According to the Wall Street Journal Middle Seat blog, American Airlines has decided to match the bag fees recently implemented by Delta and Continental.  You can read more HERE.

So, at present, Delta (including Northwest), American Airlines, Continental, United and US Airways are now all charging $25 for the first bag and $35 for the second bag with some of the airlines offering “discounts” if you perform your “bag fee purchase” online.   That would imply that they each see this price for checked bags being a bit more elastic than one would have thought.    Or, at the least, they see it as elastic as long as they all go for the same increases much as the case is with air fare increases. 

So far, no low cost carrier has adopted this pricing model or even raised their checked bag fees.  I suspect they won’t either as it gives them an opportunity to show themselves as the good guy while gaining some incremental revenue. 

If this rise in fees sticks for the next 1 or 2 quarters, I do think it will put tremendous pressure on Southwest Airlines to institute their own version of bag fees, at least by institutional investors and analysts.  So far, Southwest and its CEO Gary Kelly have resisted these calls to add checked bag fees and, so far, they believe it is resulting in incremental revenue from passengers switching to Southwest to avoid fees.  Since CEO Kelly (and Southwest as a whole) is not one to shade the truth, I’ll continue to believe these claims. 

However, with other LCC carriers such as Airtran and Virgin America and even jetBlue (on the 2nd bag) have added fees and do report significantly improved revenues from that, I would imagine that the call for Southwest to add these fees will be defeaning particularly when Southwest could implement a jetBlue or Airtran style program and see improvements to their quarterly results which haven’t been too impressive in the last year. 

It is sad but I don’t believe we’ve seen the last of these increases.  I do think that some airline will probe the upper limits of these fees just a bit more yet.  I do think that Southwest will resist the call to add these fees for at least another 6 months but if there hasn’t been some kind of collapse in the price of these fees by then, I would not be surprised to learn that Southwest has begun to make changes to their infrastucture to implement them.   I think the first sign will be the withdrawal of their “no fees for checked bags” advertising.

Filed under: Airline Fees, Airline News by ajax