Delta tops industry in money from fees, mileage sales

By Kelly Yamanouchi

The Atlanta Journal-Constitution

Fees for checked bags, reservation changes and other services are a bane to fliers these days, but they have become a significant source of revenue for Atlanta’s top two airlines.

Atlanta-based Delta Air Lines had the highest “ancillary revenues” per passenger in the third quarter among major airlines ranked in a federal report. It brought in $24 per passenger in such revenue, the U.S. Bureau of Transportation Statistics report said.

That was 20 percent more than the next-closest airline, Delta merger partner Northwest Airlines, whose numbers were reported separately. And it was twice as much per passenger as fellow “Big 3” airlines American and United.

AirTran Airways, meanwhile, collected only $10 per passenger from such sources, but that money accounted for 11.4 percent of its operating revenue -- highest in the industry. Delta was second at 9.3 percent.

The revenue measured in the federal report includes baggage fees, reservation change fees, pet transportation fees and standby passenger fees. However, it also includes proceeds from the sale of frequent flier award miles to marketing partners, which can vary significantly between airlines and might help explain Delta’s wide lead over other carriers. Delta sells miles to its credit card partner American Express and other partners monthly.

Delta’s total ancillary revenues in the third quarter were $447.5 million, compared with $261.2 million at American, $230.8 million at US Airways and $223.2 million at Northwest.

The industry as a group got 6.9 percent of operating revenue from those sources, up from 4.1 percent in the third quarter of 2008.

Among the 10 airlines ranked, Delta had the highest total collections of baggage fees and miscellaneous operating revenue, including pet fees, standby passenger fees and sales of miles to business partners. Delta had the second highest total for reservation change fees, behind American.

But on a per-passenger basis, the amount Delta collected for baggage and change fees was in the middle of the pack.

Some of Delta’s fees are on the high end relative to the industry. While Delta and United charge $175 for oversized bags, for example, American charges $150 and US Airways charges $100. AirTran charges $79.

“The entire industry has moved toward these a la carte fees and Delta has remained competitive with other carriers,” Delta spokeswoman Susan Chana Elliott said.

The fees have been criticized by some passengers and travel experts as “nickel-and-diming” customers.

But Delta and other airlines have been losing money and have been searching for ways to boost revenues. At Delta’s investor day this week, Delta president Ed Bastian said “we’re going to stay the course with respect to our ancillary revenues,” adding that the company had a $500 million improvement in revenues this year from “unbundling” of ticket prices.

Elliott said Delta’s “most loyal customers do not incur these fees, as they typically apply to customers that choose to fly Delta on a less consistent basis.”

For example, Delta’s elite frequent fliers don’t pay fees to check up to two bags, while other passengers pay at least $15 for the first checked bag and $25 for the second bag on domestic flights.

Delta’s fees on domestic flights

• $15 for a first checked bag, $25 for a second checked bag, plus a $5 surcharge per bag for paying the fee at the airport instead of online.
• $90 for each overweight bag weighing 51-70 pounds, $175 for each overweight bag 71-100 pounds.
• $175 for each oversized bag
• $175 for checking a pet
• $50 for same-day confirmed travel
• $150 for a ticket change, depending on fare rules

Fee and mileage sale revenue per passenger

Delta: $24

Northwest: $20

US Airways: $18

American: $12

Northwest: $11

Continental: $11

Alaska: $11

AirTran: $10

JetBlue: $8

Southwest: $6

Source: Bureau of Transportation Statistics