Free advice to airlines

Posted by Tatyana Deryugina on Aug 26, 2012

Filed Under (Other Topics)

This past week, I reached Gold Status on American Airlines, which, along with some economics credentials, makes me qualified to give airlines some advice.

In my opinion, the most frustrating experiences of flying are the lines: bag check, security, boarding. I’m not going to debate security procedures here, but I will talk about the best way to reduce the boarding line: start charging passengers for carry-on baggage that doesn’t fit under their seat.

There’s nothing more frustrating than watching a long line of people try to stuff their clearly too-large roller suitcases into the overhead bins. Actually, there is: when it turns out that there isn’t enough space in the overhead bins and people have to start checking their carry-ons. The delay created by these phenomena costs the airlines a lot of money. A few years ago, a study calculated that padded schedules, which happen because airlines anticipate delays, cost them about $4.1 billion that year. Reducing the time that it takes people to board the plane could shave off some of that cost. Reducing the amount of stuff people bring on the plane would definitely reduce boarding time.

What would happen if airlines started charging for carry-on bags? Presumably, people would (a) pack fewer things and (b) check more bags. An alternative would be to stop charging for checked bags. However, that option would probably raise costs because people would pack more things into their suitcases and bring more suitcases with them. Fuel costs already make up around 40% of airlines’ costs, so adding more bags (and thus weight) to planes by not charging people what they cost to transport is not desirable.

Why don’t airlines charge for carry-on bags already? I’m guessing it’s some kind of game theoretic equilibrium where it’s good for everyone to charge for carry-ons, but bad to be the first mover. This is certainly consistent with what happened to free bags and meals: once someone started charging for checked bags and stopped serving meals, everyone else followed. Though Spirit already charges $20 per carry-on and will start charging $25 in November. Care to follow, anyone?