American Airlines has reached an out-of-court settlement in order to put to rest a class action lawsuit that was brought against them by up to 2.8 million passengers that claim they were “improperly charged” baggage fees between 2013 and 2021.
The lawsuit originated from the action of five passengers who claimed the airline broke its promise to allow them free baggage check-in on some of their luggage due to their frequent flier status, premium credit card or first-class ticket.
“The settlement applies to two sets of affected passengers: those who received email confirmation that promised one or more of their checked bags would be free but still had to pay; and those who held branded credit cards that entitled them to no-charge luggage checking but who were still charged on domestic trips. Travel had to take place on or after Feb. 24, 2017, and tickets needed to be bought no later than April 8, 2020,” the Washington Post reported.
American Airlines has agreed to pay at least $7.5 million to settle this lawsuit that has been filed in a Federal Court in Texas in February 2021 but has admitted no wrongdoing as the plaintiffs claimed the airline has “breached its [own] contract” by not allowing certain passengers to check-in some of their baggage for free.
“Rather than risk trial and appeal, which could lead to class members getting zero or less than-full compensation at an uncertain time later, the settlement gives every settlement class member a guaranteed opportunity now to get 100% compensation,” says the motion by American Airlines as reported by Business Insider.
The carrier also agreed to pay administration costs for the settlement as well as attorney fees and has put no limit or cap on the amount it will pay above that number. “That amount represents a strong result given the potential recovery and the risks and delay of ongoing litigation in this case. The fairness, reasonableness and adequacy of the proposed settlement is even clearer in light of the risks, expense, and delay that would accompany ongoing litigation,” continues the motion.
According to the lawsuit American Airlines failed to program the correct exemption into the software that automatically calculates baggage fees when passengers check in at the airport.
Baggage Fees Generated Over $2 Billion for U.S. Carriers in 2021
According to Statista.com, in the U.S. passengers have paid $2.18 billion in baggage fees, and almost a quarter of this amount has ended up in American Airlines’ accounts. In fact, the Texas-based carrier has collected $520.9 million in baggage fees, and it is firmly at the top of this list, leading second-ranked Delta Air Lines by an ample margin. Delta’s revenues in this area are just shy of $360 million for 2021, just above the $341 million reported by United Airlines.
The three biggest carriers in the U.S. account for over 56% of the total amount corrected by all carriers. In fourth place, there is ultra-low-cost carrier Spirit Airlines whose business model heavily relies on ancillary revenues that account for almost 50% of the carrier’s revenue, according to CAPA.
Notably absent from the top positions of this list is Southwest Airlines, which is still refusing to charge baggage fees for the first two pieces of luggage, maintaining the policy that was common practice in the U.S. until the mid-2000s. In fact, the progenitor of all low-cost carriers, despite carrying 17.4% of domestic passengers in the U.S., only collects 1.2% of the total amount of baggage fees.
