Airline Lets Passengers Pay for Checked Bags With Miles

Sept. 7, 2010— -- In the past few years, airline passengers have been bombarded with a bevy of new fees, including the much-dreaded checked-bag charge. But one airline is now experimenting with allowing passengers to cash in frequent-flier miles for bag fees.

Gulf Air, Bahrain's national carrier, allows passengers who are beginning their trips in either Bahrain or London pay their excess baggage fees with frequent-flier miles instead of cash.

The Middle Eastern airline currently lets passengers check a bag up to 30 kilograms (about 66 pounds) for free. It's one of the most generous luggage allowances in the industry.

But some passengers still have more bags, especially students heading off to study abroad and larger families going on a long vacation.

Between London and Bahrain, the airline charges an extra $15 for each extra kilogram.

Now, passengers can instead use 6,000 miles for each extra 5 kilograms of weight, saving $75 in fees. The program launched June 1 for flights out of Bahrain and Aug. 1 for flights out of London. Last year, Gulf Air also began to allow passengers to use miles to gain entry to its airport lounges.

Stay Up to Date on the Latest Travel Trends from ABC News on Twitter

So could this expand beyond the Middle East?

"Once the American airlines find out about it, I wouldn't be surprised if they initiated a program, but it's something that's very small. But it's very convenient," said Ray Neidl, an independent airline analyst.

Checked bag fees are a big business for the airlines, and a growing source of revenue.

In the first three months of 2010, U.S. airlines took in $768.5 million in baggage fees, according to the Bureau of Transportation Statistics. And that figure is up 33 percent from the same period last year.

Airline Checked Bag Fees

In some cases, the bag fees are the only things keeping the airlines profitable. So why would they be willing to sacrifice that new stream of cash?

The answer might lie in new accounting rules that require airlines to count all unused frequent-flier miles as a liability.

"And that's why they would like you to burn your miles as quickly as possible in other ways if you can't get an airline seat," Neidl said.

As part of an effort to reduce those outstanding miles, the airlines have imposed or shortened expiration dates for the miles. Some airlines, such as Delta, now let passengers cash in miles for cameras, televisions, lawn mowers and kitchen knives.

"People have excess miles. It's hard to get seats. The airlines are trying to get them to use their miles on other products. This is one other way they could burn some miles, so it's probably a good idea," Neidl said.

John DiScala, a blogger known as Johnny Jet, called the concept "awesome."

"If I were an airline executive, I would implement it," he said. "For those who only travel a couple times or once a year, and they can't earn enough miles for a free ticket and they don't want to use it for magazines, it's a good option."

Avoid Checked Bag Fees

DiScala notes that a cross-country flight earns about 5,000 miles.

"So many people don't even join the programs, but with this type of thing, it might give them more of an incentive to join because that one flight would pay for their baggage," DiScala said.

Ultimately, DiScala said he doesn't believe the airlines would lose too much in fees because he doubts many fliers would choose the option, but that the marketing and loyalty potential would make it worthwhile.

Robert Mann, an airline consultant and president of R.W. Mann & Company, said passengers with miles to burn could be attracted to the programs as a way to avoid these fees.

That said, premium travelers who do have excess miles tend to have most fees waived for them anyway. But for customers who can't seem to use their miles for a free flight or just don't have enough miles, this could be an appealing alternative.

And while the airlines would like to whittle down the number of outstanding miles, Mann said that we shouldn't be holding our breath for such an option.

"So far, most airlines here seem to like green cash dollars instead of blue miles, even for one-off lounge visits," he said.