Frequent flyers know from experience that there have been numerous unintended (or at least undesirable) consequences resulting from most airlines’ decision to charge fees for checked luggage. Some of these consequences were entirely predictable, such as the increase in the number and volume of carry-ons–including luggage that exceeds normal size constraints. Passengers respond to incentives, and by charging for checked luggage airlines created an incentive to carry luggage onboard that otherwise would be checked.
Apparently, United Airlines has begun enforcing limits on carry-on luggage.
The pattern of incentives is clear.
- The area under the seat is essentially private property owned by the passenger, whereas the overhead compartment is a common property resource. Therefore, a “tragedy of the commons” infects the overhead compartments. Passengers have an incentive to store carry-on luggage in the overhead compartments instead of under the seat, where it competes with the ever-decreasing amount of leg room.
- Charging a fee to check luggage leads some passengers to carry luggage aboard that they otherwise would check.
- As the supply of carry-on luggage increases, it becomes increasingly likely that there will be more carry-on luggage than room to store it.
- There is no explicit price system to allocate the overhead compartment resource, so passengers develop innovative ways to exploit this common property before others do, such as by securing early boarding privileges or utilizing the first available overhead compartment irrespective of its proximity to their seats;
- Airlines devise implicit price-based allocation schemes to monetize and capture the value off overhead storage, such as providing early boarding as a perk of elite frequent flyers or charging extra for the privilege. (Note that the amount of revenue that an airline can capture increases as the amount of carry-on luggage strains overhead compartment capacity. This gives the airline an incentive to permit (at least some) passengers to bring excess carry-ons or carry-ons that are unusually large, as long as they pay for the privilege. They also are able to blame passengers for the space shortage, even though it is the airline that initiated the space battle by levying checked baggage charges in the first place.)
- Passengers learn to avoid the baggage check fee by schlepping to the gate luggage they’d otherwise check, then allowing it to be courtesy-checked at no cost.
The USA Today editorial board salutes United for “cracking down on passengers who board planes with carry-ons the size of dumpsters, or who try to game the system at the gate.” But this is a fairness argument, not one about the efficient use of overhead compartment space:
In a perfect world, all airlines would allow at least one free checked bag. Or they would charge for large carry-ons, or roll everything into the ticket cost instead of nickel-and-diming passengers. The least they can do, however, is to politely carry out their own size limitations.
Why these arbitrary schemes are “perfect” is nowhere explained. What they mean is it reflects what they think is fair, which is to treat every passenger the same regardless of differences in market demand for in-cabin space. This is clearly evident in the editorial board’s misunderstanding of economics:
By catering to passengers who think they have a right to bring aboard anything they can roll or lug into the cabin, and by checking some of these monsters for free when they won’t fit, the carriers have created another class of customers: those who are regularly infuriated by this clueless rudeness.
But there is nothing “clueless” about this. It’s the predictable result of the invention of checked baggage fees and the airlines’ subsequent discovery that they could monetize and capture the economic value of increasingly scarce overhead compartment space. They have converted the aircraft cabin into a competition for storage space among passengers, one in which the airline collects the rents and passengers get blamed for responding rationally to incentives.
Airline policies vary, of course, and consumers can choose which kind of airline cabin they want. Some airlines charge for every checked bag; others (like United) allow one bags to be checked for free, and others (like Southwest) allow two checked bags. Economic theory predicts that cabins will be less civilized among airlines that charge fees for all checked baggage. Presumably United Airlines has concluded that the passenger incivility they themselves induced by charging fees on checked baggage has become a cost to the airline. Its decision to enforce carry-on restrictions is an effort to rein in the worst excesses wrought by its checked baggage fee policy.
If fairness is the desired objective, as USA Today advocates, this effort is likely to fail. Fairness requires treating everyone the same. But United gate personnel will experience unrelenting incentives to enforce the carry-on rules less stringently on some passengers (such as elite frequent flyers and those who have paid more for their seats) than others. If past practice is any guide, United will seek to monetize and capture the value of being exempted from carry-on size constraints.
Interestingly, the USA Today editorial board advocates that all airlines behave like Spirit Airlines. Spirit charges $100 for a carry-on brought to the gate that exceeds its maximum size standards, thus solving the problem USA Today complains about. But that doesn’t make Spirit Airlines unusually popular among passengers. In 2013 (Table 3), passengers filed 1,039 complaints against Spirit–the third largest number among domestic carriers, behind United (1,935) and American (1,730). But United and American were the 4th and 3rd largest domestic carriers by passenger volume; Spirit was 13th.