During the 21 days leading up to the start of the New Year, about 43.3 million Americans were expected to take airline flights, according to Airlines for America, an industry trade group.
Most of those people traveled with luggage, and many did not check their bags because they wanted to avoid paying baggage fees. Among major domestic carriers, only JetBlue and Southwest continue to allow passengers to check a bag for free. Passengers on other airlines are now typically asked to shell out around $25 per bag per flight. Collectively, airlines took in $3.4 billion in 2010 and nearly $1.7 billion during the first half of 2011 from baggage fees, according to the Department of Transportation.
As a person who flies regularly for business and personal reasons, I detest baggage fees. First of all, like most everyone else, I simply don’t want to pay more money for the same service. Since the fees aren’t usually added until check-in, it is now nearly impossible to see the full cost of flights or to make easy comparisons between airlines when making plans, unless you memorize various airlines’ baggage policies.
But what bothers me even more than the fees themselves is the increase in carry-on baggage spurred by the fees. “Smart” travelers, looking to cut costs, are increasingly deciding that it makes perfect sense to carry on everything they need for a week or more, even if that means hauling suitcases they can barely lift. I am not alone in being annoyed by the problems this causes. In a recent survey released by the U.S. Travel Association, 72 percent of respondents cited “people who bring too many carry-on bags” as one of their biggest frustrations with modern air travel.
The sight of vertically challenged or elderly people trying to hoist heavy carry-ons into crowded overhead bins has also convinced me that there is at least a minor safety hazard involved here. Many able-bodied people, myself included, make a habit of offering to help when others are visibly struggling with their bags. But all of this stuffing and shuffling does little to promote speedy boarding and on-time take-off.
All the bags that are being shifted from the newly pricey cargo compartment to the overhead compartment also need to be cleared by security. According to Homeland Security Secretary Janet Napolitano, that extra scanning costs the Transportation Security Administration $260 million a year. “The increased volume of carry-on baggage is causing significant checkpoint congestion, negatively impacting security and causing significant strains on TSA personnel and resources,” TSA president and Chief Executive Roger Dow told a Senate committee.
Florida-based Spirit Airlines has found one solution to the problem: charge for carry-ons too. Since August 2010, Spirit has been asking passengers to pay extra for bags whether they check them or bring them on board. To my surprise, Spirit has increased its passenger count by nearly 25 percent since it added the carry-on fee. But not many passengers want other airlines to adopt this approach.
Instead, passengers and some lawmakers have argued that Congress should curb baggage fees. Senators Ben Cardin, D-Md., and Mary Landrieu, D-La., have proposed legislation that would prohibit airlines from charging passengers an extra fee for their first checked bag.
Airline industry groups counter that a government mandate on the subject would roll back the calendar to the days of heavy airline regulation when, as Steve Lott, a spokesman for Airlines for America, put it, “customers paid more and had fewer choices.”
As much as I would rather not agree with the airline lobby on this one, I do. Legislators and regulators have no business telling airlines and their customers what terms they can agree upon. After all, while I prefer not to fly on Spirit Airlines and pay its fee for carry-on bags, others apparently do. If lawmakers start negotiating travel deals on passengers’ behalf, they may end up just eliminating choices instead of improving them.
U.S. Airways, for example, might not have a future if it weren’t for baggage fees. After a decade of huge losses, the fees played a big part in bringing the carrier back into the black. U.S. Airways posted $450 million in profit in 2010. Its profit was down substantially through the first three quarters of 2011, largely due to higher fuel prices, but in both years the airline’s entire profit could be attributed to baggage and other non-ticket fees.
In the case of baggage fees, the easiest legislative fix is to close the tax loophole that favors companies that charge separate baggage fees at the expense of those that include standard baggage allotments in ticket prices. While airline tickets, which for Southwest and JetBlue include baggage transportation, are taxed, separate baggage fees are not. Given the amount of government infrastructure airlines require, taxes on tickets make sense. Free passes for separate baggage fees don’t.
