The avg. 5 yo is approaching the upper limits to use a carseat on an aircraft; the FAA recommendation is to use them for children under 40 lbs. There is no *requirement* on the part of the FAA for any child to use a carseat on an aircraft, though some airlines are now requiring them if an under-2 is in a purchased seat. It is recommended for smaller children, though, and is definitely the safest way for them to fly.
Carseat satchels are a good investment, especially if you need to transport multiple seats (you can nest up to 3 in one bag.) They tend to cost between $15-30, depending on the brand and where you buy it. Target often has good prices on them, and they are also available at BRUS, and even Wal-Mart has begun to carry them in some markets. There is a new one out w/ wheels on it, but be careful of that one; reports are that the area around the wheels isn't properly reinforced, and the bottoms of the bags are developing holes where they scrape the ground. The Prince Lionheart that I have (from BRUS) is a good one with a thick vinyl bottom on it; it has taken a lot of abuse for the last 6 years.