Over the last year JetBlue has made several moves to squeeze more revenue from customers. The airline has been eliminating its product advantages over competitors, and diminishing its customer-friendly approach. They still offer more legroom and their inflight internet generally works, but the legroom advantage is less than it used to be and the airline no longer offers a free checked bag to everyone.
Now JetBlue has made a move that its domestic rivals hadn’t yet — increasing the cost of a first checked bag to $30. And what everyone wants to know is, will other airlines match?
Last year a man checked a can of beer as luggage on a Qantas flight.
JetBlue isn’t generally an industry trendsetter, though undoubtedly other airlines will be watching what happens.
This move puts JetBlue at a $5 fare disadvantage against their competitors as customers increasingly have visibility into total trip costs and will see when a higher checked bag fee makes JetBlue the more expensive travel choice.
It’s the future of travel search, helping passengers see all-in pricing, that caused American Airlines to announce that Basic Economy would no longer prevent customers from bringing a carry on bag onboard. The airline saw itself losing business from people comparing prices with a checked bag and finding that Delta was cheaper.
Now – for customers checking bags – JetBlue will need to offer airfares that are $5 lower than competitors to offer the same total trip cost.
Of course lowering fares and increasing fees puts more money out of reach of the federal government. The 7% excise tax on domestic airfares doesn’t apply to these fees, so if nothing else JetBlue should see a tax savings.
Ultimately checked bag fees aren’t free money, except for reducing the carrier’s tax bill. Ticket prices have fallen as checked bag fees have been introduced. Some customers pay less (elites, those without checked bags) while others pay not as much less (because they’re checking a bag).
Checked bag fees give up speed-to-boarding as customers try to bring as much on the plane as possible, which means less efficient use of aircraft and across an entire fleet the need for more planes. Gate checked bags add time to the boarding process as well.
These checked baggage fees fall largely on the most price sensitive customers. Leisure travelers check bags far more than business travelers, are coming out of their own pocket, and families on the whole will be more concerned with total trip pricing.
Blog reader Hemal G checked deoderant onto an American Airlines Charlotte – Newark flight because he wanted to use his free checked baggage allowance.
Some of the checked bag fees represent revenue at the margin the airline wouldn’t have earned if they were still bundling bag fees in with fares, but certainly not most. The point is this isn’t all new revenue to the airlines. Indeed Southwest Airlines even thinks they make more money not charging checked baggage fees.
I don’t see airlines matching because JetBlue has done this. If Delta moves to a $30 first checked bag fee, United and American may assume it’s a smart move because Delta executives must know what they’re doing.