United Airlines Is The King Of Fees

A newly released study shows that airlines around the globe are raking in cash from ancillary revenue like baggage fees. Worldwide, carriers collected $13.5 billion in fees last year, an increase of 43% over the previous year. And sitting high atop that pile was United Airlines.

United may only be the third-largest carrier in the U.S. (at least until they get their merge on with Continental), but they beat out both Delta and American in collecting ancillary revenue last year with a total of $1.9 billion. About $400 million of that coming solely from fees for checked bags.

By comparison, the overseas airline with the highest revenue from fees was Australian airline Qantas, who took in around $963 million in 2009.

Coincidentally, yesterday United’s president made a statement that he thinks we’ve only seen the tip of the iceberg in terms of money that could be made from charging fees.

“I don’t think we’re very far along, frankly,” John Tague said during a discussion of the airline’s earnings. “That might be surprising to people given where we are in terms of ancillary revenue generation.”

Tague theorizes that the airline could someday generate over $1 billion from just checked-bag fees alone: “It appears that the trend is firmly in place, and that over time more and more bags will be assessed fees.”

While those of us who aren’t airline executives aren’t generally pleased with all the extra fees that have sprung up in recent years, one of the authors of the new study believes that deal-seekers will ultimately benefit from this nickel-and-diming:

In the future, if the consumer wants to squeeze travel costs down to next to nothing, he or she will buy online, maybe pay with a debit card, won’t have an assigned seat, bring a snack from home and will have a carry-on… Anyone who wants a different experience will pay more.

Of course, he’s assuming that what’s left-over after you’ve stripped away all those extras is still a reasonable fare.

Airlines bag big bucks from fees [Chicago Tribune]

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  1. nbs2 says:

    “Of course, he’s assuming that what’s left-over after you’ve stripped away all those extras is still a reasonable fare.”

    And therein lies the the problem. I wouldn’t mind the fees if we were seeing the deals that we saw last year. Instead, we are returning to standard higher fares, with fees piled on top. It just doesn’t make sense (especially with TSA doing its level best to further discourage air travel).

    • tasselhoff76 says:

      He’s also assuming that airlines won’t begin charging and imposing stricter rules for carry-ons or bringing “snacks” on a plane.

    • awer25 says:

      I completely agree that this is the problem. We’re having all these extra fees added but I’m not seeing the lower prices that the airlines keep talking about.

  2. zandar says:

    An alternative trend- shipping your bag via UPS or FedEx- makes more and more sense.

    • Invalid_User_Name says:

      The cost of that is about $90 whereas the cost of the checked bag is $25 or so. We’re screwed.

      • webweazel says:

        It depends. We flew recently and were going to ship our clothes/shoes. But we were visiting relatives for 3 weeks and had a washing machine available. We could use their soaps, shampoos, etc. and didn’t have to take those, so, I did a test pack a few days ahead of the flight. In a carry-on, I stuffed clothes/shoes for myself, and my 5-year old. It all fit. I carried one other small bag for the TSA baggie items, other necessary toiletries, tickets, camera, camcorder, cords & plugs for electronics, a book to read, and a fillable water bottle. The munchkin carried a backpack with a sweatshirt and toys & games for the ride.
        It would not have cost too much to ship just the clothes/shoes, even if I added a few extra. Don’t forget about flat rate boxes and parcel post! Parcel post works out to generally around $1 per pound. Flat rate is just whatever fits in the box. Don’t overpack and you’ll be golden.

  3. ARP says:

    Ugh, just tax fares and fees at the same rate and be done with it. Some airlines will keep the fees as a “teaser rates” and some will go “all-in” and mock those who don’t. In this case, the market actually could figure it out.

    • Polish Engineer says:

      Exactly! If airlines are going to make fees a significant amount of their revenue stream than they should be taxed.

      Bringing a bag is not ancillary to travel and should not be treated as such both in accounting lines or tax purposes.

