Do Bags Fly Free? An Empirical Analysis of the Operational Implications of Airline Baggage Fees

In 2008, the majority of U.S. airlines began charging first for one, and then, two checked bags. One of the often cited reasons for this action by the airlines’ executives was that this would influence customers to travel with less baggage and thus improve cost and operational performance. A notable exception to the charging for checked bags trend was Southwest Airlines, who turned their resistance to this practice into a “Bags Fly Free” marketing campaign. Using a publicly available database of the airlines’ departure performance, we investigate whether the implementation of checked bag fees really did result in better operational performance metrics. At the aggregate level we find that the airlines that began charging for one checked bag saw a significant relative improvement in their on-time departure performance in the 35-day period afterwards, compared to the airlines that were not charging for a checked bag during the same time period. However, charging a fee for both checked bags results in a worse on-time departure performance compared to charging for one checked bag. We also identify the differential impact of baggage fees on ‘low-cost’ versus ‘legacy’ carriers: the departure performance of the low-cost airlines became worse while it improved for the legacy carriers when charging for one checked bag. When the airlines began charging for two checked bags, we find no significant change in departure performance of legacy carriers, but a degradation of departure performance of low-cost carriers. Thus, our study provides empirical evidence on the influence of checked baggage fee policies on airlines’ operational performance.