This week Air Canada stated that higher revenues from bag and other fees were part of their drive to permanently raise profits even with the rises in fuel prices.
On Tuesday, Calin Rovinescu, CEO of Air Canada said:
"Low fuel prices are a welcome tailwind, but history has shown how fickle oil pricing can be, so we remain intensely focused on the execution of the strategy that has brought us this far."
As Canada's largest carrier they earned a record $122 million in profits. This excluded one time costs during the first quarter. This was in part thanks to a 25% decrease in fuel cost for the same quarter during the previous year.
Also Air Canada stated that non-fare revenues for each passenger went up by 15% during the first three months of this year. This in turn led to higher contributions from baggage being checked in, cancellation fees, selection of seats, preferred seating and upgrades.
Comments made by Air Canada's CEO came a week after WestJet Airlines posted quarterly records in net income. These were due because of falling prices in fuel and higher fees.
Such charges have left quite a few passengers angry. They have started to accuse the airlines of "nickel and diming" them relentlessly. Whilst at the same time removing free on board meals and the comfort of extra legroom.
Meanwhile Air Canada's CEO said that such charges have been broadly accepted in the US as well as in other parts of the world. In the US bag fees charged by airlines rose by 5% to US$3.5 billion during the last year. As for the fees for changing reservations these rose by 6% to US$ 3 billion.
Observers of the industry stated that the airlines willneed to change a broken economic model that has seen quite a few carriers go out of business.
In exchange for keeping base fares as low as possible, many airlines now charge their passengers for those services they value. This includes checking in luggage, preferred seating and very soon Wi-Fi.
Air Canada states that raising fees is all part of their business strategy. They intend to cut costs through the expansion of their low cost leisure carrier service (Rouge). Also they intend to add another 100 seats on to flights using the large Boeing 777s. Plus they will be providing more flights using the new Boeing 787 Dreamliners.
All this has resulted in the their shares increasing by 4% to $12.19 on the Toronto Stock Exchange during Tuesday's midday trading.