A recent annual report revealed that the top 20 global airlines generated over $33 billion in revenue from baggage fees in 2023, making up about 4.1% of global airline revenue. This marked a 15% increase from the previous year, according to a report from IdeaWorks Co. and CarTrawler.
Baggage fees have become a significant component of ancillary revenue for airlines, helping them offset other costs. The trend of charging for checked baggage began as a response to rising fuel prices during the oil shock of 2007 and 2008. Major U.S. carriers transitioned from offering two checked pieces with every fare to charging for the first checked bag.
American Airlines recently announced an increase in fees for checked luggage, marking its first increase in six years. The carrier raised fees for the first and second checked bags on domestic flights, with prices varying depending on whether the bags are checked at the airport or online in advance.
In addition to baggage fees, traditional airlines have also been generating revenue from fees related to assigned seating. While low-cost carriers have been implementing these fees for years, the rapid adoption of assigned seating fees by global network carriers has been surprising. The report suggests that revenue from assigned seating fees may now rival the revenue generated from baggage fees, surpassing $30 billion.
Overall, the airline industry continues to rely on ancillary revenue streams such as baggage fees and assigned seating fees to bolster their financial performance. As airlines adjust their fee structures in response to market conditions and consumer demand, the landscape of ancillary revenue generation is likely to evolve in the coming years.