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Hooray for Carry-On Luggage Fees!

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I was happy -- yes, happy -- to see Spirit Airlines announce in early April that it would begin charging passengers for carry-on luggage. So imagine my aggravation upon hearing that several lawmakers have been getting a bunch of airlines to promise not to do likewise.

Few people seem pleased about airlines' new carry-on fees. Air travelers are quite reasonably fed up with all the extra expenses they're now being charged. Remember when your bags, carry-on or checked, flew with you at no extra charge? Remember when airlines offered complimentary meals? Even pillows and blankets are no longer free on some airlines.

And here comes Congress ...
By targeting these fees, Sen. Charles Schumer (D-N.Y.) and others probably seek an easy win among voters. They reportedly have secured no-fee agreements from five major airlines: AMR's (NYSE: AMR  ) American Airlines, Delta Air Lines (NYSE: DAL  ) , UAL's (Nasdaq: UAUA  ) United Airlines, US Airways (NYSE: LCC  ) , and JetBlue Airways (Nasdaq: JBLU  ) . (Continental Airlines (NYSE: CAL  ) may be a holdout.)

But if the lawmakers really believe in what they're doing, they're missing the point. The airline business is notoriously difficult, besieged by volatile fuel costs, fare wars, unpredictable weather, complicated routing logistics, expensive equipment, and even the occasional volcano. Of the carriers listed above, only JetBlue has eked out a profit over the past 12 months. 

Since JetBlue made its IPO in 2002, and United, Delta, and US Airways all have entered and exited bankruptcy protection, only a couple of the airlines mentioned above have a 10-year stock history -- and both of them reported losses in that span. Within the industry, Southwest Airlines (NYSE: LUV  ) is a rare exception, having been consistently profitable over many years.

Pay less here, pay more there
When rising fuel costs and fare wars put pressure on airline profits, many carriers end up cutting back on their services, or charging more for them. According to an AP report citing government data, among 26 U.S. airlines, "so-called ancillary fee revenue accounted for 6.9% of their total operating revenue in the third quarter of 2009, up from 4.1% a year earlier."

By adding fees, the ticket prices can seem relatively low, while the companies save or make money by not offering meals or by charging for things such as sandwiches or checked bags. These new policies may sadden many of us, but they also lead us to change our behaviors.

When one carrier starts charging for checked bags, and realizes a financial edge by doing so, others tend to follow. Soon many are charging, and passengers respond by carrying on more of their bags. That's exactly what happened in real life, and the growing competition for precious room in overhead compartments increasingly slowed down passengers' entrances to and exits from their flights.

Spirit Airlines' plan to charge for carry-on luggage should reverse that trend, making getting on and off planes faster. Yes, the fee is unwelcome, but come on -- if airlines weren't charging these fees, they'd likely be hiking their fares.

If I have to choose between footing the bill for carry-on fees that make flying more pleasant, or paying a slightly higher base fare with no carry-on fees, I'll opt for the more pleasant option.

Are you for or against carry-on fees? Share your thoughts on modern air travel -- leave a comment below!

Airlines are only one of the industries that exhibit signs of being terrible investments.

Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article. Try any of our investing newsletter services free for 30 days. The Motley Fool is Fools writing for Fools.


Read/Post Comments (15) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 19, 2010, at 1:19 PM, ChannelDunlap wrote:

    Gas goes up, airlines add fees for bags adding weight and reducing fuel efficiency. Fine, OK, I get it, it kind of sucks, but I'll deal with it.

    But gas is "cheap"(er) again. Why are these fees still around?

  • Report this Comment On April 19, 2010, at 1:24 PM, DSmod wrote:

    Pay it all up front, or incrementally--they get your dollars either way. They just have to keep shifting the strategy to get that temporary edge buy perpetually duping the consumer. In this case, one enterprising competitor will decide next month that customers are irritated enough with the fees and would rather just pay the whole chunk at once with no surprises later. Either way, it's the airlines' game to play--I see no value to congress wasting their time (our tax dollars) talking about it for even ten seconds...

  • Report this Comment On April 19, 2010, at 1:52 PM, kingman48 wrote:

    This is more gov't socialism at work. Trying to control prices, costs and profits. If spirit or anyone else wants to charge whatever for a bag , carryon or any other it is their business. If the people don't like it they can fly someone else . If it's unpopular and less seats are sold, they will remove it to get market share back. This is how free enterprise works. You charge for a service and if the public doesn't like the price or service they don't buy it. Im tired of these Gdm senators and representatives thinking they need to control free market. get out of the way let it work and the strong will survive and spirit if it can't will go away and another airline will come along. What they could be doing is making sure spirit or any other doesn't cut corners on inspections or maint. Now that would make me wonder if you have to charge to carry on a small bag , what are you cutting corners on???

  • Report this Comment On April 19, 2010, at 3:03 PM, wfoutz7 wrote:

    I applaud all efforts to cut down on baggage; almost everybody overpacks for any given trip and that ends up costing all of us time and money. Too many carry-ons also eliminates any extra legroom when the overhead bins are full, so I agree, let the surcharges continue...

  • Report this Comment On April 19, 2010, at 3:38 PM, ejclason2 wrote:

    I would rather have higher ticket prices than have to deal with the hassle of baggage and carry on fees. I don't mind paying for meals.

    The reason airlines add fees instead of raising ticket prices is that most online ticket sites list tickets by price. What needs to happen is for online ticket sites to include the fees for the options a customer will be using when it sorts the tickets by price. Then airlines would see little or no advantage from adding fees instead of raising prices.

