South­west seat fees top $600M for 2018

Pri­or­ity board­ing now key source of rev­enue

USA TODAY International Edition - - MONEY - Dawn Gilbert­son

South­west Air­lines brags non­stop about its bags-fly-free pol­icy and lack of ticket change fees, poli­cies that drive pas­sen­gers to the air­line in droves.

What the air­line doesn’t trum­pet: It’s do­ing just fine on the fee front thanks to other pas­sen­ger charges, most no­tably pri­or­ity board­ing fees.

The tally for 2018 is in, and South­west col­lected $642 mil­lion in pas­sen­ger fees last year, the air­line dis­closed in a reg­u­la­tory filing last week. That’s up 13 per­cent from $566 mil­lion in 2017.

Air­lines have long had to dis­close bag­gage fee and ticket change rev­enue to the U.S. Depart­ment of Trans­porta­tion, but ac­count­ing rules now re­quire them to pro­vide a to­tal figure for pas­sen­ger fees in reg­u­la­tory filings in­stead of lump­ing them into a broader cat­e­gory called “other” rev­enue.

The so-called pas­sen­ger an­cil­lary rev­enue cat­e­gory in­cludes a range of fees such as in-flight Wi-Fi and al­co­holic bev­er­ages, pet fees, unac­com­pa­nied mi­nor fees and bag­gage fees of all sorts, but the the big­gest source of fee rev­enue for South­west is its 10-yearold Ear­lyBird Check-In op­tion.

For $15, $20 or $25 one way per per­son de­pend­ing on the route, pas­sen­gers who buy Ear­lyBird Check-In get a higher po­si­tion in South­west’s board­ing line. Board­ing or­der is crit­i­cal on South­west be­cause the air­line doesn’t as­sign seats. Pas­sen­gers are free to pick any open seat when they board.

South­west didn’t break out the to­tal for Ear­lyBird check-in fees in 2018, but it did in 2017 and that year the fees to­taled $358 mil­lion, or 63 per­cent of the to­tal pas­sen­ger fee rev­enue.

South­west Pres­i­dent Tom Nealon said in Jan­uary that Ear­lyBird rev­enue and an­other pri­or­ity board­ing op­tion called Up­graded Board­ing grew by dou­ble-digit per­cent­ages in 2018. A con­ser­va­tive 10 per­cent year-overyear gain would mean Ear­lyBird rev­enue ap­proached $400 mil­lion for 2018.

South­west charged a flat $15 fee each way for Ear­lyBird Check-In be­fore switch­ing to vari­able pric­ing in Au­gust.

“We’re mak­ing this change so we can con­tinue offer­ing a prod­uct our cus­tomers love,” South­west said in a state­ment then. “Of course, an in­crease in the price of a prod­uct is rarely wel­come news, but as Ear­lyBird in­creases in pop­u­lar­ity, we want to pro­tect the value it offers our cus­tomers.”

A USA TO­DAY spot check of flights found that the Ear­lyBird fee on many routes went up.

South­west also in­creased its Up­graded Board­ing fee in 2018. That op­tion, which guar­an­tees trav­el­ers a spot at the front of the line, is avail­able on se­lect flights and is $30, $40 or $50 each way at the gate. South­west has not pub­licly dis­closed Up­graded Board­ing rev­enue.

South­west’s Ear­lyBird and Up­graded Board­ing fees are essen­tially seat selec­tion fees, which are com­mon at other car­ri­ers and are an in­creas­ing source of frus­tra­tion for trav­el­ers.

With­out charg­ing for the first two checked bags, South­west still lags its com­peti­tors on the fee front, of course. Amer­i­can Air­lines col­lected $911 mil­lion in bag­gage fees in the first nine months of 2018 alone, ac­cord­ing to the Bureau of Trans­porta­tion Statis­tics. And United’s bag­gage fee take in that pe­riod was roughly equal to South­west’s to­tal pas­sen­ger fees for the year.


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