The new math of airline luggage
About two years ago I wrote a column predicting that the airlines would soon be charging for luggage. Since then, British Airways started the process with their charges for extra pieces of luggage on their flights, then United Airlines opened the floodgates when it became the first major U.S. carrier to charge for the second checked bag. Now American Airlines has upped the ante with a charge for the first checked piece of luggage.
Will the American Airlines $15 charge for the first checked piece of baggage stick?
My first inclination is to say: of course.
But the changes that this new charge will make to the habits of the traveling public are enormous. The American public feels that checking one piece of luggage is a right that comes with the purchase of their airline ticket. This is one $15 fee that may evoke a negative reaction and cause consumers to book away from AA. I’m not sure whether other airlines will follow.
Every year, almost 700 million air travelers check more than a billion bags. When carry-ons are factored into that tally, it comes to about 2.5 bags per passenger. I reported two years ago that “some industry analysts say that domestic airlines handle as much in luggage weight as they do in passenger weight, and the Transportation Security Administration reports that more than 50 percent of its $6-something billion budget goes to baggage screening.” That all still holds true.
The airlines have long realized that they have a treasure trove here if they could find a way to monetize the luggage they are carrying. Corporate studies have been ongoing for years and boardrooms have tackled the situation regularly. However, only in the last year-and-a-half have the major airlines taken steps to charge for the luggage they used to transport as part of the airline ticket price.
Even amid the howls and protestations of the hoi polloi and commentators, let’s take a look at the updated math of luggage using Federal Express as a guideline. If one looks at the new luggage arithmetic this way, the airlines still appear to a bargain.
Check out the FedEx Web site. The estimated cost of shipping a 50-pound suitcase from Boston to Chicago is $231 for delivery the next morning by 10:30 a.m. and $222.63 for delivery the next afternoon. Even second-day delivery is priced at $124. These quotes are for one way.
Now look at the airfares. According to AA.com the least expensive airfare from Boston to Chicago for flights a month in the future costs $226 round trip. That’s almost exactly the same price as shipping a suitcase one-way on FedEx either next morning or afternoon delivery. (Note: with AA your luggage is “same-day delivery” and travels conveniently with you.)
With a promotion like “pay to ship one piece of luggage to Chicago and the passenger flies for free” the airlines would actually make more money based on the FedEx guidelines.
I realize that this kind of comparison isn’t exact, however in round numbers it indicates the costs associated with moving luggage — not to mention moving luggage together with passengers. Indeed, the airlines need to figure how to unlock the potential riches of charging for luggage.
I don’t think this AA initiative is the way to move in that direction and that it will create more problems than it solves. The devil will be in the details.
My predictions:
• This luggage fee is a step too far. AA will eventually have to back off of the fee.
• Problems with controlling carry-on luggage will increase exponentially.
• Delays at TSA checkpoints will increase as more passengers bring more baggage through the inspection points.
• Delays at the boarding gates dealing with luggage arguments will further delay AA flights to less than a 50 percent on-time rating.
• Other airlines will adopt a wait-and-see approach to this dramatic fee increase, forcing AA to rethink their fee structure.
• The Transportation Department will force airlines to disclose these fees in their advertisements. This will allow other airlines to simply raise airfares without raising the total advertised cost of the trip. AA will eventually (perhaps before June 15) roll this fee into their airfares.
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10 Responses to “The new math of airline luggage”
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Your comparison to FedEx is flawed. The FedEx price includes ground transportation to and from an arbitrary address.
I wonder if the next added fee will be for priority boarding. As more and more people carry-on and storage gets tight; you either pay for priority boarding to get your bags on with you or you’ll have to pay for your gate checked bag when there’s no room left for your carry-on.
Don’t have the money/credit card with you for the unexpected gate check? The airline won’t care if you are forced to either leave your bag or not take the flight.
If all the airlines join American’s “monetization” bandwagon, I think third party shipping will become more popular even if costs more than the $15. Airlines are now asking passengers to pay for notoriously unreliable baggage handling “service” that will probably become even more unreliable after the airlines lay off half the baggage handlers to save money. (Will they next “monetize” tracking down and returning bags by charging a “customer service” fee when bags we’ve paid to check don’t arrive on the carousel?) And airline baggage handling also includes the possibility of a TSA screener rifling through bags that have to be unlocked because their high-tech scanners can’t distinguish between explosives and books, leather, or chocolate.
