Markets vs Congress

Spirit Airlines announced that it will start charging for carry-on luggage that has to be stored in over-head bins. At the same time they cut the price for tickets. This is the last, and possibly most insulting, of a series of airline add-on charges.

According to an AP story, U.S. Sen. Charles Schumer said Sunday he's trying to get the federal government to prohibit airlines from charging a fee for carry-on baggage, calling it a "slap in the face to travelers."

This ignores why airlines are implementing add-on prices and the proper solution.

Airlines have a problem - cost are going up and fewer people are flying so profits are going down. If they raise prices then people will flock to their competitors. This is especially true now that people book their own flights through on-line services. The airlines figured out that they get more business if they hide some of the total cost of flying. They lower their base prices so that they will come up as low-cost on the travel sites. Then they hit you with extra charges. A traveler trying to find the actual lowest-cost carrier will have to look up all of the extra charges then order them by hand.

People are understandably upset and Congress, especially Democrats, feel the need to insert themselves into every situation. History shows that Congress seldom solves problems. They just rearrange them. Remember when Congress got involved in cable TV pricing? Prices rose faster after Congress got involved than before.

So what should happen? The on-line services need to include the add-ons in their ranking. They could either have you fill in a few check-boxes about how many bags you will have, etc. or they could rank the tickets based on average final-ticket price. They should be able to come up with a basic measure of the final ticket price just from data they already have on file.

If the airlines lose their financial incentive to hide prices through add-ons then they will fold them back into their base price.