The Baggage Surcharges

There has been a certain about of resignation about the announcements by major airlines imposing a fee for every bag checked to one's destination. I am a very frequent flyer. On two airlines I have been the most frequent flyer type for almost two decades. A lot of what I do for a living relies on the ability to travel efficiently. So the decline in airline service is something that I am concerned about. The baggage changes, although I am not a bag checker, is but one more indignity.

In recent days there have been some renewed calls for re-regulation of the industry with some even calling for re-establishing the Civil Aeronautics Board, which was abolished during the Carter years. Interestingly, when you Google the issue, you find that these things come in cycles. (For example, there were a raft of stories about the need to re-regulate in 1999.) Part of that call comes from the natural propensity of some, including many in DC, to think about regulation as a positive force. But there is also a natural desire to make things a little less messy when things are uncertain. The clear research is that we have benefitted immensely from de-regulation, even with the uncertainties.

Part of the uncertainty is self inflicted by the industry. Airlines have been caught up by the magic of algorithms. Their pricing formulas are designed to maximize revenue but with the advent of a bit more transparency (though the internet) those algorithms may not be serving their intended use. Unfortunately many airlines would love to go back into the less competitive world. Adam Smith was right.

I suspect that if one airline were to be a bit more transparent on their pricing (which said, we will charge you based on the following formula - per mile with some discount for heavily traveled routes) that a lot of people would flock to their door. The current system produces schedules like one I am flying next week where I am trying to get from DC to North Carolina but being routed through Chicago.