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Baggage fees, operational performance and customer satisfaction in the US air transport industry

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  • Scotti, Davide
  • Dresner, Martin
  • Martini, Gianmaria

Abstract

In recent years, there has been a “de-bundling†trend in the US airline industry, where specific services that used to be included in a ticket fare are now priced separately. Although a major reason for these fees is to raise revenues for the airlines, the fees may also impact the operations of carriers. Among the new fees implemented by most US carriers is a payment for checked baggage. This paper analyzes the association of baggage fees with airline operational service outcomes, as measured by flight delays, mishandled baggage rates and the rate of customer complaints. Using data from the US domestic air transport market over the period 2004–2012 and estimating a series of equations, our results show that, on average, an increase in baggage fees is associated with a decrease in the mishandled baggage rate and to a reduction in the percentage of delayed flights. No significant association is found between the fees and the rate of customer complaints.

Suggested Citation

  • Scotti, Davide & Dresner, Martin & Martini, Gianmaria, 2016. "Baggage fees, operational performance and customer satisfaction in the US air transport industry," Journal of Air Transport Management, Elsevier, vol. 55(C), pages 139-146.
    • Handle: RePEc:eee:jaitra:v:55:y:2016:i:c:p:139-146
    DOI: 10.1016/j.jairtraman.2016.05.006
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    References listed on IDEAS

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    1. Jan K. Brueckner & Darin N. Lee & Pierre M. Picard & Ethan Singer, 2015. "Product Unbundling in the Travel Industry: The Economics of Airline Bag Fees," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 24(3), pages 457-484, September.
    2. Wu, Cheng-Lung, 2005. "Inherent delays and operational reliability of airline schedules," Journal of Air Transport Management, Elsevier, vol. 11(4), pages 273-282.
    3. Scotti, Davide & Dresner, Martin, 2015. "The impact of baggage fees on passenger demand on US air routes," Transport Policy, Elsevier, vol. 43(C), pages 4-10.
    4. Kamalini Ramdas & Jonathan Williams & Marc Lipson, 2013. "Can Financial Markets Inform Operational Improvement Efforts? Evidence from the Airline Industry," Manufacturing & Service Operations Management, INFORMS, vol. 15(3), pages 405-422, July.
    5. Barone, Gerhard J. & Henrickson, Kevin E. & Voy, Annie, 2011. "Baggage Fees and Airline Performance: A Case Study of Initial Investor Misperception," Journal of the Transportation Research Forum, Transportation Research Forum, vol. 51(1).
    6. Garrow, Laurie A. & Hotle, Susan & Mumbower, Stacey, 2012. "Assessment of product debundling trends in the US airline industry: Customer service and public policy implications," Transportation Research Part A: Policy and Practice, Elsevier, vol. 46(2), pages 255-268.
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    Citations

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    Cited by:

    1. Jost Daft & Sascha Albers & Sebastian Stabenow, 2021. "From product-oriented flight providers to customer-centric retailers: a dynamic offering framework and implementation guidelines for airlines," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 20(6), pages 615-625, December.
    2. Yazdi, Amirhossein A. & Dutta, Pritha & Steven, Adams B., 2017. "Airline baggage fees and flight delays: A floor wax and dessert topping?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 104(C), pages 83-96.
    3. Warnock-Smith, David & O'Connell, John F. & Maleki, Mahnaz, 2017. "An analysis of ongoing trends in airline ancillary revenues," Journal of Air Transport Management, Elsevier, vol. 64(PA), pages 42-54.
    4. Stacey Mumbower & Susan Hotle & Laurie A. Garrow, 2023. "Highly debated but still unbundled: The evolution of U.S. airline ancillary products and pricing strategies," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 22(4), pages 276-293, August.
    5. Asahi, Ryota & Murakami, Hideki, 2017. "Effects of Southwest Airlines' entry and airport dominance," Journal of Air Transport Management, Elsevier, vol. 64(PA), pages 86-90.
    6. Cho, Woohyun & Windle, Robert J. & Dresner, Martin E., 2017. "The impact of operational exposure and value-of-time on customer choice: Evidence from the airline industry," Transportation Research Part A: Policy and Practice, Elsevier, vol. 103(C), pages 455-471.
    7. Chiambaretto, Paul, 2021. "Air passengers’ willingness to pay for ancillary services on long-haul flights," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 147(C).
    8. Shaban, I.A. & Wang, Z.X. & Chan, F.T.S. & Chung, S.H. & Eltoukhy, A.E.E. & Qu, T., 2019. "Price setting for extra-baggage service for a combination carrier using the newsvendor setup," Journal of Air Transport Management, Elsevier, vol. 78(C), pages 1-14.
    9. Cho, Woohyun & Dresner, Martin E., 2018. "The impact of a baggage fee waiver on airline choice: Evidence from the Washington-Baltimore region," Transportation Research Part A: Policy and Practice, Elsevier, vol. 112(C), pages 4-17.
    10. Rouncivell, Adam & Timmis, Andrew J. & Ison, Stephen G., 2018. "Willingness to pay for preferred seat selection on UK domestic flights," Journal of Air Transport Management, Elsevier, vol. 70(C), pages 57-61.

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    More about this item

    Keywords

    Airline performance; Baggage fees; Customer satisfaction;
    All these keywords.

    JEL classification:

    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • L59 - Industrial Organization - - Regulation and Industrial Policy - - - Other
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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