Happy Fifth Anniversary, Airline Baggage Fees!

Luggage fees
Getty Images
This month we hit a dubious milestone: It's the fifth anniversary of domestic airlines deciding to charge fees for checked baggage.

The very first checked baggage fee actually showed up in May 2008, points out FareCompare.com. That was when American Airlines, responding to rising oil prices, decided to stick its neck out and take the risk of being the first major airline to implement the fees. A couple months later, in July, the other airlines decided to follow suit, and that's the anniversary we're "celebrating" this month.

While griping about airline fees is a popular pastime among travelers, FareCompare CEO Rick Seaney says they were born out of desperation, not greed.

"Fees in general saved the airlines, to be honest," he says. "If you asked an airline executive [in 2008] if he could survive long-term at $100-dollar-a-barrel oil, he would have laughed. He would have expected that he couldn't raise ticket prices high enough to recoup [costs]."

%VIRTUAL-pullquote-The mantra from the consumer is, 'Just put it in the price of the ticket.' And as soon as airlines do that, they quit buying tickets.%Instead, the airlines kept a lid on advertised fares but tacked on baggage fees, which proved to be a lucrative revenue stream, to say the least: U.S. airlines made $3.4 billion in checked bag fees in 2011 alone, a figure that doesn't include revenue from various other fees now being charged to travelers for everything from earlier boarding to the extra legroom of an exit row seat. Making money through fees allowed the airlines to stay solvent without driving off customers.

"The mantra from the consumer is, 'Just put it in the price of the ticket,'" says Seaney. "And as soon as airlines do that, they quit buying tickets."

That's not to say that we should actually be celebrating baggage fees. While Seaney notes that ticket prices have grown at a relatively slow rate over the last five years, they haven't exactly gone down, either. So it's not as if breaking out fees into a separate charge has appreciably lowered the price of travel for those who know how to pack light.

Sponsored Links
And in a lot of ways, baggage fees have made flying a less pleasant experience. Travelers who want to avoid a $50 round-trip fee are forced to stuff everything into a small carry-on. If they still have too much stuff, they're forced into a cat-and-mouse game of trying to get all their stuff past the gate agent, creating an adversarial relationship with the company. (It's no wonder airlines consistently rank as one of the worst industries for customer satisfaction.) And all those fliers trying to cram carry-on bags into overhead compartments creates havoc on crowded planes, a problem that American Airlines is now trying to solve.

We can grumble all we want, though: Baggage fees have proven a smashing success for the industry, so don't expect them to go anywhere. And Seaney echoed our prediction from a couple months ago that Southwest Airlines (LUV), one of the last holdouts against the fees, was gearing up to reverse its policy.

In just five short years, baggage fees have become the industry standard. And in another five, it will be hard to remember there was ever a time when you could check your luggage for free.

How to Outwit the Airlines
See Gallery
Happy Fifth Anniversary, Airline Baggage Fees!

The shortest path between two points may be a straight line, but rarely does that seem to apply to airline routes. You might not be surprised by a layover in Chicago if you're flying from Boston to Seattle, but rarely will you find so obvious a route, especially on discounted and last-minute tickets.

Flying from New York to Dallas? JetBlue (JBLU) will make you lay over in Boston. Taking a short hop across the Adriatic Sea from Dubrovnik, Croatia to Venice, Italy on Iberia? Expect to lay over in Barcelona, Spain. That's because most airlines have hubs that they operate many more flights through, which make them cheaper. For example, American Airlines (AAL) has its largest hub in Dallas-Fort Worth, while United Continental (UAL) now has its largest hub in Houston (United's top hub was Chicago O'Hare before the merger).

If the 2005 Wes Craven thriller Red Eye has led you to pass on booking overnight flights, you might be missing out on some bargains.

A round-trip flight on British Airways from New York City to London on an afternoon in early July can cost approximately $1,500. An evening flight (after 6 p.m., although it varies by airline), however, can cost less than $1,000. And it's not just the transatlantic route. Red-eye flights are traditionally less expensive, not as full, and offer shorter lines at check-in and through security. And after all, time is money.

Travel newsletters like Johnny Jet, websites like Airfare Watchdog, or airline-specific social media feeds often provide flash and last-minute deals. Some sites, like Kayak, will automatically prompt you to set up an alert for a particular destination once you've done a couple of searches with the same departure and destination locations.

While many blogs and websites theorize on the best time or day to buy an airfare, there is no magic formula. Only by regularly comparing fares against other dates and airlines will you know when to make your purchase.

A good indicator of how easy an airline is to fly is its policies on changes and cancellations. While the policies are as varied as the quality of the in-flight meals, the information is easier to quantify. The Bureau of Transportation Statistics publishes an annual list of fees generated by each airline. In 2011, Delta (DAL) charged a whopping $766 million in change and cancellation fees. Alaska Airlines (ALK) charged a mere $10 million (And lest you attribute the big difference to the relative sizes of the carriers, Delta only carried nine times as many passengers as Alaska Airlines.)

While the cost of flying may be increasing, airfare deals can always be had with a little patience, persistence, and research. Whether you're traveling alone, with colleagues, or with your family, you can save hundreds or even thousands of dollars on your flights this summer. Maybe even enough for another trip.


Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.
Read Full Story