      Booking a flight is not ancillary. How freaking cocky do you have to be to look someone in the eye and say I’m going to charge you for the privilege of giving me money, call it ancillary to the whole transaction, and run off tax free?

  4. superfluousK says:

    Mike Wazowski!

  5. shoelace414 says:

    And fees are another reason people are less likley to fly. So it’s bad for the whole industry.

  6. NahWukkers says:

    Don’t you just love those words “ancillary revenue generation”? Another way of saying “other ways to screw every last penny out of the customer”. These are the guys we bailed out after 9/11, and this is the thanks we get. Fool me once …

  7. jessjj347 says:

    “Of course, he’s assuming that what’s left-over after you’ve stripped away all those extras is still a reasonable fare.”

    Exactly.

    The thing that I don’t get is that these fees actually started with cheap airlines like Ryan Air and Easy Jet…and now ALL of the airlines have adopted the fees. However, none of their fares are cheaper. So, we’re actually all just paying more, because everyone has accepted to pay the fees.

    Why are US airlines gouging so much? I think the only way out of this is to allow for change in the open sky agreement. International airlines should be able to fly between points in the US, to allow for more competition and therefor reduced fairs.

    • stormbird says:

      Wow, I didn’t know about that! The EU standards should be about the same as the FAA and some of the foreign airlines use Boeing. Do any US manufacturers use Airbus? Seems like we could at least make the deal that foreign carrier can fly in the US using US airliners.

      • jvanbrecht says:

        US Airways uses Airbus, my flight to Vegas tomorrow has me on a A319 from BWI to Charlotte, and an A320 from Charlotte to Vegas.

      • moonjest says:

        Before the merge with Midwest, Frontier had an all Airbus fleet. I think Delta uses some Airbuses as well.

  8. leprechaunshawn says:

    Congratulations United!! You are the biggest turd in the toilet bowl.

  9. c!tizen says:

    “In the future, if the consumer wants to squeeze travel costs down to next to nothing, he or she will buy online, maybe pay with a debit card, won’t have an assigned seat, bring a snack from home and will have a carry-on… Anyone who wants a different experience will pay more.”

    Yeah, until they start charging fees for carry-ons, forbidding outside snakes as they may be a “security risk”, charing a “flotation device” fee for every seat, an “online transaction administration” fee, and a “convenience” fee for paying with debit.

    The only way these pricks are going to learn is when someone starts making flying private planes cheaper and more convenient (which they already are since you don’t have to deal with TSA security crap and board on the tarmac). Make them fight for your business, that’s the only way to win this game.

    • lalaland13 says:

      I believe there was an entire movie about what outside snakes on planes are a security risk.

      Private planes are already cheaper and more convenient for rich people. The rest of us will just have to continue and suffer. I flew American recently and there was a lot of carry-on baggage and 3 out of my 4 flights were completely full, and the fourth was close. It seems like more people are traveling, so in theory airlines are doing better. But once they start charging these fees, there’s no going back because they like extra money.

      • apd09 says:

        3 out of my 4 flights were completely full, and the fourth was close

        That is partly because they have cut down on the amount of flights. So instead of having 8 flights to a place they may only have 5. Then they also cut down the amount of days those flights run, so instead of having 8 flights over the course of 3 days, there may be 5 flights over 4 days which will drive up demand for the seats.

        • c!tizen says:

          Then they overbook every flight, which is a guarantee that someone isn’t getting to where they need to be on time. They also cram the planes full which takes it longer to load and unload, then wonder why their always running late. This should be a business school example of how not to run your business, or better yet, how to run your business into the ground (which is a double no-no for an airline.)

      • c!tizen says:

        Lol, I saw that after I submitted, but with no edit button I figured I’d just try to fly under the radar.

        If you’re planning a trip with a large group of people, chartering a plane can actually be cheaper for you. A few years ago I went with a group of friends to Vegas and we chartered a plane. There were almost 20 of us and we all met up in Texas (short drive for all of us) and few out. The ride was great and splitting the cost made it cheaper than getting the tickets through a commercial airline.

