Airlines report big gains from fees but don't expect lower fares

Bag fees generated $3.5 billion for the nation's airlines in 2014

Higher revenue from bag and reservation change fees, plus lower fuel costs and steady demand helped the nation's largest airlines collect $7.5 billion in profits for 2014, according to the latest financial data from the U.S. Department of Transportation.

The country's 14 biggest airlines reported collecting $3.5 billion in revenue from bag fees in 2014, up 5% compared with 2013, the U.S. Department of Transportation reported. Reservation change fees generated nearly $3 billion, up 6% compared with the previous year, the federal agency reported.

Revenue from bag fees has more than tripled since 2008, when most of the nation's airlines began to adopt the fee, while reservation change fees have nearly doubled at the same time. The Transportation Department does not keep track of revenue from other passenger fees, such as charges for food, entertainment or wireless Internet.

The airlines' overall revenue in 2014 -- $208 billion -- was the highest in 15 years, but net profits dropped from the record $12.2 billion collected in 2013 partly because of added expenses last year for new planes and higher salaries.

The latest strong financial data for the industry, however, will likely not lead to lower airfares, said Jason Rabinowitz, data research manager for Routehappy, a travel website that tracks airline amenities, such as in-flight Wi-Fi, entertainment and food.

Instead, he said that airlines are increasingly investing their profits in new planes with better entertainment and lay-flat seats, as well as in upgraded airport lounges.

American Airlines last week unveiled plans for an extensive overhaul of airport lounges in six airports, including Los Angeles International Airport.

"Today's trend among U.S. carriers is to take the money from these profits and reinvest them into the airlines," Rabinowitz said.

To read more about travel, tourism and the airline industry, follow me on Twitter at @hugomartin.

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