According to the Government Accountability Office, taxes on baggage fees could have generated an additional $240 million in 2010 for the Airport and Airway Trust Fund, which helps pay for airport construction, traffic control systems and safety inspections. Congress could also require airlines to communicate their baggage fee policies to passengers more clearly and earlier in the booking process.
A harder task for Congress will be fighting the current hub system. Customers flying out of certain single-airline-dominated cities currently have little opportunity to exercise any real choice. Nearly two-thirds of passengers who come in or out of Atlanta’s airport, for example, end up on Delta flights, according to the Bureau of Transportation Statistics.
That may soon change as Southwest, which acquired fee-charging AirTran last year and thus gained a 12 percent share of Atlanta’s market, introduces its own baggage-fee-free Atlanta flights next month. Atlanta travelers will thus have a more robust competitor to Delta on flights to Denver, Houston, Chicago, Austin and Baltimore-Washington. But there are no fee-free options for flights on important nonstop routes to Florida, New York and the West Coast, in large part because JetBlue, a major player on those routes, has no presence in Atlanta.
Congress can’t order other airlines to start moving their business to Atlanta. But it could remove obstacles that serve to entrench airlines’ positions of power in their hubs while keeping others in the shadows. Granting local airports more authority to reallocate gates and terminal space could go a long way toward creating a more flexible power structure. At busy and space-constrained airports, the allotment of takeoff and landing spots plays a large role as well.
As we have seen from the so-called Southwest effect, when one airline in a market starts to offer customers better deals, others follow suit. Without choices, however, customers have no way to act on their dissatisfaction with policies like baggage fees, and airlines face no pressure to reform.
In the long run, with some Congressional help, customers may be able to convince airlines that they don’t appreciate being hit by fees at the check-in counter or by suitcases falling into the aisle. Until then, the carry-on shuffle will likely continue to be as popular a game in the skies as Angry Birds.
Posted by Larry M. Elkin, CPA, CFP®
During the 21 days leading up to the start of the New Year, about 43.3 million Americans were expected to take airline flights, according to Airlines for America, an industry trade group.
Most of those people traveled with luggage, and many did not check their bags because they wanted to avoid paying baggage fees. Among major domestic carriers, only JetBlue and Southwest continue to allow passengers to check a bag for free. Passengers on other airlines are now typically asked to shell out around $25 per bag per flight. Collectively, airlines took in $3.4 billion in 2010 and nearly $1.7 billion during the first half of 2011 from baggage fees, according to the Department of Transportation.
As a person who flies regularly for business and personal reasons, I detest baggage fees. First of all, like most everyone else, I simply don’t want to pay more money for the same service. Since the fees aren’t usually added until check-in, it is now nearly impossible to see the full cost of flights or to make easy comparisons between airlines when making plans, unless you memorize various airlines’ baggage policies.
But what bothers me even more than the fees themselves is the increase in carry-on baggage spurred by the fees. “Smart” travelers, looking to cut costs, are increasingly deciding that it makes perfect sense to carry on everything they need for a week or more, even if that means hauling suitcases they can barely lift. I am not alone in being annoyed by the problems this causes. In a recent survey released by the U.S. Travel Association, 72 percent of respondents cited “people who bring too many carry-on bags” as one of their biggest frustrations with modern air travel.
The sight of vertically challenged or elderly people trying to hoist heavy carry-ons into crowded overhead bins has also convinced me that there is at least a minor safety hazard involved here. Many able-bodied people, myself included, make a habit of offering to help when others are visibly struggling with their bags. But all of this stuffing and shuffling does little to promote speedy boarding and on-time take-off.
All the bags that are being shifted from the newly pricey cargo compartment to the overhead compartment also need to be cleared by security. According to Homeland Security Secretary Janet Napolitano, that extra scanning costs the Transportation Security Administration $260 million a year. “The increased volume of carry-on baggage is causing significant checkpoint congestion, negatively impacting security and causing significant strains on TSA personnel and resources,” TSA president and Chief Executive Roger Dow told a Senate committee.
