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Airline profit margins and baggage fees growing

September 25, 2012|By Hugo Martin
  • In the second quarter of 2012, airline passengers such as these spent more on baggage-check fees and reservation-change fees than in the same period of 2011.
In the second quarter of 2012, airline passengers such as these spent more… (Don Bartletti / Los Angeles…)

Profits for the nation's largest airlines are on the rise thanks to lower fuel prices, steady demand and growing revenue from passenger fees, according to a new federal report.

In the period of April through June, the profit margin for the nation's nine largest airlines was 6%, compared to 5.3% in the same period in 2011, according to a report Tuesday by the U.S. Bureau of Transportation Statistics.

But industry leaders point out that the improved finances won't offset the loses from the previous three-month period.

For the first half of 2012, the nine largest airlines posted $1 billion in losses, with a profit margin of -1.5%, said Victoria Day, a spokeswoman for Airline for America, the trade group for the country's airlines.

Still, she said the industry's financial condition improved in the second quarter of the year because of strong passenger revenue and "some fuel-price relief."

As a group, the airlines posted a profit of $2.3 billion for the April-through-June period, with every carrier reporting a profit margin for the first time in months. Seattle-based Alaska Airline reported the largest margin, 15.8% for the period, according to the report.

For the period, the total that airlines spent on fuel dropped by about 4%, according to federal statistics. Meanwhile, the airlines enjoyed an increase in revenue from baggage-check fees -- up 5% to $932 million -- and reservation-change fees, which rose 8% to $661 million, according to the report.

Delta Air Lines led all carriers in baggage fee revenues, with $231 million, followed by United Airlines with $195 million. Delta also collected the most in reservation change fees, with $201 million, followed by United with $175 million, according to the report.

Airlines are not required to report separately other fees they collect, such as charges for wireless Internet, food, drinks and seat upgrades.

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Follow Hugo Martin on Twitter at @hugomartin

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