Airlines' bag fees weigh down customers

An airport employee keeps an eye on luggage after a computer glitch crippled the baggage handling system at the American Airlines' Terminal 8 at New York's John F. Kennedy International Airport July 30, 2008.

CHICAGO (Reuters) - U.S. airlines are slowly ratcheting up their bag-check fees, like US Airways Group Inc did on Wednesday, but analysts warn that carriers risk alienating customers with excessive fees.

US Airways said that on domestic flights it would charge $20 to check a single bag and $30 to check a second bag. The carrier said it also would charge $50 to check a second bag on its transatlantic flights.

Late Wednesday, Continental Airlines Inc also unveiled plans to charge some economy ticket holders $50 for a second checked bag on transatlantic flights. Travelers who buy nonrefundable or discounted fares are among those who would be subject to the fee, a company spokeswoman said.

The airline said the fee does not apply to elite members of the airline's frequent-flier program, those traveling on full- fare economy tickets and other groups.

The fees are consistent with those implemented by rival airlines such as AMR Corp's American Airlines, which added a fee last week for a second bag check on some international routes.

Airlines view the new fees as fair and necessary to bolster revenue as the industry grapples with weak demand and volatile fuel prices. But for many travelers on long, extended trips, the charges, while technically optional, are unavoidable.

"Airlines are fighting for scraps here. These are penny ante policies that often catch consumers by surprise," said Joe Schwieterman, transportation expert at DePaul University in Chicago. "It's made traveling with two bags punitive for many flyers."

The airline industry, facing losses that have threatened the survival of many carriers in the last few years, have begun unbundling items and services that used to be included in the ticket price.

Last year, several top carriers took the controversial step of charging fees, even for a single bag check on a domestic flight. Customers balked, but they paid.

"All of the fees are unfair for the consumers, but charging for fees is one of the only ways that the airlines can survive," said Basili Alukos, an airline analyst at Morningstar.

Alukos noted it is still much cheaper to check a bag on an airline than it is to ship the same bag through another major cargo service.

The new fees are common in the U.S. airline industry. Delta Air Lines Inc charges $15 for a single checked bag on travel within the United States and $50 for a second checked bag on travel in the economy class between the United States and Europe.

Some carriers such as US Airways and Delta are encouraging travelers to check bags online by charging a $5 airport service fee per checked bag.

"So far, it appears that consumers have pretty much embraced these fees," said Kevin Mitchell, head of the Business Travel Coalition, which represents business travelers.

Mitchell noted that when airlines first began charging for second and first checked bags last year, analysts forecast the initiative would net airlines about $400 million a year in ancillary revenue. That figure is now over $2 billion a year for U.S. domestic carriers, he said.

"The airlines are not going to let up in looking further for anything they can charge for that's not nailed down," Mitchell said. "They're running the risk of turning travelers off with all the nickel and diming, because that's how it's perceived."

Mitchell said travelers who rebel against bag-check fees they find excessive can try their luck with another airline.

Southwest Airlines Co has made its relatively inexpensive bag-check policy a centerpiece in its advertising lately. Southwest will check the first two bags weighing under 50 pounds for free. The third checked bag is $50.

(Additional reporting by Deepa Seetharaman; editing by Richard Chang and Andre Grenon.)