Airline fees and a la carte pricing for flights may be highly annoying to passengers, but it’s also proving to be a highly profitable business model. Spirit Airlines, the “low-cost” carrier at the forefront of fees—since 2010, it’s charged upwards of $45 each way per carry-on bag—now averages more than $100 in fees per passenger above and beyond the cost of a round-trip flight.
The Optional Fees page at Spirit’s website cannot be viewed in a glance. You’ll have to scroll down, then scroll some more, then some more, and then a couple more times, before getting to the bottom of the page. The fees include some things you’d assume you’d have to pay extra for (scuba tank: $75, itinerary change: from $115), and some things you’d think would be included (seat reservation: up to $50).
It’s this structure of a la carte fees and services that allows Spirit Airlines to sell flights at cheap prices, sometimes under $20 each way. Considering how much the average passenger pays in fees to Spirit, though, flying with the airline often doesn’t wind up being a “low-cost” experience.
The Wall Street Journal reports that during the first quarter of 2012, the average “nonticket revenue” (i.e., money collected via fees) per passenger reached an all-time high of $51.68 per flight segment. That’s an average of $103.36 in extras per round trip. Considering what the average passenger paid per flight ($76.65), it’s not hard to imagine situations in which travelers have wound up paying more in fees than they have for their actual transportation.
Ancillary fees—anything over and above the mandatory cost of the flight—are responsible for an escalating proportion of Spirit’s revenues. They represented about 21% of revenues in 2009, 34% in 2011, and over 40% in the first quarter of 2012.
While all airlines have embraced fees in recent years, it is believed that no other large domestic carrier surpasses or even comes close to the $50-per-flight-segment average. No other carrier can boast of how quickly fees and fee revenues have expanded either. A 2011 report from IdeaWorks, a consulting firm based in Wisconsin, includes a graph tracing what the average Spirit passenger has paid in fees over the years. In 2006, non-ticket revenues totaled just $4.80 per passenger per flight. By 2009, the figure was up over $25, and in 2011, the average was up over $43. As previously mentioned, today it tops $50.
Looking ahead, what does Spirit have in store for travelers? Yep, more fees. Spirit CEO Ben Baldanza informs the WSJ that the airline “could push ancillary revenue higher with more revenue-management techniques that would replace the flat fees for some services with varying charges.” That could mean that sometimes a seat reservation might cost $10, and during certain peak-demand periods it could cost a lot more. The Associated Press just reported that as of Novermber 6, Spirit will begin charging up to $100 (!) for bringing a carry-on bag on board, but not paying the carry-on fee until arriving at the boarding gate. Previously, the fee was $45. The fee if you pay for a carry-on at an airport kiosk is also going up, from $40 to 450. Checked luggage and assorted other fees are set to rise by $2 to $10 a pop, indicating that the airline’s whopping $100+ average per passenger nonticket revenue for a round trip will be increasing.
It’s worth noting, however, that many travelers—ones who don’t feel the need to have a reserved seat or a giant carry-on bag, most likely—prefer the unbundled flight pricing structure. The explosion of fees won’t bother you if you’re unlikely to be paying many of the fees, so long as the pricing structure means you’ll be paying less upfront.
For that matter, the fee that has drawn the most ire (carry-on baggage) doesn’t seem like as big a deal as it once did. The IdeaWorks study estimated that roughly one in five Spirit passengers paid the fee to bring a carry-on bag on board in 2011. Like it or not, fees for carry-ons are spreading—Allegiant Air just instituted one—meaning that Spirit is something of a (gulp!) trendsetter.
Perhaps we’ll even be seeing more promotional airline videos like this one featuring Spirit’s Baldanza, who in 2010 made his case for carry-on fees while lodged in a plane’s overhead bin: