Since airlines instituted separate fees for checked bags over the past few years, the customer reaction has been, well, not very supportive. As this article from last week’s Wall Street Journal points out, however, airports and airlines have been implementing or investing in new technologies, such as advanced data analytics, automated sorting, and radio-frequency identification (RFID) tags, to ensure smoother luggage handling. As the piece points out:
Airlines have increased pressure on themselves to do better by charging passengers anywhere from $15 to $100 to check bags. The fees help offset carriers’ losses during their worst slump in years, but have the potential to doubly infuriate customers if bags don’t arrive.
While consumers are likely to almost always perceive “free” as a good thing, they should carefully consider the economic effects when a product that was previously provided as complementary is unbundled and priced separately. Passengers now have an option to pay for these services–an option they didn’t have before. And airlines now have a strong incentive to improve the quality of that optional service lest they miss out on potential revenue. Because such an incentive is weaker when the product is bundled with an airline ticket, there is a good chance product quality will rise.
And that is exactly what seems to be happening for luggage: while flyers do see an additional fee on their ticket for luggage check, they are also participating in a competitive process that promotes innovation and product improvement. These effects may be difficult to see as a father of three goes for his credit card when booking a family trip, but there are certainly some consumer benefits to this new airline industry policy.
Every week we bring you in-depth interviews with leading thinkers and entrepreneurs from the world of technology. The most recent episode features 