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Baggage Becomes A Big-Ticket Item

March 11, 2008; Page D1
Pack light or pay up.

Forcing customers to pay for service previously included with ticket purchases, UAL Corp.'s United Airlines and US Airways Group Inc. will begin charging $50 round-trip for checking a second piece of luggage on May 5, and Southwest Airlines Co. has already implemented a similar fee for checking a third bag. Other airlines may follow, eager to collect hundreds of millions of dollars without raising ticket prices.

Is it nickel-and-diming customers to start charging for previously free services?

Scott McCartney speaks to WSJ's Gordon Deal about airlines' new baggage pricing measures and what's included in a ticket.Airlines are under severe financial pressure from high fuel prices, and their finances may worsen if recession curbs some travel. Carriers have been scrambling for ways to "up-sell" fliers, including selling first-class upgrades, fancy alcoholic drinks and day passes to airport clubs.

But they've also been stripping out previously free services and charging customers for anything more than basic transportation -- everything from use of skycaps and telephone reservationists to on-board meals and, at a few carriers, assigned seats and exit-row or bulkhead legroom.

Customers have adapted to most of that, and giving fliers the chance to pay reasonable fees to improve their travel experience has been popular.

Baggage fees may be different, however. The stiff penalties can add hundreds of dollars to a family vacation, especially if travelers show up at the airport with bags heavier than 50 pounds or larger than the size limit airlines use -- 62 linear inches, the combined measurements of height, length and width.

Fees for overweight and oversized bags have been raised by some airlines in the past year, even as baggage-service reliability has declined. And the fees are charged cumulatively -- an extra bag that is overweight and oversized gets hit with three fees. So a second checked bag that is overweight and oversized will cost $450 round-trip at United after May 5. At Delta Air Lines Inc., a third checked suitcase that weighs 71 pounds and is oversized costs $660 round-trip.

Baggage policies vary greatly these days. At ultra-cheap discounters like Skybus Airlines Inc. and Spirit Airlines Inc., customers pay $10 to check even one bag, but fees are generally low. Skybus charges $50 round-trip for an oversized bag, for example, compared to $100 round-trip at Southwest and JetBlue Airways Corp. and $200 round-trip at AMR Corp.'s American Airlines, United, Delta and Continental Airlines Inc.

Air Canada, a unit of ACE Aviation Holdings Inc., a pioneer in a la carte airline pricing, offers customers a $3 discount if they don't check bags.

Beyond the potential expense, baggage fees test the boundaries of what constitutes basic airline service. What do you get when you buy a ticket, beyond transport from one city to another? Since most of us need clothes when we travel, baggage service has always been part of the deal, like a bed, shower and television in a hotel room. Is it fair for airlines to make it an add-on service the way hotels charge extra for movies, meals and telephone calls?

Some travelers say no, especially when security rules limiting liquids force many to check more bags, and weight limits and the airline proclivity to lose bags encourage people to opt for multiple suitcases.

"There's a reasonable expectation of being able to travel with the bags I need, and I think two bags is reasonable," said Joseph South of Phoenix. "It's bad enough having to weigh my bags before leaving the house, but now I have to try to miraculously put the same number of clothing changes into a trash compactor in order to condense them into one single bag."

Wayne Peterson of Dallas is a road warrior with elite status on several airlines who rarely travels with more than one bag. But he does take his son on photographic expeditions at national parks -- with multiple bags. "The [second bag] policy seems to be one more method to nickel and dime us to death, and seems targeted at families traveling for pleasure rather than business travelers," he said.

Golfers and skiers will be hit hard by the new policies. Most airlines count a set of golf clubs or a pair of skis as one checked bag. Add a suitcase, and passengers on United and USAirways will have to pay the second-bag charge. Some extra items are exempt, such as duffle bags for military personnel and mobility devices such as scooters for disabled passengers. Many carriers automatically charge extra for scuba tanks. The rules, found on each airline's Web site, can be arcane and confusing, even getting down to fees and requirements on checking antlers, kayaks and surf boards. American, for example, allows each passenger to check one javelin for a $160 round-trip fee; Delta does not allow javelins.

United says one of every four customers checks multiple bags, and they are more likely to be leisure travelers -- who likely paid cheaper fares than other travelers. United did exempt its elite-level frequent fliers and travelers with expensive, refundable tickets from the new baggage fees. The new second-bag fee by itself will generate $100 million in annual revenue, the airline said. That's two million customers hit with round-trip second-bag fees.

Dennis Cary, United's senior vice president of marketing, says the definition of basic airline service is evolving, and different airlines today have different answers of what comes standard with a ticket.

"Unbundling" services means travelers will pay only for what they use, he says. Currently, every customer pays for baggage service, whether used or not. "We believe it has been too much of a one-size-fits-all model," Mr. Cary said.

United and other airlines believe selling extras like upgrades and better seating, along with charging for previously free services, will make the airline business more sustainable by helping carriers cover their costs. But the baggage decision was difficult, Mr. Cary said, because "changing customer expectations is obviously difficult."

US Airways, a marketing partner with United, was studying a second-bag fee when United announced its policy last month and opted to follow along beginning May 5, executives said. US Airways decided to include international travel in the new fees; United's policy applies only to domestic travel. Like United, US Airways exempts top-tier frequent fliers and first-class passengers, but all other customers have to pay even if they bought expensive refundable fares.

The airline considered charging $5 for every checked bag, but decided that would result in long lines and slower service. Since only 8% of US Airways customers check a second bag, the carrier doesn't think the new fee will clog airports. But it will generate $75 million for the airline.

"At the end of the day, it's a price increase," says US Airways Chairman and Chief Executive Douglas Parker.

US Airways spends roughly $250 million a year on baggage service, Mr. Parker says, and passing some of that cost to customers who actually use the service helps the airline offer lower basic fares. Consumers will switch airlines over even a $5 fare difference, airlines say, but are less sensitive to fees paid at the airport.

"It may be a better pricing model to segment some of the services we provide," said Mr. Parker.

That doesn't mean fees will result in better baggage handling, however, though reducing the volume of checked bags could help airlines. Last year, United ranked fifth best in baggage handling among the 10 biggest airlines, and US Airways was worst among major carriers.

US Airways says if you pay fees for baggage handling and the airline doesn't deliver, it will consider refunding fees on a case-by-case basis, likely depending on how long you have to wait for your bag to be found and delivered. United, however, says it won't refund baggage fees even if it loses your bag.

Write to Scott McCartney at middleseat@wsj.com

On my next trip, I'm going skiing. I'll stay at my in-law's house, where I have absolutely everything I need.

So, my goal is to walk from my car to the plane with nothing but an iPod and a book, and come home the same way.