Airlines bag big bucks from fees; United tops peers

By Julie Johnsson
Posted July 21, 2010 at 2:56 p.m.

U.S. airlines are world-beaters when it comes to finding creative ways to boost passenger fees, onboard food sales and other revenues that aren’t rolled into an air fare, financial data show.

United, American and Delta Air Lines led all global carriers in collecting so-called ancillary revenues during 2009, according to a new study by airline consultancy IdeaWorks and Amadeus, a global clearinghouse for airline transactions.

Chicago-based United led airlines around the world by generating $1.87 billion in ancillary revenues last year, the study found. That’s about double the $963 million in fees pocketed by Australia’s Qantas Airways, the highest ranking overseas carrier in the study.

Airlines globally collected $13.5 billion in 2009, a 43 percent jump from 2008 totals, according to the study of financial filings made by 96 airlines worldwide.

The proliferation of checked bag fees in the U.S. and much of Europe accounted for the startling jump in this source of airline revenue, said Jay Sorensen, president of Wisconsin-based IdeaWorks.

Led by American, U.S. carriers rolled out luggage fees during 2008 in an effort to boost revenues to offset skyrocketing oil prices and then the collapse in business travel as Wall Street melted down. Now that most large airlines are again profitable, they aren’t inclined to rescind the controversial charges.

In fact, baggage fees are expected to spread around the world. “The fees are here to stay,” said Sorensen.

United President John Tague caused a stir during a quarterly earnings call with analysts, Tuesday, when he suggested the Chicago-based carrier is only just scratching the surface could reap far greater income from passenger fees.

Only about 40 percent of United passengers currently pay to check bags, generating $350 million to $450 million annually for the nation’s third-largest carrier. But Tague said United’s annual baggage revenues could over time top $1 billion as carriers in other regions of the world start levying similar charges.

“It appears that the trend is firmly in place and that over time more and more bags will be assessed fees,” he added.

But bags aren’t the only area where airlines are striking gold.

Carriers are also gain money from affinity card programs, and are commanding a greater commission on hotel and rental-car services packaged along with air fares on their Web sites. They’re also experimenting with new, upgraded onboard meals. And they’re also selling passengers one-day access to priority security lines and lounges once reserved for first-class customers.

The fee frenzy has caught the attention of lawmakers like Rep. James Oberstar, D-Minn., and prompted the Transportation Department to propose rules making pricing and fees more transparent so that passengers don’t suffer sticker shock when they get their final bill.

While the added fees annoys some travelers who long for the days when airlines provided full service at no added cost, the new environment could prove to be a bonanza for deal-seekers, Sorensen said.

“In the future, if the consumer wants to squeeze travel costs down to next to nothing, he or she will buy online, maybe pay with a debit card, won’t have an assigned seat, bring a snack from home and will have a carry-on,” he added. “Anyone who wants a different experience will pay more.”

Top 10 Airlines – 2009 Ancillary Revenue
Rank Carriers Fee revenue in dollars
1 United $ 1,878,610,086
2 American $ 1,854,551,046
3 Delta $ 1,374,071,956
4 Qantas $ 962,980,320
5 Ryanair $ 816,236,162
6 easyJet $ 748,827,421
7 US Airways $ 664,931,734
8 Air Canada $ 657,002,460
9 Alaska Airlines $ 453,713,407
10 TAM Airlines $ 438,797,540
Exchange rate applied to press release data 1 euro = 1.23 dollars
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  1. terry paul July 21, 2010 at 4:13 pm

    you will let me read the story.
    you will ask me for my email adress
    yet I can not email nor print the story.
    is that not typical Chicago!!!

  2. James July 21, 2010 at 4:56 pm

    Is it not odd that I hate flying with almost all of these airlines already?

  3. Hello2012 July 21, 2010 at 4:57 pm

    All these billions for “baggage” and not a tiny peanut’s worth of comfort or extra service on these flying sardine cans. Well, I will ship my luggage by Federal Express or UPS. I will not give the airlines another nickel; if you wanna be chumps and pay through the nose, then go ahead, but count me out. If airlines have to recoup every freakin’ nickel they can out of the consumer, then they can fly their planes empty of passengers. It’s like everything else in life these days; the airlines can screw you because they don’t give a damn about you, John Q. Public, and John Q. Public doesn’t give a rat’s a$$ about raising its collective voice above a whimper. The public is so gutless that getting screwed is the one act of corporate humiliation it understands.

  4. position July 21, 2010 at 5:16 pm

    Funny….why is it I don’t see Southwest Airlines on that list??? Hmmm… oh, yeah! They don’t charge any baggage fees! I’m flying Southwest Airlines from now on!

  5. Anne July 21, 2010 at 5:22 pm

    And how much of that cash is paid out for extra fuel costs in order to fly the extra baggage weight. You ship it, you pay for it. It sounds fair to me. Airlines like southworst raised their ticket prices for everyone to cover the baggage weight – kind of like spreading the wealth, or fees among everyone.

  6. Jerry Krueger July 21, 2010 at 5:29 pm

    This is why Southwest is always my first choice if at all possible. They know how to run a profitable airline without ripping off their customers.

