RFID on airline luggage: ROI in three years?

RFID for luggage tracking is feasible but it's not for everyone, according to a new analysis of how the tracking tags could help the airline industry.

The report was produced by consultancy BearingPoint in conjunction with German airline Hapagfly and it examined how RFID could be used to cut costs of lost luggage in three European airports.

It concluded that employing such a system wouldn't bring enough cost savings for Hapagfly itself but it could generate sufficient benefits for other airlines - if they mishandle enough luggage.

Using the industry average of bags per 1,000 mishandled, BearingPoint reported that an airline could expect to see ROI within three years.

The more likely an airline is to mishandle bags and the greater the average cost of the luggage and its contents, the more worthwhile RFID will be to deploy, the report found. It added that the cost difference between one deployment and another - regardless of size - will remain minimal.

The study added that RFID implementation is purely a cost issue - there is no benefit for airlines to be gained from using the track and trace technology aside from saving a few pennies.

The report said: "Increasing passenger volumes most likely will increase the operating costs more than they will increase the benefits in the near future.

"This leads us to the conclusion that, in order to successfully implement RFID-based baggage handling operations, a suitable starting point for investment is more likely to be found with larger airlines and larger airports which include significant hub operations."

Delta and British Airways have already expressed an interest in rolling out the technology.