4 Airlines With the Highest Fee Revenue
CHICAGO (
) -- Do airlines make too much money from fee revenue? Or might it be too little?
Some say the move to fees, which essentially
originated in 2008 when United instituted a $25 second-bag charge, has been the industry's salvation.
Others view it as another curse inflicted on airline passengers.
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The debate reignited recently as the Bureau of Transportation Statistics released figures showing that U.S. airlines collected about $4.3 billion in fee revenue in the first three quarters of 2010. The amount is roughly equivalent to the industry's
anticipated total profits for the current year.
Factor in the fourth quarter at the same rate as the first quarter -- another slow period -- and the total could fee income could be about $5.6 billion.
Read on for the airlines with the four highest fee revenue totals.
No. 4: United
United had fee revenue of $483 million, including $240 million from bag fees and $243 million from change fees. Merger partner Continental had fee revenue of $439 million, including $258 million from bag fees and $181 million from change fees.
This week, Continental developed a new fee called FareLock, which enables customers to hold a reservation and lock in the ticket price for 72 hours or for seven days without committing to actually buying the ticket. The fees begin at $5 for a 72-hour hold and $9 for a seven-day hold. "FareLock is an innovative option for customers who need extra time to plan their travel before purchasing a ticket," said Chris Amenechi, managing director of merchandising, in a prepared statement.
Aviation consultant Robert Mann said the new fee reflects that airlines seek to "find something customers say they want,
something you categorically won't give them, and give it to them for a fee." But it seems unclear whether the arrangement will benefit passengers, the airline or both.
Continental will continue to allow changes or a refund, without a fee, within 24 hours of booking.
No. 3: US Airways
Amazingly,
US Airways
(LCC)
ranked third in fee revenue, ahead of two bigger rivals,
United
(UAL) - Get Report
and
Continental
. US Airways' $580 million fee revenue included $388 million from bag fees and $192 million from change fees.
"The reason our bag fees are proportionately higher than those of our competitors is due to our large domestic footprint," said spokeswoman Michelle Mohr. US Airways revenue is 22% international, while United's third-quarter revenue was 46% international. No major carrier charges for the first checked bag on most international flights.
US Airways is the only carrier that has
publicly disclosed fee revenue, which it estimates at about $500 million this year. That is slightly different than the BTS number. Mohr said the agency includes some change fees and some on-board fees that US Airways does not.
No. 2: American Airlines
American, the second-largest airline, had about $785 million in third quarter fee revenue. That includes $432 million in bag revenue and $353 million in change fees.
In August, American created a new fee for customers who want to sit in the first few rows of the coach cabin. Participating in the program, dubbed "Express Seats," also enables passengers to be among the first group to board the plane. Fees range from $19 to $39. Last week, American CFO Bella Goren said fourth-quarter revenue is
trending slightly better than the carrier expected.
No. 1: Delta
It should not be a surprise to anyone that
Delta
(DAL) - Get Report
, the world's largest airline before the United/Continental merger was completed, had the highest fee revenue, about $1.3 billion during the first nine months, according to the BTS. The amount includes $733 million from bag fees and $530 million from change fees.
As important as bag fees are to carriers, Delta thinks the income and the allegiance derived from its affinity credit card is even more important. So it waives the first bag fee for holders of its
American Express
(AXP) - Get Report
card. The benefit can be worth $50 a person on a round trip ticket, Delta notes. Delta allows select passengers to check two bags at no charge.
-- Written by Ted Reed in Charlotte, N.C.
>To contact the writer of this article, click here:
Ted Reed