The aviation industry saved over $800 million globally last year on reduced compensation and other related costs with the number of passengers' bags mishandled during travel falling from 42.4 million in 2007 to 32.8 million in 2008.
The fifth annual edition of travel firm Society International Telecommunications Aeronautics' (SITA) baggage report shows that the number of bags lost or stolen also came down from 1.28 million in 2007 to 736,000 in 2008.
SITA delivers and manages business solutions for airline, airport, government and other customers.
SITA CEO Francesco Violante said: "The good news is that for the first time since we started publishing this report there has been a significant drop in both mishandling and lost baggage rates. With almost 10 million fewer bags being mishandled last year, the industry saved some $800 million".
The number of passengers traveling in 2008 was 2.3 billion, up by 1.4 per cent over 2007.
The drop in mishandled baggage numbers can be due to several reasons, among them is the increasing number of airlines charging for baggage resulting in fewer bags being checked-in, the report said.
The International Air Transport Association (IATA) has presented its Baggage Improvement Programme to over 180 airlines around the world and aims to reduce baggage mishandling to half by 2012. This would result in annual savings of the industry between USD 1 billion and $1.9 billion depending on the range of issues addressed.