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[September 26, 2012]
Hawaiian nets record $16.5Min bag fees for quarter
Sep 26, 2012 (The Honolulu Star-Advertiser - McClatchy-Tribune Information Services via COMTEX) -- Pesky baggage fees are adding hundreds of dollars to the cost of family vacations.
But for Hawaiian Airlines, the add-on fees turned into a company-record $16.5 million in additional revenue during the second quarter, according to data released Tuesday by the U.S. Bureau of Transportation Statistics.
The state's largest carrier, which collected $32.6 million in baggage fees through midyear, is well on its way to eclipsing the record $56.6 million it collected in 2011.
Hawaiian, though, is not alone in tapping baggage fees as a lucrative revenue stream.
The 15 major U.S. airlines made $932.4 million from baggage fees in the second quarter, up 5.2 percent from $886.7 million in the year-earlier period. For all of 2011, domestic airlines pocketed $3.4 billion in baggage fees.
Colorado-based aviation consultant Mike Boyd said passengers are going to have to learn to live with the baggage fees and other ancillary charges.
"They can think of fees that us mere mortals can never dream of," Boyd said. "I think they've thought of all they can, but who knows Spirit is the godfather of fees, but in reality, if you don't want to pay the (baggage) fees, you just don't check a bag. Fees are part of the program now, part of the revenue stream, and it's not going to change." Miramar, Fla.-based Spirit Airlines has taken baggage fees to the next level and now charges for carry-ons. It plans to raise its carry-on bag fee to $100 in November, up from $45.
Meanwhile, Hawaiian charges $17 for the first and second checked bags for interisland flights, $25 for the first checked bag and $35 for the second checked bag on mainland travel, and no fee for the first two checked bags for international routes.
"Baggage fees represent only a small fraction of our total revenues, but with margins so slim in our industry, they can mean the difference between profit and loss because fares do not keep pace with the costs of operation, including the costs of transporting bags," said Hawaiian spokesman Keoni Wagner.
"Such was the case in the second quarter this year, when Hawaiian would have posted a loss were it not for the revenue generated by baggage fees." Baggage fees, which are assessed for checked, oversize and overweight luggage, enabled Hawaiian to report a second-quarter profit of $3.9 million and represented 3.4 percent of the airline's $484.6 million in revenue. The $16.5 million in baggage fees was a 15.4 percent increase from $14.3 million in the year-ago period.
Although not as lucrative, fees for reservation cancellations and flight changes also provided revenue for airlines.
Hawaiian generated $4.4 million in the second quarter from reservation cancellation and change fees, but that was down 3.6 percent from $4.5 million in the year-earlier period. Domestic airlines made $660.8 million in such fees in the second quarter, up 7.9 percent from $612.4 million in the year-earlier period. For all of last year, domestic airlines brought in $2.4 billion in cancellation and change fees.
Still, baggage fees are clearly the top producer when it comes to additional charges.
Some airlines began charging for checked bags in 2007 as fuel costs began to escalate, and it wasn't too long before others joined the party.
Now, it appears, there's no going back.
"There's no doubt at certain times of the year, especially the holidays, they push the limits as far as they can between one overhead and one handheld carry-on," said airfare travel expert Rick Seaney, CEO of Dallas-based FareCompare.com. "The bottom line is if you're not in the first couple of boarding groups on a flight, you'll likely have to put the bags in the (cargo) hold. People don't want to spend 50 bucks round trip for most airlines, and for a family of four, that's 200 bucks. A family of four can get a nice hotel room for 200 bucks." Thus, it's no surprise that passengers will go to great lengths to bring their personal items into the cabin.
"It's human nature to want to save money," Seaney said. "That's why the word 'cheap' is the most commonly typed-in phrase on Google." Kaneohe resident Paulus Tsai, who traveled with his wife, Hueichen, and three children on a family vacation to Los Angeles last December, said baggage fees have made him think twice about what he's packing.
"I'm more careful about what I pack and I try to make it compact," said Tsai, who checked two bags for his family and had to fork over $100 round trip on his United Airlines flight during winter school break. "I have young kids (now ages 12, 10 and 7), so what we did was we gave them a bag that they carry on, but you don't want to load up your kids. I don't want to burden my kids with traveling things. It's enough to travel with kids before having to worry about them and stuff that they're carrying on. If we were to check bags, there would be less hassle for sure." Tsai acknowledges that the baggage fees are another way to generate revenue for the airlines.
"You can artificially lower the price of your tickets, but in reality, they recover some of that through baggage fees or other fees, or charging a premium for certain type of seats with extra leg room, like aisle or exit-row seats," he said.
Boyd said the fees are merely a sign of the times, although he said it's a running joke that airlines may someday charge a fee to use the bathroom.
"That will never happen," he said.
Still, he's irked that airlines will charge a fee to a passenger who arrives at the airport a couple of hours before a scheduled departure and wants to take an earlier available flight.
"That's outrageous," Boyd said. "Some airlines will charge you $50 to get on an earlier flight. A charge for leaving earlier is really stupid. I don't mind paying for a meal, but if you want to change your flight ahead of time and you're at the airport, that's kind of gouging. Other than that, they can charge whatever they want (for fees)." CLICK TO ENLARGE.
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