British budget carrier EasyJet has suggested that European Union baggage regulations could create moral hazard by removing consequences from inefficient passenger behavior.
The legislative proposal would mandate free cabin baggage for all passengers across European air travel. Parliamentary approval has positioned regulations for implementation requiring airlines to provide allowances for both personal items and larger carry-on bags.
The airline’s leadership argues that pricing mechanisms create appropriate incentives for responsible behavior. Passengers who pack efficiently save money, encouraging resource-conscious choices that benefit overall system efficiency.
Eliminating these price signals through mandatory free baggage removes incentives for efficiency, potentially encouraging wasteful behavior. This represents a form of moral hazard where removing consequences encourages less optimal decisions.
EasyJet generates billions annually from ancillary services that create appropriate incentives. The carrier reported quarterly losses of £93 million while managing passenger behavior through pricing and seeing encouraging booking trends.