Both Delta Air Lines and Continental Airlines are raising their checked-baggage fees. According to this article the winners may be package-delivery companies and airlines without such fees. Unfortunately, it is hard to verify the exact numbers through shipping companies, but officials from both Southwest Air Lines and JetBlue Air Lines admit that their lack of checked-baggage fees have bolstered their bottom lines.
1. Look at Delta Air Line’s most recent 10-Q (http://www.sec.gov/Archives/edgar/data/27904/000095012309053249/g20908e10vq.htm)
Where do you think the checked luggage fees are reported in its financial statements?
2. During the third quarter of 2009, Southwest Airlines reported $2,550 million in passenger revenues and JetBlue Airlines reported $764 million for the same period. Assuming that their “no checked-bag fees” are responsible for the increased traffic gains reported in November (12% and 7%, respectively) and continue to attract travelers at the same rate throughout the fourth quarter, what additional revenue will the two companies achieve in the fourth quarter?
3. Assuming that the average traveler checking bags pays a fee of $35, how many travelers on U.S. airlines paid for checked bags in the third quarter (see the total in the article)?
Berr, Jonathan. (2010). “UPS, FedEx Win When Airlines Charge to Check Bags,” Daily Finance (Retrievable online at http://www.dailyfinance.com/story/media/ups-fedex-win-when-airlines-charge-to-check-bags/19313593/?mod=mktw)
SEC. (2009). Delta Air Lines 10-Q for 3rd quarter 2009. (Retrievable online at http://www.sec.gov/Archives/edgar/data/27904/000095012309053249/g20908e10vq.htm)