Revealed: How Much Money Lost Luggage Really Costs The Airlines

At an internal meeting on Friday, American Airlines President Robert Isom told employees “every lost bag is nearly $60.” That amount was new to me.

In January alone American mishandled 74,975 bags, the most in the industry by far, and not any improvement over the prior year. At $60 per bag it cost American $4.5 million, and annualized at the same rate $54 million. Extrapolating similar costs for the industry would mean US carriers losing over $160 million a year to mishandled bags.

It would be even costlier to airlines if they were forced to refund checked bag fees when losing a customer’s luggage, something that’s only required for Canadian passengers.

It makes sense to invest to reduce these costs.

In the U.S. however there are only two kinds of luggage: carry on and lost. Two years ago an American Airlines baggage handler fell asleep in the cargo hold and flew to Chicago.

This, however, is how to get it right:

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. I’m actually surprised its not higher when you consider the cost to transport the bag, employees to file the report, search, locate, handle the bag, plus the real estate costs of the service centers in baggage claim and bag storage areas, plus the cost for a claim if a bag actually is permanently lost…$60 seems kinda low.

  2. Seriously if your like me, you need to get replacement clothes, toiletries etc ASAP. I thought it would be much higher. But in a way I like it when they lose my bag.

  3. First off, the “carry on and lost” thing is trite. Repeating it endlessly doesn’t make it true. I’ve flown maybe a thousand flights and never had a bag lost, although I’ve had a half dozen times where one was misplaced. Secondly, Isom doesn’t differentiate between mishandled and lost in the top statement. Frankly I’m not sure which ends up costing the airline more. I suppose compensation factors would affect that greatly.

  4. I try not to check bags, but flying with a small child who needs a car seat means that I’ve been forced to check luggage quite a bit more recently. The only time I’ve had an issue is when someone wasn’t paying attention and grabbed my bag by mistake, despite it being on the wrong carousel and missing their giant luggage tag. The Southwest bag office was not much help, but since we found the other bag that looked like ours, I was able to call the number on the luggage tag and arrange a swap. Bought some brightly colored luggage straps to prevent anything similar happening in the future.

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