How Checked Bag Fees Became a $7.4 Billion Business for U.S. Airlines

The suitcase that used to fly free

On May 21, 2008, American Airlines, then the nation's largest carrier, announced that starting June 15 it would charge $15 for the first checked bag. Until then, the big legacy airlines had charged only for a second bag and beyond. Low-cost Spirit already charged for the first one, but American was the first of the major carriers to do it.

It was part of a broader shift that the Government Accountability Office later documented. Airlines began unbundling: charging separately, as optional fees, for services that used to be folded into the ticket price, such as checked bags and seat selection. In 2008 and 2009 combined, the GAO found, airlines reported $7.9 billion in revenue from baggage fees and reservation change and cancellation fees.

What a first bag costs now

Bag fees have climbed in steps. In early 2024, American, United and Delta moved to $35 online and $40 at the airport for a first checked bag. In April 2026 they went up again. United now charges $45 if you prepay online and $50 at the airport. American charges $45 online and $50 at the airport, with $60 for a second bag and $200 for a third, according to Bloomberg Government. Delta's first-bag fee rose from $35 to $45 for tickets issued from April 8, 2026, The Points Guy reported.

Exact prices depend on when the ticket was issued, the route and how you pay, so the airline's own baggage page is the final word for any particular trip. The direction of travel, though, has been one way: from free, to $15, to roughly three times that.

The tax the bag fee skips

Here is the part most travelers never see. The federal government levies a 7.5% excise tax on domestic air passenger transportation, and it applies to the fare. Under Treasury regulations and IRS guidance, many fees airlines charge for optional services, including checked baggage, early boarding, phone reservations and onboard meals, are generally not subject to that tax, as the GAO explained in a 2010 report.

The exemption hinges on the bag fee being separate and optional. If checking a bag were a required part of the ticket, the charge would be part of the fare and taxed like the rest of it. That helps explain the appeal of unbundling for airlines: money collected as a separate optional fee falls outside the base of the ticket tax.

How much tax goes uncollected? The GAO estimated that if baggage fees in 2009 had been taxed at 7.5%, roughly $186 million more would have been credited to the Airport and Airway Trust Fund. It described that amount as small, less than 2% of the roughly $11 billion the fund received in fiscal year 2009. That estimate dates from 2009. Working backward, it implies a taxable base of about $2.5 billion in bag fees that year, roughly a third of the 2025 total.

From $15 a bag to $7.4 billion a year

Added up, the fees are a big business. According to the Bureau of Transportation Statistics, U.S. airlines collected $7.4 billion in baggage fees in 2025, about 2.9% of their total operating revenue. Domestic operations alone accounted for $6.0 billion of that. Don't confuse that domestic figure with the headline of the same BTS release, which reports the airlines' 2025 net profit, also $6.0 billion. The year before, baggage fees totaled $7.27 billion.

Those numbers explain why the fee has stuck. A charge that began at $15 on one airline in 2008 is now a standard line item across the industry, priced separately from the fare and largely outside the ticket tax. For travelers, the practical result is that the advertised fare is no longer the full price of a trip with a suitcase. The bag is its own purchase, and unlike the fare, it is a cost a traveler can avoid by packing light.

Questions people ask

When did airlines start charging for the first checked bag?

American Airlines announced on May 21, 2008, that it would charge $15 for the first checked bag starting June 15, 2008, the first of the major legacy carriers to do so. Low-cost Spirit already charged for a first bag.

How much is a checked bag fee in 2026?

After increases in April 2026, the first checked bag costs $45 prepaid online and $50 at the airport on United and American, and $45 on Delta, according to Bloomberg Government and The Points Guy. Check your airline's site for the fee on your ticket.

Are checked bag fees taxed like airfare?

Generally, no. The 7.5% federal excise tax applies to the fare, and Treasury regulations and IRS guidance generally exclude optional fees such as checked baggage, according to the GAO.

Sources

1. American Airlines to charge for 1st checked bagAssociated Press via HeraldNet · 2008-05-21
2. Commercial Aviation: Consumers Could Benefit from Better Information about Airline-Imposed Fees and Refundability of Government-Imposed Taxes and Fees (GAO-10-785)U.S. Government Accountability Office · 2010-07-14
3. GAO-10-785, full report textU.S. Government Accountability Office · 2010-07-14
4. American Airlines Is Latest US Carrier to Raise Bag FeesBloomberg Government · 2026-04-09
5. Delta Air Lines hikes checked bag feesThe Points Guy · 2026-04-07
6. US Airlines profited $6.0 billion in 2025, a decrease over 2024Bureau of Transportation Statistics · 2026-05-12
7. As their policies shift, see how much U.S. airlines are making in checked bag feesCBS News · 2025-05-27

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