Airlines that charge fees lost more money than airlines that didn't

The US airlines that created the largest, most redonkulous and abusive fees this year lost the most money last quarter. Airlines with low or no fees lost the least.

Accountants have rigged the system. They create a stream to track the ancillary revenue from fees and they look like heroes when they can report they earned the airline millions of dollars of "new" revenue. But ask them if they can track the revenue we lose because passengers booked away or chose not to fly and they look at you like you have nine heads...

To celebrate the victory of fees over profit, several airlines used their first-quarter reporting to add still more ancillary revenue initiatives:

+ Delta Air Lines, which lost $693 million in the first quarter and suffered a 15 percent decline in revenue, will now charge you $50 if you check a second bag on an international flight.

+ Alaska Airlines will charge a first-bag fee of $15 on domestic flights.

+ US Airways is raising its checked-bag fees by $5 each if you don't prepay on the Web.




  1. There are tradeoffs to every change. And in this case, it seems, that the costs outweighed the benefits.

    However, it would seem to be a mistake to assume that the reason the other carriers are making money is because they are not charging for bags (etc.). It may be that they are simply run better in other ways. But, I, for one, hope that people are voting with their wallets and these fees will be changed.

  2. Didn’t your science teacher tell you that correlation does not prove causation? Maybe broke airlines are more desperate to charge fees.

  3. Correlation is not causation, but all causation correlates. That is, where you see correlation, it is not unreasonable to wonder if causality might be at the root of it.

    1. When we look about us towards external objects, and consider the operation of causes, we are never able, in a single instance, to discover any power or necessary connection; any quality, which binds the effect to the cause, and renders the one an infallible consequence of the other. There is required a medium, which may enable the mind to draw such an inference, if indeed it be drawn by reasoning and argument. What that medium is, I must confess, passes my comprehension; and it is incumbent on those to produce it, who assert that it really exists, and is the origin of all our conclusions concerning matter of fact. This question I propose as much for the sake of information, as with an intention of raising difficulties. I cannot find, I cannot imagine any such reasoning. But I keep my mind still open to instruction, if any one will vouchsafe to bestow it upon me. (David Hume)

  4. If I’m not mistaken, this situation DOESN’T apply in Europe, where RyanAir , who pratically invented every annoying fee ever, is still the world’s most successful ailine.

  5. People HATE being nickled-and-dimed to death… and when they compare the amount of the fees to what they pay for an item in their normal life, it feels that not only are they being inconvenienced, they are being gouged. Charging for things that obviously have no real cost – like choosing your own seat – are a recipe for pure anger. And guess what? Angry customers try to go elsewhere when they can!

    capcha: “got logician”… lol! It would seem these airlines don’t!

  6. @Donal

    You may be right…I should check. I refuse to fly with Ryanair, though, because of the Chief Executive, Michael O’Leary.

    Before there was *actually* a recession, I read an interview with him where he said what we needed was a good hard recession to sort the economy out. Tool.

    1. “Before there was *actually* a recession, I read an interview with him where he said what we needed was a good hard recession to sort the economy out. Tool.”

      O’Tool, surely.

  7. As much as I would like to believe that air travel is elastic (that a 1% increase in price would decrease air travel by more than 1%) this random guy on the internet does nothing to show it.

    I suspect that the same airlines that were hesitant to charge fees are the same ones that have better customer service or some other intangibles that this guy completely ignores.

    Also, @redrichie, we have been needing this recession since about 2005 to fix the insanity that was happening in the realty markets and much of the wackiness that was happening in the financial sector, among others. It is painful no doubt, but we’ll be better off ten years from now because of it. Remember the Volker recession of 1982 which cleared out a bunch of crap from the economy, and led to the boom times of the 80s and 90s.

    1. @ anon “Also, @redrichie, we have been needing this recession since about 2005 to fix the insanity that was happening in the realty markets and much of the wackiness that was happening in the financial sector, among others.”

      Oh, don’t get me wrong, I’m no fan of the way that the economy went. The imbalance towards financial services/real esate is clearly mad (and I argued this many, many times before there was any inkling, and I’m not claiming prescience, I just didn’t like it. Although I did use to hear “oh, well, you can’t lose money on property” from people, when a look back at even the 90s, for crying out loud, would show that, yes, you can.)

      However, (and not to go off topic here – apologies) the point about people like Michael O’Leary going on about what a good medicine a recession will be for us, is that it is a seld-interested position to take and it tends to forget that he is in a position to benefit from the weakness of other companies, whilst many ordinary people will just get a shafting. (Look at Adam “Northern Rock” Applegarth. He can actually bear responsibility in his own way for some problems, and yet manages to find good employment again.)

      Back on-topic, I must confess that this year – as a reaction to the awfulness of the airlines we took the train from Glasgow to Paris (stopping off in London for a couple of days) and, man, it was freakin’ sweet compared to the way that one gets treated at the airport.

      Plus, additional bonus, when you get to Paris, you actually arrive in the centre of Paris, rather than Kiev. (Terrible joke, apologies…what’s the moderation policy on them? Hee.)

  8. Piers: Those figures are from 2003. 2008 figures show Ryanair carried the most international passengers (not so much of a surprise, when their focus is on Europe). But they’re 6th for all passengers too:

    I’ve used Easyjet a few times and been very satisfied. I haven’t used Ryanair yet, in part because their flight map requires Silverlight and I’ve heard enough bad things about the airline that that puts me off.

