Checked Bag Fees Cost US Airlines MillionsIn 2008, United Airlines started charging Economy class passengers a small fee to check in a second bag on domestic flights. The other US airlines quickly realised that they could increase their revenue by doing the same and, within just months, every legacy carrier in the United States had extended this to charging for all checked luggage. What originally began as a $15 fee quickly became $25, and most US airlines now charge US$30 for the first checked bag.

A key exception was Southwest Airlines, which still lets its passengers check up to two bags at no additional cost.

Here’s the thing. Although checked bag fees may be generating extra income for the US airlines, this short-sighted policy could be costing them far more than they earn from it. This policy is also one of the reasons that flying in the United States has become so miserable.

Checked bag fees slow down the boarding process

Because of checked bag fees, it often seems like passengers in the United States are trying to take their kitchen sinks on board as carry-on. The problem is that there’s simply not enough overhead locker space for everyone’s suitcases.

Compared to other countries, the boarding process in the United States takes a ridiculously long time. I’ve been on US domestic flights where boarding has commenced an hour before departure, and we still haven’t managed to get away on time because the cabin crew have spent ages trying to find space for – or gate-check – all of the surplus cabin bags. When bags need to be gate-checked – at no cost to the passenger – this wastes the time of airline staff that could be doing other things and has the potential to cause delays.

And because overhead locker space is such a premium, the boarding procedure for US domestic flights is often an unpleasant scrum. Instead of remaining seated until their boarding group is called, there always seems to be what’s commonly referred to as “gate lice” crowding around the boarding area, ready to push their way to the front of the boarding queue at the earliest possible opportunity. It really detracts from the overall experience, and combined with long queues at security, is probably one of the reasons United CEO Oscar Munoz thinks his passengers are “pissed at the world” when they step onto a United plane.

Boarding group madness

There are now up to 10 boarding groups on some US airlines. For example, Delta last year “simplified” its boarding procedure by creating a new boarding order with 8 different categories. This doesn’t include those entitled to “pre-board” before Group 1, nor those entitled to “early access”, which board between groups 2 and 3.

Delta's boarding group order since 23 January 2019
Delta’s boarding group order since 23 January 2019

Admittedly, the boarding shambles also creates an opportunity for airlines to monetise the struggle to board first, by offering priority boarding (which is actually enforced) as an incentive to earn elite status. The US legacy carriers also use priority boarding as a key selling point for their profitable co-branded credit cards and paid subscriptions such as Delta’s “SkyMiles Select”. They can also encourage flyers to pay for a more expensive ticket by threatening passengers on Basic Economy tickets with a spot in the dreaded last boarding group. So, perhaps it’s in some airlines’ interest to keep it this way.

Either way, the boarding process for US domestic flights has become a complete mess and – crucially – takes way too long.

In Japan, airlines routinely board wide-body aircraft in under 15 minutes. They can do this because most passengers have only a small amount of carry-on and the boarding procedure is orderly and efficient. Passengers simply stand up when their boarding group is called, walk onto the plane and sit down. As a passenger, this is also a much more pleasant experience!

Looking exclusively at ancillary revenue is short-sighted

Last year, American Airlines made around US$1.2 billion in baggage fees. United and Delta each made a little under US$1 billion respectively. That’s a lot of money, but it comes at a cost.

Just think of how much extra revenue the US airlines could collect by reducing their turnaround times and increasing aircraft utilisation. I would argue that the increase to airlines’ bottom lines from operating more flights with the same number of aircraft would far outweigh the ancillary revenue earned from checked bag fees – which anyone with frequent flyer status, eligible credit card holders and active military members aren’t paying anyway.

Looking purely at revenue from checked bag fees also overlooks the big picture. Like, how much revenue have the US legacy carriers lost to airlines without checked bag fees – such as Southwest Airlines? As it happens, Southwest is consistently one of the world’s most profitable airlines.

Shorter turn times = greater aircraft utilisation

When Qantas reduced its standard Boeing 737 turn time from 40 to 35 minutes in 2015, it was able to increase its fleet utilisation by 5%. The efficiency improvements saved Qantas millions, while also allowing the airline to launch new routes without buying any new aircraft.

At American Airlines, for example, the minimum turn time is currently 45 minutes (although it’s often longer than this). By comparison, Southwest Airlines – the only major US airline without checked bag fees – turns planes around in just 30 minutes.

This could explain why JetBlue is currently trialling a system in Orlando where passengers can check in their carry-on sized bags for a significantly reduced fee of only $5.

Planes sitting on the ground don’t earn money, so reducing turnaround times to the international standard would have huge cost and revenue benefits for airlines. In fact, Southwest Airlines has publicly said that adding even just a couple of minutes to the block time for each flight would mean they’d have to buy 8-10 more planes to maintain their current schedule.

But it won’t be possible for US airlines to do this until the current boarding process is made quicker. And it’s going to be very difficult to make this process more efficient while airlines continue to charge for checked baggage.

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Matt Graham
The editor of Australian Frequent Flyer, Matt's passion for travel has taken him to over 60 countries… with the help of frequent flyer points, of course!
Matt's favourite destinations (so far) are Germany, Brazil, New Zealand & Kazakhstan. His interests include economics, aviation & foreign languages, and he has a soft spot for good food and red wine.

You can contact Matt at [email protected]

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@7e7

Matt, I wonder if planes would be nevertheless be delayed through longer queues at check-in as pax bag drop.?

Peter

I am a huge fan of Southwest. For many years. I always fly with them when possible. Sure, its a cattle truck, but has an air of reality about it. As you say, one of the best run airlines, and yet it does not appear on any of the booking agent sites. I just feel safe when the ‘mature’ lady attendant says’ “..if you wanna get outta here….” I feel that if I was a bit slow she would upend me and throw me out. No, you-first, or ‘after-you’ stuff on Southwest.

Oberonboss

It’s not just boarding US airlines which is an unpleasant experience, it’s the whole lot.

Lane Melcic

I’ve been saying this for years! Well put!