 The impact of baggage fees on passenger demand on US air routesDavide Scotti and Martin Dresner Transport Policy, 2015, vol. 43, issue C, 4-10 Abstract: In recent years, US airlines have unbundled ancillary fees from base air fares. As a result, the carriers have implemented a variety of fees on a range of optional services. Among these, checked baggage fees now represent a significant source of airline revenues. This paper assesses the impact of baggage fees on passenger demand and airline fares. We study a sample of US domestic routes over the period 2007–2010 where passengers have a choice between carriers that charge fees for checked baggage and Southwest Airlines, which allows passengers one or two “free” checked bags. A system of simultaneous equations is estimated. Our results show that, on an average route, a $1 increase in baggage fee leads to a loss of 0.7 passengers and is associated with a $0.11 reduction in fare levels. Interestingly, an equivalent increase of $1 in fares results in a much greater decline in passengers (eight times greater). Therefore, our results support the idea that substituting additional baggage fees for higher fares may be a beneficial strategy for carriers in terms of generating revenues and maintaining market share. Keywords: Airline pricing; Baggage fees; Ancillary fees; De-bundling (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:trapol:v:43:y:2015:i:c:p:4-10 Ordering information: This journal article can be ordered from DOI: 10.1016/j.tranpol.2015.05.017 Access Statistics for this article Transport Policy is currently edited by Y. Hayashi More articles in Transport Policy from Elsevier |
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