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Airlines lowered fares but not enough to offset bag fees, study says

Travelers protested when airlines began charging bag fees in 2008, claiming the extra charge was a blatant money grab.

But a new study concludes that the nation’s airlines quietly lowered fares slightly to make the bag fees more palatable to those fliers who would get stuck paying the new charge.

Still, the airlines are coming out ahead because the drop in fares was so small that it did not totally offset the added cost of checking a bag, the study found.

“The fact that the airlines are doing it must mean they are coming out ahead,” said Jan Brueckner, an economics professor at UC Irvine who co-authored the study with other economics experts.

The study will appear later this year in the Journal of Economics and Management Strategy.

A trade group that represents the nation’s airlines did not dispute Brueckner’s theory, saying fares are lower now that airlines are charging fees for extra services like checking bags.

The nation’s major airlines began to adopt checked bag fees about six years ago when a spike in fuel costs and the country’s financial crisis squeezed the airline industry’s already-thin profit margin.

Bag fees started at $15 per bag and grew to about $25 each. In the first nine months of 2013, the nation’s airlines collected $2.5 billion in bag fees, according to federal statistics.

When the airlines added the bag fee they faced downward price pressure—the resistance of budget-minded travelers to pay more, the study said. In response, airlines dropped fares slightly, by about $7 for most lower-priced tickets, according to the study.

The airlines did not lower fares for the first-class and business-class fliers who are usually exempt from the bag fees, the study concluded.

But for travelers who do pay the bag fee, Brueckner’s study found that the drop in fares offset only about half to one-third of the cost of the added fee.

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Copyright © 2014, Los Angeles Times
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