If we have to pay airlines for a baggage shipping service that too often loses, delays, damages, or pilfers luggage, it would make sense to pay a little more for a third party that provides reliable and secure service. And by the way, vacationers who are able to plan ahead can significantly reduce the cost of third-party shipping by sending their bags several days in advance.
If the fees persist, the third-party shipping will become just another one of the many expenses and hassles that go with air travel. Of course, the best solution to all those hassles is to choose destinations that don’t require flying. This summer would be a great time to spend a vacation exploring the attractions in our home towns that we overlooked when air travel was easy!
Another flaw in your comparison to FedEx is that FedEx also has an extensive tracking system in place. At any given time, they can locate a package with nearly pinpoint accuracy. AA does not have any such system. If one of your checked bags is missing, AA usually cannot tell you where it is or even make an approximate guess of when it will arrive. So with FedEx you are getting far better service for the money.
I don’t intend to fly AA anytime soon. It already takes a long time to get on and off a plane because of so many people struggling with their carry-ons. I cannot imagine how bad it will be once the number and size of carry-ons starts to increase.
I realize that the comparison between FedEx and AA is not exact, however, I wanted to provide a system so that we could see what the costs of moving luggage were outside of the airlines.
I just checked “luggage delivery services” for their pricing:
firstluggage.com = $371.20
luggagefree.com = $220.00
carymyluggage.com = $375+ (based on exchange rate from British Pounds)
Luggageconcierge.com = $411.06
I think they have it backwards. Airlines should be charging $15 per bag for carry -on. luggage
I see 3 glaring problems with your comparison of FedEx to airline luggage that you conveniently omit:
1) FedEx delivers to your door. I would gladly pay the $15 luggage fee if the airline did that for me.
2) You compare next day FedEx (paid the day before arrival) to an airline ticket bought a month in advance. Maybe a USPS next MONTH price would be more appropriate, or use the airline fare price bought only one day in advance.
3) You are comparing the maximum size bag (50 pounds) before the extra airline fee. One extra pound and the airline price goes from $15 to $65. I don’t think FedEx has this big of a price change for that extra pound. Maybe we should compare a more typical bag size of say 35 pounds. The price goes down for FedEx, but the airlines charge the same.
Regardless, I hope you are right about the fee not sticking.
Charles, after reading your column on MSNBC.com, the one question I was left with is that if luggage, due to weight, costs the airline so much in fuel, why is it every time I see luggage being loaded into a plane there is a long parade of “shipping” items (postal trays, boxes that obviously aren’t passengers, other freight). Are the airlines cutting back on this on upping fees on carrying non-passenger goods?
The other point missed in large part by the media, but touched on by you is the effect of increasing carryon luggage. As it stands right now, there is NOT room for all carry-ons already brought onboard. So how are bigger and more carryons going to find room. Add in that fact that now everyone will “carry-on” bags that cannot possibly fit, so will the airline go back and collect the fee when those have to be checked. What will happen on regional jets when all but the smallest carryons have to be gate checked. What does that count as?
I honestly believe that as much as this is being stated about fuel, the secondary benefit is clearly in the costs airlines have in mishandling a record number of bags. When the airline loses or delays my bags, they to pay a delivery charge, pay replacement costs, etc. Less “checked” bags relieves them of this liablity for late, lost or damage bags.
Also, when talking about luggage increases, it should be noted that these fees most affect non-business travels. The bulk of business travels check very few bags in my experience. People taking multiple bags are either the family travels, older travelers taking longer trips, or vacationers traveling with golf clubs, baby gear, or items they are bringing back from their vacation spot. My wife and I are going for a two-week vacation with two small kids. I can hear the cash register ringing up parents luggage, kids luggage, car seats, playpen. Of course I am checking it all, because I already have two small kids to haul around the airport. So they have me stuck…
Great column, thanks for the insight.
American Airlines already has a reputation for being a crappy carrier within the US. They don’t feed you, don’t provide good service, and charge you to breathe once you’re onboard. Let them keep shooting themselves in the foot. When no one wants to fly with them anymore because all of their fees are ridiculous, they’ll figure it out or fold, whichever comes first.
Hi - I have a question that I hope someone can answer. If AA charges for luggage - is this luggage now considered air cargo which I believe can have a higher recoverey value, if lost, than luggage? Charging for the luggage may land AA in court if someone challenges the lower valuation placed on luggage rather than air cargo. Just a question - Cliff woodrick