"Virtue has never been as respectable as money." - Mark Twain

SavingAdvice.com Blog

Bridging the gap between saving money and investing

airline fees

Airline Baggage Fees Gave Carriers Nearly $1 Billion in Extra Income Last Quarter

By 6 Comments

Airlines earned nearly $1 billion from checked bag fees in the last quarter
You may hate them, but airlines love them. There’s now only one US carrier not charging baggage fees. This took place earlier this month when Jet Blue announced it would begin charging baggage fees to consumers using their airline, leaving Southwest as the only airline still letting customers check their bags at no cost.

The reason so many airlines have made the move is simple. It’s a huge cash cow, and brought in nearly $1 billion ($960 million) for 27 airlines charging these fees in the last quarter alone, according to the Department of Transportation. That’s a 9% in baggage fee income from 2013, and earned the airlines some $2.7 billion extra dollars so far in 2014.

While that’s nothing to sneeze at, it still is a far smaller number than ticket costs, which have brought in some $34 billion during the quarter. Still, considering these fees weren’t around 10 years ago, it’s a revenue stream most airlines aren’t going to be willing to abandon even with lower oil prices.

It’s these extra fees like the baggage fee which makes it a lot more difficult for travelers to know exactly how much their flight is going to cost. It wasn’t too long ago all charges were part of the airline ticket you bought, but now they have been broken out into a plethora of different fees. While most people hate paying a fee to check their bag, there are a few who think they are great (beyond the airlines).

Airlines do have massive costs to operate. Airlines spent $11 billion for jet fuel in the last quarter, and another $10 billion for labor fees to keep their planes in the air. While the huge drop in oil costs should help airlines reduce costs in the long run, the savings has yet to show up in ticket prices, even while gas prices for cars has tumbled. Consumers may see ticket prices drop soon if consumers decide that driving is a less expensive alternative to airplane ticket prices.

Charging to check luggage is just one way airlines are nickle and diming air travelers these days. It’s important to know how they do this so you can make choices to avoid these fees and save money when possible, so you don’t spend more for air travel than you need to.

(Photo courtesy of brownpau)

Baggage Fees: Why You Should Love Them

By 4 Comments

When I’m at a restaurant with a group of people, often times there is a discussion on the best way to split the bill. It always seems that the person who had the most expensive meal suggests that we simply split the bill evenly to make it easy. This makes perfect sense from his perspective. If each member in the group pays the same amount, those that choose less expensive meals will end up subsidizing his meal and making it cheaper while they don’t get the benefit of paying less since they ordered a less expensive meal. If you have ever been in a situation like this, my guess is that you weren’t too happy when that person made the “split the bill evenly” suggestion.

This is why I find it interesting that so many people hate airline baggage fees. The vast majority of airlines charge an extra fee for baggage these days. Only Southwest and Jetblue don’t charge for a first bag (and only Southwest doesn’t charge for a second bag), so there’s a good chance that you will run into the possibility of having to pay a baggage fee if you fly in the US. The thinking of most people is that the baggage fee (or any other fee) should be part of the airline price so they don’t have to pay any more than the ticket price. Essentially, they are arguing that the bill at the restaurant should be split evenly no matter what each person orders.

I, on the other had, can see that baggage fees (and specific other optional airline fees) are actually to the advantage of the passenger. These fees exist because the airline industry is so competitive that airline tickets are basically at the lowest price possible. If individual fees like the baggage fee didn’t exist, then the price of tickets would have to be more expensive for all. You have a choice as to whether you pay the baggage fee whereas you wouldn’t have this choice it if was already included in the airline ticket price.

When you look at if from this perspective, airline fees quickly become a good thing. Instead of paying more for an airline ticket, I can pick and choose those things I’m willing to pay for and those I’m not. For people who know how to travel light (like me) or have learned to pack well (video), they simply don’t pay a baggage fee. In the same way, I choose not to pay for food when I fly (I bring my own snacks for the trip).

So the next time you see all the optional airline fees on top of your ticket listed, don’t get angry or upset. Remember the dinner with friends analogy and view the fees as a challenge to avoid as many as you can knowing that by doing so, you’re getting the best airline price possible.