I saw this story about United Airlines charging customers to check a SECOND bag. Not the fifth or sixth bag, but NUMBER TWO!

This reminded me of a training slide that we have in our Lean education program. There are three ways to cut costs. You can cut costs across the board by reducing all budgets a fixed percentage. This is the lazy path. You can cut costs by cutting services. This is the stupid path. Finally, you can cut waste. The smart path.

This extra fee strikes me as part of the stupid path because it cuts a core service and makes customers pay extra for something they get “free” from other airlines. According to the article, United expects it to generate $100 million in revenue and cost savings a year. Does this mean that United’s tickets will be consistently cheaper than companies that do not charge a per bag tax? I highly doubt it as the article shares that this is but one small part of a larger plan to charge more for less, a clear violation of the Profit=Price-Cost rule:

Airlines want to charge more for not only checked baggage but assigned seats and other services. Investors have urged airlines to pass on the higher costs of fuel to passengers through ticket-price increases or similar surcharges.

If United is planning to save money by flying fewer people, they might be able to claim savings because I don’t think their scheme will end up with them making any more revenue. We’re likely to see United lose revenue to the benefit of airlines that are more responsive to real flying customers, not day traders.

********UPDATE 2/26/2008**********

It appears that US Air is going to charge $25 for a second bag.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s