Here’s how much WestJet, Air Canada will rake in from baggage fees

New non-stop service to London could be the 'tip of the iceberg' for WestJet's ambitions to open routes in Europe, experts say.
The country's two biggest airlines said this week they are "unbundling" baggage costs from the base airfare for economy class customers. A $25 fee will apply to the first piece of checked baggage. The Canadian Press /Bayne Stanley

The country’s two biggest airlines stand to rake in millions from new baggage fees implemented by each this week, experts said Friday.

Early this week, WestJet said it would begin charging $25 for the first piece of checked luggage, a move followed by Air Canada on Thursday.

“We’re matching the market. We took a couple days to think through it,” Mike Rousseau, Air Canada’s head of finance, said at a conference on Thursday.

WestJet says the fees, which apply to economy class flyers at both carriers, is a move to break out or “unbundle” the cost of baggage from the base airfare, allowing for lower ticket prices for those travelling with just carry-on. New promotional fares will also be offered.

“The unbundling of the fare would allow for lower sale fares,” WestJet said in a promo statement.

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That doesn’t mean however WestJet and Air Canada aren’t lifting costs on customers. Experts say both will generate tens of millions of dollars in incremental revenue from broken-out baggage fees.

“This week we saw both Air Canada and WestJet adding to their … revenues by starting to charge for first bags,” Kevin Chiang, a transportation stock analyst at CIBC, said in a note to clients.

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CIBC estimates the moves, which will affect about one in five domestic or transborder customers at each carrier, will generate $37 million for Air Canada. WestJet stands take in around $70 million annually from the new fee.

Chiang noted that both carriers are matching what U.S. operators flying into Canada already do. “The U.S. airlines already charge first bag fees,” he said. “So this is not a new development for the industry.”

At the same conference on Thursday, Vito Culmone, WestJet’s head of finance, said the new fees were a “natural evolution for Canadian fare structures.”

WestJet announced a seat sale on several flights on Thursday to showcase the new promotional fares it plans to offer as a result of the shift.

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“We remain dedicated to being Canada’s low-fare leader and this seat sale supports our commitment,” Bob Cummings, head of sales and marketing said.

WATCH: Consumers who buy the least expensive airline tickets with Air Canada will now face a $25 fee to check the first piece of luggage.