Now that the festive season is getting into swing, many of us will be travelling for the holidays. And if you’re in the US or Europe, you’re going to be dealing with the annoyance of people with carry-on luggage taking up cabin space. There’s one big reason for that: airlines charging you for checked baggage.
Here is a fun video clip on this from Vox.
According to Vox, the rapid rise in fuel prices in the late 2000s meant airlines needed to find new ways to raise revenues and cut costs. And they did that with price discrimination. Instead of charging all economy class travelers for the same all-in ticket, airlines broke it down into:
- Fare-only tickets for flyers that travel with carry-on luggage; and
- Additional luggage charges, for those that want checked luggage.
This had two outcomes:
- Extra revenue from any checked luggage; and
- Fuel efficiency savings due to lighter planes due to less checked luggage in the hold.
Then, of course, airlines got really carried away with meal options and early seating options and priority boarding options. I’ve never felt so choosy as when I’ve been booking domestic American flights.
But the question Vox is now asking: if the price of fuel has fallen, shouldn’t we go back to having the cost of checked luggage included in the standard price of a ticket?
Seems like a bad question to me. Business people don’t discover a new source of revenue and then give it up when their costs go down. No. Rather, they congratulate themselves on a job well done, and then go on trying to extend that revenue stream.
Like charging for items of carry-on luggage as well.
In theory, this should be good for travelers – because now you’re able to pay for exactly what you want. In practice, it feels like you’re being scalped.
It’s why I’m such a fan of a decent loyalty program. If you stick to the same airline alliance, and you’re a frequent flyer, then priority boarding and ‘free’ checked baggage become your reward for loyalty.
Also, perhaps it’s because we’re irrational, but getting ‘free’ checked baggage as a loyal customer feels a lot nicer than getting it as a standard inclusion on your ticket.
Just sayin’.
Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at www.facebook.com/rollingalpha.
