Unexpectedly Intriguing!
April 6, 2005

The end of an era came about last Friday, April 1, as Southwest Airlines became the last of the Big 8 airlines to impose fees on passengers whose baggage exceeds weight, size or quantity limits. Southwest, which had previously resisted "nickle-and-diming" its passengers, joined American, America West, Continental, Delta, Northwest, United and US Airways in adding the fees, as they have had to adapt to a marketplace driven by two negative cost factors: the rising cost of jet fuel and an increasing rate of workplace injuries, the latter of which was specifically cited by Southwest in announcing the new charges:

Southwest spokeswoman Whitney Eichinger said the airline is changing its policy because passengers are stuffing their bags with more and more, putting workers who lift them at more and more risk.

While the price of oil is highly visible these days as it nears all time highs, the cost of workplace injuries is much less visible to the public. This cost is highly visible to the executives of the nation's airlines, who must bear the cost on their businesses' bottom lines. Workplace injuries cost businesses not just the labor of their injured employee, but also affect the business' financial health through:

  • Higher health and life insurance costs, including worker's compensation.
  • Increased costs of labor for the injured worker's coworkers who must take up the slack.
  • Increased risk of additional injuries among the remaining workers filling in for the missing worker.
  • Training costs if a replacement worker must be brought in.
  • Management costs in ensuring that all employees are currently trained.
  • Incidental costs from the disruption to the workplace from the injury.

The cumulative loss to business from occupational injuries is staggering. According to Liberty Mutual's 2002 Safety Index (reported by Ergonomics Today):

The direct cost of workplace injuries (payments to injured workers and their medical care providers) rose 3.6 percent to $40.1 billion in the 2002 Safety Index from $38.7 billion in the 2001 Safety Index.

The total financial impact of both direct and indirect costs (lost productivity, overtime, et cetera) is estimated by the 2002 Safety Index to be as much as $240 billion.

With these costs so extraordinary, the real wonder is that Southwest Airlines held out for so long before imposing its fees. That it could hold out until now is largely due to the airline's excellent financial health, which ranks at the top of the industry. It's a different story at the other legacy carriers however, as several of these airlines are either already operating in bankruptcy or may be entering bankruptcy proceedings in the near future. Consequently, I suspect that passengers may expect to encounter some unique "innovations" in fees and charges in the very near future, as these distressed airlines seek to remain aloft.

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