Rhetorically JetBlue, United, Delta and Southwest are tying increased checked bag fees to the high cost of jet fuel. That’s not really true, but it opens them up to this charge: they’re jacking up fees but won’t commit to reduce them when the price of fuel falls.
It’s a simple misunderstanding of how tickets are priced, but it’s rhetorically compelling.
The Delta CEO won't commit to lowering ticket prices if jet fuel prices go down.
When asked if his company would lower prices if fuel costs dropped, he instead said that lower fuel costs would "certainly help us boost our margins this year and clearly into next year as well.”
— More Perfect Union (@MorePerfectUS) April 8, 2026
First, this is going to be controversial, but big airlines don’t actually make very much money flying passengers. That suggests they aren’t ‘taking advantage of passengers’ with their fees.
Much of their profit comes from selling miles to banks. When you strip that out, you get passengers barely providing enough money to cover the cost of flying. Put another way, airline tickets plus fees for things like checked bags are closer to break-even or even a loss leader to get passengers to take their credit cards.
In simplest terms, we can look at airline financials and back out profits from their bank partnerships using self-disclosed margins of 53% for American Airlines, 39% for Delta, and 44% for United. That way we avoid the common mistake most commentators make of using revenue figures from the banks and treating that as profit.
- American Airlines: 2025 revenue was $54.6 billion, operating income $1.47 billion, and net income $111 million. Card-linked loyalty marketing services revenue was $3.51 billion (this is a more conservative number to use than $6.2 billion in cash payments from co-brand and other partners – I am intentionally using the lower number because the higher one would make their margin from flying much worse).
Backing out profit on the marketing services figure, American’s operating margin (from flying) was 0.8%. And in fact marketing services is mostly profit, stripping out the actual cost. Arguably the total remuneration figure would be better to use, and backing out the margin on that number gets you to – 3.4%. Either way, the point is that American Airlines actually loses money flying passengers and cargo.
- Delta Air Lines: discloses $8.2 billion from American Express in 2025 out of $63.36 billion in revenue, operating income of $5.82 billion, and net income of $5 billion. They had a 4.8% operating margin excluding American Express payment, and a 3.3% net margin.
United’s figures are a bit more obscured in their financials. However they’re profitable without Chase revenue, but with a net margin of around 0.7% – 1.2%.
Airlines Chase Profits By Lowering Prices!
Since the marginal cost of an additional passenger is almost zero (just a bit of extra fuel to carry their weight) and a seat that goes out empty earns zero and can never be re-sold, if one airline started taking advantage of passengers with higher prices that generated high margin revenue, in most markets other airlines would just lower their prices to attract the passenger. They would make more money.
They’re going to charge more for non-stop flights in markets they dominate, and less in markets where there’s one-stop competition. But overall this model holds with actual airline behavior.
Higher Costs Adjust Supply Which Affects Price
Ultimately, in competitive markets, prices are set by supply and demand not cost of production. Cost of production – in this case jet fuel – affects supply. Since flights aren’t very profitable, as fuel rises, airlines lose money on those flights. They might still operate many of them to make sure they’re relevant to passengers with credit cards (they don’t want to lose credit card spend to a competitor still flying). But they scale back supply. That leads to higher prices, at any set level of demand, helping to cover the higher price of fuel.
And, in fact, including fees the price of air travel has fallen significantly in inflation-adjusted terms:
Checked Bag Fees Are A Price Increase Subsidized By The Government
Checked bag fees are one way to raise price. It’s also tax-advantaged (encouraged by Congress). Domestic airline tickets are subject to a 7.5% excise tax, but ‘optional fees’ are not. So moving money out of the fare and into fees is tax arbitrage.
- U.S. airlines generated $7.3 billion in checked bag fees in 2024. $5.8 billion of that was domestic bag fees.
- This saved airlines $435 million in taxes.
If you don’t like checked bag fees, understand that Congress is providing airlines with a half billion dollar a year incentive to charge them. And they use those bag fees as an incentive to get their credit card (which waives many of those fees), in turn driving their profits.
