Is It Possible To Be Gouged by an Airline?
by Wilton D. Alston
by Wilton D. Alston: How
Can Anyone Not Realize the War on (Some) Drugs Is Racist?
fees are understandable, but the airlines have gone too far."
~ Zach Bennett, in USA Today
doesn’t pay to read the paper. On a recent business trip I had some
time to kill, so I filled it with one of my guilty pleasures – reading
the copy of USA Today that was left outside my hotel room.
As is my habit, I read the Sports section first. (Yes, I’m one of
those guys.) I followed that vital bit of information gathering
by reading the Life section. (Finding out which recent movies are
"hot or not" tends to complete my day.) Finally, I settled
in to absorb the certain-to-be Austrian-inspired insights in the
Money section. The cover story was about the ostensibly outrageous
fees airlines are beginning to charge for, well, everything.
As an aside,
I’m sure the reader has seen the catchy commercials from Southwest
Airlines, touting their "Bags Fly Free" slogan. Funny
stuff. And, from the standpoint of business and economics, absolutely
fair game. Southwest seeks to differentiate itself from other airlines
by pointing out a particular sore point with travelers – having
to pay for checked baggage. The USA Today piece highlighted
the results of a recent survey – conduced by USA Today –
on the same subject. The article noted that some airlines were charging
as much as $450 for a checked bag. (This particular charge is for
a bag over 70 pounds, flying on an Asian flight.) Seventy pounds?
Really? Do people actually leave home with bags that heavy and want
to have them fly for "free"?
also made the point that what the airlines were really doing was
"unbundling" baggage fees from ticket fees. In other words,
where all passengers previously paid a portion of the baggage handling
fees for those who checked bags, the current paradigm is to charge
only the folks who actually check bags, i.e., lots of bags or one
really heavy bag equals lots of fees, or at least one really big
fee. Sounds pretty simple, right? The question I had as I read the
USA Today article, particularly as I read the quotes from
both travelers and supposed experts was this: Is it unfair for an
airline to unbundle ticket fees? Further, if they do unbundle them,
is it unfair to charge passengers ostensibly exorbitant prices for,
well, exorbitant packing? No, it is not. One might argue that since
I never check a bag – a practice I began after several lost-in-space
baggage episodes – my opinion is a little skewed, but I’d beg to
the people cited in the USA Today piece used words like "gouging"
when they described the current (higher) fees for checked bags generally,
and over-weight bags specifically. From the standpoint of Austrian
economics, if the transaction is voluntary, the characterization
of that transaction as gouging or unfair is misplaced. No one is
forcing anyone to fly. No one is forcing anyone to fly a particular
airline. No one is forcing anyone to pack in a particular manner.
The airlines are simply charging customers for the specific service
of which the customer takes advantage. More importantly, a rise
in market prices for a scarce resource tends to drive additional
entrepreneurs into the market, which leads to more choices in that
market, all good things. [Well, except for the fact that the airline
industry is so overregulated that it is very difficult for a new
entrepreneur to enter this particular market.]
case of generators at the scene of a natural disaster. If prices
for existing generators are allowed to rise to a price point that
is market-driven, i.e., the market clearing price, given their scarcity
(supply) and their necessity (demand), two outcomes – both beneficial
– will result. One, not every generator will be bought, scooped
up at a bargain price by anyone passing the store. Two, more generators
will arrive, should all the local generators be sold. (If you were
in the business of generator sales and you could sell generators
at a profit, even after shipping them in from many miles away, wouldn’t
you do it?) However, should those prices be artificially held low,
in a misguided attempt to protect the consumer, two other outcomes
all generators will sell out. Two, no more will show up to replace
them. The very condition the well-meaning, but economically-ignorant,
protectors sought to preclude will take place – there will be people
who need generators (and who could pay for them) who will not get
them. This is the problem with anti-price gouging laws. What does
all this have to do with ticket fees being unbundled from baggage
check fees? Quite a bit.
of the undercurrents in the USA Today piece was that of "unfair
profits." The thought was (and is) that the airlines are raking
in a ton of cash by charging bag fees, and those profits are somehow
too high. The article also mentioned that the Transportation Department
– in response to complaints – had imposed a rule requiring airlines
to list fees for optional services. I don’t know about you, but
I can sense where this is going.
At some point,
there will be calls to put a ceiling on the amount an airline can
charge for these optional services. (If you’re wondering how in
the hell the fee for an optional service can simultaneously be unfair,
you’re not alone.) As already noted, what airlines are doing when
they unbundle baggage fees from ticket prices is charge the exact
person who should be paying the amount of money his transaction
requires. Further, they are no longer charging me for some other
dope’s decision to bring too many clothes on a 3-day trip to his
sister’s house. Call me a greedy capitalist, but I like that.
What the airlines
are also doing when they charge a substantial fee for a substantial
bag is penalize people for bringing them. Should I, a rather frequent
air traveler who never checks a bag, be required to finance the
baggage checking privileges of other travelers? Should not the person
who receives the service make the payment? Like hotdogs at a baseball
game, those who consume them leave home knowing they will cost much
more than they otherwise would. Furthermore, their purchase is optional.
Both these qualities render any suggestion that the price is unfair
ridiculous. The same must be true of a person who attempts to bring
one of those old-time steamer trunks to the airport, planning on
shipping it at no additional charge.
the record, let me hasten to add: I too can be (and have been) miffed
at prices charged in the airport, or my local minor league baseball
park. Even when one understands the economics, he can be disappointed
by the outcome. My fear, however, is not that people will continue
to be ignorant of basic economics, or that I’ll be faced with the
decision to buy a $10 tube of mystery meat at the next baseball
game I attend. My fear is that all the whining about unfairness,
particularly in the air travel market – where there is already far
too much government involvement – will lead to even more meddling
by well-intended and economically-ignorant bureaucrats. If there
is one thing upon which I hope we can agree it is this: We don’t
need more government rules at the airport. When you whine about
baggage fees to the government – the terrorists win.
Alston [send him
mail] lives in Rochester, NY, with his wife and three
children. When he’s not training for a marathon or furthering his
part-time study of libertarian philosophy, he works as a principal
research scientist in transportation safety, focusing primarily
on the safety of subway and freight train control systems.
© 2011 by LewRockwell.com. Permission to reprint in whole or in
part is gladly granted, provided full credit is given.
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