The Airlines' Bag Reflex

Airlines lose roughly $4 billion annually on lost luggage. Shouldn't they be doing something about it—at least to save money?

By Francesca Levy

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On Wednesday Delta Airlines (DAL) announced it would begin doubling the price economy class passengers pay to check a second bag to $50. But does that extra money guarantee that your bag will arrive when and where it is meant to? No.

Lost luggage is one of the banes of modern air travel, right up there with flight delays, long security lines and overbooked flights. Michele Menno should know. In the first week of April, the 41-year-old administrative assistant from Fort Lauderdale planned to visit relatives in Buffalo, where she would be a bridesmaid in her favorite cousin's wedding and introducing her new boyfriend to her family. But when the pair arrived at Buffalo Niagara airport, and the suitcase and garment bag with all of the couple's clothes—their formal wear and her bridesmaid's dress did not, she started to get nervous. The next day, when a representative from Continental Airlines (CAL) called to say that their luggage, mistakenly flown to California, would not be returned until well after the ceremony, she was on the verge of tears. "It was utter despair," she said. "I thought: 'How can I be in this wedding?'"

Menno received her luggage after she had returned home, but she says the experience all but ruined her vacation. Frantic shopping and phone calls to replace their missing items kept her from the bridal luncheon, and cost her boyfriend time to meet the family. "You're frustrated, you want to cry, and you're pissed off," she said of the experience.

Of course, she is not alone. Every year millions of air passengers' luggage is delayed, sent to the wrong airport, or worse. But it's not just an inconvenience for travelers; it's a huge cost for the airlines. What, if anything, are the airlines doing about it?

Losing Customers, Too

Bags that go missing on a passenger's arrival, officially dubbed "mishandled," cost the airline industry roughly $4 billion globally per year, according to SITA, a Swiss airline technology provider. Last year, customers in the U.S. filed over 7.5 million mishandled baggage reports—roughly seven per 1,000 passengers. Some experts say these costs could be reduced dramatically, and complaints minimized, if airlines would take passenger convenience more seriously. Although eliminating mishandled bags altogether is a near-impossibility, some airlines and airports have successfully cut down on missing bags. At a time when airlines have resorted to cutting flights, stripping away passenger conveniences, and even slowing down planes to offset fuel costs, they may be overlooking an opportunity to save money that could also improve customer service.

You'd think that, given the fact that airlines are expected to pay more than $60 billion for jet fuel this year, they'd be eager to find ways to save money. The cost of returning a mishandled bag to its owner, including fuel, manpower, and ground transportation costs, is estimated at around $90 by the International Air Transport Association, and at more than $100 by some airlines.

But losing bags does more than cost money—it can also cost repeat business. If an airline loses a passenger's bag, "you raise the possibility of losing the customer for the long term," said Robert Mann, an industry analyst in Port Washington, N.Y. The passenger dissatisfaction that accompanies a bad luggage experience can damage the chance that a customer will ever trust the airline again.

Not Just The Handlers

However, some airlines and airports have made progress toward coordinating agencies with competing interests, unpacking complex systems and technologies, and navigating miles of conveyor belts and equipment. Their gains in baggage handling may hold lessons for the industry.