Emboldened by the revenue success of checked-bag fees, several carriers this week said they are implementing new charges, including Alaska Airlines' plan to follow legacy carriers in implementing a first-checked-bag fee, US Airways' plan to add a $5 surcharge for customers paying to check bags at the airport and Delta Air Lines' intention to bring its second-bag fee to international markets.
US Airways said economy customers traveling on or after July 9 would have to pay an additional $5 if they elect to settle checked-bag charges at the airport. The carrier, like all of its domestic legacy carrier competitors, already levies a $15 fee for the first bag and $25 for the second. The carrier today began enabling customers to prepay first- and second-bag fees as they check in online through its Web site.
CEO Doug Parker during US Airways, first-quarter earnings today said the new charge is less about potential revenue generation and "more about trying to have less go on at the airport. What we'd like to do now that we have this functionality is to encourage customers if they're checking bags to go check in online and pay for it there."
Meanwhile, Alaska today said beginning July 7 it would implement a $15 charge for passengers to check one piece of luggage. However, Alaska is guaranteeing that passengers who pay to check bags will receive "2,500 Alaska Airlines Mileage Plan miles or $25 off a future flight" if they don't get their luggage within 25 minutes of arrival.
Delta earlier this week said on July 1 it will begin charging $50 for international passengers to check their second piece of luggage, making it the first U.S. legacy carrier to bring such fees to international routes
(BTNonline, April 21).
No other domestic carrier has matched Delta on that fee, though some are exploring the option. US Airways president Scott Kirby today said the carrier is "looking at" such a charge, but said, "We've not made a decision on that front."
Responding to a question on international bag fees during its earnings call this week, United Airlines COO John Tague wouldn't comment, but noted, "We are a believer in unbundling."
During the JetBlue Airways first-quarter earnings call today, Bank of America aviation analyst Michael Linenberg inquired if the carrier would charge for the first checked bag, noting, "Looking across the industry, it's just you guys and Southwest." CEO Dave Barger said JetBlue has joined competitors in charging $25 for the second piece of checked luggage, but remains resistant to a first-bag charge, noting that customers "truly value the fact that the first bag is part of the purchase price."
Despite being similarly pressed by analysts on its earnings call last week, Southwest Airlines, the only major U.S. carrier not charging for either the first or second checked bag, also said it would continue to offer those services for free
(BTNonline, April 16).
The addition of checked bag fees and other ancillary revenue initiatives have proven to be a definable revenue source for legacy carriers in this environment of depressed demand and rampant fare sales. United's Tague this week said the carrier "collected approximately $14 per passenger in ancillary and fee revenues during the first quarter," which includes checked-bag fees. "We expect full year ancillary and fee revenues of about $1.1 billion in 2009, or $200 million higher than in 2008, on much lower passenger volumes."
Though US Airways did not forecast how much revenue it expects to generate from its newest $5 fee, the carrier today said it is on track to earn up to $500 million through a la carte fees, including those for checked bags.
Delta president Ed Bastian this week said, once implemented, the carrier expects to generate $100 million annually from its new international checked-bag fee, while "baggage fees implemented in 2008 generated more than $160 million of revenue for the quarter."