Will the new regulations protect consumers against misleading advertisements? Or is there some sort of government conspiracy afoot? While many observers welcome changes that promise to bring about more transparency in airline pricing, Spirit Airlines, one of the nation’s leading low-cost carriers, has taken a rather audacious, anti-regulation stance by sending out e-mails like this: “WARNING: New government regulations require us to HIDE taxes in your fares.”
Seen any airfare sales advertised lately? If you have, it probably looks like flight prices went up. But they didn’t.
What’s happened is that a new rule by the U.S. Department of Transportation has taken effect requiring carriers to include all mandatory taxes and fees in their fares upfront. So no longer will you see ridiculously low fares that end up costing much more when you actually go to book a flight. The strategy, relied on regularly in the past by airlines like Spirit to reel in customers, is now officially banned.
For example, before the rule change, an airline might have advertised a $59 flight each way between Los Angeles and San Francisco. But once you tacked on taxes and fees, the price actually paid by the traveler was $69.80. From now on, the only price the airline is allowed to advertise for such a flight is the full $69.80.
The point of the regulation is to make airline ticket pricing more transparent, and to safeguard consumers against any semblance of bait-and-switch trickery. But Spirit Airlines has gone public against the regulations, suggesting that they will hurt the airline business and the economy as a whole. Spirit argues that the rules actually mislead consumers and leave them in the dark about taxes and fees assessed by the government and airports.
“We’re against these new regulations because we actually think it reduces transparency,” Spirit Airlines CEO Ben Baldanza told me yesterday. “We think it makes it harder for consumers to understand what they’re paying for.”
Spirit argues that with taxes and fees being rolled into the base fare, it looks like airlines are raising their prices. For low-cost carriers, which rely on offering super-cheap fares, that could ultimately drive away consumers. Spirit says the new rules are unfair: Why should airlines have to include taxes and fees in their advertised prices when other purchases are under no such obligation?
“Now it’s going to look like airline tickets are disproportionately more expensive vs. everything else consumers buy,” says Baldanza. “That’s ridiculous. If they’re going to do it for the airlines, they should do it for everything.”
But considering the substantial fees that can often surprise consumers once they’ve already settled on what they thought was a low fare, the new regulations seem more consumer friendly than Spirit makes them out to be. If Spirit wants the average traveler to be on its side, the airline has an uphill fight.
“This is one of those DOT rules that has bubbled up from the public,” says Randy Petersen, founder of milepoint.com. “The public was finding out that by the time they made a reservation and got ready to make a payment, it seemed like the price changed.”
Petersen says that the new rules will help consumers determine the actual cost of flying in a flash, not only after jumping through multiple hoops on airline websites. For leisure travelers who choose flights primarily on cost (in other words, almost everybody), the changes are especially welcomed.
What’s been interesting about Spirit’s response is its over-the-top anti-government tone. The airline seems to be deliberately playing off the deep skepticism about Washington regulation these days. “The suggestion that the government has a hidden agenda, that’s good marketing,” says Petersen, who suggested that the move is more about advancing Spirit’s “cowboy image” of being a carrier that operates outside the mold.
In a message e-mailed to its customers and in a giant banner on its website, Spirit accused the government of forcing airlines to “hide” fees inside those fares. “This is not consumer-friendly or in your best interest. It’s wrong and you shouldn’t stand for it,” Spirit said in an e-mail. Another e-mail sent to customers on Thursday was headlined: “The Hidden Tax Sale!” and read, “Instead of providing you our ultra low sale fares in a transparent format, we’re going to have to just provide you with the routes and dates. We promise there are some great fares on those dates though … check them out!”
Spirit’s CEO told me that he believes the new regulations are misguided and could not only hurt the airline industry as a whole, but it could trickle into other sectors of the economy that rely on robust air travel, like hotels, rental cars and tourism.
It’s hard to believe that Spirit is opposed to the regulations mainly out of concern for the well-being of consumers and other businesses, though. For years, Spirit has relied on advertising absurdly cheap $9 fares to gain customers. That is, fares that seem cheap before mandatory taxes and fees are added in, and then optional fees for checked and carry-on baggage, seating assignments, and the like are tacked on as well. If any airline will be hurt by the new regulations, it’s Spirit.
Still, there’s nothing preventing any airline from breaking out those taxes and fees for consumers, either in its ads or when consumers pay their airfare. In fact, Baldanza says that Spirit is planning on breaking out a 7.5% excise tax that was initially included in the base fare, something he said was illegal to separate out until now. “We’ll see if the DOT wants to fine us on that,” he says.
In the meantime, don’t expect to see a crazy $9 fare to Washington, D.C. from Spirit, or any other airline for that matter, any time soon.