UAL Corp's United Airlines (UAUA) announced Thursday it was going to follow American Airlines' lead and charge $15 for the first checked bag. United had already started charging steerage passengers $25 for a second bag. The fees are each way, so the standard two checked bags will now cost $80. Want to bring a third bag? You may as well Fed Ex it. That'll run you somewhere between $125 and $250, the press release says, without explaining the particulars.
United estimates their plan will rake in $275 million a year. That would be a huge amount of money for United, which has revenues of $20 billion, but net income of only $400 million.
The trouble is, when you set up such stark economic incentives, customers react. How many weekend passengers are just going to stuff what they need into their carry-on bag instead of checking a bag? Who is going to check two small bags when one large one will cost $50 less? United is incentivizing customers to behave badly. The shuffle of carry-on bags slows down passengers and airlines alike. In the name of efficiency, wouldn't it make more sense to charge for carry-ons and keep checked bags free?
Is there an alternative?