        Not to mention we had a blast flying on our own plane. The service was great and the time flew by (no pun intended). If you can gather enough people this is the best way to go.

    • aloria says:

      You already can’t bring your own drinks from home due to the wholly idiotic 3-1-1 liquid rule, forcing you to spend the crazy airport markup for the privilege of having a beverage during your trip.

      • c!tizen says:

        That’s what I’m saying, it starts with stuff like this and grows and grows until it’s just normal and no one even notices anymore. I’ve taken to just bringing an empty bottle or cup with a lid and filling up at the water fountains in the airport. If I want something with flavor I’ll usually bring one of those powdered crystal light mixes. They’re cheap and work like a champ.

    • Doughbuy says:

      Have you checked an airlines financial statement? You do realize they are making no money at all, and are constantly losing money. Here’s United’s financial statement:

      http://www.google.com/finance?q=NASDAQ:UAUA&fstype=ii

      Oh wow, look at that huge pile of money their making. Makes ExxonMobil look like childs play….

      It’s par for them to raise prices and fees. Or how about you run a business and keep losing money in order to have a bunch of cheapskates feels good about getting a great deal. Makes you feel like such a big man.

      Vote with your wallet and drive. Or stay at home. No one is forcing you to fly.

      • c!tizen says:

        “Or how about you run a business and keep losing money in order to have a bunch of cheapskates feels good about getting a great deal. Makes you feel like such a big man.”

        Sounds like someone is loosing money on a bad stock investment. And since when did expecting decent service for your money make you a “cheapskate”? You want to raise fee’s, fine, but give something in return, even if it’s just better service.

        As far as the “big man” comment goes, grow up son. What am I supposed to say to that? My dad can beat up your dad? You did so well providing links to back up your comment, then you go and say something like that, almost a win… almost.

        And you’re absolutely right, no one is forcing me to fly, I do drive. Unless of course theres one of those pesky oceans in my path, in which case I’ll float if I’m not on a deadline.

        Thanks again for stopping to rant, feel free to drop by anytime.

        • c!tizen says:

          haha, “losing” sorry.

        • jvanbrecht says:

          While on the books they may be taking a loss, I am sure creative accounting has something to do with that, sort of like the movie industry using creative accounting to show that a movie lost money to avoid paying out the %’s to actors/staff when in reality the movie raked in millions, possibly billions.

  10. Sparty999 says:

    nice planes… crappy everything else…

  11. FatLynn says:

    I have to wonder how the percentage of business travelers compares across airlines. Obviously, a checked bag makes more sense if you are on an expense account.

    • jessjj347 says:

      Business travelers usually don’t have large bags though. I guess it depends on the length of time they travel for.

    • fs2k2isfun says:

      Most business travelers don’t check bags, and if they do, many are elite frequent flyer members so they don’t pay anyway.

  12. TheSpatulaOfLove says:

    >Tague theorizes that the airline could someday generate over $1 billion from just checked-bag >fees alone: “It appears that the trend is firmly in place, and that over time more and more bags >will be assessed fees.”

    And the nickle-dimed public theorizes that said fees only fosters disgust for the industry and drives more customers to alternative forms of travel: “It appears that this fee scam is firmly in place and we can sap those poor suckers with more ridiculous fees – TAX FREE! We’ll run this scam a long as possible until our customer base is completely blown apart, then of course we’ll head to Washington and beg for a bail-out, blaming everything outside of our broken business model and cavalier attitude towards the traveling public.”

  13. Invalid_User_Name says:

    “and will have a carry-on… ” THAT WILL END UP BEING CHECKED AT THE GATE ANYWAY!

    Warning to anyone who hasn’t flown lately: EVERYONE is bringing a carry-on on United because of their fee policy. If you are not among the first to board the plane, they are going to take your carryon at the gate and make you check it and you get to pick it up on the carousel, sucker.