Fees Are Just One Way Airlines Adjust Prices To Try To Avoid Losing Money
Checked bag fees aren’t all the same. JetBlue has a structure which can make their bag fees higher than competitors, with peak and off-peak seasons – when they’re able to fill planes, they charge higher bag fees, supply and demand!
But checked bag fees also do not fall when costs or demand falls, airfare adjusts, and there’s a strong legal incentive for this to be the case.
Delta’s CEO isn’t going to promise to lower bag fees. He can promise, though, that the airline will adjust the total cost of providing travel as its costs change and demand for its product changes.
The blunt truth is that airlines do not make money flying passengers. If you’re buying a domestic coach ticket you are most likely getting a fare that does not cover operating costs. There’s very few situations like that in the free market. So, the public maybe shouldn’t complain about a hike in fares.
If everyone is pinching pennies these days, why are we (i.e. Congress) incentivizing airlines with a half billion dollars so that they can charge us baggage fees? I’m not suggesting that baggage fees be eliminated (although that would be nice), but eliminate the incentives and have airline pay the 7.5% excise tax.
American could not possibly operate on such a narrow margin and stay in business!
Still shilling and licking boots, I see. @Gary Leff, @George Romey. Naw, this is corporate and individual greed. Ed has a $100 million incentive package. Crocodile tears, y’all. They’d gut their workers and us consumers for mere extra penny; maybe even for free.
They should charge carry-on luggages as well.
They promise to charge what the market will bear, and no more. In return I promise to pay what I have to, and no more.
And, @Mike Hunt, @Tim Dunn, @Mike P, and the other faux-intellectual ‘conservative’ economist libertarian types, if it makes you lot feel any better, please feel free to call me a ‘socialist, communist, liberal, leftist cuck,’ like you usually do, BUT… this is a regressive tax on consumers. You already know that the relatively well-off people with status, who already fly mostly in premium cabins, and those of us who do carry-on only are not the ones paying these fees. Rather, it’s the relative poors who are getting kicked in the balls, yet again. And, if costs go up too much for them, they’ll just stay home. Empty planes. Less travel. Less commerce. This is not a good way to run a business, much less a country. Gonna milk ’em dry. Prove me wrong, ye robber barons.
Question: If a bag was shipped as stand-alone air freight, would that cost more than $50?
Checked bag fees are very profitable for American, Delta and United Airlines.
@1990 You do realize that during the CBA days, when the government set routes and fares and determined which airline operated on that route, the average American could rarely afford to fly. So when the government controlled the airline far less of the “poor” as you say flew. In fact, they probably never flew.
And as someone that was alive during the days no one complained. No one claimed it was “systemic racism” that kept them off planes. Or greedy airlines. But the again the government wasn’t full of charlatans such as Bernie Sanders and AOC ginning up the ignorant masses.
@George Romey – I’m convinced that a lot of the nostalgia for the CAB days has to do with wanting to somehow bring passenger-rail back.
@George Romey — (I guess the others are still asleep. Rest up, fellas!) Give us a year particular year for your appeal to nostalgia, because de-regulation in the US was 1978; many consider the “Golden Age” of passenger air travel as the 1950s-70s. Perhaps, you were flying them; I was not. I am not asking for the expensive fares, hijackings, safety incidents, discrimination (very much both racism and sexism, you must have been insulated from that as a non-colored man, one assumes), or the cancerous smoking everywhere at that time. Rather, I’m for things like bringing back Rule 240 (requiring carriers to rebook passengers on competing airlines during delays or cancellations within their control) and adding common-sense regulations like an EU/UK261 or Canada’s APPR, whereby passengers get compensated when the airlines fail them. All of this can be done without reverting to the bad things of the past. I know you’ll claim this just raises costs, yet, how is it that ULCC’s like Ryanair can offer dirt-cheap fares (like €49) while still complying and profitable? Huh.
@Denver Refugee — Heck ya, we (choochoo) there! Would love to see a United (Amtrak). Gimme some actual high-speed rail, please. If China can do it, why can’t we (US)? Are we lame?
