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In a recent move, American Airlines (NASDAQ:AAL) has decided to increase its baggage fees for the first time in over five years. The airline also announced a change in its policy for travel agency bookings, which will impact the earnings of frequent flyer miles.
What Happened: American Airlines revealed on Tuesday that it would now charge $35 for the first checked bag on domestic flights if the service is booked online in advance, reported CNBC. If purchased at the airport, the fee will be $40. This marks an increase from the previous $30 fee. The cost of a second checked bag has also been raised to $45 from $40, regardless of when it is purchased.
For flights to Canada, the Caribbean, or Mexico, the first checked bag will cost $35, regardless of when it is purchased. This change is part of the airline’s strategy to boost revenue amid a decline in airfare over the past year.
Scott Chandler, America’s senior vice president of revenue management and loyalty, attributed the fee hike to the significant increase in the cost of transporting bags, particularly due to rising fuel costs.
Other airlines, including Alaska Airlines and JetBlue Airways, have also recently raised their bag fees. These changes are seen as necessary to cover the increased costs of transporting bags and to help the companies return to profitability.
Despite the fee hike, American’s frequent flyer members with elite status and some American Airlines credit card holders will still receive a complimentary checked bag.
Why It Matters: The increase in bag fees and reduction in frequent flyer miles for travel agency bookings come at a time when the airline industry is facing various challenges, including reputational damages, as seen in the case of Boeing.
Despite the challenges, American Airlines managed to beat the consensus estimate in its fourth-quarter earnings in January.
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