Southwest bags more traffic by passing on fees

To the frustration of many travelers, the nation's 10 largest airlines collected about $740 million in baggage fees in the third quarter of this year — a 111 percent increase over the same period in 2008.

With those kind of numbers from the U.S. Bureau of Transportation Statistics it's hard to tell who is profiting most from the baggage fees — the airlines that charge to check your bags or Southwest, the lone carrier that still doesn't make you pay to check your first two bags.

In the third quarter of the year, Delta Airlines, the world's largest airline, collected the most baggage fees, $130 million — a 172 percent increase over the same period in 2008.

But Southwest Airlines doesn't seem to be hurting by the decision to forego the fees.

Speaking this week in New York to the Wings Club, a group of aviation professionals, Southwest chairman Gary Kelly sounded nearly giddy about the company's success in 2009. He said he was "overjoyed" that Southwest now serves more passengers than any other U.S. airline.

While the airline cut capacity by 5 percent in 2009, it added service to four new airports — New York LaGuardia, Boston, Minneapolis-St. Paul and Milwaukee. At the same time, he said the airline has gained a 1 percent market share and even has offered all employees raises during one of the worst financial slumps in airline history.

"It's just been a very, very gratifying year," he said.

Kelly said the "bags fly free" strategy was a key reason the airline gained market share this year.

Julius Maldutis, an economist and consultant to the airline industry, called Southwest's no-fee strategy "absolutely brilliant."

"That is their key marketing strategy, and they are winning big," he added.

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