Airlines Balk at New Rules Over Lost Bags

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(Bloomberg) -- A federal rule change about how airlines count the luggage they lose has pitted Southwest Airlines Co., the “bags fly free” carrier, against its two larger rivals, which tend to charge for the privilege of using the cargo hold.

For decades, an airline’s lost-bag rate has been calculated by dividing the number of people it flies by the number of bags reported missing. Starting next year, the U.S. Department of Transportation plans to change the lost-bag rate arithmetic, replacing passenger counts with bag totals and requiring airlines to tally every checked bag they accept, including those at the gate, transferred from other carriers and the “valet” bags left on a jetway because the overhead bins were too stuffed.

To comply, U.S. airlines will have to improve their counting systems to achieve an accurate sum of the hundreds of millions of bags they fly each year. The rule change is likely to alter airlines’ monthly performance rankings against each other (although it won’t affect the tally of bags they lose, since that’s based on customers reports.)

Last year, the dozen largest U.S. carriers misplaced 2.46 bags per 1,000 passengers, an improvement from 2.7 bags per 1,000 in 2016. Overall passenger numbers at the 12 rose by 21.2 million, to 652.2 million, in 2017. The DOT sees the new method for calculating mishandled baggage rates as more accurate.

American Airlines Group Inc. and United Continental Holdings Inc. contend the new rule would cost the industry more than $16 million to comply. Southwest, which flies more domestic passengers than any U.S. carrier and favors the change, told the DOT it could equip 600 of its gates with technology to track gate-checked bags for less than $3 million. In an earlier round of comments on the proposal, Delta Air Lines Inc. also opposed the measure, arguing that compliance would cost $10.9 million, along with passenger delays and inconvenience.

American and United are also curious as to why Uncle Sam even tracks lost bags, given that Congress deregulated the industry 40 years ago. “No party has convincingly demonstrated that the government has a legitimate role in a deregulated industry of requiring airlines to report this service metric,” the two giants wrote Feb. 21 in a joint letter to the agency. Moreover, neither the government nor anyone else has been able to show “any quantifiable, or even unquantifiable, public benefits” from having such a measure, American and United wrote. 

The industry’s divergence of opinion stems largely from the $25-and-higher baggage fees that have become an integral component of U.S. airline profits—except at Southwest.

No one flies more bags than Southwest, in part because the carrier allows passengers to check two for free. This also means the carrier ends up with the most lost-bag reports. Meanwhile, passengers who fly with its rivals—desperate to avoid those fees—try to scoot past the gate agent. When they fail, the items end up in baggage—and not always tallied.

“Right now, the metric is out of date and highly misleading,” Leslie Abbott, a senior attorney for Southwest, said in an interview Wednesday. “It compares two numbers that are unrelated to each other.”

Under the new rule, airlines also must start tracking and reporting mishandled wheelchairs and scooters. American and United haven’t objected to that mandate.

“We don’t oppose monthly operational metrics on Mishandled Baggage Reports,” said Meghan Ludtke, managing director of regulatory affairs for American Airlines. “We support a consistent industry standard that puts all carriers on a level playing field and gives consumers the ability to make a true comparison.”

Dallas-based Southwest is also opposing its larger peers’ efforts to squelch a DOT rule that would require airlines to report mishandled baggage, as well as on-time performance and denied-boarding, for flights operated by their domestic code-share partners. For example, if American flies a route on which Alaska Air Group Inc. has sold tickets, or vice-versa, it has to report any of these shortcomings. Southwest currently has no such flights.

©2018 Bloomberg L.P.

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