Florida-based Spirit Airlines has found one solution to the problem: charge for carry-ons too. Since August 2010, Spirit has been asking passengers to pay extra for bags whether they check them or bring them on board. To my surprise, Spirit has increased its passenger count by nearly 25 percent since it added the carry-on fee. But not many passengers want other airlines to adopt this approach.
Instead, passengers and some lawmakers have argued that Congress should curb baggage fees. Senators Ben Cardin, D-Md., and Mary Landrieu, D-La., have proposed legislation that would prohibit airlines from charging passengers an extra fee for their first checked bag.
Airline industry groups counter that a government mandate on the subject would roll back the calendar to the days of heavy airline regulation when, as Steve Lott, a spokesman for Airlines for America, put it, “customers paid more and had fewer choices.”
As much as I would rather not agree with the airline lobby on this one, I do. Legislators and regulators have no business telling airlines and their customers what terms they can agree upon. After all, while I prefer not to fly on Spirit Airlines and pay its fee for carry-on bags, others apparently do. If lawmakers start negotiating travel deals on passengers’ behalf, they may end up just eliminating choices instead of improving them.
U.S. Airways, for example, might not have a future if it weren’t for baggage fees. After a decade of huge losses, the fees played a big part in bringing the carrier back into the black. U.S. Airways posted $450 million in profit in 2010. Its profit was down substantially through the first three quarters of 2011, largely due to higher fuel prices, but in both years the airline’s entire profit could be attributed to baggage and other non-ticket fees.
In the case of baggage fees, the easiest legislative fix is to close the tax loophole that favors companies that charge separate baggage fees at the expense of those that include standard baggage allotments in ticket prices. While airline tickets, which for Southwest and JetBlue include baggage transportation, are taxed, separate baggage fees are not. Given the amount of government infrastructure airlines require, taxes on tickets make sense. Free passes for separate baggage fees don’t.
According to the Government Accountability Office, taxes on baggage fees could have generated an additional $240 million in 2010 for the Airport and Airway Trust Fund, which helps pay for airport construction, traffic control systems and safety inspections. Congress could also require airlines to communicate their baggage fee policies to passengers more clearly and earlier in the booking process.
A harder task for Congress will be fighting the current hub system. Customers flying out of certain single-airline-dominated cities currently have little opportunity to exercise any real choice. Nearly two-thirds of passengers who come in or out of Atlanta’s airport, for example, end up on Delta flights, according to the Bureau of Transportation Statistics.
That may soon change as Southwest, which acquired fee-charging AirTran last year and thus gained a 12 percent share of Atlanta’s market, introduces its own baggage-fee-free Atlanta flights next month. Atlanta travelers will thus have a more robust competitor to Delta on flights to Denver, Houston, Chicago, Austin and Baltimore-Washington. But there are no fee-free options for flights on important nonstop routes to Florida, New York and the West Coast, in large part because JetBlue, a major player on those routes, has no presence in Atlanta.
Congress can’t order other airlines to start moving their business to Atlanta. But it could remove obstacles that serve to entrench airlines’ positions of power in their hubs while keeping others in the shadows. Granting local airports more authority to reallocate gates and terminal space could go a long way toward creating a more flexible power structure. At busy and space-constrained airports, the allotment of takeoff and landing spots plays a large role as well.
As we have seen from the so-called Southwest effect, when one airline in a market starts to offer customers better deals, others follow suit. Without choices, however, customers have no way to act on their dissatisfaction with policies like baggage fees, and airlines face no pressure to reform.
In the long run, with some Congressional help, customers may be able to convince airlines that they don’t appreciate being hit by fees at the check-in counter or by suitcases falling into the aisle. Until then, the carry-on shuffle will likely continue to be as popular a game in the skies as Angry Birds.
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