A joint study by Idea Works Company and CarTrawler says that airlines across the world made USD 29 billion in baggage fees in 2022, a sharp growth of 39 pc over 2021.

Idea Works Company, a consultancy on airline ancillary revenues, and CarTrawler, a global B2B provider of car rental and mobility solutions to the travel industry, have jointly airlines’ ancillary revenue at USD 102.8 billion worldwide for 2022. Of this, the baggage fee collected amounted to USD 29 billion, which was 39 pc more than the fee collected in 2021.

According to a press statement, each year Idea Works Company analyses the ancillary revenue disclosures for airlines all over the world. It shows that in 2022, baggage fee contributed 4.2 pc of global airline revenues. There were significant differences in the approach of airlines, depending on geographies. While in Asia Pacific and the Middle East, most airlines offer baggage with every fare category, the same is not true all over the world.

The study says that baggage fees are now a regular revenue source for airlines in Europe, North America, and Latin America. For global network carriers, these are typically associated with “basic economy” fares, while for low cost carriers, baggage fees are typically charged to all consumers.

“It is great to see that baggage fees are such a key ancillary revenue driver for airlines, with a significant increase from 2021 to 2022 of just over USD 8 billion,” says Aileen McCormack, Chief Commercial Officer, CarTrawler.

 “At CarTrawler, we know the importance of ancillary revenue for our partners, and how providing the right product to the right customer at the right time is key to optimising these revenues, while providing the best possible customer experience,” McCormack adds.

The table on the next page lists the baggage fee policies for 20 top non-low cost carriers, which 16 years ago would’ve displayed all as including checked baggage for all fares. Today, the competitive pressures brought by low cost carriers have reduced the list to just eight airlines which continue to include checked baggage as a feature for all fares.

The adoption of baggage fees continued in the last year with Turkish Airlines adding its EcoFly fare on routes between Turkiye and Europe. This is the carrier’s first basic economy style fare which excludes checked baggage and seat assignment, in exchange for a lower fare for consumers.

Baggage fees are also appearing in business class. Finnair introduced Business Light fares during the pandemic, which are priced below its Classic business fare in Europe and Asia markets. The fare does not provide checked baggage, while travellers may bring the usual 2 carry-on bags, similar to the Classic business fare.

The pandemic did not bring sweeping changes to baggage policies among global network carriers based in Africa, Asia, or the Middle East. But this will change as low cost carriers become more prevalent in these regions. Europe’s low cost carriers flew approximately 38 pc of Europe-based airline traffic for 2021.

Within Asia, this statistic drops to 23 pc, because the region has less low cost airline activity. The study says that the arrival of baggage fees represents good news for consumers, because it is an indicator of robust competitive behaviour between traditional and low cost carriers.

Ancillary revenue from baggage fees will continue to grow and 2023 results will likely surpass the record USD 32.9 billion reached in 2019. Baggage is a reliable revenue stream which easily surpasses 4 pc of total airline revenue. While economic conditions cause air fares to swing up and down, baggage revenue is isolated from these fluctuations.

The share of total industry revenue held by baggage activity was estimated to drop to 4.2 pc from last year’s level of 4.6 pc. This can be attributed to larger gains made by other ancillary revenue activities such as seat assignment fees and co-branded credit card programs. But the trend is abundantly clear, baggage fees, be they assessed for checked bags, large carry-ons, or included as part of a bundle, are a crucial component of profitability for nearly every airline.