Replying to Spirit Airlines Announces $100 Baggage Fees!!

They ought to put one together for Ryan Air that should be even more fun

Over the weekend, the Wall Street Journal on-line had an article about Spirit (the airline passengers hate but still fly), and an interactive game to match the Spirit fee with the service. Very amusing.

WSJ.com is a subscription service, but for those who can access it (Starbucks offers free access), here is the link:

Spirit Fee Game

And yet, no one complains about prices they pay for computer equipment and services (most fortunately for us in the industry), I suppose because they keep coming down and are perceived to be low enough for the value of the service for the customer. But what it has to do with the actual cost of providing the service is another matter altogether.

Oh, there are plenty of areas where there is little apparent connection between cost and price. Some attract a lot of attention (uninsured medical care jumps to mind), some virtually none (list prices for a lot of technical things; part of this is that nobody actually pays those prices as far as I can tell).

Texas: I would at least like to see a better regime of regulation on this front. Broadly speaking, I have very little issue with letting the market set prices...but I've got an issue when that market ends up rewarding businesses that engage in bait-and-switch tactics to fuel sales. In general, I'd like to see "special surcharges" (the big one here is the "fuel surcharge") put under a microscope...and not just for airlines (I know that shippers assess these charges as well, as do cruies lines). While I do not have a problem with such a surcharge existing to deal with, for example, rare spikes in fuel prices in sensitive industries, I'd at least favor restricting when and how they can be applied (i.e. setting a standard for requiring companies to either bake in or eat oil prices below a certain level and preferably banning hikes assessed after the time of purchase). In particular, I'm thinking of the tendency of cruise lines to set their triggers between $65 and $75/barrel (in the case of a $65 trigger, the price of oil hasn't been below that since 2009).

The charges that were added by Southwest included various flat-rate taxes and fees including the federal segment tax, the 9-11 security fee, and airport PFC's. The 7.5% excise tax was included from the start. Southwest joined Spirit and Allegiant in asking the federal courts to block the new rule.

Dallas Morning News

Thanks for the link PRR 60.

I still have a problem with the idea that Southwest was "piling on" hidden charges that would have previously been included in the original ticket rate. The growing list of hidden costs that were confusing and annoying consumers were related to things like arbitrary fuel surcharges and baggage fees, but Southwest did not levy those fees in the first place. More than anything I'd like Jis to explain to us which US airline he thinks was doing a better job than Southwest of resisting the temptation to unbundle everything into a confusing myriad of secondary surcharges and fees. I'm hard pressed to come up with anyone.

It's true that some of the fees that Southwest charges are of questionable value to passengers, but it's not like Southwest has much control over when they're levied or how they're used. The security fees are of questionable value when compared to the extremely small chance of being on a Southwest-sized aircraft on a Southwest-issued flight plan that is a target of actual terrorism. Even in the heyday of hijackings back in the 1960's and 1970's, when the most we had were early generation metal detectors and anyone at all could legally approach an open gate, it was extremely rare to be on a flight that was a direct target of any terrorist group. For an airline like Southwest the risk/reward equation still probably doesn't add up the same way it would for an airline like United or American.

PFC's as currently managed are also of questionable value in my opinion. Here at SAT we recently demolished an extremely well maintained and renovated terminal just so we could build a brand new replacement terminal with the exact same number of gates and even fewer active airlines. If American Airlines happens to go belly-up or is bought out then this brand new terminal will have no more than a couple of active United gates left in the whole building. Why did we waste all of that money on a brand new terminal that nobody was asking for and the vast majority of our city's visitors won't ever see? I really don't get it.

I can certainly understand Southwest's position about this being a rule that is applied almost nowhere in our caveat emptor society outside of a handful of arbitrary exceptions such as airfare, gasoline, and concession venders. That being said, I can also see the benefit to giving the consumer the total cost up front along with a clearly itemized receipt before the last click. If it's unfair that these rules are only being applied to airfare then maybe the real solution is make them applicable virtually everywhere like they are in Europe?

