Charges reach new heights

By TERRY MAXON
Staff Writer tmaxon@dallasnews.com

LOCAL ECONOMIC SNAPSHOT | AIRLINE FEES

KYLE ALCOTT
Staff Artist kalcott@dallasnews.com

U.S. airlines have come to rely on ancillary fees to prop up their revenue and their profit in recent years. Primary among the fees are charges for checked bags and for changing reservations. Combined, those two categories have more than quadrupled since 2007 to $5.69 billion in 2010.

Total bag and change fees

Major carriers have boosted their revenue significantly, particularly since many airlines began charging fees for the first and second bags in 2008. A major exception: Southwest Airlines, which imposes bag fees only on the third bag or overweight bags and doesnt charge for reservation changes.
$2 billion

2007
1.5 1 .5 0 $30 $203 $78 $186

2010
$1.1 billion $579 $125 $43

$1.7 billion

$485 $91 $171 $21 $30

$635 $384 $28

$767

AirTran Airways

Alaska Air Group

American Airlines

Continental Airlines

Delta Air Lines

JetBlue Airways

Southwest Airlines

United Airlines

US Airways

Note: Delta's 2007 numbers include Northwest Airlines, with which it merged in 2008

Bag fees pass change fees

Until airlines began charging for the first and second checked bags, reservation change fees put more money into carriers pockets. By late 2008, bag fees passed the change fees. In 2010, bag fees out-gained change fees by $1.1 billion. Change fee
$1,500 1,200 900 600 300 0

Bigger share of revenue

For Southwest Airlines, fees for checked bags and reservation changes are an imperceptible part of its revenue. But its new acquisition, AirTran Airways, gets a greater percentage of its revenue from fees than other carriers. Airline
AirTran Airways US Airways Alaska Air Group Delta Air Lines American Airlines JetBlue Airways United Continental United Airlines 1.9% .2% Southwest Airlines 5.3% 5.2% 4.7% 4.5% 3.6%

Bag fee

Total fees

$1.4 billion

Fees as a percentage
7.7% 6.4%

$829 million

$560 million

2007

2008

2009

2010

No fees, no income
Most airlines would have shown a loss in 2010 if it werent for the fees on checked bags and reservation changes. Only two major airlines reported higher net income than their total revenue from bag and change fees.
(In billions)

Fees per passenger

The biggest airline, Delta Air Lines, also realized the most bag and change fees per passenger, followed closely by US Airways. At the bottom is Southwest Airlines, which doesnt charge for reservation changes or for the first or second checked bags. Airline
Delta Air Lines US Airways Continental Airlines American Airlines United Airlines Alaska Air Group AirTran Airways $.05 $.43 JetBlue Airways Southwest Airlines $.28 $8.71 $8.19 $7.07

Airline
American Airlines Delta Air Lines United Continental US Airways AirTran Airways JetBlue Airways Alaska Air Group Southwest Airlines

Net income
-$0.47 $0.59 $0.25 $0.50 $0.04 $0.10 $0.25 $0.46

Fees
$1.05 $1.65 $1.22 $0.77 $0.20 $0.17 $0.20 $0.03

Income minus fees

-$1.5 -$1.1 -$.97 -$.27 -$.16 -$.07

Fees per passenger

$14.88 $14.80 $13.32 $12.21 $11.74

SOURCES: U.S. Bureau of Transportation Statistics, the airlines, Dallas Morning News research

The bottom line

About half of all travelers now are paying the fees, and that group is significantly less satisfied than those who dont pay the fees. And satisfaction actually is declining among the group thats paying the fees. Theyre feeling the pinch even more so than they were a year ago. David VanAmburg, managing director, American Customer Satisfaction Index Charging a base rate with the option to purchase additional products or services is common in hotels, computers and cars. But when airlines do it, somehow it is anti-consumer. Without fees in 2010, the industry would have reported yet another loss. William S. Swelbar, research engineer, International Center for Air Transportation, Massachusetts Institute of Technology The numbers show that revenues from fees were still growing in 2010, but at a slower pace than in 2008 and 2009. It is clear that air carriers now rely on non-ticket revenue to keep them in the black. Expect airlines to look hard to find new services that they can charge for. Terry Maxon, airline writer, The Dallas Morning News