United and RyanAir: How Expensive Your Luggage?

You’ve probably already heard the news that United plans to start charging the majority of its customers $25 for the second piece of checked luggage on domestic U.S. and Canadian flights. You can check out their new policy here. This comes as no surprise to airline insiders and follows the “successfully introduced” industry-wide reduction of individual suitcase weights to 50 lbs/23 kg from 70 lbs/32 kg. While many issues surely factor into this move (increased handling due to security concerns, lost/misplaced luggage rates, corner-cutting on staffing), airlines cite the rise in fuel costs for the need to start charging you more. It is estimated that this change will save/earn United over $100 million per year.

RyanAir also recently announced an increase in the price of checked luggage, from from £5 to £6 (€9) per bag — not including the airport check-in fee, which has also risen to £3 (€4) from £2. That is to say your checked bag now costs you £9/€13 — which, if you only paid 2 cents, 2 euros or 10 euros for your flight, doesn’t seem like much of a bargain. If you haven’t already, you might take a look at my post on packing less and carrying-on.

When it directly impacts your pocketbook, are you more conscious of how much you pack? The idea behind these additional fees is largely a textbook lesson in rational economic decision-making. Nevertheless, these two airlines with their completely different business models also have radically different reasons why they’re charging you for the handling of your suitcase.

United is banking less on deterring passengers from carrying a second suitcase (which it will undoubtedly do for some fliers, resulting in airline savings for luggage handling costs, fuel costs and improved lost/misplaced luggage rates) and more on the continued heavy packing habits of many Americans, earning an extra $50 for each round-trip purchased by 1 in 4 vacationers. For those who absolutely must have that second bag (heading to college, moving in general, Christmas gifts, whatever), a $25 fee is still likely to be cheaper than the shipping costs for a 50 lb suitcase.

RyanAir passengers already pack lighter (limit on checked luggage is 15 kg total), so they are tweaking the economic equation in order to encourage more people to both check-in online and carry on their bags. Online check-in saves them the cost of (generally outsourced) ground personnel; carry-on luggage saves them on handling costs and improves lost/misplaced luggage rates. Additionally, it allows ground crews to turn around luggage more quickly, improving the experience for checked luggage travelers. And yes, while you adjust, they continue to profit from selling you a cheap seat and selling your luggage a comparatively expensive ride in the hold, raking it in even more with passengers who don’t know the weight restrictions. But again, for the $25 you’d pay for an extra suitcase on United, you get the cost of baggage handling AND your flight to London on RyanAir, so how much can you really complain?

One model is bloated and dispiriting, the other slimming to the point of anorexia. Sadly, these are the unhealthy directions airline travel seems to be headed. U.S. airlines continue to charge their passengers high fares while offering fewer and fewer services — for the amount of money paid, it seems reasonable to expect on-time flights, prompt and friendly service, a small glass of Coke and a handful of peanuts. Very few travelers these days expect much more, yet U.S. airlines can’t seem to deliver. With “no-frills” service at retail prices, it’s no wonder people are disappointed.

The low-cost carrier turns the equation on its head by charging the passenger for every service used. Your spot in the airplane, which like grocery-store tuna is often sold at a loss to get you in the door, is simply a mechanism for collecting the rest of your fees. Just like smart shoppers, smart “no-frills” fliers learn the rules of this “game” (the most basic of which is take only what you came for) and follow them religiously, beating the store, so to speak, with their own coupons. You come in with lower expectations (little to no service, nothing more than your seat and an on-time, safe flight), so there’s less to disappoint. If you want to check a suitcase, your 13 euros goes to the handling of the bag (which is probably also relatively near cost); if you want to eat or drink on-board, you’ll have to pay for your snack. Here we have the “user pays” plan; or, to put it another way, individual ticket prices do not subsidize airline services for other passengers. The most important problem with this equation is that there are many, many negative externalities (environmental, noise, length/speed/accuracy of security searches, etc.) which are not factored in to the price you or RyanAir is paying, nor into the model as it unfolds.

What happened to flying the friendly skies? Where do you see airline travel headed? I leave you to reflect in the comments.

Thanks to Em for the video link!