Why airlines are raising baggage fees and charging more at the airport

Carriers are encouraging customers to pay to check their bags ahead of their flight, an approach the airlines argue will free up employees at check-in areas and get travelers to their gates faster.

Earlier this week, American Airlines raised its checked bag fees for the first time in more than five years and adopted the two-tiered strategy that United, JetBlue and several budget airlines already have.

American Airlines customers traveling in coach will pay $35 to check a first bag for domestic flights if the service is booked online in advance, or $40 if they purchase the option at the airport, the carrier said Tuesday. American Airlines previously charged $30 for either service.

There are exemptions. Customers who have certain airline or other rewards credit cards, are traveling in a top-tier class or have elite frequent flyer status generally can check at least one bag for free on domestic or short international flights.

“It allows our team members to spend more time with customers who require additional assistance with their travel journey,” an American Airlines spokeswoman told CNBC.

American this week also said it is reducing fees for slightly overweight bags, which used to force some travelers to remove items from their bags last-minute at the airport to meet the threshold.

The different fee tiers is an approach ultra-low-cost airlines already had to luggage fees.

“It incentivizes people to get the transaction out of way. It’s easier for them, and honestly, it’s easier for us,” said Frontier Airlines CEO Barry Biffle. “There are people who need legitimate assistance” at the airport.

The prices differ depending on demand and other factors. Most travelers who add on baggage pay the fee ahead of time, Biffle said.

United first started charging customers more for paying for checked bags at the airport in 2020. On Friday, the carrier said it was raising bag fees by $5 for most flights in North America to $35 if customers prepay online at least 24 hours before their flight, or $40 otherwise, starting with bookings made on Feb. 24. A second checked bag will cost $50, or $45 at least 24 hours in advance.

Luggage fees are a big moneymaker for airlines. In the first nine months of 2023, U.S. airlines brought in more than $5.4 billion from baggage fees, up more than 25% from the same period of 2019, according to the Transportation Department’s latest data.

Airlines have argued that higher costs such as labor and fuel, their biggest expenses, mean they had to raise bag fees.

“While we don’t like increasing fees, it’s one step we are taking to get our company back to profitability and cover the increased costs of transporting bags,” JetBlue said in a statement about its latest increases. “By adjusting fees for added services that only certain customers use, we can keep base fares low and ensure customer favorites like seatback TVs and high-speed Wi-Fi remain free for everyone.”

Southwest Airlines is an outlier among the large U.S. airlines. It allows customers to check two bags for free. “That’s the way it’s going to stay,” Chief Operating Officer Andrew Watterson said.

“It does not cost us $35, $40 … to handle a bag,” Watterson said in an interview. Many customers on major airlines bring carry-on bags to avoid bag fees, but Watterson said that could slow down the operation, a big deal for Southwest, which he said tries to turn aircraft around for the next flight in 45 minutes, and even less for some of its smaller Boeing planes.

“It does smooth the operation for people to check it rather than bring it on,” he said. “Overall, we think the benefit is a combination of some efficiencies but also customers coming back to us. A repeat customer business cannot be overstated. And when you treat your customers well, give them a fair policy, they come back over and over again.”

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