Baggage fees would cost $1 billion, says US budget giant

Baggage fees would cost $1 billion, says US budget giant

US budget carrier Southwest Airlines could lose $1 billion (£660 million) a year if it charged customers to check in luggage, according to chief executive Gary Kelly.

Kelly made the surprising claim in front of 7,000 delegates at the Global Business Travel Association’s annual convention in Orlando on Monday when he was asked whether the airline missed out on revenue by not introducing a baggage fee.

Low-cost rival JetBlue brought in checked-luggage charges on July 1, estimating it would generate in excess of $130 million a year in additional revenue.

The US Department of Transport calculated baggage fees generated the equivalent of £555 million for the US airline sector in the first quarter of this year.

But Kelly said the advantage of being the only US carrier not to charge baggage fees was more valuable to Southwest than the potential earnings.

He said: “We’ve analysed the figures and we think we would lose $1 billion after taking in money from baggage fees.

“No one likes bait and switch or hidden fees. By [retaining the status quo] we will win more customers and more revenue.”

Kelly added that Southwest – the world’s largest low-cost carrier – would continue to resist the temptation to introduce a premium class cabin or fees for changes to bookings. 

Southwest is under investigation by the US Department of Justice, along with Delta Air Lines, American Airlines and United Airlines, in an inquiry into supposed collusion to inflate fares.

Kelly said Southwest was complying with the inquiry, adding that the allegations were false.

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