The $8 Billion Solution

Increased baggage fees push airlines’ ancillary revenue up 42% in 2009

Turns out being nickel and dimed really can add up—to some $7.8 billion. The Department of Transportation’s Bureau of Transportation Statistics confirmed what many had already suspected: U.S. airlines made a lot more money in fees last year.

Of the $7.8 billion total, more than $2.7 billion was generated from new or expanded baggage fees, according to the DOT. Baggage fees were introduced in 2008 but became more prevalent last year. The DOT defines “ancillary fee revenue” as baggage fees, reservation change fees and miscellaneous operating revenue, such as pet transportation and standby passenger fees.

The combined Delta and Northwest led the way with some $2.4 billion in ancillary fee revenue. American was second at $1 billion, followed by US Airways ($912 million), Southwest ($617 million), United ($620 million), Continental ($540 million), AirTran ($250 million), JetBlue ($193 million) and Alaska ($147 million).

United and Continental, which announced plans to combine in May, were sixth and seventh among carriers in fees collected, accounting for $1.16 billion. Delta, on its own, collected the most revenue from fees at $1.65 billion. Delta also led the way in pure baggage fees at $481 million, followed by America ($475 million) and US Airways ($432 million).

In other airline news, the DOT is proposing to award four routes to Tokyo’s downtown Haneda Airport to American Airlines at New York, Delta at Los Angeles and Detroit and Hawaiian Airlines at Honolulu when the airport’s fourth runway becomes operational later this year.

The opportunities were negotiated in connection with the U.S.-Japan Open-Skies agreement, which was concluded in December. The agreement permits U.S. carriers to introduce a total of four daily round-trip services at Haneda. Previously, U.S. carriers serving Tokyo have been limited to using Narita Airport, which is considerably farther from the city.