shows 2014 was a good year for the U.S. airlines, with revenue and operating profit on the rise from 2013.

Collectively, the airlines reported a $14.6-billion pre-tax operating profit in 2014, up 29 per cent from $11.3 billion in 2013.

Net profit, including one-time losses, slipped to $7.5 billion last year from $12.2 billion in 2013.

Fees began escalating in 2008, when airlines were losing money and facing a sharp rise in fuel prices. Today, they make up a growing share of airline revenue.

At Spirit Airlines, which touts low fares and adds lots of fees, only 63 per cent of its revenue comes from fares. Southwest still lets customers check two bags or change a reservation for free; it gets 95 per cent of revenue from the ticket price.

Charlie Leocha of the Consumer Travel Alliance said airlines should reduce fees, but he doesn't expect that to happen because the fees bring in too much money. He favours a proposed federal rule that would require airlines to improve disclosure of how much fees will increase a traveller's total bill.

Jean Medina, a spokeswoman for the industry trade group Airlines for America, said that fees let airlines charge customers for things they value while keeping base fares low. She said airlines are using "modest" profits and savings from lower fuel prices to invest in new planes and facilities and to reward employees and shareholders