As we predicted yesterday, American Airlines has today followed suit and raised the American baggage fee. This means all 3 of the US giants, have now made $30 the new regular price for the first piece of luggage and $40 the new price for a second. This creeping price rise was started by the LLC, JetBlue, but more over it indicates the strength of the ancillary fee revenue-generating model in air travel. Let’s take a look at the story.
The news round up on American baggage fee increase
Very briefly – In late August, JetBlue came out of the gate with a baggage fee price hike. Just a few days later United announced they’d be raising the cost of checked bags for tickets booked as of August 31, 2018. On September 19, just two days ago, Delta announced they’d be doing the same. United and Delta make up two of the big three US airlines, so the writing was already on the wall. Every additional day that American Airlines waited before adding the same increase was a day of lost comparative revenue. So, yes – we knew it would be happening with 48 hours.
Do I need to pay the American checked baggage fee?
All tickets issued as of today, September 21, 2018, will fall under the new rules. Your first checked bag costs $30, your second checked bag costs $40. These new fees apply to tickets for flights within the US (including Puerto Rico and the US Virgin Islands), as well as flights between the US and Canada.
Why are all the airlines raising baggage fees?
Okay, so this is the interesting part. These raised fees are part and parcel of the US airlines’ growing reliance on the ancillary fee revenue-generating model. In today’s parlance, this means, baggage, in flight meals, wifi, and seat selection – which make up about 10% of the overall ticket price. Essentially, budget airlines have been doing this since their inception. They unbundled the product to get customers – but in many cases their product was a loss leader. The budgets were paying towards your flight to create a loyal customer base and market awareness of their offerings.
However, while the LLCs were unbundling, the US giants were still selling a bundled package – yet amazingly, they were subsidizing travellers’ ticket costs too. They were selling you a seat often times, at less than it cost them to supply it. Because sometimes that’s just what you’ve got to do to stay afloat.
So the US airlines aren’t making any money?
They are, but not a lot and their profits are slipping. Fuel prices have a lot to do with this, which makes you wonder why they don’t just put up ticket prices instead.
I would prefer to see in advance what I’m paying for and would appreciate the transparency. But sadly, the airlines don’t see it that way. They know customers are fickle and choose flights based on which offer comes up cheapest on the list. So to stay at the top of your search, they need to increase the baggage cost instead of the seat cost. That’s just the way it is.