    • TheSpatulaOfLove says:

      Since I do not fly United, I have to ask:

      If they gate check your luggage, do you get charged the fee?

      • jessjj347 says:

        They did it for free several months ago. Policies may have changed though.

      • Invalid_User_Name says:

        No, you’re not charged the fee.

        But — BONUS FOR YOU — you packed light and small and then have to deal with the hassle of the luggage carousel anyway.

    • James says:

      It’s usually for Zone 4. Good FAs will enforce “one carry on above, and one below your seat” – Even better FAs will ensure your bag fits “wheels out,” so one person can’t hog up space horizontally by oversized bags.

  14. Bativac says:

    Man, I love traveling, but they sure don’t make it easy.

    I was fortunate enough to be able to fly myself, my wife, my dad, HIS wife, AND my sister to Rome last year, due to relatively cheap airfare. I wonder if I’ll ever be able to do that again?

  15. skakh says:

    Just one more reason to avoid United Airlines, not that I needed one.

  16. Paul in SF says:

    They need the extra dough to pay for that Taylor guitar they broke. Right Dave?

  17. James says:

    I fly United because my home airport (Denver) has flights to almost everywhere. I don’t check bags and pack my own food so fees don’t bother me.

    My only gripe is now charging for Standby, (unless waived for weather or their fault.) If I arrive early for a connection flight, and there’s space, I can’t just jump on that earlier flight without paying.

    But thankfully this year I’ll have flown enough with them and partners, (US Air/Continental/Lufthansa) I’ll have made Premiere, which gives upgrades, (economy plus) and First if available, no bag fees, and priorty boarding even if economy.

    I’ve flown a few times on Southwest or other airlines when price and schedule suit me better, but if one travels a lot there’s benefits to being even the lowest status, and it’s easy to find flights among many airlines that give you points for one.

  18. Amy Alkon says:

    The nickel and diming for luggage and a seat that isn’t next to the broken restroom at the back of the plane makes me want to fly Southwest…is a great marketing ploy for Southwest BY United.

  19. JollyJumjuck says:

    My stepbrother runs a small business for which a fair bit of long distance travel is necessary. So he got his pilot’s license, the company bought the plane (not sure what kind, but it is a six-seater, 2 engine propeller plane), and he flies across the US and into Canada. No hassles at customs, no hassles with airlines. If you have the money and can learn to fly, it’s a nice alternative option.

    • Polish Engineer says:

      Off the cuff cost/benefit analysis says this is not cost effective. Maybe a lot more convenient and fun, but not practical for most people. Over $5k for the pilots license, even more for the plane, and reduced range. It’s not like big companies are going to go out and buy fleets of private aircraft with all the pilots wages, maintenance costs, and insurance hassles that go with it just so you can bring your razor and full bottle of shampoo on your three day business trip.

    • James says:

      Kudos to your stepbrother. I’m guessing he has a fractional ownership or leaseback agreement too.

      Overall Polish is right. It’s a wonderfully fun hobby, but getting to the point where you can handle weather and schedules akin to airlines takes many hours of IFR training (in addition to your VFR basic license) and extremely disciplined and sound decision making abilities.

      I got my pilot’s license back in 2001, but I haven’t flown in a few years because I’ve gone everywhere I can go in a 400 mile radius, and the expenses are better invested in savings and my house.

      Still I go up occasionally with an instructer and friends and don’t regret it one bit. The nice thing is that every other hobby and activity (a day of rafting, Spanish lessons etc) is pennies compared to an afternoon punching holes in the sky.

  20. HogwartsProfessor says:

    …buy online, maybe pay with a debit card, won’t have an assigned seat, bring a snack from home and will have a carry-on…

    Hell, I do that now. I won’t check a bag for just a weekend trip. And I don’t know who has enough money to think that $500 for a non-refundable ticket is cheap. To me, that’s a freaking FORTUNE.

  21. Galium says:

    Can not wiat for high speed trains. BYe bye airlines.