Originally Posted by
newsmanhoss
For some travelers, however, Southwest might not have the lowest base fare, but could still be cheaper due to the lack of bag fees. I wonder how long WN will be able to hold out on that. Many people always look at the base fare and forget to factor in the bag fees.
I wonder, too. If you look at AirTran's profit this past quarter, it's essentially fully reliant on the ancillary revenue -- primarily bag and seat assignment fees. That's a bit of a generalization because they seem to be carefully timing their special items each quarter, so without the anciallary revenue this past quarter perhaps they still would have figured out a way to produce a profit. However the importance of anciallary revenue is quite clear in their results.
AirTran Q3 2008 versus 2009
Total passenger revenue decreased 16.5%, mostly due to average fare plummeting from $96.07 to $81.04. So how did they make money? Aside from the obvious answer of lower fuel costs, their "other revenue" grew by about $30 million, from $38m to $68m. That's primarily increased bag and seat fees. Considering they made $10.4 million in the quarter (about a buck sixty per passenger carried) I think it's a safe bet that bag and seating fees are critical to them. Southwest has kind of backed themselves into a corner on bag fees, and their options essentially seem to be (a) fight to earn enough additional business at better fares to offset the fee loss, or (b) eat crow and roll out bag fees. The harder they push as (a), the more difficult ever going to (b) will be. But if we see any sort of fuel spikes like last summer, I'm guessing crow will be on the menu. I really don't like bag and seat fees, but they are the way of the world these days.