Representative John Mica (R-FL) has introduced legislation to cap checked bag fees at $4.50.
He’s grandstanding. Because people don’t like paying checked bag fees. So he proposes to eliminate them. To borrow a line from Milton Friedman, “there’s no such thing as a free checked bag.”
Sure, Southwest doesn’t charge extra for checked bag fees. That doesn’t make them free. They’re part of the fare. And Southwest finds it cheaper to differentiate itself this way (it’s a marketing expense) than to invest in the IT infrastructure necessary to charge the fees.
Besides, why shouldn’t airlines be able to differentiate themselves here? Why shouldn’t an airline like Spirit be able to charge for checked bags and carry on bags? Their model is super cheap fares and lots of fees, and people with more time than money or who choose to pay by paying attention to Spirit’s rules and reducing the airline’s costs along the way can get super cheap travel. If Spirit can’t charge more than $4.50 for checked bags, they also can’t charge $23 one-way fares for Los Angeles-Baltimore. (I don’t want to fly it myself but it’s great that this exists.)
Because, you know,
- Different products meeting the needs of different consumers.
Say you don’t care about freedom, you only care about getting stuff free. Let’s take a look at how this might actually play out. The proposed legislation says airlines:
may not collect from a passenger a fee for an item of checked baggage on a flight in passenger air transportation if the amount of the fee exceeds the total amount of passenger facility charges that could be imposed.
Let’s unpack that.
- The current legal limit is set at $4.50
- Airports are lobbying to raise that. Airlines oppose the increase.
However, here’s what happens.
- Airlines could drop their opposition to increases in passenger facility charges. The more you’re taxed on tickets, the more they can charge in baggage fees. (I wouldn’t be surprised if this were suggested to MICA during this week’s “lobby day” for airports.)
- The cap doesn’t just apply to the first bag. Airlines stop allowing second bags and beyond for most customers (perhaps except elites and co-brand credit card holders). Here are Delta’s fees for third and fourth bags domestically — Mica proposes to cap these at $4.50 based on current law.
- Re-bundling bag fees into fares would cost United, Delta and American each about $50 million in taxes
- Since award tickets all of a sudden get checked bag fees for $4.50, airlines have revenue to make up there too — one way they could do it is for frequent flyer programs that don’t already to pass along carrier-imposed surcharges. How’s that for an awful trade.
- Price caps constrict supply. Just like rent control limits the supply of housing and creates shortages, capping price of bags will limit investment in bag delivery. Currently Delta and Alaska offer checked bag delivery guarantees. What would we expect to happen to the required time one must check bags in advance under price caps? What incentive is there to invest in efficient checked bag systems for prompt delivery?
What happens to airfares? Do you think airlines just charge consumers billions of dollars less in bag fees, hold fares constant, and absorb a big tax hit as well (since fares but not fees are subject to the domestic 7.5% ticket tax)?
I don’t know exactly how this will play out, but one thing is for certain it won’t be lower bag fees and holding everything else constant.
But guess what? Not gonna happen.
John Mica is the Chairman of the House Transportation Committee’s Subcommittee on Oversight. But he won’t be able to get this through.
- Mica turned away from TSA screeners back in 2003 and he has been pushing for re-privatization of airport security. How far has he gotten with that?
- He hasn’t even been able to eliminate the Essential Air Service program
- The full House Transportation Committee’s Chairman is dating a top airline industry lobbyist. His Chief of Staff is married to another top airline industry lobbyist. And he hired an airline industry lobbyist to run the Transportation Committee.
It’s pure grandstanding. Bread and circuses stuff. People don’t like bag fees, so let’s wave a wand and make them disappear. It’s costless rhetoric since it won’t happen. But a House subcommittee chairman can’t write a 2 page 18 line bill and magically transfer several billion dollars a year to consumers, let alone do that without consequence to service and fares. If this were ever taken seriously it would be downright irresponsible.
It’s just as likely that we’re all being played, that it’s leverage – a threat – to get the airlines to relent to higher facilities charges which are currently capped at $4.50. That’s the great irony here. He’s acting as a champion of the common traveler railing against checked bag fees, when he’s likely using the issue to push for higher airport taxes. Indeed, his office published a report in May arguing for just that.
Regardless, Congress is not going to save you from paying $25 or more per bag.