Private Sector: Excess Baggage
Pittsburgh Post Gazette, April 22, 2008
by Satish Jindel

Airline Security and Profits Seen in Charging for More Luggage

In the aftermath of the 9/11 terrorist attacks, the financial ruin of the airline industry resulted in unbundling of airline services and prices with charges for in-flight meal service. However, in doing so, the airlines overlooked the more important baggage service that has higher cost and security risk.

Though long overdue, the recent introduction of fees for a second checked-in bag for passengers on discounted fares by United and US Airways is a prudent development but with some shortcomings:

. Passengers will carry more bags on-board.

. It removes incentives for passengers to be more judicious in items carried on trips.

. Passengers will take more time to board and stow away the larger number of carry-on bags.

. The $25 fee should have been $50 in light of full cost (labor, fuel, aircraft space) of transporting bags and the alternative cost of shipping via FedEx or UPS at more than $100 for a slower overnight service.

In 2007, the airline industry transported about 750 million passengers, but more than 1.5 billion checked-in and carry-on bags. The industry can no longer overlook this cost and value offering. Supporting this initiative converts an "all you can eat" pricing approach to "a la carte," which will result in more judicious consumption and reduced waste.

In addition, there are numerous benefits of this fee for the airlines, airports, airport-related service providers and passengers:

. Industry survival: Even at $25 per bag, the fee will generate a few hundred million dollars annually for the industry, providing much-needed cash to cover the cost of the service. If priced appropriately and expanded to avoid the shift to carry-on bags, the revenues could reach a billion dollars.

. Provide faster aircraft turnaround: Fewer checked-in and carry-on bags will speed up loading of bags, faster boarding and exiting of passengers, resulting in quicker turnaround time for higher utilization of the aircraft and crew, resulting in a lower operating cost per flight.

. Faster and enhanced security check-in: The fewer bags used for travel, the less chance for screening error. As passengers gain financially by leaving unnecessary items at home, the check-in and security lines will move faster.

. Reduce demand for baggage handling: Passengers generally travel with more items than required. A charge for extra bags will encourage passengers to be more judicious with items carried on trips and thus fewer bags. For passengers who carry golf bags, skis, etc., they will need to evaluate the costs of paying a baggage fee or renting at the destination. This will free up precious airport space for passenger amenities, and help rental and hotel shuttle services provide faster service.

. Improved service: Fewer check-in and carry-on bags will mean more flights departing on time and thus increased opportunity for better on-time arrival; and more overhead bin space for essential items resulting in more legroom space under the seats.

. Faster baggage handling: The baggage fee will provide funds for investment in technology to provide real time status on bags and faster handling of bags at departure and arrival.

. Encourage more business travel: As airlines recover the cost of baggage handling directly from a baggage fee, they can reduce the cross subsidies between business and leisure airfares and passengers with few and more bags. Since business travelers have more opportunity to take additional trips, the combination of better airfares and improved service will increase revenues and profits for the airlines.

Since the 9/11 events have pulled the federal government into air transportation security, TSA can help by splitting the passenger security fee with a portion assigned to bags. This would enhance air travel security, support airlines still reluctant to add a baggage fee, and fund implementation of state-of-the-art baggage-handling systems.

Achieving discipline for baggage transportation will occur only through a financial incentive/disincentive system. The parcel industry has succeeded in doing so. The airline industry can learn from the experience of UPS and FedEx to enhance not only its financial stability but also the security of air travel.

Because a financially healthy airline industry is critical to safer and customer-friendly service, the passengers, lawmakers and other stakeholders should support this initiative.

Satish Jindel is president of SJ Consulting Group Inc., a Pittsburgh-based transportation consulting firm.