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US Airlines Look to Boost Revenues With Higher Checked-Bag Fees
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Delta Air Lines (DAL - Free Report) raised the price of checking luggage, becoming the latest U.S. carrier to do so. According to DAL’s management, passengers will now have to shell out a $35 fee for the first bag checked on a domestic flight, resulting in a 17% increase.
The cost of checking a second bag on DAL flights has gone up from $40 to $45. However, certain privileged members will continue to enjoy free baggage checking. Delta has announced an increase in bag fees for the first time since 2018. According to the Bureau of Transportation Statistics, Delta generated revenues worth $738.9 million in the first nine months of 2023 through bag fees.
Last month, Delta’s rivals United Airlines (UAL - Free Report) and American Airlines (AAL - Free Report) announced an increase in checked bag fees. The increase by American Airlines applies to travel booked on or after Feb 20, 2024. Like DAL, AAL increased bag fees for the first time since 2018. AAL’s baggage fee hike aims to persuade passengers to purchase tickets directly from AAL if they want to earn frequent-flyer points.
American Airlines has raised fees for bags checked at the airport from $30 to $40 and for those checked online through its website from $30 to $35. Moreover, the fee for a second checked bag is increasing from $40 to $45, regardless of whether it's purchased online or at the airport. American Airlines is the leader among U.S.-based carriers in terms of generating revenues through bag fees. This Fort Worth, TX-based carrier generated more than $1 billion in revenues in the first nine months of 2023 through this avenue.
United Airlines, while announcing its decision to raise the price of checking luggage, stated that economy class passengers traveling on domestic UAL flights will now pay an additional $5, raising the cost of their first checked bag to $40. The fee for a second checked bag will increase to $45 if paid online and to $50 at the airport.
United Airlines comes after American Airlines as far as generating revenues through bag fees is concerned. This Chicago- based carrier generated $921.6 million in revenues in the first nine months of 2023 through this avenue. In 2022, U.S. airlines generated $6.8 billion in revenues from bag fees.
Apart from AAL, DAL and UAL, a few other U.S. airlines too have announced increases in fees for checking baggage. AAL currently carries a Zacks Rank #2 (Buy), while DAL and UAL carry a Zacks Rank #3 (Hold) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Hiked Baggage Fees to Bolster Airlines’ Revenue Stream
The decision by U.S. carriers to increase checked bag fees seems prudent, given the current uptick in passenger volumes. A further increase in air traffic is anticipated during the upcoming summer season. Consequently, revenues through bag fees are likely to move further north following the hike.
The decision to boost revenues through this source also makes sense, given the increase in labor and fuel costs. With crude oil prices persistently at a high level, it is not surprising that airlines are trying hard to offset the impact by hiking checked bag fees. Labor costs are high, too. Of late, airlines have been striking frequent labor contracts in a bid to satisfy employee needs, which pushes up labor costs.
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US Airlines Look to Boost Revenues With Higher Checked-Bag Fees
Delta Air Lines (DAL - Free Report) raised the price of checking luggage, becoming the latest U.S. carrier to do so. According to DAL’s management, passengers will now have to shell out a $35 fee for the first bag checked on a domestic flight, resulting in a 17% increase.
The cost of checking a second bag on DAL flights has gone up from $40 to $45. However, certain privileged members will continue to enjoy free baggage checking. Delta has announced an increase in bag fees for the first time since 2018. According to the Bureau of Transportation Statistics, Delta generated revenues worth $738.9 million in the first nine months of 2023 through bag fees.
Last month, Delta’s rivals United Airlines (UAL - Free Report) and American Airlines (AAL - Free Report) announced an increase in checked bag fees. The increase by American Airlines applies to travel booked on or after Feb 20, 2024. Like DAL, AAL increased bag fees for the first time since 2018. AAL’s baggage fee hike aims to persuade passengers to purchase tickets directly from AAL if they want to earn frequent-flyer points.
American Airlines has raised fees for bags checked at the airport from $30 to $40 and for those checked online through its website from $30 to $35. Moreover, the fee for a second checked bag is increasing from $40 to $45, regardless of whether it's purchased online or at the airport. American Airlines is the leader among U.S.-based carriers in terms of generating revenues through bag fees. This Fort Worth, TX-based carrier generated more than $1 billion in revenues in the first nine months of 2023 through this avenue.
United Airlines, while announcing its decision to raise the price of checking luggage, stated that economy class passengers traveling on domestic UAL flights will now pay an additional $5, raising the cost of their first checked bag to $40. The fee for a second checked bag will increase to $45 if paid online and to $50 at the airport.
United Airlines comes after American Airlines as far as generating revenues through bag fees is concerned. This Chicago- based carrier generated $921.6 million in revenues in the first nine months of 2023 through this avenue. In 2022, U.S. airlines generated $6.8 billion in revenues from bag fees.
Apart from AAL, DAL and UAL, a few other U.S. airlines too have announced increases in fees for checking baggage. AAL currently carries a Zacks Rank #2 (Buy), while DAL and UAL carry a Zacks Rank #3 (Hold) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Hiked Baggage Fees to Bolster Airlines’ Revenue Stream
The decision by U.S. carriers to increase checked bag fees seems prudent, given the current uptick in passenger volumes. A further increase in air traffic is anticipated during the upcoming summer season. Consequently, revenues through bag fees are likely to move further north following the hike.
The decision to boost revenues through this source also makes sense, given the increase in labor and fuel costs. With crude oil prices persistently at a high level, it is not surprising that airlines are trying hard to offset the impact by hiking checked bag fees. Labor costs are high, too. Of late, airlines have been striking frequent labor contracts in a bid to satisfy employee needs, which pushes up labor costs.