25 Sep

Airlines Raise Baggage Fees

WRITTEN BY Ally Schmidt

Baggage fees

American Airlines (AAL) was the last of the three legacy carriers to announce an increase in checked baggage fees. The company’s stock rose on Friday, September 21, after the announcement. This is the first time the company raised baggage fees since 2010. The company said American Airlines “AAdvantage” members, as well as first class, business class, and perineum economy customers would be exempt from these fees.

Airlines Raise Baggage Fees

AAL was the last legacy carrier to implement this change in its baggage fees. Delta Air Lines (DAL) implemented a similar change on September 19, while United Continental (UAL) made the same move on August 31. However, regional carrier JetBlue Airways (JBLU) was the first major airline carrier to initiate this change on August 27.

All four carriers hiked fees for the first and second piece of checked baggage by $5. The fees for the first checked bag will now be $30 on all carriers as compared to $25 earlier. For the second checked bag, the fees will be $40 instead of $35 earlier.

AAL was the pioneer

Though American Airlines may not have initiated the change this time around, it was the pioneer in introducing the baggage fees for customers, according to airline analysis firm RW Mann & Company’s president, Bob Mann.

Unbundling

Charging separate fees for services like baggage, Wi-Fi, preferred seat assignments, and security checks are common industry practices and have been successfully used by low-cost carriers like Spirit Airlines (SAVE). Airlines began charging these fees in 2008 in an attempt to remain profitable after crude oil prices reached a peak of $132 per barrel.

Investors can gain exposure to airline stocks by investing in the iShares Transportation Average ETF (IYT), which invests 18.8% of its portfolio in airlines. Next, we’ll look at another big win for the airline industry over the last week.

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