Why Airlines Should Be More Creative as They Weigh Fee Increases

Checked bag fees probably seem like the greatest business idea ever. A decade ago, U.S. airlines took a service that was free and turned it into a massive revenue generator worth billions of dollars annually, industry-wide. But ask some airline executives about the fees, particularly when the tape recorder is off, and they can be less sanguine. The revenue is fantastic — so strong no airline that has fees will drop them — but the extra charges cause unintended consequences. Most notably, they have led passengers to cram carry-ons to save cash, a problem because bins on older planes are not large enough to accommodate one bag per person. This often leads to a scramble at the gate, where agents take away bags and put them in the cargo hold, a dance that can produce angry passengers and short delays. Airlines probably would be in better shape operationally if they made it easier and cheaper to check bags. Yet rather than retiring bag charges, many North American airlines are