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, if not fully accurate) 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 NCEN.com 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
3% is 3%. I’m sure they’ll take any revenue they can get regardless of how much it contributes to profit. At least they give out free peanuts and Biscoff!
Great Post, David. I wonder how the Southwest/AirTran acquisition is going to affect Delta’s pricing in Atlanta. I imagine (and hope!) fares might come down just a bit. Especially considering Southwest will continue the free checked bag policy once the airtran combo is complete. Living in Atlanta, I know that it is one of the more expensive airports to fly from/to. Competition is great for airlines and our economy, and wish more people would read your post and stop whining!
AirTran is cheaper than Southwest, so if anything prices are going to go up.
To put this number in perspective, last year DL had an overall profit of $593 million, so without nearly $1B in baggage fees (a staggering number in my mind) they would be in the red. I agree the airlines have to make a profit, and they’ve been bleeding for years, but to me, the baggage fees are effectively a fare increase, albeit on the people who are using the service. What irks me is that DL hasn’t improved their baggage service, and I don’t think the baggage charge per bag is commensurate with the actual cost of flying the bag and handling it, plus a reasonable profit margin–they’re using the fee as a cash cow like most of the fees.
Revenue is revenue. No revenue, no airline business. No airline business, no flying. It’s that simple. Although, I think airlines need to pay more attention to how they’re perceived by the public. Adding baggage fees has become a public image nightmare.
I agree with you completely David. The only way to ensure changes are made are through our pocketbook. We can whine all we want, but it doesn’t mean anything if it isn’t followed up with action.
What annoys me most about airline baggage fees (and other nuissance fees like charging $150+ airfare difference to change a ticket) is how the nation has vilified banks for charging fees on checking accounts, ATM withdrawals, and credit cards….and are then regulated to the hilt for it. The argument against the banks is that a $39 late fee on a credit card, for example, is nowhere near the bank’s cost for that late payment (so, banks apparently are not businesses that should earn a market-based profit, but instead, are a utility that should price things at or just above cost). I can go on and on about this with more examples and justification of banking fees…but the point really is that fees appearing to be usury (like $150 to change an electronically issued ticket) will stoke populist ire and eventually catch the eye of an increasingly invasive Congress.
The problem is that bags used to be included in the fare, whether you had them or not. You didn’t give it any thought. Now it feels like you are getting nickle and dimed to death. The excessive change fees mentioned above draw more ire. Don’t even get me started on concert ticket sellers who basically do almost nothing but want service charges on every ticket too. So now irritated passengers try to carry everything in the cabin, which creates other problems.
It is sad when your bag cost more than your body to fly.
David,
Please comment on Delta charging an airplane full of US troops returning from war in Afghanistan $200 each for excess baggage last month. Delta’s apology made public only after a huge uproar from a very angry public and thousands of thousands of disgusted outraged Americans started filling the Delta website with threats of boycott. I don’t doubt many will never fly Delta again. Not only was this really, really, bad PR and poor judgement by Delta but I’m starting to think this whole business model is gone a bit too far. One thing is to charge a regular Joe for baggage but a soldier coming back from war…I mean really? These airlines make contracts with the government, I mean are they going to really nickel and dime soldiers too? I don’t care if it was just a misunderstanding, that fact that it happened at all is just pathetic.
I was for sure expecting to find an article from you on this site commenting about the incident but all I found, to my surprise, when I searched under Delta was this article praising Delta for how much money they have made from baggage fees. :/ If you did write on it, forgive and send me the link.
Your facts are wrong. Delta actually had the most generous bag policy for military troops – FOUR free bags. A sergeant, despite knowing this policy, packed 5 bags and the agent charged a fee. After the uninformed whining on the Internet, Delta changed the policy and all the other airlines, who had been charging more, said boy, we’d better change ours before someone makes a video!
Wow Delta allows FOUR whole free bags for soldiers coming home after 6-18 months away putting their life at risk including all their gear they have to pack and bring back, most of it military gear that takes up a lot of room and weight? WOW FOUR? How does Delta stay in business, it’s a mystery to me!
LOL! Shame on that soldier for trying to sneak a fast one past Delta! Shame on him for not manning up and whining! Shame on him for making a video voicing his outrage! LOL
Correction –
On Delta–1st bag is $25; second is $75: third is $200. Not two bags at $50 as you report.
Your facts are wrong too. Are people really this lazy not to look these things up? From delta.com, baggage fees, international flights, at least one and often two bags free. Domestic first or business class, FREE, domestic economy class 1st bag $25, 2nd bag $35, 3rd bag $125. Lots of exemptions for free bags for fflyers, Amex card members, etc.
Unquestionably imagine that that you said. Your favorite reason appeared to be on the web the easiest thing to keep in mind of. I say to you, I certainly get irked at the same time as other people consider concerns that they plainly do not recognize about. You controlled to hit the nail upon the top as well as outlined out the entire thing with no need side effect , other people can take a signal. Will likely be again to get more. Thanks