True Cost of Transporting a $25 Checked Bag? About $2!!
In 2008, many airlines began charging for checked baggage and placed the blame for the new fee on high jet fuel costs. Last year (Q1-Q3 only), those checked bag fees added up to $2.5 million. Since 2008, airlines have collected almost $18 billion in checked bag fees.
But how much does it actually cost an airline in jet fuel to transport your suitcase? About $2 and maybe less...
Programs: MR LT PLT, SPG PLT100/LT PLT, HH Gold, US LT SLV, AA GLD, UA SLV, EK SLV, Hertz 5*, Avis 1st
The story even noted that there are many components other than fuel that should be included in a fully-costed analysis. Their response? "Still".
I.e. - that's too much work and wouldn't make as good a "consumers being ripped off" story, so we'll just ignore it.
I'm in favor of paying for what you use - why should I pay the baggage cost bundled into my ticket if I only have carry-on. But the cost/margin needs to be fair for all components. I'm still looking for a well-done version of this lame "analysis".
Why repost this sort of naive analysis? The incremental cost of one extra pax isn't what one ticket costs either. So what?
Supply & demand determine pricing, not some simplistic analysis of what one extra bag costs. And, the analysis also fails to include the underlying cost, e.g., somebody has to actually go out and buy an aircraft in the first place.
This is an opinion piece wrapped around exactly one piece of data, which was an "extrapolation". This blog or opinion column is really NOT news at all.
While marginal costs are important in revenue management in the airline industry, they also have tremendous overhead and infrastructure costs that they also must pay. Frankly, if you've noticed, the airlines have recently been profitable ONLY becasue of the fees. The fares simply don't cover the total cost of running the airline, even with the tremendous technology-based efficiencies that airlines have taken advantage of over the past quarter century (e.g online reservations, online check-in, check-in kiosks at the airport, etc. have cut down tremendously on the number of airport employees required).