Baggage fees could soar...again
Filed under: Tax, Transportation, Travel, 101 taxes
Get out the barbells. It's time to do more lifting to prepare for heftier carry-on bags. That's because airline passengers may be hit with even more expensive baggage fees following a little-noticed recent development.In a victory for cash-strapped airlines still struggling with lagging demand and high oil prices, the Internal Revenue Service ruled last week that the federal government cannot tax bag fees.
Speaking on behalf of the industry -- which is worried Congress will tax a bevy of additional fees that have angered already beleaguered travelers -- an unidentified carrier asked the IRS to rule on the matter.
Legislators expect to receive a report from the Government Accountability Office this summer on whether not taxing new airline fees for everything from food to blankets to headsets could lower federal tax revenue. The federal government currently taxes ticket sales.
Tax watchdogs have already been concerned that not taxing the fees will take millions of dollars away from the nation's roads, schools and parks and gift it to private industry.
Airlines are becoming increasingly reliant on the standalone fees after they've repeatedly been forced to roll back fare hikes as the recession continues to dampen travel demand.
Analysts said the ruling could prompt carriers to raise baggage fees yet again. Most airlines charge passengers for the first or second bag, although few, including JetBlue Airways and Southwest Airlines, hope that not adding the surcharge will lure travelers away from competitors.
Carriers already hiked the unpopular bag fees recently, with Delta, United and Continental opting to charge $25 for the first bag and $35 for the second.
"This will cause some abhorrent behavior by carriers," said Robert Mann, president of R.W. Mann Co. "These fares are very high margin, whereas a basic fare is somewhere between 10% operating margin in a great year and a negative margin in bad years."
Since the IRS ruling only applies to baggage fees, it's unlikely that carriers will start raising other charges in response to the department's decision, Mann said. But this doesn't mean that they won't continue to think about new ways to charge passengers outside of the basic ticket fee, analysts said.
Fare watchers expect that airlines already earn substantial profits from the fees. Had it charged baggage fees for all of 2009, American Airlines stood to rake in $2 billion, or 10% of its operating revenue, Roger Herbst, a commercial airline pilot and founder of Airlinefinancials.com told Dow Jones news wires.
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Reader Comments (Page 1 of 4)
2-02-2010 @ 9:01PM
Jimbo said...
What a rip-off. You'd think that at $60 for two bags they would be making enough money to at least give you a decent bite to eat.
Reply
2-03-2010 @ 12:51AM
MICKEY said...
This world has gone completely insane. Can I get a witness?
2-03-2010 @ 1:10AM
Sassy said...
That comment isnt even worth a comment.
2-03-2010 @ 6:30AM
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2-03-2010 @ 9:06PM
sieben13 said...
STOP FLYING AIRLINES THAT CHARGE BAGGAGE FEE,S DUH
2-02-2010 @ 9:13PM
nellis said...
As long as southwest does not charge a baggage fee, I will continue flying them. If I am not in a rush, I will drive or take the train. I will not be sucked to death by these vultures.
Reply
2-03-2010 @ 3:31AM
Larry Schmidt said...
Southwest doesn't charge for bags they just charge twice as much for the ticket. Example: $252 roundtrip from Ontario to Kansas City via United or American. Same flight via Southwest is $452. Cheaper to pay 2 bags than fly Southwest but they won't tell you that on their commercials
2-03-2010 @ 9:05PM
sieben13 said...
So simple even a CAVEMAN can understand
2-02-2010 @ 9:37PM
James King said...
This is stupid the airlines are charging their way right out of business. I guess Southwest will be the airline of choice until they decide to charge for bags. The vultures are flying over again. Good luck a*% H*$#@
Reply
2-03-2010 @ 1:32AM
Sassy said...
James, i agree whole heartedly. ...but unfortunately, southweast doesnt fly everywhere. :( ....i sure wish they did.
2-02-2010 @ 9:45PM
Sara said...
I am so disgusted by the media constantly saying "This possible income is taking money away from that." How can you depend on money that is not guaranteed? That is why the US is in extreme debt.
Reply
2-02-2010 @ 10:04PM
JD said...
Yeah - soon it will be more cost effective just to buy new clothes when you arrive somewhere! It would still be cheaper to mail them back home after your trip!
