Hawaiian Air takes in $25 million in fees

Hawaiian Airlines is finding new ways to make a buck.

The state’s largest carrier, which announced last week a new program to auction off first-class seats to main cabin passengers, continues to pull in millions in baggage fees and reservation cancellation and change fees.

Hawaiian finished the first quarter with $19.8 million in baggage fees and $5.1 million in cancellation and change fees, according to data released Monday by the U.S. Department of Transportation. That compares with $18.2 million and $5.5 million, respectively, in the year-ago period.

Despite passenger complaints about fees, airlines and industry experts say that without them Hawaiian and other carriers would need to charge higher fares.

“Ticket prices have become just one component of the revenue stream for airlines, and baggage fees, fees for seats with more legroom and other such fees all work to make the basic ticket prices more affordable,” said local aviation historian Peter Forman.

Hawaiian spokesman Alex Da Silva said airlines have shifted toward a la carte pricing.

“For several years now the U.S. airline industry has been operating under an unbundled model in which consumers pay for the services they value,” Da Silva said. “This benefits air travelers because it keeps base fares lower as it allows customers to only pay for the products and services they value.”

In 2015 Hawaiian took in more than $100 million from those fees — $81.2 million from bag fees and $20.3 million from cancellation and change fees — after serving a record 10.7 million passengers.

Colorado-based aviation consultant Mike Boyd has long been an advocate of airlines boosting their revenue by unbundling their services and passengers paying for only what they use.

“It’s critically important,” Boyd said. “Why leave it on the table if the horse is out of the barn? Economy-class passengers will pay for luggage. It doesn’t make any sense not to do it. It gives the airlines more flexibility in terms of fares.”

The 13 reporting U.S. airlines took in $975 million in baggage fees during the first quarter and an additional $745 million in cancellation and change fees.

Island Air, the state’s second-largest airline, generated $611,000 in baggage fees last quarter and $80,000 in cancellation and change fees.

Boyd said Hawaiian’s new revenue stream, a first-class seat auction program called “Bid Up,” “is nothing short of brilliant.”

“This is very innovative,” he said. “It allows literally the market to decide how much the first-class seat to Los Angeles is really worth if it’s open. If the seat’s open, let’s see what it’s worth. It just seems to be a really brilliant mechanism.”

Hawaiian also began rolling out this month lie-flat seating in the premium cabin of its A330 aircraft that will unfold into 180-degree beds.

“The lie-flat seats were a big fleet investment,” Da Silva said.

Hawaiian is in line with most airlines in charging $25 for a first checked bag and $35 for a second. On interisland flights HawaiianMiles members pay $15 and $20, respectively, for first and second checked bags.

Reservation cancellation and change fees at Hawaiian range from $30 to $300 a ticket, plus fare difference, depending on the destination.

Hawaiian doesn’t charge checked-bag fees for its international routes because none of its competitors do.

“It’s because they have to compete with foreign airlines, and they’re not (charging for checked bags) yet,” Boyd said. “If you’re flying to Tokyo on Hawaiian, Japan Airlines is not charging for it. We’ll see how long that lasts.”