As Southwest explained in the article it's true that many of the fees that make up the final cost people pay are based on factors that may not be possible to quantify when creating a new nationwide advertisement. Well, that's what happens when you let your supposedly united market devolve into a huge mess of competitive tax districts actively sparing against each other for a dwindling number of tax dollars. As with many of America's problems, you reap what you sow.

Almost every major carrier was [dinged] because they piled on various charges between the time you saw the advertized fare and you bought the ticket. Only Spirit and Southwest complained loudly, while others simply started listing both the numbers up front.

1. What surcharges did Southwest "pile on" between the first query and the final fare?

2. What sort of "loud complaint" came from Southwest regarding changes to fare publishing?

The charges that were added by Southwest included various flat-rate taxes and fees including the federal segment tax, the 9-11 security fee, and airport PFC's. The 7.5% excise tax was included from the start. Southwest joined Spirit and Allegiant in asking the federal courts to block the new rule.

Dallas Morning News

Almost every major carrier was [dinged] because they piled on various charges between the time you saw the advertized fare and you bought the ticket. Only Spirit and Southwest complained loudly, while others simply started listing both the numbers up front.

1. What surcharges did Southwest "pile on" between the first query and the final fare?

2. What sort of "loud complaint" came from Southwest regarding changes to fare publishing?

Sadly, the lords of misrule at the ICC and CAB did more to make a case for deregulation than any group of economists ever could. To be fair, I do fault the enabling legislation for giving them too much discretion...but it's a shame that they screwed up so badly.

Ain't it the truth. It is what is known in highly technical formal terminology as "Shooting yourself in the foot!"

And yet, no one complains about prices they pay for computer equipment and services (most fortunately for us in the industry), I suppose because they keep coming down and are perceived to be low enough for the value of the service for the customer. But what it has to do with the actual cost of providing the service is another matter altogether.

Much of the absolutely wacko things we see going on in airfares is not that far off from what was going on in the 19th century railroad passenger and freight rates that led to the very thorough price regulations that prevailed until fairly recently. Yes the system had many defects, but at least you knew what the ride would cost without having to do any research at all. As it is now, the guy in the seat next to you on the plane may be paying three to five times what you did or one-third to one -fifth of what you did for the exact same thing. That would be the essence of the definition of unfair business practices, cheating, price gouging or any of several other things you could think of calling it that would get you fined or in jail in most other businesses. And of course you know that if you are going between points with little to no competition or demand out of scale to supply you will be paying through the nose, while if you going between points served by several carriers, you may be able to get a seat for less than the cost of gas money to drive the distance.

I see no move by either the carriers or the government to develop some relationship between the cost of providing the service and the price charged for it.

I am reminded of the "segment abandonment" stunts that have been mentioned in places (i.e. booking an A-B-C ticket and purposefully missing the B-C connection because the A-B-C fare was a fraction of the A-B fare).

Mind you, I'm not opposed to there being a certain amount of disconnect between cost of services and cost to customer (such is the definition of loss leaders and cross-subsidization...heck, even an operationally self-sufficient Amtrak demands that profits on some routes offset losses on others), but at the same time some regulation of bucket variations wouldn't be the worst thing to happen to the market.

Sadly, the lords of misrule at the ICC and CAB did more to make a case for deregulation than any group of economists ever could. To be fair, I do fault the enabling legislation for giving them too much discretion...but it's a shame that they screwed up so badly.

Much of the absolutely wacko things we see going on in airfares is not that far off from what was going on in the 19th century railroad passenger and freight rates that led to the very thorough price regulations that prevailed until fairly recently. Yes the system had many defects, but at least you knew what the ride would cost without having to do any research at all. As it is now, the guy in the seat next to you on the plane may be paying three to five times what you did or one-third to one -fifth of what you did for the exact same thing. That would be the essence of the definition of unfair business practices, cheating, price gouging or any of several other things you could think of calling it that would get you fined or in jail in most other businesses. And of course you know that if you are going between points with little to no competition or demand out of scale to supply you will be paying through the nose, while if you going between points served by several carriers, you may be able to get a seat for less than the cost of gas money to drive the distance.

I see no move by either the carriers or the government to develop some relationship between the cost of providing the service and the price charged for it.