How Airlines Make Money: Charge Travelers $25 To Check A Bag, Only Spend $2 To Transport It

Airline fees aren’t new to travelers; in fact, it’s almost second nature to shell out $25 to check a bag. Over the years airlines have tried justified their decision to charge consumers fees for things like checked baggage or reservation changes. But two new reports are shedding light on just how much airlines are making by employing those fees.

When airlines began charging checked baggage fees in 2008 it drew the ire of travelers. Airlines justified the new fee by telling consumers the money was being used to pay for the jet fuel used to transport the bag. Well, that’s no longer the case, apparently.

No, it doesn’t cost $25 in jet fuel to transport your checked bag. It only costs about $2, a new analysis by the Detroit Free Press shows.

Airlines are notoriously tight-lipped on how much it costs to fly passengers, but the Free Press was able to extrapolate the cost from an American Airlines press release on cost savings when pilots traded in 35-pound flight manuals for sleek, 1.35-pound iPads.

So airlines are charging roughly 12 times that cost for one bag. That seems outrageous, right?

In principle it is, but airline officials are saying that’s not all the fee is used for. No, now, they serve as a revenue stream for the once struggling airlines.

While American Airlines and industry trade Airlines for America officials don’t dispute the Free Press finding, they say there are significantly more costs involved in transporting baggage like salaries and transport tracking systems.

However, not all airlines are the same. Southwest touts two free checked bag (but for how much longer), while Spirit Airlines charges travelers for carry-ons.

Still, those fees add up, boy do they add up.

In fact, the U.S. Department of Treasury reports that U.S. airlines made $2.5 billion in baggage fees in the first three quarters of 2013. In 2012, airlines brought in $3.5 billion in bag fees.

Checked baggage fees aren’t the only thing airlines are using to increase revenue. In the same three quarters of last year, airlines reported a revenue of $2.1 billion for reservation change-fees, just under the 2012 revenue of $2.7 billion.

A USA Today survey of a dozen airlines showed some airlines are levying fees of $400 or more for things like reservation changes, booking by phone, and overweight baggage fees.

Change-fees for airlines vary from nothing to more than $200, USA Today reports. Last year, American hiked their change fee by $50.

International travel is another monster entirely. Delta Air Lines charges $400 to change a ticket on some international travel, while American Airlines charges $450 for an overweight checked bag (weighing 71 to 100 pounds) for some international flights.

Fees might be hurting our wallets, but they are enabling airlines to provide consumers the ultimate choice and control over what they purchase, Airlines for America say.

The Michigan Traveler: True cost of transporting a $25 checked bag? About $2 [Detroit Free Press]

Airline fees reach $400+ [USA Today]

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  1. SingleMaltGeek says:

    I usually fly SouthWest, and I’ll usually just pack a carry-on (for speed and convenience as much as to avoid the fees). But hey, if other people want to keep paying baggage fees, I guess they’re subsidizing a lower fare for me.

  2. craftman1 says:

    The final sentence seems unverifiable. “Fees might be hurting our wallets…” How can you be sure that – in the absence of baggage fees – your $300 ticket + $25 bag fee wouldn’t be a $325 ticket?

    I’m not saying I’m right either, but this idea that fees are predatory or unjustified is getting old. Different business models. At some point they will try and charge more than it costs to overnight your bag via FedEx and they will lose. Profits can only be maximized up to a point that someone sees an opportunity and capitalizes on it.

    • SingleMaltGeek says:

      Trying to to obfuscate the cost or make it harder to compare costs is not just another way of doing business, it’s an ethically inferior and morally bankrupt way of maximizing profits. The moral and ethical way is to provide better service than your competitors and to lower costs by maximizing your efficiency.