A secret - and huge - benefit to the airlines from checked baggage fees is saving hundreds of millions of dollars in taxes. Checked bag fees don't represent a pure increase in revenue and they come at a cost in boarding efficiency. Ultimately checked bag fees themselves aren’t the big business that simply summing up the charges from an accounting standpoint would have you believe. airlines are saving $375 million in taxes. At $5 billion a year in checked bag fees U.S. By moving bag fees out of the price of a ticket airlines are able pocket a huge tax savings. However the excise tax doesn’t apply to fees. There’s an excise tax of 7.5% on domestic airline tickets. They have to schedule flights when passengers want to fly.īig Profit in Checked Bag Fees Comes From Tax Arbitrage ![]() That’s because an airline can't simply push their schedule later into the night. Southwest’s CEO claimed “It would cost us approximately 8 to 10 airplanes of flying per day if we were to add just a couple of minutes of block time to each flight in our schedule.” Just a few minutes added onto each flight generates huge costs. A minute or two gets added on to deplaning an aircraft, too. Then airline staff have to spend a couple of minutes moving gate-checked bags to the belly of the plane. Passengers spend time trying to find overhead space, and when bins are full return to the front of the plane to have their bags tagged and taken. Gate checked bags add a few minutes to the boarding process. Slower boarding means less efficient use of aircraft and more delays, which can cost airlines nearly as much as they’re taking in in bag fees. Passengers carry on more bags because they'd have to pay to check them. Southwest Airlines, which doesn't charge fees for each passenger to check up to two bags, even thinks they make more money not charging checked baggage fees.Ĭhecked Bag Fees Come At a Big Cost to the Airlines Clearly some of the checked bag fees represent money that would likely have been part of the fare before. On average the total cost of a trip, airfare plus fees, is no higher today than when a fee for each passenger's first checked bag fees was introduced by American Airlines in May 2008. While some passengers - usually business travelers - are price insensitive, checked bag fees disproportionately fall on more price sensitive leisure travelers who take longer trips, check more bags, and are less likely to be exempt from the charges due to frequent flyer elite status. Passengers checking bags aren’t suddenly willing to spend more for air travel than they were before. Apply online today to join the PSA family. Now most domestic tickets include transportation with checked bags sold separately. PSA Airlines is a wholly-owned subsidiary of American Airlines and operates an all-jet American Eagle fleet. Total Trip Costs Haven't Been Going Up Even As Checked Bag Fees Rise Photographer: Christopher Dilts/Bloomberg © 2018 Bloomberg Finance LP More than 1,000 flights have been canceled at the city's O'Hare and Midway international airport. Chicago officials say about 6 to 7 inches of snow has fallen on the city and they're gearing up for three more waves through the weekend. Airport (ORD) during a snow storm in Chicago, Illinois, U.S., on Friday, Feb. For the most recent instruction, search the DOD Directives Division website for “Air Transportation Eligibility.Travelers stand in the baggage claim area for American Airlines Group Inc. DOD Instruction 4515.13 provides the complete list of eligible passengers by category. Additional checked items will be subject to an Excess Baggage Fee of 25.00, each way. Once you sign up for a Space-A journey, you’ll be put into a category that determines your priority for a flight.
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