New York – US Airlines Collected $3.4 Billion in Bag and Ticket Change Fees

New York – U.S. airlines collected $3.4 billion in bag fees last year. The 24 per cent increase from 2009 shows how the airlines are increasingly reliant on charging for once-free services to make money.

The fees — typically $50 round-trip for the first piece of checked luggage — are one of the few bright spots for an industry that is caught between rising fuel costs and customers who expect rock-bottom airfares.

“If it weren’t for the fees, the airlines would most likely be losing money,” said Jim Corridore, airline analyst with Standard & Poor’s.

That’s little comfort to fliers who’ve felt nickel-and-dimed by the airlines over the past three years as fees have proliferated. And as they face higher airfares and packed planes for travel this summer.

“I feel like I am constantly being hit by little things by the airlines,” said Lauren DiMarco, a stay-at-home mother from Wenham, Mass. “We’re already paying so much money.”

Delta generated the most revenue from bag fees — $952 million — followed by the combined United and Continental at nearly $655 million. American collected $580 million and US Airways $513 million.

Airlines aggressively raised ticket prices early in the year. But those increases couldn’t keep up with the price of jet fuel, now 37 per cent costlier than last year. Some more recent attempts at fare increases have failed because passengers have shown resistance to higher fares.

So instead, the airlines focus on fees.

“Unfortunately, for the airlines when they try to roll $50 into the ticket prices, people stop buying tickets,” said Rick Seaney CEO of FareCompare.com.

Earlier this month, Delta and United raised fees to check a second bag to Europe. Delta also added a fee for second bags checked to Latin America and ended its $2 discount for paying fees in advance online.

American Airlines introduced fees for the first checked bag in 2008 as the price of oil skyrocketed. The other airlines, except JetBlue and Southwest, have since followed and progressively increased those charges.

Many fliers are still unaware of the fees or understand how much they have to pay until they arrive at the airport ticket counter.

“They find out very quickly when they are asked to pull out their credit card,” Seaney said.

The airlines aren’t alone in charging fees that irk customers. For instance, banks charge customers to use out-of-network ATMs and levy fees for insufficient balances. But there is something especially irritating about paying a fee just before you board a plane for your long-awaited vacation. For something that used to be free.

Buoyed by the success with bag fees, the airlines are charging for all sorts of extras.

They are now selling passengers the option to board early, get more leg room and to earn extra frequent flier miles. There are also fees for oversized bags, changing tickets, making a reservation over the phone and — on some airlines — reserving a seat in advance.

Fees for changing reservations or placing them via phone alone generated $2.3 billion for the airlines in 2010, down 3 per cent from the year before. The Department of Transportation expects to release more information about fees at a later date.

For families looking to book a vacation, the fees can add up. That $98 round-trip fare on a discount airline like Spirit isn’t such a deal when you tack on $45 each way for a carry-on plus $20 to get an assigned seat and $3 for a bottle of water.

“It makes it very difficult for comparison shopping” said Anne Banas, executive editor of travel advice site SmarterTravel.com.

New rules from the Department of Transportation will require airlines, starting Aug. 23, to “prominently disclose all potential fees” on their website prior to a ticket purchase. In the meantime, fliers just need to do their research before heading to the airport.

Henry Harteveldt, an airline analyst with Forrester Research, said airlines have done a poor job of explaining the fees to customers. Despite the bad publicity, if given the chance to do it all over again, Harteveldt said the airlines certainly would. He expects more charges in the future. A checked-bag fee based on distance flown is one possibility. Or fees could be cheaper if a ticket is purchased months in advance but much more expensive if paid on the day of travel.