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To reduce carry-on luggage, American Airlines offers bonus miles for checked bags

The Department of Seemingly Inexplicable Airline Economics brings this edition of quirky news involving American Airlines giving extra frequent flyer miles to people who check bags.

Ah, you say, sneaky tactic. Charge $25 to check a bag but give a few token miles. Not quite. The offer is only available to elite frequent flyers – and they already have a free baggage allowance. The reckoning (there is no official statement about this offer) suggests American wants to create more room in its overhead bins without doing away with the baggage charges that contribute to USD2.4 billion of annual ancillary revenue but also lead people to carry on their luggage instead of checking it.

While checked bag fees and other ancillary revenue streams have largely helped US airlines to turnaround their financial position, they have earned the wrath of passengers not just for charging bag fees but also because the fees have increased the number of carry-ons, which sometimes results in running out of space in overhead bins (although this could help sell the early boarding add-on). It has become a problem for airlines too: finding space for bags in overhead bins or gate checking bags adds boarding time, decreases (marginally) utilisation rates/schedule padding and could lead to delays.

Checking bags in exchange for bonus frequent flyer miles – which cost American Airlines little since they control the currency's valuation – helps theoretically alleviate bin space shortage, reduce boarding time and reduce departure delays. The offer is only available on flights from Boston, one of American's focus but not hub cities, suggesting this is very much a trial – the bonus miles end 22-Nov-2011. See here for American's official page on the promotion.

Even offering free checked bags has not helped Southwest escape consumer irritation. Its fares are regularly undercut by legacy competitors, even when including checked bag fees. Read more: Southwest losing consumer lustre as pilots vote on integration

Working against American in this initiative is that elite frequent flyers who carry on their bags are likely doing so to save time, not money since they have a free luggage allowance. American will find out, if boarding process improvements are made and if five or 10 minutes at the luggage carousel waiting for your priority-tagged bag is worth 500 extra miles.

Or maybe there is no need to wait at the luggage carousel. As frequent flyer the Wandering Aramean quipped on his blog, "There doesn’t really seem to be a need to care about what you’re checking. I figure just grab a FedEx box, put a bag tag on it and collect your 500 miles. No need to even collect the box at the other end."