Tue, Mar 02, 2010
Other Revenue Streams Under Consideration
As airlines have tried with little
success to raise fares amid growing concerns that oil prices may
again start to climb, they appear ready to again increase the fees
charged for checked luggage, industry observers say.
"Baggage fees are here to stay and they are only going to grow
in importance for carriers,” said Jay Sorensen, who operates
IdeaWorks, a Shorewood airline consulting firm.
The Milwaukee Business Journal reports that Sorensen calls the
possible baggage fee increases a "tweak", with airlines possibly
considering a sliding scale based on the distance of the flight.
The public has groused about baggage fees, but Sorensen said he has
not seen a lot of customer backlash. "Consumers begrudgingly
accepted their fate," he said.
In a news release, IdeaWorks says he group of big-5 airlines
(American, Continental, Delta, United, and US Airways) all boosted
baggage fees during January 2010. IdeaWorks estimates these
carriers will realize annual baggage fee revenue of $1.76 billion.
The “new money” portion of this amount for the group of
big-5 carriers exceeds $117 million. Southwest Airlines, which has
positioned itself above the fray by promising “bags fly
free,” is a large and vocal holdout. The carrier’s
current advertising campaign virtually assures it will remain on
the sidelines for some time. But if Southwest achieved
Delta’s per passenger result of $7.32 from baggage fees, its
100 million annual passengers would contribute $732 million to the
bottom line. The US airline industry is unlikely to stop this trend
and more tweaking of the fee structure can be expected during 2010
and beyond.
Meanwhile, carriers continue to look for ways to generate
additional revenue through ancillary fees, Sorensen said.
Passengers may soon find themselves being charged for things like
early boarding, priority check-in, and seat assignments. “The
revenue stream is just too attractive and the airlines are
terrified about getting caught up in a high fuel price environment
again,” Sorensen said.
FMI: www.ideaworkscompany.com
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