Hawaiian Air reaps $70M in bag fees

Hawaiian Airlines set a company record last year by carrying nearly 10 million passengers.

Not surprisingly, it also reached an all-time high for baggage revenue: $70 million.

Say what you will about those nominal $25 and $35 checked-bag fees, they’re certainly adding up for the state’s largest carrier.

Hawaiian bucked the national trend in 2013 as the amount it made from baggage fees rose 3.3 percent from $67.8 million in 2012, according to data released Monday by the U.S. Department of Transportation. Overall, the 16 reporting U.S. airlines made $3.35 billion from baggage fees in 2013, down 3.9 percent from $3.49 billion in 2012.

Colorado-based airline consultant Mike Boyd attributed the national decline in baggage fees to passengers with affinity cards or elite-level frequent-flier status who are eligible to check their bags at no cost.

"It would make a lot of sense that a lot of business and leisure travelers are getting these affinity cards and, as a result, are getting free baggage," Boyd said. "The airlines are not losing anything on those affinity cards because they’re making those airlines a lot of money."

Boyd described the frequent-flier levels that are benefiting travelers as "bracket creep."

"It used to be having a gold card was the top," he said. "Now you have gold, platinum, diamond, kryptonite and spent uranium. They keep creating new minerals for this, and if you’re a frequent flier and you’re gold or above, generally you’re not going to pay for that first bag most of the time."

While baggage fees are the biggest ancillary revenue producer, Hawaiian also collected $17.9 million last year in reservation cancellation and change fees to bring its total from those fees as well as from baggage fees to just under $88 million in 2013. Hawaiian’s cancellation and change fees were down 1.9 percent from $18.3 million in 2012.

Island Air, which began reporting to the DOT in 2013 after the carrier starting using planes that seat more than 60 people, took in $3.2 million in bag fees and $480,000 in reservation cancellation and change fees.

"Here’s the reality," Boyd said. "The customer’s booking decision is usually made on fares, and then later they have to pay for bags and the other stuff. The fare is the sticker shock. After that it’s just a mild annoyance."

All airlines are pulling out the stops these days with ancillary fees to offset the high cost of fuel and boost profits, with Denver-based Frontier Airlines the latest to join Allegiant Air, which serves Hawaii, and Spirit Airlines in charging for carry-on bags. Some of the fees for carry-on bags are as much as $100.

Hawaiian spokeswoman Alison Croyle said the airline has no plans to charge for carry-on bags, but will be expanding its premium seat product by introducing Extra Comfort seating on its Airbus A330s in August.

"There is a demand for a premium economy product on longer-haul flights that provides additional features like extra legroom, personal power ports and complimentary inflight entertainment at a nominal cost to the customer, if they would like to choose these value-added amenities for their flight," Croyle said.

Airlines have relied heavily on baggage fees and other fees to help offset their expenses since fuel prices began to spike. They began charging for checked bags in 2008. Bag fees also increase for bags that are large or overweight.

Those fees also have helped turn losses into gains for airlines such as Hawaiian, whose $70 million in bag fees helped it post a $51.9 million profit in 2013.

Hawaiian charges $25 for the first checked bag and $35 for the second checked bag for flights between Hawaii and North America. It doesn’t charge for the first two checked bags on international flights.

For interisland flights, Hawaiian increased its fees in March for non-HawaiianMiles members to $25 from $17 on a first checked bag and more than double to $35, from $17, on a second checked bag. Hawaiian did lower the first checked bag for frequent fliers to $15 from $17 at the same time, but increased its fee for HawaiianMiles members for a second checked bag to $20 from $17.

Hawaiian, though, does have programs for its frequent fliers and its co-branded credit card holders that enable them to check bags for free.

Last year, Delta Air Lines collected the most in bag fees at $833.2 million, followed by United Airlines at $624.8 million and US Airways at $527.6 million.

In the fourth quarter, Hawaiian’s bag fees decreased 2.7 percent to $16.6 million from $17.1 million in the year-earlier quarter while its reservation cancellation and change fees fell 3.8 percent to $4.4 million from $4.5 million in the previous year.

ENLARGE CHART