Five out of six the most important American airlines To have they’ve increased fees for checked baggage from January 2024
Take American Airlines. In 2023, it cost $30 to envision in for a normal bag on an airline; today, as of March 2024, it costs $40 at a US airport – a rise of as much as 33%.
How Business school travel professorI’m often asked why airlines discourage their customers by charging baggage fees as a substitute of mixing all fees. There are many reasonsbut a crucial, often missed reason is hidden within the US tax code.
A loophole in tax law
Airlines pay the federal government 7.5% of the ticket price When flights of individuals inside the country, together with other fees. Airlines do not like these fees industry association arguing that they increase the fee of a typical airline ticket for the patron by a couple of fifth.
However, the US Code of Federal Regulations specifically excludes luggage from the 7.5% transport tax, so long as “the fee is separate from the fee for transporting a person and is indicated in the exact amount.”
This signifies that if an airline charges a complete of $300 for a round-trip flight with you and your luggage inside the U.S., it owes $22.50 in taxes. If the airline charges $220 for airfare and in addition charges $40 each way for baggage, then the whole cost is similar, however the airline only owes the federal government $16.50 in taxes. Splitting baggage fees saves the airline $6.
Now $6 may not look like loads, but it will possibly add up. Last 12 months, passengers benefited over 800 million trips on major airlines. Even if just some of them check their bags, it means big savings for the industry.
How big? The government has tracked baggage fee revenue for many years. In 2002, airlines charged passengers a complete of $180 million for checked bags, which worked out to about 33 cents per passenger.
Nowadays, as any traveler can attest, baggage fees are much higher. Last 12 months, airlines collected greater than 40 times more in baggage fees than in 2002.
When full data for 2023 is offered, total baggage fees will likely exceed $7 billion, or about $9 per average domestic passenger. By dividing the fee of the baggageLast 12 months, airlines avoided about half a billion dollars in taxes.
In the 20 years since 2002, travelers have paid a complete of roughly $70 billion in baggage fees. This signifies that charging baggage fees individually saved airlines roughly $5 billion in taxes.
It seems clear to me that tax savings are a consider unbundling baggage fees on account of a loophole within the law.
The US government doesn’t impose a 7.5% tax. international flights over 225 miles outside the country. Instead, they’re constant international taxes on departures and arrivals. That’s why major airlines charge $35 to $40 for bags should you are flying domesticallybut don’t charge a baggage fee if you fly to Europe or Asia.
Do travelers get anything for their money?
This system raises an interesting query: Do bag fees force airlines to be more careful with bags when higher-paying customers expect higher service? To discover, I contacted the Bureau of Transportation Statistics, which is where this happened tracking lost luggage for many years.
For a few years he calculated the variety of reports of mishandling of luggage per thousand airline passengers. Government data showed that the very best level of mishandling of bags was in 2007, when there have been seven reports of lost or damaged luggage for every thousand passengers. This signifies that roughly once every 140 flights you may expect your luggage to go on a special journey than the one you’re occurring. By 2018, this estimate had dropped to at least one in every 350 flights.
In 2019, the federal government modified the best way of tracking mishandling of luggage, calculating the figures based on the whole variety of checked bags relatively than the whole variety of passengers. New data shows that around six bags per thousand checked are lost or damaged, representing lower than 1% of baggage checked. Unfortunately, the information doesn’t show any improvement since 2019.
Can something be done about higher baggage fees? Complaining about politicians probably won’t help. In 2010, two senators tried to ban baggage feesand their bill went nowhere.
Given that Congressional motion has failed, there’s a simple approach to avoid higher baggage fees: travel without unnecessary luggage AND do not check any luggage. Not taking all of your stuff with you when traveling could appear difficult, however it would be the most suitable choice as baggage fees increase.
