Air Canada adds $25 checked bag fee for economy travel

Air Canada says economy-class passengers travelling within Canada, as well as those flying to and from the U.S., Caribbean and Mexico, will now have to pay $25 to check a bag.

The move matches an announcement made earlier this week by WestJet.

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The fee only applies to customers on the airline's lowest-fee ticket option, known as Economy Class Tango.

Flyers travelling on Flex and Latitude Economy Class fares, or Altitude Prestige, Elite and Super Elite members won't be affected, nor business class travellers or Star Alliance Silver and Gold members, military personnel or anyone booking with Air Canada Vacations.

"We're matching the market," the airline's CFO Michael Rousseau told an investor conference in Toronto on Thursday. "It's what the market is bearing at this point in time."

The airline says about20 per cent of its Canadian customers will be subject to the new fee, whichrepresents the equivalent of about five per cent of Air Canada customers system-wide.

Analysts had been expecting the move, especially after WestJet moved first. It's believed the new fees could bring in between $50 million and $75 million a year in new revenue for the carrier.

Changing fee structure

The move is part of a broader industry trend toward making airline travel more customizable, where travellers theoretically pay only for the services they want and need on a flight from a basic seat to luxuries like food, alcohol and sleeping quarters.

Canaccord Genuity'sairline analyst David Tyermansays the airline can expect to see about a $50-million bump in its revenues from the fee in the first year, but that comes with a possible upside for travellers.

"There is definitely the potential for base ticket price reductions, as WestJet has talked about reducing ticket prices this week as part of its first-bag fee initiative," he said in a note to clients on Thursday morning.

Almost all major North American carriers now charge for checked baggage, with the notable exceptions of U.S. lines JetBlue and Southwest.