Early on a Saturday morning last September -- at 2:52 a.m., in fact -- Congress passed a massive, sweeping piece law that made a lot of big changes to the airline industry.

Officially, the law reauthorized the Federal Aviation Administration. But it also did a lot of other wide-ranging things -- from prohibiting passengers from using cell phones during flights, to letting pregnant women to board airplanes first, and even establishing an "office of spaceports" within the FAA.

I wrote about all the changes here. But I also wrote about the giant change that didn't happen.

Because after intense lobbying by the big airlines (including American, Delta and United), a provision to limit the change fees and baggage fees that airlines can charge to "reasonable and proportional" amounts somehow disappeared.

Now, we've learned exactly how much money the airlines made as a result -- and why they truly wanted to avoid that restriction -- courtesy of the U.S. Bureau of Transportation Statistics

During 2018, the total baggage fees charged by U.S. carriers added up to $4.9 billion -- and fully $2.9 billion of it was attributable to the big three legacy airlines: American, United, and Delta. 

Here's the list:

  • American: $1.22 billion
  • United: $889 million
  • Delta: $788 million
  • Spirit: $638 million
  • Frontier: $366 million
  • JetBlue: $321 million
  • Alaska: $280 million
  • Allegiant: $220 million
  • Hawaiian: $85 million
  • Southwest: $50 million
  • Sun Country: $36 million

Change fees are also another $2.9 million or so on top of it, by the way. A few fun data points in there: 

  • Southwest stands out among U.S. airlines by bundling bag fees into the ticket price, at least for the first two checked bags. Hence, the "bags fly free" motto. But they still managed to bring in $50 million in bag fees. I guess a lot of people bring a third bag.
  • And Spirit is interesting -- and lives up to its nickel and diming reputation despite coming in fourth, because it has only 29 million passengers a year, compared to American's 203 million.
  • Do some math, and this means Spirit averaged $22 in bag fees per passenger; American averaged $6 per passenger.

A decade ago, in 2008, the airlines were in a very different place -- and so were their baggage fee revenues, which were about $1.5 billion in total.

Pushing to charge more for bags doesn't just add dollars to the airlines' bottom lines, although it certainly does that.

And it doesn't just result in fuel savings from some passengers choosing to carry less aboard, although it does that too.

But it also helps the airlines save on taxes, because while airline tickets are subject to a 7.5 percent federal excise tax, fees for things like checking bags are not. 

I find all this fascinating -- both for the reasons that many readers seem to be especially interested in the airline industry, but also because of the lesson that it suggests for almost any business. 

Your most lucrative add-on might be something that you can unbundled from what you normally think you sell. For airlines, it's not just the seats. It's the baggage fees and the change fees. 

And oh, also the frequent flyer programs.

Maybe there's an add-on or an upsell, or a thing you can unbundle in your business. Identify it, sell it, and maybe you can find yourself lobbying Congress not to act, too.

Published on: May 9, 2019
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