Reply
2-02-2010 @ 10:01PM
phil said...
Last week, Delta did not enforcee the size limits for carry-on baggage. Many travelelers avoided the checked baggage fees by carrying on large bags to the extent that all carry-on space was overflowing and the flight attendants had to handle and stow the baggage in the baggage compartment. This is totally unfair to those who were honest and paid the fees while the crooks received free service. To be honest, the airlines should be required to enforce the carry-on size limits. They have apparantly transferred baggage handling responsibilities from baggage handlers to the flight attendants. That is blatently unfair to the flight attendants and honest customers.
Reply
2-03-2010 @ 8:10AM
patricia said...
I agree. Also, this is a very dangerous practice. In extreme turbulance, if those overhead doors pop open, those large bags falling down will kill someone. I now sit on the window seat which is inconvenient for me, but am leary of the aisle because those bins are extremely stressed with luggage they were never manufactured to carry. I have had folks try to put bags up when I was sitting and drop them on me, didn't even apologize, just expected me, a fellow paying passenger who is elderly, to pick it up and return to them. This is a very unsafe practice; huge metal backpacks, jammed in with strollers and large suitcases. Something is going to happen someday and then the airlines will be forced to enforce their own carryon policy (which was originally written to provide a safe travel experience.) Now, they are all just bidding for the customers. And I fly SouthWest, regardless of the price. I just want my luggage in a safe place, not over a child's head.
2-03-2010 @ 12:05PM
Tony P said...
I agree withyou phil. The only items that should be allowed as carry on are pocket books, laptops, attache cases. All luggage, no matter what size should be checked. If they don't check them, and then have to have them stowed in the cargo compartment, they should be charged the fee at the gate.
2-03-2010 @ 12:19PM
dede4007 said...
Phil, I agree with your comment. I have flown quite a bit the past couple years and have noticed passengers taking HUGE BAGS on the planes. The bags DON'T FIT in the overhead compartments, whereas attendants are "stuffing" them in the bins, which then leave the rest of us NO ROOM for our smaller bags. In going from hot to colder climates where you have to take a heavy coat, you have to WEAR IT, because once again, there is no room to even stuff a coat overhead.
The airlines ARE NOT ENFORCING the regulation size "take on" bags. I have WATCHED IT HAPPEN REPEATEDLY, AND WISH THIS WOULD STOP!!!
To top it all off, the airlines are now CHARGING FOR EVERYTHING!! WHY DON'T THEY JUST RAISE THE RATE OF TICKETS AND LET US TAKE OUR BAGS BACK ON THE PLANE? Every person I talk to while in line at airports all say the same thing. IT ONLY MAKES SENSE.
Dede
2-03-2010 @ 1:14PM
kmk5397 said...
Actually I work for Delta and that is not the case. In many stations we have Delta personnel at security checkpoints to catch any over size bag before it becomes an issue for the flight crew. Also with online check in or checking in at the kiosks most passengers are able to check in without using a person. So the opportunity for us to see your oversized bag isn't there like in the past. It's not a perfect system by any means but we're not just turning out heads and ignoring the size of what's being brought on our planes.
2-02-2010 @ 10:06PM
phil said...
You pay the airline for transportation, not for food!
Reply
2-02-2010 @ 10:35PM
MIKE said...
i get a kick out of the flying public, they want a trip on a multi million dollar plane ,that gulps fuel, that costs a fortune to maintain, they want it to be simple no complications, no delays,they want food, they want their asssess kissed by overworked underpaid employees and they complain about paying for extra bags, last time i looked flying was a luxary not a right, maybe if airlines charged what it cost to actually fly these planes i wouldnt be stuck next to overweight, smelly, loud.adults, and undisiplined rowdy kids, i say triple the cost the planes will still be filled with those of us who can finally enjoy a flight, the others can drive or take a bus
Reply
2-02-2010 @ 10:49PM
JJ said...
I think that is the most arrogant thing I have ever heard. You must live a very miserable life. Maybe if you could actually afford the increased tickets you are asking for, your cheap ass would splurge for first class (and that means you have to fly an airline other than Southwest) and you wouldn't have to worry about all the obese people sitting next to you. Grow up, ass.