Friday, July 1, 2011

Delta Air Lines Makes Profit Off Bag Fees — Good For Them!

Delta Air Lines Makes Profit Off Bag Fees — Good For Them!: "
Delta Air Lines Boeing 767-300ER.

Delta Air Lines Boeing 767-300ER.

There is no question that Delta Air Lines made a lot of money off bag fees last year — $952 million to be exact. While many other airlines made a load of money with bag fees as well, Delta gets the majority of the attention since they made the most. Some attention has been in late night routines (okay, Conan’s bit is hilarious) and others have been negative news articles. It seems odd that so many companies are getting pats on the back for making profit out of the bad economy, but airlines end up being punished, like they are somehow earning their money illegally.

Dan Webb, on his blog Things in the Sky, shows that although Delta made more in bag fees than other airlines, that doesn’t mean it is a large percentage of their revenue. His post has a very handy chart that shows that Delta’s bag fees are only 3% of their overall operating revenue. When looking at all major US airlines, Delta is actually 9th in the percentage of bag fees to total operational revenue with ultra low cost carriers Spirit and Allegiant at the top the list with 10.5% and 8.7% respectfully.

There are a lot stories out there hating on the bag fees, but one of my favorites is from Boston’s titled Fuming over Bag Fees. It is a classic story talking to passengers who are up in arms for the airlines not being “honest” with them and hiding these bag fees. Even for people that do not travel often, it is pretty difficult not to know about bag fees. For those that do not, every airline I have ever flown makes it quite clear when booking your ticket, if there will be additional fees for luggage so one can plan accordingly. Passengers in NCEN’s story act like airlines are literally opening their wallets and stealing their money. The author, Peter Howe, states that airlines are “addicted” to fees like they are some nasty habit that should be kicked. Since when does a business not like a new idea that makes them money and allows them to survive? Without bag fees, you can be certain that not as many airlines would be able to survive, there would be less competition and airfares would be higher overall.

Airlines are not charities — they are businesses looking to make profit. Airlines had this idea to charge passengers for bag fees, obviously many passengers pay this fee and airlines are able to make a profit. Why would an airline get rid of these fees? Customers have the ability to vote on these fees with their pocket book. Southwest Airlines and JetBlue both don’t charge you for checking a bag (on Southwest, you can check two for free), but of course, they are not always the cheapest option, even when checking a bag.

All that being said, yes I know that they are annoying when you are checking in and you have to drop another $50.00 for two bags. I do whatever I can to avoid paying bag fees myself and cringe when I end up having to pay them.I wish airlines would do a better job explaining why they are charging the fees. It seems like most airlines are like “we are charging them, take it or leave it approach.” I do not think most customers realize that weight costs money and instead of selling it as, “if you have a checked bag, you will owe more,” sell it as, “if you do not have a checked bag, we now let you save money.”

I believe that ala cart pricing will be the future of airlines. Many other businesses operate this way and why should I have to pay for something that I don’t want to use. When I book a hotel room, I might cringe when I have to pay $25 for parking and $20 for Wi-Fi and $5 for a bottle of water, but it is understandable. Why should parking be built into my hotel price if I do not have a car?

Image: Thomas Becker


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