@George Romey…I give you credit for trying, but 1990 is an economic ignoramus, which I’ve proven on numerous occasions. He denounces people for calling him a leftist, socialist, or communist, but if the label fits, it’s appropriate. Only the weak-minded use terms like “greedy” and “robber barons” when attempting to explain decisions made in the marketplace.
Of course, I find it ironic that someone who writes “…and the other faux-intellectual ‘conservative’ economist libertarian types,…” is surprised when others use the same tactic to describe his political/economic leanings. What a hypocrite!
Of course they shouldn’t lower them in the future. The market forces dictate that. If another airline cuts bag costs (BTW between elite status and credit cards does anyone really care about those that have to pay bag fees?) they will be lowered.
Airlines, like any publicly traded company, work on behalf of shareholders. Their mission is to maximize return. They aren’t charities (as much as 1900 thinks they should be) that owe the traveling public anything. Again market forces will set the pricing based on alternatives available (as it should be).
It would surely make my flying life much nicer if a single bag was included with every ticket. Then the Kettles would be checking their bags rather than putting them in the overhead. Then, I wouldn’t have to arrive at the gate early to make sure my carryon made it into the overhead.
Gate checking is not an option, since my carryon usually includes electronics like computers and other essentials.
Yesterday, for example, I boarded with Group 5 on American, because I was busy eating dinner in the Amex lounge. The first class overhead luggage space was full. I had to do some aggressive re-arranging (I hate to do that) to store my bag.
@1990 You’re the one that always wants government to step in and control pricing in the marketplace. Up until 1978 in fact government ran the airline business and fares weren’t “dirt cheap.” And of course to you everything must have an element of “racism” or whatever virtual signaling you’re trying to attribute. BTW the government heavily controlled banks up until the late 1980s. I’m old enough remember a $10 monthly service fee and a fee for each check paid. Back in those days the only to pay someone and in many instances was to “write a check.”
@Mike P — Could you contribute anything on-topic, or just name-calling? You proved MY point.
@Retired Gambler — Market forces? Ok, rising prices usually decrease demand, but I guess we’ll see… maybe these airlines will do the all-business class model (like La Compagnie), since that’ll be the only folks who can afford to travel.
“Could you contribute anything on-topic,…”
I just did, I pointed out how ignorant you are.
@1990 – if you can’t afford to travel then don’t. There is no guarantee that anything offered is affordable for many people. I see the same whining when Disney raises their prices (“my kids can’t go to Disney World”) or when Las Vegas increases costs and fees. What people don’t understand is companies don’t want poor or cheap people. They want ones that spend more and their policies typically work well in that regard.
Who checks bags? Totally unnecessary. Take the number of days in yout trip and divide by 2 or 3 to determine how many days worth of clothes you need. You’ll never see the people you meet traveling ever again. The hotel and airline employees wear the same thing every day (uniform), so who cares if you wear the same thing three times? Just make sure you have enough clean shoes, enough socks and undies for your personal needs.
Enough clean shoes = one pair….
@Gene — 100%. WFBF. Carry-on only. This is the way.
@Retired Gambler — I can; I do; though, it needs to be good value; like, I’m not paying thousands extra when it makes no sense. 1-2 hour flight in a regional aircraft? Psh. I’ll take my chances with a complimentary upgrade from a 2-2 to a 1-2 recliner. 50-50 usually. Transcon, recliner at least, but ideally lie-flat; long-haul international, business-or-first, hopefully finding a deal or using points/certificates. Even with the changes, devaluations, etc. over the years, I still feel ahead.
@Mike P — So, you still got nothin…
The price of two checked bags is included in my trips to Southeast Asia, which don’t push branded credit cards as much. I get one checked bag along with my seat for my trips in the USA due to having a branded credit card that has a yearly fee. A trip cost is not calculated as only the ticket price. It is also including the price for all of the side deals that make profit, such as a bit from buying food at the airport along with money made from credit card spend. Airlines know as a whole they can make money on credit card spend so they are willing to take less on the seat price but they can get some back with bag costs or alternately pushing people to spend on their branded credit cards. The truth is that the domestic airlines have never really pushed to see how much they can get out of passengers by charging higher baggage fees. You can see some of the pain that can be caused on no frills airlines, both domestic and overseas.