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The impact of baggage fees on passenger demand on US air routes.
- Source :
-
Transport Policy . Oct2015, Vol. 43, p4-10. 7p. - Publication Year :
- 2015
-
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. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 0967070X
- Volume :
- 43
- Database :
- Academic Search Index
- Journal :
- Transport Policy
- Publication Type :
- Academic Journal
- Accession number :
- 109319893
- Full Text :
- https://doi.org/10.1016/j.tranpol.2015.05.017