Delta Joins the Crowd, Adds First-Bag Fee

Combined with unprecedented capacity cuts, fees for baggage and other services are helping to boost the airline industry's fortunes. Expectations for a profitable 2009 are becoming widespread, despite the troubled economy.

UAL(UAUA), for instance, says new fees will likely boost next year's revenue by $750 million. US Airways(LCC) projects a revenue gain of $400 million to $500 million.

Additionally, the new fees have led to a new industry model where passengers pay for services they use while airlines handle less baggage and, in the case of US Airways, which charges for drinks -- fewer drinks. In September, the number of checked bags on US Airways fell by 25%. "We've stumbled onto a better product," Parker said, in an interview.

With all the legacy carriers signed on to bag fees, attention may shift to the low-fare carriers. Southwest seems wedded to the policy it has so heavily advertised, but clearly AirTran(AAI) is not.

On the AirTran third-quarter earnings conference call, CEO Bob Fornaro noted that the carrier has looked at adding baggage fees. "We have elected not to, primarily because our largest competitor in Atlanta hasn't done it," he said. "We compete on two-thirds of our flights and 80% to 90% of our revenue. We prefer to be a follower in this situation rather than a leader."

If Delta were to add a first bag fee, Fornaro said, "we would strongly consider it."

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