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Airline’s Recent Decision to Charge Passengers A Whopping $45 for Carry-on Baggage Exploits Unintended Tax Loophole

(Washington, D.C.)-U.S. Senators Jeanne Shaheen (D-NH), Charles E. Schumer (D-NY), Robert Menendez (D-NJ), Ben Cardin (D-MD), Frank Lautenberg (D-NJ), and Amy Klobuchar (D-MN) announced new legislation Wednesday to confront airlines that are socking travelers with new fees for carry-on luggage. The legislation comes after Spirit Airlines announced last week that it would begin charging customers a whopping $45 for carry-on luggage. The policy could spur other airlines to follow suit and impose a similar fee. The legislation is designed to rein in this new practice and restore basic fairness to airline travel. The bill is called the Block Airlines' Gratuitous Fees Act, or the BAG Fees Act.

"Charging consumers for overhead carry-on luggage is skyway robbery," said Shaheen.  "It is outrageous that American families, who are already feeling the squeeze in this economy, are now being punished for something that is completely beyond their control."

During these tough economic times, the airline industry has sought to keep ticket prices low while maintaining their bottom line by adding supplemental fees to airline travel. In the past year, some airlines have added fees for checked baggage, extra legroom, seat assignments, and beverages. For the most part, passengers have begrudgingly accepted these new fees. But the latest fee that the airline industry is seeking to impose on travelers breaks with a longstanding practice of allowing travelers to carry luggage onto the plane for free.

"Consumers are fed up with being nickel and dimed by airlines at every turn, and rightfully so," added Shaheen. "I am hopeful this legislation will prevent airlines from forcing more unreasonable and unfair fees onto their customers."

Since the inception of commercial air travel, customers have always been given the opportunity to bring one carry-on bag with them to store in the overhead compartment without fear of being slapped with an additional fee. Carry-on luggage is particularly essential for weekend travelers, day trippers, and overnighters. The new fee will greatly add to the cost of travel for both business and leisure travelers. Families with children will also be hurt, as parents almost always need a carry-on item in order to store vital items like medicine, baby formula, or diapers.

The timing of the fee will also likely impact those trying to take their family on a summer vacation.

The Senators' legislation would confront this proposed fee by designating carry-on baggage as a necessity for air travelers. Airlines currently pay a 7.5-cent tax to the federal government for every dollar they collect in fares, but no tax is imposed on fees collected for non-essential services. Last January, the Treasury Department issued a ruling that deemed carry-on bags as non-essential for air travel. As a result, airlines can impose fees on these bags without paying any tax to the federal government on the revenues they collect. This creates a tax incentive for airlines to try to bilk consumers in the form of fees rather than by increasing the fares. The Senators said Wednesday that if this tax loophole regarding carry-on bags did not exist, the airlines would likely not seek to charge travelers for this baggage.