March 25 (Bloomberg) -- Airlines mishandled 23 percent fewer bags last year as passengers traveled lighter to avoid new fees and updated technology helped keep track of luggage.

The number of checked bags that were late, sent to the wrong place, damaged or lost entirely fell to 32.8 million from 42.4 million a year earlier, SITA, the world’s largest provider of airline computer applications, said in a statement today. The decline was the first since the group began publishing an annual luggage report in 2005.

A policy of charging for checked bags has gathered pace since 2006, with many airlines now requiring passengers to pay for more than one item. Low-cost carriers including Ryanair Holdings Plc, Europe’s biggest, impose fees for all stowed cases, buoying revenue even as the recession hurts ticket sales.

“There is a clear trend across the industry toward encouraging passengers to lighten the load, with fewer and lighter bags, or at the very least ensuring that passengers pay the costs associated with checking-in baggage,” SITA said.

Airlines reduced mishandled luggage to 14.28 items per 1,000 in 2008 from 18.86 per 1,000 the year before. The number of pieces that failed to be recovered declined to 0.32 bags per 1,000 travelers from 0.57.

AMR Corp.’s American Airlines, the world’s second-largest carrier, imposed a $25 charge for a second checked bag in early 2008. In June, the Fort Worth, Texas-based company added a $15 fee for the first item. Delta Air Lines Inc., UAL Corp.’s United Airlines and others also levy charges. Ryanair in January boosted fees for the first bag by 25 percent to 10 pounds ($15).

‘Room for Improvement’

“We welcome the drop in mishandled baggage but it needs to be put in the context of the decrease in traffic and the number of passengers actually checking bags in,” James Fremantle, spokesman for the Air Transport Users Council, said today.

“There is still room for improvement,” added Fremantle. The London-based group is a consumer advocate funded by the U.K. aviation regulator.

BAA Ltd., owned by Spanish builder Grupo Ferrovial SA, blamed inadequate training and glitches in the baggage system for 12 days of cancellations and delays at the opening of London Heathrow’s Terminal 5 last year. At one point, the terminal operator had a backlog of 20,000 bags and had sent some to a sorting facility in Italy.

‘Needless Bags’

The number of airline passengers rose 1.4 percent in 2008, so the decline in mishandled luggage didn’t occur because of less business, SITA said. Even so, airlines have cut capacity in a bid to fill planes and many have increased time available between connecting flights, helping luggage get to the right place on time.

“We are glad to say that fewer people are traveling with checked-in baggage,” Stephen McNamara, a Ryanair spokesman, said in an interview from Dublin. “We discourage people from bringing needless checked-in bags.”

SITA, based in Geneva, was started in 1949 by 11 airlines and is now owned by 550 carriers, as well as some airports. The company had sales of more than $1.42 billion in 2007.

SITA, which sells baggage-management systems, also said the decline in complaints was caused by an increase in use of its tracking software that was in place at 73 airports in 2008, up from 50 in 2007.

Radio Identification

Baggage-handling solutions include RFID, or radio frequency identification, which reads tags on the luggage, helping automate the process. According to SITA, 11 percent of airlines use the technology, an increase from 2 percent in 2007.

Declining growth in air travel and the introduction of baggage charges are having “some beneficial effect,” said Douglas McNeill, a London-based transport analyst at Blue Oar Securities. “It is part of the whole trend toward ancillary revenues, particularly among low-cost carriers, and those bag charges will remain in place.”

British Airways Plc will introduce a worldwide handling charge of 25 pounds for larger bags as of April 1. Ryanair now asks 30 pounds a second carry-on.

The fees are making up a larger slice of airline revenue. Atlanta-based Delta, the world’s biggest carrier after buying Northwest Airlines last year, estimates it will take in $1.4 billion this year from “a la carte” fees such as checking luggage and changing tickets. That represents about 4 percent of the company’s total revenue.

To contact the reporter on this story: Sabine Pirone in London at spirone@bloomberg.net

Last Updated: March 25, 2009 06:52 EDT