Compass

Analysis shows true cost of checked luggage: Less than $2 per bag

Compass

An American Airlines press release led a newspaper to figure the actual fuel cost of checked bags. (Photo: Scott …

There’s no disputing this fact: Fuel prices have fluctuated for years, and they’ve been on an upswing much of the time. Airlines’ baggage fees have risen accordingly — or have they? According to Ellen Creager, aka The Michigan Traveler at the Detroit Free Press, baggage-handling fees just don’t add up.

The airlines instituted the fees, generally $25 per bag, back in 2008 to help offset fuel prices. But by Creager’s calculations, the actual cost per bag is about $1.79.

Creager published this finding in the Free Press on Feb. 2. When Yahoo Travel checked in with her, she spoke about the red flag in an American Airlines press release that first caught her attention.

“I have a source in the industry that pointed this press release out to me, which gives a clue into how much it would actually cost in jet fuel to transport checked bags,” Creager said. “Airlines normally don’t give away any financial information at all, but in this case, you could extrapolate from that press release and, using some other data, come up with an answer.”

That’s exactly what the Free Press did in its own analysis.

Most airlines charge for checked luggage, averaging $25 per bag. (Photo: Chris Seward/Raleigh News & Observer/MCT …

The press release it was based on talked about how much fuel American Airlines saved by having pilots carry 1.35-pound iPads instead of 35-pound flight-manual jet bags. Based on the numbers in the release, the Free Press took the 400,000 gallons of fuel saved divided by 669,000 system-wide mainline AA flights (based on BTS data) and multiplied it by the price of jet fuel (about $3). The result: $1.79 saved, per flight, by using iPads versus jet kits.

The formula then took the weight of a pilot bag minus that of an iPad and came up with the amount of weight saved by not carrying the jet kit: 33.65 pounds. This is about the same weight a typical piece of baggage averages — which means the price to transport that weight in luggage is $1.79.

Creager’s reaction to the findings: “I was very surprised about how little [the cost of fuel per bag] is. I used a proxy of around 33 pounds [of weight per bag] and, in jet fuel, that mounts up with planeloads of passengers and thousands of flights.” The biggest surprise? “How small a percentage [of the $25 fee] goes to jet fuel.”

When Creager approached American Airlines, the carrier didn’t argue with her findings. Spokesman Matt Miller’s response: “Your numbers, I guess, are correct. It would be difficult to align those two things; why is the airline charging me $25 when it only costs them $2? But it’s not directly linked to that. It’s a revenue stream.”

This revenue stream netted the airline industry $2.5 billion in the first three quarters of 2013, according to the U.S. Department of Transportation.

John McDonald, American Airlines vice president of corporate communications, added, “It is a revenue stream, and it helps offset a cost stream. But Ellen's logic is faulty. It assumes the only cost for bags is in fuel.”

United Airlines was the first to charge for checked bags in 2008. (Photo: Joe Raedle/Getty Images)

McDonald explained that “we have, on average, seven people who will touch the bag along its journey from curbside to carousel. There is a highly complex and expensive baggage transportation system that in most airports exceeds a mile of belting in length. There are tugs, carts and loaders to buy and maintain, and rents to the airports for the counters and carousels our customers use.”

Continues McDonald, “Certainly, when bag fees were first introduced, they were explained as a way to offset rising fuel costs, which had risen to historic levels and still remain high, but it was never intended to be the only cost recovered by the fee.”

McDonald also mentioned passengers who bypass bag fees due to elite status and co-branded credit cards. In the end, he said, “We always try to be transparent in our explanations, so we were happy to explain the fuel savings that occur when switching from paper manuals to iPads. But to use that as logic to explain bag fees is a leap too far.”

Creager stands by her findings. “My point was when the fees were originally instituted in 2008, they reason the airlines gave was that they were recouping the cost of jet fuel. Now it’s an essential revenue stream they count on. One that seems to be expanding.”

Creager is referring to other fees at airlines like Spirit Airlines, which charges for carry-on luggage (the later you pay for bags, the more you pay, up to $100 per bag) as well as other things like the ability to choose seats.

So what about carriers like Southwest Airlines that don’t charge baggage fees? Are they managing to stay afloat? Yes, says Southwest spokesperson Dan Landson. In fact, Southwest has the rare distinction in the airline world of never having filed for bankruptcy.

“Southwest Airlines does not charge for the first and second bag (size and weight limits do apply),” Landson told Yahoo Travel. “We’ve stayed in the black for 40+ years of profitability by not nickel-and-diming Customers. By not charging for bags, it’s brought us more new business than any other carrier in the world. Clearly, that’s working for people now, and it’s working for us.”

View Comments