Monday, December 5, 2011

Why airlines now charge for baggage

Simple answer: taxes.  As a Saturday article in the N&O indicates, the U.S. Department of Transportation is concerned that it is losing tax revenue because airlines have started charging fees for checked baggage, in-flight meals and services, or aisle seats.  DOT maintains that ticket prices have held steady or even slightly decreased whereas airline revenue from the ancillary fees has steadily increased.  This has enabled airline revenues to increase while tax revenues have fallen off.  As an airline consumer, these extra fees are often annoying, but if pillows and blankets were taxed at the same  rate as the flight itself, the airline would have no incentive for a la carte pricing. 

This can explain why airline pricing concepts have not been adopted in other industries.  Hotels sometimes charge for internet usage, but not for soap. 

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