Is American’s Charging for a FIRST Checked Bag All That Bad?

The blogosphere and everywhere else is lit up about American’s decision to begin charging not just for the second checked bag, but the first as well.  They’re also cutting back on domestic flights.

The first bag fee doesn’t apply to (both paid and award) first and business class passengers, full fare coach (and full fare aka AAnytime award) passengers, and American and oneworld partner elites. Fortunately, though I’m not much of an American flyer, I do have lifetime elite status since they’re the only carrier which grants such privileges based on total miles earned in an account rather than miles flown.

Some folks describe the new policy as the end of the world, others just say the end of the world is $130 a barrel oil and what are you gonna do? Others think American is misguided, since they surmise American must believe consumers are foolish and won’t realize it’s a disguised price increase… and book competitors instead.

I don’t have a lot to add to the debate, except that I think some of the commentary misses the point. American is raising price, though it’s exempting it’s presumably already-profitable customers (elites and those paying premium fares). So it’s a price increase for passengers paying less. At the same time, they’re reducing supply, perhaps to a level that’ll support the lost customers they expect from the move. Basic economics, though their cost structure will reveal whether this is a profitable or unprofitable move in the end.

Meanwhile, they’re trying to cut costs having announced layoff plans as well (to go along with the capacity cuts).

My own bet is against American succeeding. But they are facing a very real bankruptcy risk (if their unrestricted cash falls below $2 billion they’re presumably filing) so they’re acting a bit desperately at the moment. And what they’re trying isn’t crazy, even if it’s infuriating.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. The rule of unintended consequences suggests that this added cost will push more bags into the overhead compartments. This is problematic for two reasons:

    1) American seems to fly a lot of MD-80s/88s, which given their 2-3 configuration means that you can only stow carryon rollerbags lengthwise in the starboard bin. But more importantly,

    2) No airlines seem to want to crack down on the jerks who bring their John Deere Lawnmasters in their 44 inch rollerbags and, unable to fit them in lengthwise, take up an entire bin. And you can expect to see more of these on American flights unless they start checking. Which is pretty unlikely.

    The net result for American? A lot more gate checked bags. And a lot more angry passengers.

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