Airlines Bring In More Money From Bag, Reservations Fees
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MIAMI (CBSMiami/AP) -- Airlines in the United States, earning billions, are now making more on fees for checked bags and reservation changes.
Whether airlines are making more or less profit than before depends on which figures you use, although the parent company of American and US Airways comes out on top either way.
The Department of Transportation said Monday that airlines collected $3.5 billion in bag fees last year, a 5 percent increase over 2013, and $3 billion in reservation-change fees, a 6 percent hike.
Fees began escalating in 2008, when airlines were losing money and facing a sharp rise in fuel prices. Today, they make up a growing share of airline revenue.
At Spirit Airlines, which touts low fares and adds lots of fees, only 63 percent of its revenue comes from fares. Southwest still lets customers check two bags or change a reservation for free; it gets 95 percent of revenue from the ticket price.
Charlie Leocha of the Consumer Travel Alliance said airlines should reduce fees, but he doesn't expect that to happen because the fees bring in too much money. He favors a proposed federal rule that would require airlines to improve disclosure of how much fees will increase a traveler's total bill.
Jean Medina, a spokeswoman for the industry trade group Airlines for America, said that fees let airlines charge customers for things they value while keeping base fares low. She said airlines are using "modest" profits and savings from lower fuel prices to invest in new planes and facilities and to reward employees and shareholders.
Net income at the 27 airlines counted by the government fell to $7.5 billion last year from $12.2 billion in 2013. However, net income can include one-time gains or losses, and analysts usually prefer to look at operating profit.
On that basis, the airlines did even better in 2014 than 2013 — pretax operating profit rose to $14.6 billion from $11.3 billion.
One carrier, Delta Air Lines, accounted for more than the entire industry's decline in net income because it scored a one-time tax gain of $8 billion in 2013. That caused net income to plunge from $10.54 billion to $649 million in 2014.
But take away the 2013 tax gain and 2014 losses on fuel-hedging contracts, and Delta saw a more modest decline in pretax operating profit — $2.93 billion last year, compared with $3.84 billion in 2013.
Other than Delta, both net income and operating profit rose at all the other leading airlines — American, US Airways, which is now part of American, United and Southwest — according to government figures. Those carriers control more than 80 percent of the U.S. air-travel market.
American Air Group Inc. had the highest revenue, net income and operating profit.