A Quick Update on Ancillary Fees

Last week a Congressional Subcommittee met with Spirit CEO Ben Baldanza and Southwest Airlines exec Dave Ridley to have a little chat about the ancillary fee situation.  I was all prepared to write something up on this, until I saw that the Centre for Pacific Aviation wrote a term paper on the topic and covered it better than I ever could.  You can read that here.  A few quick notes:

– Representatives Peter DeFazio and Laura Richardson pretty much had it in for Baldanza from the beginning, apparently interrupting him repeatedly.

– Baldanza has caught a bit of crap for supposedly saying that luggage is “not essential” for vacation (to deflect criticism that everyone carries luggage and, hence, a carry-on fee is unfair).  Shame on ABC for reporting that, since that is not what he said.  He said, in part, “Carrying more than one bag is not necessary for all travellers.”  That is very different.

– I’ll give Spirit some credit because at least they lowered their airfares before imposing all manner of fees, which is how they now claim that fees have lowered total price for many of their passengers.

– For all of the back-and-forth and Congressional blowhardery, there are two genuine issues here:

1) The General Accounting Office (GAO) came out with a report the same day saying that airlines need to do a better job of informing passengers prior to purchase about the additional fees.  This has been my beef all along:  fees are not the problem, how the fees are disclosed are the problem.  Part of this is a GDS problem, so travel agents can’t see the fees in advance.  This will be fixed soon.

2) The government collects a 7.5% tax on airfares and a handful of fees (ticket change, for example), but does not collect the tax on other fees (baggage, for example).  This is why the government is actually angry.  Airlines are, of course, fighting the tax on ancillary fees, but that’s ridiculous.  If the argument is that fees are replacing fares as a means of revenue, they (and, in turn, consumers) are going to have to suck it up.

What’s most annoying is the disingenuousness of the argument of the annoying populist Representatives, who are berating these airlines for trying to make money (gasp!!).  Spirit earns 21% of its revenue from ancillary fees, a fact that outraged the subcommittee.  But, as Baldanza pointed out, their average fare is much lower than other airlines, driving the percentage higher.  Spirit has done a decent (but not great) job at disclosing their fees.  If they can create a website where there is full and obvious disclosure of the final ticket costs, they should be commending for changing an obviously broken business model, rather than harassed about trying to turn a profit.

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