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Your Misery is the Product: The TSA and the Airline Cartel

The Transportation Security Administration — one of the many component bureaucracies of the sprawling Department of Homeland Security — is reportedly preparing to force all air travelers to remove all books and paper objects, as well as food items, from their carry-on bags when going through airport security. The next time you travel by air, you can likely look forward to being barked at by a surly blue-shirt to separate your laptop, your snacks, and all your paper belongings, including books, magazines, diaries, etc., into separate bins while also taking off your shoes and belt, and placing the contents of your pockets into your carry-on, unless, of course, those contents are either paper or food. And hurry up about it. You’re holding up the damn line.

Homeland Security Secretary John Kelly blames this policy change on air travelers themselves, who he claims are overpacking their carry-on bags to avoid checked bag fees. Apparently, all of the stuff we’re lugging onto the plane — in a rational attempt to avoid paying for half of an additional fare just to bring our clothes with us — are making it hard for Sec. Kelly’s agents to see through our overstuffed backpacks with their x-ray machines.

This is a problem with an easy and immediate fix — one that doesn’t involve introducing massive new inefficiencies into an already ridiculous and punitive security process, or allowing government agents to scrutinize the reading materials of private citizens in possible violation of the 4th Amendment. All it would require is convincing the airlines to charge less — or better yet, go back to charging nothing — for checked baggage. Problem solved.

But the obvious solution appears to be a non-starter. So while you contemplate how much worse air travel will become as a result of this proposed new policy, here are a few things to consider:

  1. The domestic airline industry is dominated by four players, which are shielded from foreiegn competition on domestic routes by the federal government.
  2. Fees for non-overweight checked baggage didn’t exist until May of 2008, and were initially justified by the airlines as a temporary measure to defray the high cost of jet fuel during the recession.
  3. Airlines are taxed on revenue generated from ancillary charges like baggage and reservation-change fees at a much lower rate than revenue generated from fares. This is important.
  4. Industry-wide profit from baggage change fees grew by 10% last year, even as overall profits declined by 46% from record highs in 2015.
  5. The TSA sucks at the job it claims to be doing. According to a 2015 DHS internal investigation, TSA agents failed to prevent undercover agents from smuggling weapons through airport checkpoints in 67 out of 70 attempts including, in one case, a fake bomb strapped to a man’s back. It has never stopped a real terrorist. But despite all its failings, flying is still really safe.
  6. When they do resort to the use of force, agents of the state generally do so to coerce passengers in ways that benefit the airlines.

Ancillary fees are now a core element of the business model of domestic airlines. Thanks to the non-competitive structure of the deregulated domestic air travel industry, we have no idea how much airlines can charge for checked bags, how many flights they can overbook, or how many people they can rip off of planes by the scalp before they finally become vulnerable to competition or re-regulation. We’re not there yet. The fact that those revenues are not subject to the excise tax imposed on revenue from fares only makes ancillary fees more attractive to the airlines.

Pro-industry analysts have argued that the revenue from baggage fees pales in comparison to the costs airlines incur through delays caused by the increased number of carry-ons, and by inefficient security procedures. But if it's not profitable to charge people to check their bags, then why do it? Why has almost every major domestic carrier increased their baggage fee revenues each year since 2008? If they're so worried about delays, why wouldn’t they see the TSA’s insane proposed security regulations as a looming financial disaster? Why wouldn’t they be doing everything they could to stop the TSA from enacting them?

The truth is that baggage fees are a major profit driver for airlines, and that by making it more difficult for passengers to carry their luggage onto the plane, the TSA is directly contributing to the airlines' bottom line. According to its own operational assessment, the agency isn't really accomplishing much of anything else.

There may not have been any backroom meetings in which Kelly and his TSA chiefs agreed to shake down paying customers on behalf of domestic air travel industry. (Although in the current political climate, who knows?) It doesn’t matter though, because the effect is the same. The TSA may be terrible at delivering actual security. But it is getting quite good at delivering value for the airlines, by negatively incentivizing passengers to make use of the airlines' most profitable “services.” All of which prompts the question: is that its actual job?

Eric Busch

2300 Red River Street, University of Texas at Austin, TX, 78712

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