  7. Come On July 21, 2010 at 5:44 pm

    Hello2012, would you rather have these fees included in your original fare? The airline industry, like every other for-profit company is trying to… drum roll please… make a profit! The reason they switched to this model of segregating the costs is because more consumers were sensitive to fare costs, and the only way they could hope to make a profit was to keep fares stable and get additional revenue from other “add-on” services. They very well could have just raised prices and bundled it all together, however they felt that this was the best way to ease the majority of consumers into the higher total cost of air travel on their carrier. Good luck shipping your luggage UPS or FedEx, as it will cost substantially higher than what the airlines are charging you.

    We live in fair/free economy and the prices are set by costs to provide goods and services as well as what the consumer is willing to pay. If you don’t like it, don’t buy it. People tend to tout Southwest for low fares and no baggage fees, but those are only possible because they did a good job (and got some luck) with their fuel hedges. If they suffer a few quarters of losses or if the competition begins to record consistent higher earnings per share, their shareholders will demand that they increase revenues… someday they will likely raise prices or lead to charging for bags.

  8. Bob July 21, 2010 at 5:55 pm

    The spoiled American public has gotten exactly what it demanded. Cheap, cheap airfares which leads to less services, fuller flights and ala carte pricing. Fares in many cases are no more than they were 20 years ago (specific example – ORD to LAX). We now have a greater choice in airlines and how we choose as consumers to spend our money on travel than ever before.

    Quit whining, do some research and find your own best deal out there!!

  9. joeschmo July 21, 2010 at 6:11 pm

    One word: SOUTHWEST!

  10. Joe1 July 21, 2010 at 6:27 pm

    anyone who flies UAUA is a fool anyway. Go Southwest!! Bob.. your the one who’s clueless. Understand that corporate America is all about GREED ..So da boyz stock options make them rich.. you do YOUR research!! Has Southwest ever gone bankrupt? hmmm. And come on..Theres a saying in business.. Want to be a millionaire? Be a billionaire and buy an airline.. In the history of airlines its one the biggest money dumps on the planet. Except the best run like LUV. The legacy carriers business model has sucked and still does. Always will.

  11. JB July 21, 2010 at 6:38 pm

    At United, the irony / outrage is that you cannot find anyone
    working at O’Hare baggage claim / service, or anywhere else for that
    matter, at Terminal 1 after 11 PM / before 5 AM.

    Think about it … top 5 airport in their “home city” of Chicago, and
    even after their punitive baggage fees, you cannot get help in finding your bag (when is does not get delivered) after 11 PM. This has happened to me 3 times in the last 5 months.

    Earlier post was right … just fly Southwest, and avoid the aggravation.


  12. Bob July 21, 2010 at 6:39 pm

    Hey Joe1 – can’t read huh? Try responding to something that was actually written. The point being made was about CONSUMERS………not specific airlines, big business or millionaires.

  13. K July 21, 2010 at 7:13 pm


  14. Come On July 21, 2010 at 7:30 pm

    Joe1, anyone who is a frequent flyer and takes LUV is a fool (or perhaps they have no choice). It must be pretty exciting cashing in the earned free flights for domestic travel only. For leisure and infrequent travel or short hauls… sure take LUV. If you travel for business or very frequently pick a legacy airline that has better reward/loyalty programs and can actually fly outside of the US. Southwest has never gone bankrupt because they are a relatively new company in the industry and they serve a niche that does not require them to take much risk. Also, there is not much competition for that niche as the barriers to entry are too large and the legacy carriers can’t adjust their model due to union contracts (see failed Ted product from UA).

  15. mike July 21, 2010 at 7:32 pm

    We’re lucky to have the choice of flying Southwest here in Chicago. I’m Premier Ex. on United and still book Southwest when I have the chance. They’re always on time and their travel times to the same cities is always less than ORD.

  16. Clay July 21, 2010 at 8:35 pm

    This is why I fly Southwest every chance I get.

  17. July 21, 2010 at 8:56 pm

    well ill be sure never to fly united, american or delta. i’ve already had a baggage fee nightmare with american.

    any way they can tack on additional revenue they will. im not against making a profit, but the way they have implemented some of these baggage fees are ridiculous.

  18. STeveB July 21, 2010 at 10:21 pm

    All I want to do is get from point A to point B. I fly Southwest all the time.

  19. George July 21, 2010 at 10:38 pm

    Yep, I just got screwed for $200 by United just this afternoon. My wife & 2 daughters (both less than 4 years old)traveled overseas to visit family for a few months. Even though with 3 tickets in hand, she could have brought 6 50lb suitcases carrying a total of 300lbs, she packed their things into 2 suitcases weighing 69lbs & 46 lbs for a total of 115lbs yet still got whacked for $200 because the one bag was over the limit. Next time I told her to pack 6 bags for her and the 2 kids and then weight each so they’re all 49lbs in order to get her money’s worth out of United. If EVERY traveler did this I’m guessing their planes would get heavier & burn more fuel. Then we’ll have to watch them invent some more new ways to screw passengers.