Airlines Soar To Profitability On Fees

Like the banking industry, the airlines have discovered the secret to profitability. Fees. Lots and lots of fees.

Three years ago, when fuel prices rose dramatically, the airline industry began charging passengers for the second checked bag. Then the first. Now, baggage fees have become a major profit center.

U.S. airlines collected $3.4 billion in baggage fees in 2010, according to a report from the Transportation Department. When you roll in fees charged for reservation changes, the fee total surged to $5.7 billion.

Passengers notice

Don't think passengers haven't noticed. Ludene of Chandler, Tex., booked airfare on Spirit Air for a Caribbean vacation for herself, her husband, son and daughter-in-law.

“We had four bags and four carry-ons for the four of us,” Ludene told ConsumerAffairs.com. “Our tickets cost $1600, our bag fees cost $680. They charge for every bag, even the carry-ons.”

 The report shows Delta generated the most revenue from bag fees, $952 million. United/Continental was second with $655 million. American was third with $580 million and US Airways a close fourth at $513 million.

Taking on fees allows the airlines to increase the cost of air travel without raising rares. Therein lies the problem.

Ludene and many other consumers complain about a lack of transparency when it comes to airline fees, and the government agrees with them. Starting in August, new Transportation Department rules will require airlines to “prominently disclose all potential fees” on their websites prior to a ticket purchase. 

The fees, however, have been a godsend for the airlines. Even with fuel prices almost a third higher this year than last, the industry as a whole is reporting higher profits.