Airlines Rake in $2.1 Billion from Fees

The numbers never fail to dumbfound: U.S. airlines made $2.1 billion in revenue from ancillary fees in the second quarter of this year. Ancillary fees, in the parlance of the Department of Transportation’s (DOT) Bureau of Transportation Statistics (BTS), refers to “baggage fees, reservation change fees and miscellaneous operating revenue, including pet transportation, sale of frequent flyer award miles to airline business partners and standby passenger fees.”

Breaking down the $2.1 billion reveals more staggering figures: $893 million from bag fees; $594 million from change fees; $618 million in “miscellaneous operating revenue,” which includes pet fees and standby fees.

More importantly, most of these numbers are on the rise. Revenue from bag fees has jumped 33 percent over the same period last year. Total revenue from ancillary fees has increased 15 percent. (Notably, change fee revenue has actually dropped 2 percent.)

In fact, just for illustrative purposes, here are the quarterly bag fee revenue numbers for the past five quarters:

• Q2 2009: $669.6 million
• Q3 2009: $739.8 million
• Q4 2009: $741.5 million
• Q1 2010: $768.5 million
• Q2 2010: $892.8 million

These financial reports always stir mixed emotions for me. On one hand, I’m appalled by the massive amounts of money being made for services that, not too long ago, were considered part of a passenger’s ticket. On the other hand, I’m glad the airlines seem to have found a viable business model, since I do enjoy traveling and typically need an airline to do so. It would be nice, however, if all these fees were presented in a more transparent fashion.

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That said, it’s difficult to look at this steadily growing source of revenue and not wonder: What about fares? Fares, as it happens, are on the rise this year, thanks to strengthening demand and a lack of capacity thanks to cuts made during the recession. So fee revenue is going up, and fares are going up.

Not a bad equation for the airlines, but less appealing, unfortunately, for you and me.

As for individual airlines, Delta’s $681 million in fee revenue was by far the highest (not surprising, since it’s currently the largest airline in the world), and Spirit once again had the highest percentage of its revenue come from fees—a whopping 24.2 percent.

Readers, do you feel you’ve been spending more on airfare lately?