Posted on March - 28 - 2010
United Airlines delivers bags via FedEx in limited-time deal
United Airlines whipped up a sizzling deal this week for people who refuse to travel light.
United offered Door to Door Baggage service by FedEx for a ridiculously low $25 a bag one-way for a limited time.
Cargo and airline experts said the special might be aimed at using excess space on FedEx flights to take the load off passenger flights, a loss leader to win business for United, or both.
Helane Becker, analyst with Jesup & Lamont Securities, quizzed FedEx executives about arrangements with United during an earnings call Thursday.
Asked if FedEx discounts the service to United, CFO Alan Graf told Becker “Amazon uses FedEx a lot and offers free shipping. And I promise you we don’t give it to them for free.”
FedEx executive vice president Mike Glenn said FedEx has “a number of agreements” with airlines and others to haul luggage, golf clubs and skis.
“Obviously, as the airlines tighten their restrictions on baggage, it provides us additional opportunities, which we are certainly planning to take advantage of, but this is not a new program.”
Becker: “OK, but you are still making money on this?”
Glenn: “Yes, ma’am.”
The sale price was good from last Thursday through March 29 but had to be booked by Friday afternoon. United officials didn’t immediately respond to a query about how the promotion went. United regional carriers offered six daily flights out of Memphis International Airport in January.
United’s Web site listed regular one-way Door to Door Luggage rates at $79 and $99. That’s much lower than $149 and $179 when the collaboration was announced in October 2008.
“What it does show as far as the luggage fee is, it’s a revenue strategy for airlines, but it’s very much a cost strategy,” said Seth Kaplan, managing partner with Airline Weekly. “Airlines are happy not to handle bags. But it’s interesting that it does compete against United’s own baggage handling service.”
United raised fees to $25 for the first checked bag and $35 for the second in January.
Kaplan said for United, “There is a variable cost at these fuel prices to carry anything on board.
For FedEx, it isn’t likely a high-margin product, but “they have trucks and planes that have to be out there anyway,” Kaplan said.
–Wayne Risher: 529-2874
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