  • Report this Comment On April 19, 2010, at 3:44 PM, well581 wrote:

    I agree but at the same it is necessary to get off drasticallyt the fees for baggage in the hold

  • Report this Comment On April 19, 2010, at 3:50 PM, NoGOP2010 wrote:

    I am an old timer who flew back in the late 50's/early 60s.

    If you look at the historical data on airline fares, you will find that they are less than half of the fares charged during the 1950/60s.

    This is the only price item that is lower now than back then.

    If the airline industry is important, maybe the fares should reflect the actual costs of flying rather letting the industry fall apart and finding mickey mouse methods to stay afloat.

  • Report this Comment On April 19, 2010, at 6:47 PM, Clint35 wrote:

    I completely agree with kingman 48. Let the free market reign. Politicians should find something better to do.

  • Report this Comment On April 19, 2010, at 10:27 PM, jomueller1 wrote:

    My flying experience going back to the combustion engine era I believe I have seen a lot. One thing is that flying became affordable for almost anyone and there is no more class in the flying public in general, only class has class. Sad in my view. Yes, prices were much higher but the joy was too. Nowadays I despise flying with all the hassle and the rude TSA people.

    I like to bring my camera and computer with me into the cabin, so I cannot do without carry-on and I do not like the idea of being nickeled and dimed. On the other hand, if that carry-on would be charged by weight I would be all for it. I agree that the airlines have to make a profit but I just wish they would have the European system where they quote a price and that price includes everything. Don't try to fool me with a seemingly low price and then add and add and add. How dumb do they think I am?

    The airline industry shows the stupidity of excessive capitalistic competition. Nobody earns good money and constantly newly invented fees, procedures, advertising, and gimmicks just waste what should be profit for a solid business.

  • Report this Comment On April 20, 2010, at 3:18 AM, stardusterboy wrote:

    I find it disingenuous of Schumer and congress to "pass a law" protecting consumers.

    The reality is that the airline business is a cash cow for taxes and fees piled on by the government. These taxes are based on the "ticket" price. If you give away the seats, and charge "fees" for everything, it takes a huge bite out of these taxes collected for the government. Congress is afraid of loosing a lot of tax revenue with the new "fee based" airline pricing. They already saw a huge drop in tax revenue with baggage fees.

    The "consumer protectionism" is really "government revenue protectionism", and nothing else.

  • Report this Comment On April 20, 2010, at 3:28 AM, Acorn17 wrote:

    I think this is a great idea (charging for carry ons especially if it's weight based). In Asia, budget airlines charge you based on a weight allowance that you specify 10, 15, 20, 25 kg, etc. and you pay for the right to pack that much stuff. Since weight largely determines fuel economy that makes the most sense. Some even debated (but didn't do it) charging passengers by weight.

    The math is simple -- the lighter the plane the better fuel economy. Thus you compensate the airline for how much you decrease the fuel economy through what you bring. The ticket price is cheap which covers fixed costs and the per weight charge covers the variable.

  • Report this Comment On May 03, 2010, at 5:58 PM, krazycanuck wrote:

    I don't think I should be charged to bring a book or magazine and iPod carry-on to keep myself entertained during a flight. I can understand with carryons that are the largest or heaviest allowed charging a small fee. Then again, I also think that if carry-on fees are introduced, that each passenger should be allowed ONE checked bag at no cost, especially on flights that are not business-oriented short hauls. I don't object to charging for food on a flight, if it's not too long (less than 6 hours), and there's no fee or restrictions to bringing on your own food, beyond what's necessary for security matters. They shouldn't charge for water, if we're not allowed to bring on liquids, but if you're allowed to bring on liquids purchased in the secure area (including water from a fountain in the secure zone), then I'm okay with it on flights under 6 hours in duration.

  • Report this Comment On May 03, 2010, at 6:24 PM, stan8331 wrote:

    My problem with the explosion of airline fees is the lack of total cost visibility. Long lists of fees make it increasingly difficult to compare fares among airlines, since the posted fares may have little relation to the total price of the flight. In many cases, especially if a customer is not a frequent flier on that particular airline, the total fee package may not be known at the time of booking.

    I have no problem with the idea of a la carte fees if all fees are clearly published and provided to the customer in a total price prior to booking, but comparing apples to oranges makes no sense for anyone except the airlines.

  • Report this Comment On May 03, 2010, at 6:45 PM, wraycolo wrote:

    I feel that fees for carry-on baggage is a wonderful idea. One we have had for years after watching morons try to stuff their full bags in those little holes above my head, since I didn't bring anything but a newspaper, or a book, or anythiing to take up my god-given space.

  • Report this Comment On May 04, 2010, at 12:37 PM, chuck0921 wrote:

    Every time I read your articles I am more convinced you are an absolute crack pot. Last year you were recommending folks save for retirement. I think that's great!! However you gave estimates on how much they should save based on receiving 10% returns. This is irresponsible to make people think it's easy to receive a 10% return. Returns have ben decreasing over the past few years.

    You should be more responsible.

    In regards to this article, airlines have been running poor business models for years. As a result, they cannot live without charging ridiculous fees. Why should I pay to carry my bag on board vs. getting my bag checked for free that requires excess work on behalf of the airlines.

    I won't go on. I think your a nut case. it's sad that anyone can write an article and get thousands of people to read nonsense. I'm assuming you agree with charging to use an airplane bathroom as well.

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Selena Maranjian
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Selena Maranjian has been writing for the Fool since 1996 and covers basic investing and personal finance topics. She also prepares the Fool's syndicated newspaper column and has written or co-written a number of Fool books. For more financial and non-financial fare (as well as silly things), follow her on Twitter...

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