The Most Successful Airline Business Model of the Past Decade

It’s been 10 years since major airlines implemented baggage fees. How did it go for them?

Over the last decade, we’ve all begrudgingly accepted the new normal for air travel: fees, fees, fees. Ten years ago this year, American Airlines, and U.S. Airways began charging for any checked bags, following suit of five other carriers who implemented charges on a second or third bag that same year.

So how has it panned out for them? Great, it would seem. When American first started collecting baggage fees, the airline made $124 million. But last year, it bankrolled $827 million in just the first three quarters. United made $6.2 billion in all fees, not just baggage, in 2017. And it’s because customers are willing to play the game. We pay each new fee.

But we’re not happy about it – and it’s drastically changed how we choose airlines, preferring to choose a specific airline and earn loyalty points instead of hunting for the cheapest fare.

“I work hard to stay a frequent flyer elite [on United] so that I don’t have to pay fees,” Tommy McCall, founder and CEO of Infographics Inc., told Skift. “It’s great to get everything from lots of free baggage and Economy Plus or first class upgrades, down to a complimentary snack and beverage.”

Airlines have been relatively transparent with their shifting attitude in how flights should operate, going from included everything to included almost-nothing. Passengers, though, have been quite vocal about disliking all the extra fees, and air travel analysts are taking note.

“Rather than take Humpty Dumpty and put him back together, [airlines] took Humpty Dumpty and pushed him off the wall,” Henry Harteveldt, co-founder of Atmosphere Research, told Skift.

[Photo: Shutterstock]