LAUSR

Leveraging cognitive appraisal theory, this manuscript investigates how implementing the new baggage fee policy impacts carriers' financial performance, on‐time performance, and consumer complaints. Utilizing the latest event study methodology from the econometrics field, our analysis shows that the effect of this policy is twofold and non‐linear. Financial performance deteriorated immediately upon the policy implementation and continued to decline before eventually improving, demonstrating a U‐shaped curve. On‐time performance improved instantly upon the policy implementation and continued to improve before eventually deteriorating, showing an inverted U‐shaped curve. Consumer complaints surged instantly upon the policy implementation and continued to rise but at a diminishing rate. Our different findings on the impact of the baggage fee policy extend the current stream of airline literature and provide new managerial insights for airline managers.