Your Checked Luggage Is Saving the Airline Industry

http://www.dailyfinance.com/2012/08/16/checked-bag-fees-saving-airline-industry/

Over the years, the airline industry has been plagued by financial troubles. Most of the major U.S. carriers have had to declare bankruptcy at least once during their histories, and costs like high fuel prices present a constant challenge.

But as much as customers hate them, baggage fees and other tacked-on charges for travelers have made a huge difference to the bottom lines of airlines. Charges of $25 and up for checked bags and in-flight snacks may seem like small change, but they add up to real money for airlines. In fact, the fee strategy has been so successful that some airlines are looking for new premium services to give their customers.

"Thank You for Checking Your Bag and Keeping Us Aloft"

A recent report from Ideaworks showed how fees have added billions to airline profits -- $22.6 billion, in fact, at 50 airlines worldwide last year.

Read More: http://www.dailyfinance.com/2012/08/16/checked-bag-fees-saving-airline-industry/

 

I think the title of this article is a bit misleading. It's like saying that that "government mandated fees" saved the phone providers. The data in the article really illustrates that any deceptive pricing practices usually work to a vendor's advantage. The new airline fees are just another installment of this.

 

It has been called unbundling of services. In theory individuals who do not need these services can fly more cheaply. Having spent the mid '80s flying People Express, I think it can. It can also reduce taxes. Just look at fares to the EU where the government gets more than the airline in far too many cases. Unbundled services are not taxed at the same rate. Where there is some consternation, is that the airlines make it hard for many to avoid these ancillary fees or find ways to get other revenue streams (think credit cards) for people seeking to get around them. All in all I do not see any way around it. The old business model led to multiple bankruptcies and losses.

 

While this theory sounds attractive, the article states precisely the opposite. The airline industry collected $22.6 billion more from the passengers. The only people who saved under the new model must've used points and miles to pay for their tix.

 

I would ask the question that if these fees were banned would fares go up. Yes they would. By a lot, too.