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Southwest Airlines reported a rise in its revenue per passenger (RPM) numbers this past January, up 7.1 percent from January of 2009. The airline flew 5.5 billion RPMs last month, and 5.1 billion in January of 2009. Southwest’s chief executive Gary Kelly said the carrier’s “Bags fly Free” policy has picked up hundreds of millions of dollars in revenues from passengers picking Southwest.

Mr. Kelly said Southwest has shifted 1 percent of the estimated $80 billion domestic market to itself (about $800 million). While the Bags Fly Free campaign is not entirely responsible, Mr. Kelly noted that its a major factor.

The airline’s available seat miles (ASMs) decreased 6.7 percent to 7.6 billion this past month, down from January 2009’s 8.2 billion. Like most carriers, the airline’s number of seats offered has fallen; due mainly to weak demand for air travel.

Southwest is the only major airline in the United States not charging baggage fees. Many of the major carriers increased baggage fees this past month – passengers are paying them, and its boosting ancillary revenue. How far are customers willing to go? While some passengers are packing carry-ons, overhead storage is cramped. Some passengers are surprised to find out how much they have to pay for bags at the airport, but let it happen – how far will consumers let airlines go with baggage fees?

“Customers hate these fees,” said Mr. Kelly.

“They hate them. I was on a panel with another airline CEO, who will go unnamed and he said I hate these fees, but we have to do them. Nobody likes these things. So we are definitely hitting on a passion point with customers. So, we thought like the main thing is we didn’t want to get lumped in with the crowd, and we had to make sure that there was a deep awareness by customers that we don’t charge these fees, which of course led to our variations of advertising campaigns.” (source: The Dallas Morning News)