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Lost Bag Refunds Could Cost Airlines $600K a Month

NEW YORK (MainStreet) — Consumers have had to put up with an endless series of new or increased airline fees in recent years on everything from checked bags to printing out a boarding pass, but now one U.S. Senator wants to provide travelers with some small but symbolic consolation.

Sen. Chuck Schumer (D-N.Y.) told the Associated Press this week that he plans to introduce a bill requiring airlines to reimburse customers for any baggage fees they paid if their luggage doesn’t arrive on time, unless the airlines take the initiative to adopt the guideline on their own.

Schumer’s proposal expands on a rule set to take effect next month that forces airlines to refund passengers for baggage fees if their luggage is lost permanently, but the regulation, part of the Department of Transportation’s passenger bill of rights, does not address luggage that is delayed temporarily.

At the moment, airlines are required to cover related expenses on lost or delayed baggage for up to $3,300 per passenger, but even if your luggage ends up lost in another country for all eternity, the airlines are allowed to hold onto the fee you paid for them to transport that baggage in the first place.

Schumer’s proposed bill would potentially add some quality controls for how the airlines treat a passenger’s luggage, by imposing a not insignificant monetary penalty for carriers. MainStreet analyzed the most recent Department of Transportation data on mishandled baggage complaints from May 2011 to determine which airlines are the worst offenders. (The data include complaints about bags that were damaged as well as lost, which would not be subject to the new rule, but the numbers provide a ballpark estimate.) We then paired this with each carrier’s current cost of checking in a single piece of luggage to find out how much money the airlines stand to lose in a single month from Schumer’s proposal.

To put these numbers into perspective, however, keep in mind that airlines reaped more than $3 billion per year from baggage fees in 2010. Delta alone earned some $952 million from baggage fees that year, yet by our calculations, it would have lost just $600,000 in the month of May. If we assumed that Delta lost this much each month, that would still only be $7.2 million in lost revenue for the year, or less than one hundredth of what it takes in from baggage fees.

Southwest (Stock Quote: LUV)

Mishandled baggage complaints in May 2011: 37,360

Cost of First Checked Bag: Free

Estimated Lost Revenue: $0

American Airlines (Stock Quote: AMR)

Mishandled baggage complaints in May 2011: 24,999

Cost of First Checked Bag: $25

Estimated Lost Revenue: $624,975

Delta Airlines (Stock Quote: DAL)

Mishandled baggage complaints in May 2011: 24,014

Cost of First Checked Bag: $25

Estimated Lost Revenue: $600,350

American Eagle Airlines

Mishandled baggage complaints in May 2011: 12,896

Cost of First Checked Bag: $25

Estimated Lost Revenue: $322,400

US Airways (Stock Quote: LCC)

Mishandled baggage complaints in May 2011: 11,932

Cost of First Checked Bag: $25

Estimated Lost Revenue: $298,300

United Airlines (Stock Quote: UAL)

Mishandled baggage complaints in May 2011: 10,357

Cost of First Checked Bag: $25

Estimated Lost Revenue: $258,925

Continental Airlines (Stock Quote: CAL)

Mishandled baggage complaints in May 2011: 9,566

Cost of First Checked Bag: $25

Estimated Lost Revenue: $239,150

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