May 12 (Bloomberg) -- American Airlines and US Airways Group Inc. led U.S. carriers in collecting a record $1.1 billion in bag fees in 2008 as they began charging to check all luggage to defray jet-fuel costs.

Industrywide collections more than doubled from 2007, when the fees were levied chiefly on fliers who had heavy baggage or checked more than two pieces, the U.S. Transportation Department said yesterday. Last year’s total was the most since the agency started keeping track in 1990.

The data gave the first glimpse of U.S. carriers’ extra revenue, because they didn’t detail the baggage money in year- end earnings releases. With jet fuel retreating from 2008’s peak, the cash is helping soften the blow from a plunge in travel during the recession.

“These small fees really add up,” said Matthew Jacob, a Majestic Research LLC analyst in New York. “It helps, when you’re in a competitive industry and demand is under pressure, to be able to squeeze revenues out of part of your business where you couldn’t previously.”

A 61 percent surge in jet-fuel prices last year through July 3 spurred carriers to abandon the long-standing industry practice of checking two bags for free. UAL Corp.’s United Airlines announced a $25 fee for a second piece of checked luggage in February 2008, becoming the first U.S. carrier with that charge, and most competitors followed.

American, US Airways

American, the world’s second-largest carrier after Delta Air Lines Inc., ramped up pressure on competitors in May when it said it would add a $15 fee for the first bag, setting a industry standard.

US Airways, the smallest of the full-fare airlines, trailed only AMR Corp.’s American in baggage-fee collections. Tempe, Arizona-based US Airways has made so-called a la carte pricing a centerpiece of its strategy, charging passengers only for services they use.

Southwest Airlines Co., the biggest low-fare carrier, doesn’t charge to check the first two bags, and Chief Executive Officer Gary Kelly has said it helps win passengers.

Traffic, as measured in miles flown by paying passengers, has fallen 11 straight months among the largest U.S. airlines. Jet fuel for immediate delivery in New York Harbor tumbled 65 percent through yesterday since last year’s record.

The following table shows the largest U.S. airlines, ranked by traffic, and their 2008 collected baggage fees and the percentage change from a year earlier. The figures are from U.S. Transportation Department reports. Delta bought Northwest in October.

Rank, Airline    2008 Baggage fees in      Percentage change
                 millions of dollars       from 2007

1. Delta         $177.1                      83
2. American      $278                       123
3. United        $133                       151
4. Continental    $97.5                     128
5. Southwest      $25.2                      21
6. Northwest     $121.6                     224
7. US Airways    $187.1                     574

Total for all
U.S. carriers  $1,149.4                     148

To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net.

Last Updated: May 12, 2009 00:01 EDT