Felix Salmon

The negative bag-check fee

By Felix Salmon
March 26, 2010

Back in September, Joe Brancatelli made a compelling case that bag-check fees at major airlines were actually losing them money, rather than making money. And that was before Southwest airlines embarked on a major marketing campaign touting the fact that they check bags for free — a campaign that Eric Joiner calls “pure marketing genius”.

Eric has some very smart and well-informed analysis of the economics of checking bags: essentially, if, like Southwest, you only have one kind of aircraft, then checking bags saves you money because it speeds up the rate at which passengers get on and off the plane. And he knows that the economics of reducing the bag-check fee from $25 to $0 are essentially the same as the economics of reducing it from $0 to -$25. And so:

What if an air carrier said…rather than charge you a fee to check a bag, They would PAY you to do so?

I love this idea. A lot of people, of course, simply hate the idea of risking their bags being lost, and/or of milling around at a baggage carousel waiting for their bags to arrive. But many others would love the idea of getting paid, in dollars or in frequent-flyer miles, for checking their bags — especially if they had realtime information on exactly where their bags were at all times. (I think the current paper baggage tags would need to be replaced by tags with RFID chips, but that’s doable.)

The result? Passengers would get on and off planes more quickly, the airlines would make more money, and everybody would be happier. It’s a vast improvement from the status quo, where, according to Eric, airlines sometimes deliberately lose bags:

Consumers think the airlines lost the luggage. In fact many times the airline couldn’t accommodate it so they chose to pay a premium to deliver it to you later, often at the cost of your loyalty and future business.

So, Southwest (or JetBlue, or Virgin America, or one of you guys), whaddyathink? Who wants to be the first airline with a negative bag-check fee?

(HT: Ryan Schick)

6 comments so far | RSS Comments RSS

It’ll never happen — paying people to check bags will incentivize passengers to bring more luggage, and the extra fuel cost of carrying more dead weight will more than offset any cost savings from more speedy seating.

The flip side of the same argument: I recall a rule of thumb that one extra OUNCE of weight a plane has to carry each year translates into one gallon of fuel consumed. Charging for bags reduces the stuff people bring on trips and saves fuel, probably enough to offset the inefficiency of the extra waiting required for everyone to stow their luggage in the overhead bins.

Posted by MarkC123 | Report as abusive

So, I usually travel light, but the airlines will pay me to bring some empty cardbox boxes to the check in?
At the other end, depending on how much time I have, I pick up those boxes from baggage claim and run up to the check-in counter to sell them to someone waiting in line who forget to bring their own empty boxes? Neat-o!

… “the economics of reducing the bag-check fee from $25 to $0 are essentially the same as the economics of reducing it from $0 to -$25″

I guess I learned different economics. Where I learned it, they kept blathering on about incentives and such.

Posted by bxg | Report as abusive

The insane aspect of the current policy is carry-on bag free, checked bag over-priced. From an efficiency standpoint it’s clearly preferable to have professionals examine bags at a truly secure location deep in the bowels of the airport and have passengers proceed quickly onto the plane carrying as little as possible. The weight is the same in either location, but in one its carried and stowed slowly and haphazardly in the cabing while in the other it’s safely below. But airlines encourage the homeless person approach to travel. Thus thousands of families wander through a security checkpoint with multiple oversized bags (since no one wants the hassle of trying to enforce limits on unreasonable people trying to save $25 and no one polices the “expert traveler” line – I think if you reach the front of it with no clue you should be sent back to the curb to start over). In the fog of trying to scan through 5000 over-stuffed bags that barely fit in the x-ray machine in order to distinguish cans of peanuts from explosives, I wouldn’t be surprised if screeners miss a fair number of actually dangerous items. I would vastly prefer a system where you step on a scale to get your boarding pass, pay by the pound, then put everything not needed in-flight under the plane. This would also help deal with the passenger size>seat size problem. Grande passengers could occupy two seats, since they paid extra.

Posted by najdorf | Report as abusive

Interesting article. But there seems to be a basic problem with the current setup. The airlines have two objectives here:

(1) minimize the amount of luggage that people bring, to save on fuel, and

(2) for the luggage that people do bring, make sure they check it, to avoid delays.

Charging for checked luggage helps with (1) but hurts them on (2), while not charging for checked luggage may help with (2) but hurts them on (1). To achieve both, you really need to start charging for the total weight of checked plus carry-on, to avoid arbitrage between checked and unchecked baggage. Not looking forward to this, but I could see this coming soon.

Posted by TSTS | Report as abusive

Late to this but for what it is worth.
Any analysis of the checked bag vs. speed question should be directed to the true low cost flyers Ryanair, not LUV.

Ryanair charge for checked bags because they PAY BAGGAGE HANDLERS. Fewer bags = less expense. Also, you need check-in desks for checking bags. They cost money too.
Also, they already have the fastest possible turnaround hand-baggage or not because they don’t allocate seats.
This causes an absolute riot to get on the plane first.

Trust me, if it was more economical to pay people to check bags Ryanair would do it. It isn’t so they don’t.

Posted by TinyTim1 | Report as abusive

What is ironic is that I have been yacking about the strategy of baggage handling since 2008. I wrote the article linked below which is really what I think about this subject. Its more valid today that it was then.

http://www.freightdawg.com/2008/02/heres -why-i-don.html

Posted by ejoiner | Report as abusive

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