Airline Stocks Continue to Nickel and Dime Passengers With Bag Fees
Companies / Sector Analysis Feb 14, 2015 - 03:22 PM GMTBy: Investment_U
Rachel Gearhart writes: In 2008, airlines justified the raise in baggage fees by blaming rising fuel costs. But in recent months, oil prices have been halved. And yet, baggage fees remain lofty.
This week's chart looks at the amount of baggage-fee revenue collected by airlines compared to the price of Brent crude over the past eight years.
In the first three quarters of 2014, airline bag fees already totaled $2.65 billion before the busy holiday travel season that takes place in the fourth quarter. This indicates that bag revenue is remaining steady despite the drop in oil prices.
The bar graph on the right looks at the amount of baggage revenue collected by individual airlines.
You'd be hard-pressed to find a bigger benefactor of low oil prices than airliners. Between October 13, when the market bottomed, and December 31, 2014, Delta Air Lines (NYSE: DAL) gained 59% and American Airlines (Nasdaq: AAL) jumped 82%.
Last year, Delta and American Airlines each used about 4 billion gallons of jet fuel. With oil prices now half of what they were for the majority of 2014, airlines have the potential to cut their expenses significantly. Analysts project that, if oil prices remain low this year, airlines will be able to cut their operating expenses by about 16%.
Low oil prices should ensure airlines spend less...
But, as any frequent flier knows, that isn't stopping them from charging more.
As oil prices continue to be volatile, look for discount airliners such as Spirit Airlines (Nasdaq: SAVE) to start picking up more revenue from irritated and economically savvy passengers.
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Source: http://www.investmentu.com/article/detail/43552/oil-prices-airlines-baggage-fees
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