UPS, FedEx Win When Airlines Charge to Check Bags

Delta Airlines (DAL) and Continental Airlines (CAL) are raising the fees they charge customers to check baggage, underscoring how the cash-strapped industry is trying to squeeze every nickle from the flying public. About the only winners from this trend are the package-delivery companies.%%DynaPub-Enhancement class="enhancement contentType-HTML Content fragmentId-1 payloadId-61603 alignment-right size-small"%% Fed up with the fees and poor airline service, consumers are increasingly mailing their luggage to their destinations to save money. Some are taking this a step further and forgoing luggage all together. Instead, they are packing their belongings directly into shipping boxes, according to company officials and industry experts. Exact figures are hard to come by though UPS (UPS) confirms this is occurring. FedEx (FDX) was not able to verify this since it does not gather information on shipping volume.

'A Gotcha Fee'

"I sometimes think that airlines do not want to be in the bag business," says George Hobica of Airfarewatch.com, which monitors airfares. "It's a gotcha fee...I have to believe that people vote with their wallets."

Atlanta-based Delta and Continental, which is based in Houston, on Tuesday raised checked-on luggage fees to $25 for the first bag and $35 for the second, making them among the highest in the industry, according to the Wall Street Journal. The airlines have little choice. Though their economic performance is improving, the International Air Transport Association expects global airlines to lose $5.6 billion, making fees collected for services such as checked luggage all that more important.

Southwest Airlines (LUV), which heavily advertises the fact that "bags fly free" on the Dallas airline, posted a 12% gain in traffic in November. Meanwhille JetBlue Airlines Corp. (JBLU), which does not charge for first bag but does for the second, reported a 7% traffic gain during that same time.

Officials from both companies told DailyFinance that their checked bag policies are bolstering their bottom line. Shares of Southwest are up more than 31% over the past year while JetBlue is off 22%.

Industry Pickup Seen

The battle over baggage fees comes as the travel industry is expected to pick up this year. A survey by the National Business Travel Association found that more than half of the travel managers who respondended project their spending to increase this year, while another 31% expects it to remain flat.

Carriers sometimes waive fees for frequent travelers -- like George Clooney's character in the hit film Up in the Air -- as a courtesy, leaving less well-heeled travelers holding the bag (pun intended). It's big money: U.S. airlines took in $700 million from checked-bag fees during the third quarter, up 111% from last year, according to data from the U.S. Bureau of Transportation Statistics cited by the Journal. U.S. carriers imposed the bag levies in 2008 to off-set spiralling oil prices, which although have fallen have been rebounding.

Atlanta-based UPS is finding increasing numbers of customers are shipping their personal effects through its UPS Stores because it leaves them one less thing to worry about. "You don't have the schlep factor," says Susan Rosenberg, a company spokeswoman, in an interview. Schlep is a Yiddish word meaning "to proceed or move especially slowly, tediously, awkwardly, or carelessly."

Packing light is not only smart but is proving to be increasingly cost-effective.

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