If your luggage is late, you will be entitled to a refund

This is the latest decision of the US Department of Transportation, which is currently drafting a rule that forces airlines to refund the luggage fees in case luggage gets lost or arrives late.

Currently, almost all major US airlines charge between $15 and $45 per checked-in bag. The only exceptions are Southwest Airlines and JetBlue, which allow 2 and respectively 1 free hold bag. But if your luggage gets lost or arrives a couple of days later, no airline will give you a full cash refund. If your hold baggage arrives late, Alaska Airlines will offer you the choice between a $20 credit for future flights and 2,000 frequent flyer miles as a compensation. Delta will give you a $25 credit for future flights. If your luggage gets lost, you can request the refund of the luggage fee when you file the complaint with the airline.

While some airlines try to compensate the unlucky travellers, this is not a general practice in the industry. In addition, compensations usually come as “discounts for future flights”, which most of the time are not used by unsatisfied customers.

At this point, I am left wondering: is this good or bad news?

In the short term, it will benefit the few unlucky persons who run into this problem. So, it should be good news for them, while for all the others it will not change a thing. Is that right?

In order to understand the repercussions of this new rule for the lowcost world, one should take into account the lowcost business model. Lowcost airlines were set up with the purpose of offering basic services to the travellers who wanted really cheap prices. That means no free food on board, no special services, no assigned seats, no business class, no luggage insurance, no flights to main (expensive) airports and many other limitations. Cheap airlines cut most of the costs that were not directly related to the main service – ensuring a safe flight. This worked very well, judging by the large number of satisfied customers.

However, if airlines are forced by the Department of Transportation to refund the fees, they will have to create some sort of luggage insurance. As any insurance, this will come at an additional cost. Airlines will thus be constrained to offer (and charge for) a service that is not strictly related to the flight. This will involve higher costs for the airline and will translate into higher flight ticket prices.

We may only be talking about a few dollars here, but if rules like this one continue to be passed in the future, the costs they will generate will continue to add up to the ticket prices. So lowcost airlines may end up being obliged to offer the same services as the regular airlines and to charge similar ticket prices.

Are we sure we want this? Do you like it? What do you think?

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