In 2022, airlines globally earned an estimated $103 billion in ancillary revenue, of which $29 billion came from fees for carrying bags. The data is in the Car Trawler Global Estimate of Baggage Fee Revenue, released yesterday.

Aviation and ancillary revenue consultancy IdeaWorksCompany and CarTrawler, a global B2B car rental and mobility solutions provider to the travel industry, compile the report. Each year IdeaWorksCompany analyzes ancillary revenue disclosures for airlines globally, and baggage activity for each airline category is added to the analysis.

The revenue comes from three primary sources: checked baggage in the aircraft hold, added fees for heavy and extra-large bags, and for some airlines, the price charged for larger carry-on bags. The report said that baggage revenue is a significant component of ancillary revenue and a regular income source for airlines in Europe, North America and Latin America.

The $29 billion earned in 2022 represented 4.2% of global airline revenue and was a 45% increase from 2021, although still below the pre-pandemic $32.9 billion collected from baggage fees in 2019. CarTrawler chief commercial officer Aileen McCormack said:

"It's great to see that baggage fees are such a key ancillary revenue driver for airlines, with a significant increase from 2021 to 2022 of just over $8 billion. At CarTrawler, we know the importance of ancillary revenue for our partners and how providing the right product to the right customer at the right time is key to optimizing these revenues while providing the best possible customer experience."

Legacy carriers are waking up to baggage revenue

For global network carriers, the baggage revenue is usually associated with basic-economy fares, while for low-cost carriers, baggage fees are typically charged to all consumers. The following chart lists the 2023 baggage fee policies for 20 major airlines that, before the early 2000s, would have included checked baggage for all fare types.

That picture has changed, and now only eight airlines include checked baggage for their cheapest ticket types. IdeaWorksCompany said this could be attributed to competitive pressures from low-cost carriers. An example is Turkish Airlines' basic economy EcoFly fare on routes between Turkey and Europe, which does not include checked baggage or seat assignment in return for a cheaper ticket.

Similarly, Finnair introduced Business Lite fares during the pandemic, priced below its Classic business fare but without free checked baggage.

Is it about choice or just extra revenue?

The report said that the pandemic did not bring sweeping changes to baggage policies among global network carriers based in Africa, Asia or the Middle East, but that may change as low-cost carriers gain ground in those regions. In Europe, low-cost carriers flew approximately 38% of Europe-based airline traffic in 2021, while in Asia, that figure dropped to 23%, illustrating the reduced activity from low-cost carriers.

We'd love to see you on Instagram - follow us here!

While no one is happy with paying for something once free, IdeaWorksCompany points out that baggage fees are good news for consumers. The report said they are a sign of "robust competitive behavior between traditional and low-cost carriers" and that more network carriers in the Middle East and Asia "will gradually adopt a stronger a la carte approach."

Are you happy to have the choice of a cheaper ticket and pay for checked bags? Let us know in the comments.

Source: IdeaWorksCompany