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?

Also read
Is there an alternative?

Increase your money and finance knowledge from home

Timing Your Spending

How to pay less by changing when you purchase.

View Course »

Economics 101

Intro to economics. But fun.

View Course »

Add a Comment

*0 / 3000 Character Maximum