Not too long ago, the airline industry was struggling to keep its head above water. In the last decade alone, over a dozen airlines have filed bankruptcy, while others (such as American Airlines) opted to take drastic cost-cutting measures. Within the last five years, however, the majority of US-based airlines have found one simple way to increase their profit margin – and the numbers will shock you.
If you’ve flown anywhere within the last few years, you’ve undoubtedly noticed that it’s become increasingly difficult to avoid getting hit with additional fees. This phenomenon began in 2008, when American Airlines found themselves struggling with rising oil prices. Their solution: instead of raising ticket prices, they decided to start charging an additional fee for checked baggage. Within months, other domestic airlines followed suit and today, checked baggage fees have become the norm. Today, most US-based airlines charge about $25 per checked bag (or $50 round trip).
PORT-AU-PRINCE, Haiti (Feb. 19, 2010) Workers at Toussaint Louverture International Airport in Port-au-Prince, Haiti unload luggage from an American Airlines flight. (U.S. Navy photo by Senior Chief Mass Communication Specialist Spike /Released) (Photo credit: Wikipedia)
This year alone, the global airline industry is expected to clear a profit of $1.27 billion. If you think that sounds pretty high, you’re right — in fact, that’s a 67% increase from 2012.
Interestingly, this number has little to do with an increase in ticket sales; instead, it has a lot to do with fees. In fact, additional fees (such as baggage fees and penalties for changing flight times) account for $36 billion last year alone, and according to the International Air Transport Association, that number is expected to “grow significantly” this year.
But does that increase in global revenue really impact individual airlines? Yes, and you may be surprised as to what degree. Take US Airways for example. In 2007, they raked in $27.7 million in baggage fees alone. In 2012, they raked in $516.2 million, resulting in a whopping 1761% increase. Frontier Airlines has had similarly impressive results. They saw a 1419.6% increase in revenue from baggage fees between 2007 and 2012. Out of all major US-based airlines, Delta Air Lines raked in the most revenue from baggage fees — a cool $865.9 million in 2012 alone.
Airlines around the world have begun to take note of these numbers and are beginning to charge additional fees as well. Between 2011 and 2012, UK-based airlines raised their baggage fees by as much as 67%, which, as the (London) Daily Telegraph points out, is 24 times the rate of inflation. In addition, many UK-based airlines have begun to increase other fees – for example, several airlines opted to raise the fee for traveling with an infant.
No matter where you live, one thing’s for certain: “budget flights” may certainly become a thing of the past, so you need to get used to paying fees, or finding ways around them.
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