{"id":36825,"date":"2024-08-02T07:28:00","date_gmt":"2024-08-02T07:28:00","guid":{"rendered":"https:\/\/www.lifeandnews.com\/articles\/?p=36825"},"modified":"2024-08-08T17:39:55","modified_gmt":"2024-08-08T17:39:55","slug":"why-do-airlines-charge-so-much-for-checked-bags-this-obscure-rule-helps-explain-why","status":"publish","type":"post","link":"https:\/\/www.lifeandnews.com\/articles\/why-do-airlines-charge-so-much-for-checked-bags-this-obscure-rule-helps-explain-why\/","title":{"rendered":"Why do airlines charge so much for checked bags? This obscure rule helps explain\u00a0why"},"content":{"rendered":"\n

Jay L. Zagorsky<\/a>, Boston University<\/a><\/em><\/h1>\n\n\n\n

Five out of the six biggest U.S. airlines<\/a> have raised their checked bag fees<\/a> since January 2024.<\/p>\n\n\n\n

Take American Airlines. In 2023, it cost US$30 to check a standard bag in with the airline; today, as of March 2024, it costs $40<\/a> at a U.S. airport \u2013 a whopping 33% increase.<\/p>\n\n\n\n

As a business school<\/a> professor who studies travel<\/a>, I\u2019m often asked why airlines alienate their customers with baggage fees instead of bundling all charges together. There are<\/a> many reasons<\/a>, but an important, often overlooked cause is buried in the U.S. tax code.<\/p>\n\n\n\n

A tax-law loophole<\/h2>\n\n\n\n

Airlines pay the federal government 7.5% of the ticket price<\/a> when flying people domestically, alongside other fees<\/a>. The airlines dislike these charges, with their trade association arguing<\/a> that they boost the cost to the consumer of a typical air ticket by around one-fifth.<\/p>\n\n\n\n

However, the U.S. Code of Federal Regulations specifically excludes baggage<\/a> from the 7.5% transportation tax as long as \u201cthe charge is separable from the payment for the transportation of a person and is shown in the exact amount.\u201d<\/p>\n\n\n\n

This means if an airline charges a combined $300 to fly you and a bag round-trip within the U.S., it owes $22.50 in tax. If the airline charges $220 to fly you plus separately charges $40 each way for the bag, then your total cost is the same \u2014 but the airline only owes the government $16.50 in taxes. Splitting out baggage charges saves the airline $6.<\/p>\n\n\n\n

Now $6 might not seem like much, but it can add up. Last year, passengers took more than 800 million trips on major airlines<\/a>. Even if only a fraction of them check their bags, that means large savings for the industry.<\/p>\n\n\n\n

How large? The government has tracked revenue from bag fees<\/a> for decades. In 2002, airlines charged passengers a total of $180 million to check bags, which worked out to around 33 cents per passenger.<\/p>\n\n\n\n

Today, as any flyer can attest, bag fees are a lot higher. Airlines collected over 40 times more money in bag fees last year than they did in 2002.<\/p>\n\n\n\n

When the full data is in for 2023, total bag fees<\/a> will likely top $7 billion, which is about $9 for the average domestic passenger. By splitting out the cost of bags<\/a>, airlines avoided paying about half a billion dollars in taxes just last year.<\/p>\n\n\n\n

In the two decades since 2002, flyers paid a total of about $70 billion in bag fees. This means separately charging for bags saved airlines about $5 billion in taxes.<\/p>\n\n\n\n

\n