It’s fun to sit back and ponder “what if” scenarios, so when I saw Holly Hegeman mention in PlaneBusiness a recent note from Wolfe Research analyst Hunter Keay, it caught my attention. The note is entitled “What if UAL adopts Bags Fly Free?” and Hunter was kind enough to provide me with a copy.
As Hunter says in the note, this isn’t meant to advocate for United to actually eliminate bag fees. Instead, the note reads like a bunch of smart avgeeks sitting around on a Friday night with a beer and a Cirium login. That’s my kind of party.
So what exactly is the thesis here? Well, it can be summed up like this. United has a strong need to either stimulate demand or steal market share in the next few years if it is going to fill up all that new capacity it’s bringing on. Making checked bags free would be a way to try to steal market share, especially since bag fees are less important to United than any of the other network carriers.
We already know that Southwest has no bag fees. EVERYONE knows that thanks to years of Southwest being the only airline with that policy. But Southwest was also the only airline with no change fees, and now others have followed there. United was the first to make that move, and it has been pointed out that Southwest’s increasing penetration into new markets along with a focus on growing business travel with friendlier policies makes the airline an increasing threat. Ditching change fees had a real benefit of soothing people during the uncertain COVID-19 pandemic, but it also put United on more even footing with Southwest.
Bag fees are admittedly quite different. They are less important to the all-important business traveler since those people usually have elite status, a credit card that waives fees, or they don’t check a bag anyway. No, this move would only indirectly benefit the business traveler. The idea is that if you can fill up enough of those seats in the back with a decent fare, you can fly more seats to more places where the business travelers need to go. And today, United’s domestic network lags, so there would be a good benefit. It all works together to try to solve that problem.
Let’s start with the biggest question. Does the math work? I’d say… it would require a leap of faith that I don’t think I’m ready to take. Let’s take a look at 2019.
Bag Fees as a Percent of Passenger Revenue

Hunter looked at bag fees as a percent of total revenue and noted that United had the lowest percentage of bag fee revenue of all the airlines that have first bag fees. (Southwest doesn’t count since with no bag fee, those are only excess or oversize bag fees you see there.) I decided to look first at bag fees as a percent of passenger revenue, because if you get rid of bag fees, you have to make up for it under the passenger revenue line item. The end result is the blue column.
And indeed, you see that United and Delta both sit at the bottom, virtually tied at 3.3 percent of passenger revenues. But this also doesn’t seem like the right way to look at it. After all, international skews the metric a lot. This would really be a domestic play anyway, and that’s where I isolated the data you see in the gray bars. In that case, Delta actually has a lower percentage of bag fee revenue, but both are lower than American. And yes, JetBlue and Alaska are higher with what is presumably a higher percentage of leisure passengers, especially JetBlue. I included those two since they are American partners.
If United were to eliminate bag fees, it would need to make that up in terms of higher fares. Southwest has made the argument time and time again that it was the right move for the airline and it continues to be, but the lone wolf always gets the advantage. United can’t get the same kind of bump that Southwest got being a standout.
The bigger question is really whether others would follow or not. Delta seems to think pretty highly of itself, so it might try to hold out. Then again, it wants to be seen as passenger-friendly, and the headlines pointing to Delta refusing to move might be too much to take. American has the most to lose among the big three, and it might try to hold out because that’s a lot to lose. After all, this isn’t like change fees where everyone caved quickly.
Sure, people hate bag fees, but if they really care about them, they probably fly Southwest or they already have them waived via credit cards or elite status. For everyone else, they’ll just book the airlines based on options up front and pay the fees they have to pay down the line if they need to check a bag. It doesn’t creep into the psyche the same way that change fees do in our current uncertain world. For that reason, airlines might try to hold out to see if they can justify a differentiated product like that. If everyone caves, then United loses any advantage it might have had.
Let’s say United does ditch the fees, and it’s able to make up the revenue. That won’t happen overnight, but let’s just pretend it does happen at some point. It’s still not that simple. Let’s not forget United’s favorite overlord… Chase.
Hunter brings this up in his analysis as well. Chase holds the United credit card, and all those cardholders who get free bags as a perk would need to be given something else to blunt the loss of a major benefit. United would have no choice here; its overlord Chase is too important to the airline’s business. I’m just not sure what would have to be surrendered and how much that would cost.
On top of that, United is probably going to have go out and rebuild baggage infrastructure as well as hire more people. If you don’t charge to check a bag, more people will check them. Hunter put up a chart showing that Southwest checks 0.75 bags per passenger flown. Of the big three, American is next at 0.6 and United is at 0.54. That could mean a LOT more bags flowing through the system.
All these costs will serve to make it harder to make up for that lowered fee revenue.
While I do like this thought exercise, I just have trouble seeing how it makes sense. Bag fees are different than change fees. People were holding back on booking tickets because of the uncertainty in their plans. Eliminating change fees helps with that. Nobody is holding back from booking due to the existence of bag fees.
That’s not to say it isn’t worth further discussion. For example, a nice hybrid option might be to make a checked bag free for regular economy but charge for those in basic economy. That creates further differentiation in the products, and it allows United to continue to use basic economy as a blunt force weapon to compete with ultra low cost carriers. I’m not sure if that makes sense either, but it’s fun to ponder all of these things.