Baggage fees, operational performance and customer satisfaction in the US air transport industry

Abstract

In recent years, there has been a “de-bundling” trend in the US airline industry, where specific services that used to be included in a ticket fare are now priced separately. Although a major reason for these fees is to raise revenues for the airlines, the fees may also impact the operations of carriers. Among the new fees implemented by most US carriers is a payment for checked baggage. This paper analyzes the association of baggage fees with airline operational service outcomes, as measured by flight delays, mishandled baggage rates and the rate of customer complaints. Using data from the US domestic air transport market over the period 2004–2012 and estimating a series of equations, our results show that, on average, an increase in baggage fees is associated with a decrease in the mishandled baggage rate and to a reduction in the percentage of delayed flights. No significant association is found between the fees and the rate of customer complaints.