Cheap fares, be they cheap airplane tickets and discount hotel rooms or cheap vacation packages are great so long as additional airline fees do not significantly increase the final price of travel. Spirit Airlines has announced that as of November 6th it will charge $100 for the privilege to stow a bag in an overhead bin if paid at the gate.
Currently Spirit charges $45 to stow a bag in an overhead bin if paid at the gate vs. $30 if a passenger pays online prior to check in.
Spirit is raising the price on about two dozen other baggage fees effective November 6th. The increases run between $2 to $10 a bag depending on whether the fees are paid online, via phone or at an airport.
Spirits business model is based on charging for everything from making reservations and printing boarding passes to complying with the unintended consequences of government regulations. Spirits fee policies have allowed it to offer low base prices and maintain profitability.
Spirit defends it fee structure noting Our pricing continues to offer customers savings and time at the airport if they book their bags in advance on Spirits websiteBy encouraging self-service, Spirit is able to lower our costs and pass those savings along to customers by way of low fares.
Spirit defends its last minute $100 fee to stow a carry-on in an overhead compartment as a way of ensuring that customers pay for the privilege in advance and do not delay the boarding process.
Clearly Spirits business approach is providing positive financial results. During the first three months of 2012, the airlines operating revenues totaled a little more than $301 million, up almost 30 percent from the prior year. Its quarterly profit was in excess of $23 million vs. a little less than $8 million last year.
Taking an a la cart approach to fees, whereby customers are charged for almost any conceivable service separately, has proven a very profitable strategy. In the first quarter of this year Spirit earned almost $52 in non ticket revenue per passenger per flight segment, an increase of 21 percent over last year.
Ticket revenue fell, almost 7 percent, from $82 to a little less than $77 per passenger per flight segment. This was to be expected since Spirit has claimed that it has reduced its base fares so that customers only have to pay for those services that they desire.
This strategy has enabled Spirit to often price its base fares lower than its competition. The average Spirit passenger is now paying a little more than $100 in fees for bags, boarding passes and other ancillary services. www.cheapfares.com