    But if they start charging passengers based on their mass, I’ll be first in the queue for the discount (I’m 55kg).

  9. @ Cory

    Indeed. The first thing I thought of was fees being the result of a company that didn’t plan for something like this to being with and in an effort to stay competitive on pricing, opted to institute fees to compensate. These fees served not to boost the bottom line, but simply to make up for the costs incurred during 2005-8 when fuel prices went all screwy.

    To further the point: Absent from this list is Southwest who was able to continue on without fees because they saw the writing on the wall and were able to lock in fuel at a then higher, but comparatively much lower rate, saving their business and being able to use their lack of fees as a selling point.

  10. Case in point; last week a client’s travel staff offered me cheaper flights on US Air. However, after I had calculated the baggage fees, American was actually the cheapest since my status allows for free bags.

    US Air certainly lost 4 round-trip tickets on that transaction.

  11. We don’t need statistics and talk of correlation or causation to figure this one out. The additional fees are just the latest in a chain of customer-hostile actions from airlines.

    Jet Blue is one of the few airlines that gets it, that goes out of its way to make a pleasant experience for its customers, and, a higher percentage of the time than most other carriers, not treat them like garbage. And even they seem to be slipping lately.

    Recent flights on Delta, American, and United have suggested to me that they are all trying to one-up each other in just how unpleasant, unpredictable, and stressful to make the journey on their passengers. The only thing they have going for them is that they fly to the places I want to go.

    It’s a subtle difference between “we don’t provide meals so we can keep prices low” and “we don’t provide meals because woe is us we’re poor please give us money for our profits our $8 cheese and lettuce on bread is awesome we promise and BWAHAHAHA you should have brought your own food sucker now you’d pay $20 for a cookie so shut up or pay up and be thankful that your legs still fit between you and the next seat,” but that’s the impression I get.

    I don’t quite see why most airlines don’t just jack the prices by $25 and offer the first checked luggage free, but as someone who’s going carry-on-only whenever possible, I won’t complain about the current situation.

    If anything, the additional luggage fees have encouraged me to explore the sheer joy that accompanies traveling without checked luggage. Awesome! It almost feels like cheating when I’m in a rental car within 15 minutes of landing.

  12. … ask [accountants] if they can track the revenue we lose because passengers booked away or chose not to fly and they look at you like you have nine heads …

    This is where we need to help them out by sending them what I call an uncheck.

    An uncheck would be a piece of paper that resembles a check, but which is clearly marked to show that it is not negotiable (“promise NOT to pay the bearer” etc). It contains a field for an amount, and the words “This uncheck represents the money that I have decided not to spend with you today because …”

    It’s the least we can do to help businesses understand the consequences of their decisions.

  13. mic, at first I had the same comment as you, but then when you read the article, the author gives a pretty good reason to believe in causation.

    In particular, he kept track of when the airlines introduced fees to the change in profitability per airline. The kicker is that the earlier fees were introduced, the more revenue declined, across the board.

    “But the overall numbers don’t lie: The faster airlines add fees for basic services like checked bags, the faster their total revenue declines.”

  14. I haven’t flown in more than a year because of my company and the economy but I recall that as the fees were being added on people avoided checking baggage. One of the things I noticed was more and more passengers trying to cram inappropriate sized stuff into overhead bins or under seats. I suppose if you charge for something, people will try to avoid it. Net effect, same amount of luggage, just all crammed into the passenger space.

    Noticing one revenue number going up and ignoring the ones going down is classic American corporate. Eventually though (after several bankruptcies) the negative revenue catches up with you.

  15. This reminds me of that xkcd comic:

    A: I used to think that correlation equalled causation. Then I took a statistics class. Now I don’t.

    B: It sounds like the class helped.

    A: Well, maybe.

  16. I predicted to anyone who would listen (almost nobody) that when the airlines started this charging for first checked bag nonsense, the already bad of too many/too large carryons for overhead bin space problem was going to get far worse.

    I have spent far more time in the past few months than I would like on planes and I have to say that my personal experience has not shown my earlier prediction to be true. The carryon problem does not seem to have gotten noticeably worse.

  17. This isn’t a big surprise, but I don’t think it’s that flyers are avoiding these airlines because of the extra fees. Usually:

    A = B

    Where A = Company that’s suddenly instituting policies that are basically about nickel-and-diming its customers; and B = drowning company going down for the third time and clutching at straws (in this case, a business plan that now includes pissing off its customer base and making the cabin–with all the added potential projectiles in the overhead–more dangerous).

  18. Lazy googling on my part there.

    EasyJet have improved a lot since the departure of the hideous Stelios Haji-Ioannou, who I assume is one of Michael O’Leary’s role models.

    Don’t fly Ryanair.

    Air France often have cheap flights from London City Airport, which after you consider the cost of public transport or taxi to central London, are in fact cheaper than flying from Gatwick or Luton.

    Or go with Easyjet, if you don’t mind the entire flight being interrupted by invitations to buy lottery tickets, or their peculiar obsession with creating unnecessary queues at check in and departure.

    But whatever you do, don’t fly Ryanair.

  19. Reason why, I’ve just worked out, is if if you hit ‘reply’, and then sign in, you have to go back and hit ‘reply’ again.

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