Airlines 'lose one million bags'.
The AUC reports that the problem was the industry's worst baggage performance statistics in recent years.
The announcement also said that some airlines were trying to improve baggage handling but stated that passengers were not being fairly compensated.
Among concerns highlighted by the AUC were that travellers without receipts for their lost items were not being fully reimbursed.
It also noted cases where airlines were taking into account the depreciating value of items.
Tina Tietjen, who chairs the AUC Board, said: "If something goes wrong, airlines should be prepared to compensate their passengers fairly. Complaints to the AUC show that passengers often struggle to get reasonable redress from airlines after the event,"
Even with delayed baggage, passengers could be left out of pocket, she added: "Airlines will not reimburse them fully for expenses they incurred buying essential items whilst they are without their bag."
She praised the efforts of some airlines to improve their baggage handling performance, but said they also needed to turn their attention to what happens when things go wrong.
"Airlines are still too quick to load the risk onto the passenger," she added. Figures published in the AUC report showed 42 million bags were mishandled in 2007 compared with 34 million in 2006 and 30 million in 2005.