Airlines are improving their baggage management practices, with the rate of mishandled bags falling by 70.5 per cent over the last decade to a record low as technology allows for better tracking, according to a report released on Thursday.

Delayed, damaged and lost bags cost airlines an estimated $2.3 billion in compensation, transport and other imposts last year, the report from Swiss aviation technology group SITA shows, down 46 per cent from a decade ago.

"In every service industry 'the mistake' is very expensive," SITA CEO Barbara Dalibard said in an interview before the report was released. "If you reduce drastically the number of events of this kind you make huge savings. It also reduces anxiety for the passengers."

In 2017, 5.57 bags were mishandled for every 1,000 passengers, a record low. That added up to 22.7 million bags globally.

To help cut down on mishandled bags, International Air Transport Association members, representing 83 per cent of the world's air traffic, have agreed to keep track of each bag at specific points in the journey from this June.

The carriers will have to share that information with all involved in delivering those bags back to passengers at their final destination.

"While we won't see a sudden change in 2018, it is a real turning point for the industry as airlines begin to unlock the value of the tracking data for the 4.65 billion bags they carry," Dalibard said.

By 2020, 71 per cent of airlines plan to provide real-time bag tracking information to passengers, according to the SITA report. Some carriers, like Qatar Airways and Russia's S7, have already rolled out systems allowing passengers to track their checked bag's status through mobile apps.