By Janet H. Cho
Southwest Airlines isn't the only U.S. airline that will make more money off of passengers' checked bags and assigned seats this year.
More airlines are raising their fees for optional services, called ancillary revenue, to compensate for their soaring jet fuel costs. It's because they know they can only raise ticket prices so much.
Henry H. Harteveldt, president and travel industry analyst with Atmosphere Research Group in San Francisco, explains that airlines are paying at least 70% more for their jet fuel than before the Iran war, raising their fuel costs from 24% of a typical flight to more than 30% to 35%. "Airlines cannot be expected to absorb all of that high jet fuel cost" and pass along all of it through increased ticket prices, Harteveldt said.
"Airlines know they can increase domestic airfares only so much," he said.
Airlines are trying to find a balance between offering basic fares for travelers who are trying to save money and raising money from other options for people who want and are able to pay more, he said.
This has translated into higher fees for checked bags, advance seat reservations, extra legroom, earlier boarding, lounge access, and pretty much anything else airlines can charge more for, Harteveldt said. Airlines typically generate higher margins on ancillary products, often 60% to 100%.
The current increase in jet fuel prices is well beyond what most airlines have projected they would be, and helped contribute to Spirit Airlines' demise last week.
Spirit Aviation Holdings, the parent company of Spirit Airlines, blamed the spike in fuel prices when it announced its shutdown on May 2. Spirit's President and CEO Dave Davis said that despite reaching an agreement with its bondholders on a restructuring plan in March, "the sudden and sustained rise in fuel prices in recent weeks ultimately has left us with no alternative but to pursue an orderly wind-down."
That's why airlines have been scrambling to find other solutions. "They don't want to keep people from traveling, so they're hunting for revenue anywhere they can get it," said Patrick De Haan, head of petroleum analysis at GasBuddy. "Everywhere they can spread it out, they're going to spread it out."
He told Barron's that the airfare for a summer trip to Italy that he bought for $737.63 jumped to $850 in mid-March, and now costs more than $1,200.
Of all the optional fees, "baggage remains the largest single source of ancillary revenue," said Jay Sorensen, president of IdeaWorks Company in Shorewood, Wis. His firm specializes in airline ancillary revenue strategy and research.
The 13 major U.S. airlines together collected more than $5.47 billion in checked bag fees for the first three quarters of 2025, according to the latest data from the Bureau of Transportation Statistics. American Airlines collected nearly $1.1 billion in bag fees, while United Airlines collected $1.01 billion.
Those 13 airlines collected more than $7.27 billion in checked bag fees in 2024, including American Airlines' $1.5 billion, United Airlines' $1.34 billion, and Delta's $1.06 billion.
After the U.S. and Israel began attacking Iran on Feb. 28, causing oil prices, gasoline, and jet fuel prices to climb worldwide, airlines started raising their airfares, trimming their flight schedules, and hiking their checked-bag fees.
On March 30, JetBlue Airways raised its checked fees by up to $10 a bag, to $39 for off-peak periods (from $35), or $49 during peak periods (from $40), citing increasing operating costs. Baggage checked within 24 hours of departure rose to $49, or $59 for peak periods.
United Airlines, Delta Air Lines, and Southwest Airlines all followed suit in early April, each raising the cost of the first checked bag to $45, from $35 a bag on most domestic routes. That's on top of airfares that increased by 2.7% industrywide in March from February, according to the March consumer price index.
Southwest Airlines, which once trademarked the word "transfarency" to emphasize that it treated passengers "honestly and fairly," with "no unexpected bag fees, change fees, or hidden fees," last year ended its 54-year-old "bags fly free" policy for most passengers.
Its checked-bag revenue more than quadrupled, from $54.5 million in the second quarter of last year to $227.3 million in the third quarter. It collected $303.1 million in the first three quarters of 2025, versus $83.1 million in all of 2024, according to the Transportation Bureau data.
Like other airlines, Southwest lets its top-tier Rapid Rewards members, credit card holders, and active duty military check their bags for free. Southwest said its first-quarter Rapid Reward enrollments increased 37% from a year ago and tier-status earners jumped 62%, as it "successfully launched assigned and extra legroom seating on January 27," replacing its previously free open-seating policy.
Airlines also generate billions of dollars in revenue annually through their loyalty programs tied to co-branded credit cards. Sorensen estimates that a quarter of American Airlines' passengers use co-branded credit cards or elite loyalty status to waive their checked-bag fees.
American Express, for example, pays Delta Air Lines for the SkyMiles that passengers earn for their transactions when they use their cards. JPMorgan Chase does the same thing for cardholders using their credit cards to earn United Airlines' MileagePlus credits.
Delta Air Lines generates the most in ancillary revenue, which it reports as "loyalty and related revenue." Delta reported that its remuneration from American Express grew 11% last year, to $8.2 billion, "driven by double-digit growth in co-brand spend in each quarter" and more than 1 million acquisitions for the fourth straight year.
Delta reported record first-quarter revenue of $14.2 billion, including a 13% increase in loyalty and related revenue, primarily driven by "continued double-digit growth in card spend," an expanding base of cardholders, and American Express remuneration of over $2 billion, up 10% over the prior year.
"Demand remains strong, and we are taking actions to protect our margins and cash flow," including by trimming capacity growth, CEO Ed Bastian said during first-quarter earnings. Delta expects to post $1 billion in pretax profit in the current quarter and revenue to rise by a low-teens percentage, including an estimated $300 million benefit from its refinery, despite an expected increase of more than $2 billion in fuel costs.
That fuel cost increase assumes a price of $4.30 a gallon, up from $2.62 in the first quarter.
Delta Air Lines recently announced that starting May 19, it will no longer offer onboard beverage and snack service on flights shorter than 350 miles, a change from the previous 250-mile limit -- except for passengers traveling in first class.
A Delta spokesperson told Barron's that the change is "not related to costs and is about shifting resources to more longer-duration flights where more customers will have access to more on-board snacks and beverages."
Although charging ancillary fees might make sense for airlines, "it's a terrible idea" to make passengers pay for higher jet fuel costs, said syndicated travel columnist Christopher Elliott. "We're getting to the point where you're paying more for your luggage than your ticket."
Write to Janet H. Cho at janet.cho@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
May 10, 2026 18:13 ET (22:13 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments