U.S. airlines see decline in revenue from baggage fees

By Rob Lovitt, msnbc.com contributor

Despite carrying more passengers, U.S. airlines earned less in baggage fees last year, a result that has observers wondering: Are travelers carrying less ? or just carrying more on board?

Consider the numbers. According to the Department of Transportation, the 17 largest U.S. airlines earned $3.36 billion in baggage fees in 2011, down slightly?from $3.4 billion the year before. That was the first drop since the industry fully embraced ? la carte fees in 2008.

Meanwhile, U.S. airlines carried 730 million passengers in 2011, up 1.3 percent from the year before.

The numbers are even more dramatic for individual carriers. Last year, Delta Air Lines maintained the top spot in baggage fees, taking in almost $864 million. That was down 9.2 percent from the $952 million the carrier earned the year before, despite a 2.3 percent increase in passengers.

United Airlines, in the No. 5 spot, posted an even bigger decline in bag fees, dropping 11.8 percent to $276 million from $313 million, although that was concurrent with a 6.7 percent drop in passengers.

The reasons for the decline in revenue run the gamut, says Rick Seaney, CEO of FareCompare.com: ?The airlines are doing a better job of selling branded credit cards, which often waive bag fees; they?re giving out more elite perks; and people have finally figured out how to pack a little lighter.?

They?re also carrying more and bigger bags on board. ?There?s no doubt that if you?re not in the first half of the boarding process, you?re not going to find bin space,? said Seaney. ?People who try to cheat the system are carrying on their entire lives.?

That prospect is one reason Allegiant became the second U.S. carrier, after Spirit, to charge a fee for carry-on bags that don?t fit under passengers? seats. Announced in April, the airline is now charging variable fees ? $10 to $30 if paid in advance, $35 if paid at the airport ? to stow a bag in the overhead bin.

?If people are charged to check a bag and not charged to take it on the plane, the inclination is to try to put more and more and more into their carry-ons,? said Allegiant spokeswoman Jessica Wheeler. ?It slows the boarding process and it?s not fair to the people who do follow the rules.?

It may also prove to be a good source of ancillary revenue. Last year, the carrier earned $53.5 million in baggage fees, down slightly from $55 million in 2010. Spirit, on the other hand, earned almost $134 million, up 65 percent from the year before.?

For cash-strapped airlines, that sort of revenue must seem like manna from heaven, especially as airlines struggle to maintain profitability in tough times. To put it in perspective, without the $864 million that Delta earned in baggage fees last year, the airline?s net operating income of $854 million would instead have been a $10 million loss.

"Even with these impressive revenues from ancillary fees, some airlines are still reporting razor-thin profit margins thanks to increased fuel costs,? said George Hobica of AirfareWatchdog.com. ?Imagine what would have happened without them.?

Rob Lovitt is a longtime travel writer who still believes the journey is as important as the destination. Follow him at Twitter.

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