$100 for a carry-on?
Spirit Airlines is charging high fees to encourage customers to check their bags.
Is Florida's Spirit Airlines (SAVE) trying to anger customers just in time for the holidays? This week, the low-cost carrier quietly implemented a change it first announced in May: It's charging up to $100 for large carry-on bags brought to the boarding gate and meant for the overhead bin.
On its web site, Spirit says it empowers passengers "by offering ultra-low fares with a range of optional services -- including bags -- for a fee, allowing you the freedom to choose only the extras you value."
Management seems to understand its luggage fee hike is not popular. "What's most important is that we truly don't want any of our customers to have to pay $100 for a bag," airline spokeswoman Misty Pinson told the International Business Times. "The fee is intentionally set high to encourage customers to reserve their bags in advance, and it is meant to deter customers from waiting until they get to the boarding gate."
The fee, which Spirit hiked from a previous $45, is only for large carry-on bags declared at the gate. Passengers won't have to pay for bags they can safely stow under their seats.
Analysts believe Spirit's high baggage rate is part of an effort by many discount airlines to re-train customers' behavior regarding baggage in order to keep operational costs down and planes on schedule.
"Spirit certainly marches to the beat of a different drummer, in that they are a very pure, low-cost carrier," says Jay Sorensen, president of IdeaWorksCompany, a Milwaukee airline consulting firm. "They have a core customer base that understands how they do business. And these customers appreciate the trade-off between fees that might be charged in the low-base fare charged by the airline. "
IdeaWorksCompany, along with the global reservations and travel technology company Amadeus, recently estimated that airline ancillary revenue -- that is, the money generated by airlines beyond the actual movement of passengers from one destination to another -- will reach $36.1 billion globally this year. And within the United States, 20% of that ancillary revenue comes just from baggage fees. Domestic airlines reportedly made $3.4 billion in revenue from checked bags in 2011 -- compared to $464.3 million in 2007.
Given those soaring baggage rates, Sorensen (who, for disclosure sake, notes Spirit is not a client of his company) says Spirit and other low-cost airlines present a trade-off to their customers. "They can come in with this kind of quid pro quo offer to the consumer saying, 'OK, yes, we do charge fees, and if you want extra convenience and comfort, there will be a charge for that,'" he says. "'However, if you can get by with the bare minimum, we're going to offer you a fare that the others simply can't touch.'"
While a core base of air travelers might understand the reasoning behind Spirit's actions, observers wonder whether the general public will be as forgiving.
"Unless you're a very, very large brand like Apple (APPL) and Google (GOOG), you really don't have the money to change consumer opinion," says Darrin Duber-Smith, a marketing professor at Metropolitan State University of Denver.
"You can maybe change the opinion of a very small target market, but it's not necessarily something that an airline can do," he says. "Now the industry can do it, as a concerted effort through the association. The industry can certainly do some things that might alter consumer perception. But to think that one small airline with very little brand equity can do that is I think a bit of an overreach."
But both Duber-Smith and Sorensen believe consumer anger over higher airline baggage fees will fade. Earlier this month, the U.S. Bureau of Transportation Statistics announced domestic air fares rose to $385 in the second quarter of 2012 -- up 4.1% compared to the same time a year earlier. And as air travelers deal with higher fares, they will also become accustomed to the new baggage rates -- especially as the more traditional U.S. airlines like Delta (DAL), US Airways (LCC) and United (UAL) try to remain competitive with their low cost rivals.
"The word here is transition," says Sorensen. "I don't expect the messiness to continue forever. I think that, over time, consumers will begin to accept the new normal and airlines will get better at presenting this information in a fair and transparent manner."
More on Top Stocks
I never understood why ANYONE would want the thankless job of flight attendant. Way too many rude narcissist "special" passengers that have made flying an unbearable chore. Those large/oversized bags do not belong in the cabin and should have been stopped at the boarding gate to begin with! Charge away!!! Airlines need to stop treating their employees as disposable and afford them the same respect as their grossly over-paid CEO's and top managers.
Essentially with this move Spirit believes that its passengers' time is of little consequence, and they also believe that their passengers are devoted-enough to not consider other low-cost alternatives that do not charge either carry-on or checked bag fees. While there may be little or no competition from some of the smaller airports that Spirit serves, there is plenty of low-cost competition at many other airports too. For instance, Detroit to Denver is served by two other low-cost carriers that don't charge for carry-on luggage or for checked luggage up to one or two bags either.
Since DIA is a hub airport for both Frontier and Southwest, and other major carriers are also forced to compete there too, if you can spare that hour waiting in baggage claim flying Spirit non-stop, you can now easily spare that same hour connecting through DIA and taking your luggage aboard Spirit's competitor's aircraft for free instead.
My guess is that this rash move will eventually backfire for Spirit as many of their customers try the alternatives and discover that all of the trouble at Spirit adhering to their crazy rules and fees isn't worth it on a time basis or on a cost basis either.
So, usually if it's too big too lift, then it should be in the belly. I applaud Spirit for charging for carry ons, and wish all airlines would start to do the same. Would make boarding so much smoother, and definitely faster. You Americans, are so cheap these days, you expect to fly all over the place for peanuts, and then think you deserve all the bells and whistles for free as well. Wake up people, jet fuel is expensive, and the more weight on an airplane the more fuel is burned to carry that weight. Passenger carrying airplanes, are for carrying passengers. If you feel like you have to carry everything, then pony up, or go with fedex and UPS. Too bad your bag will go with them, but not you. You all want cheap tickets, then expect to pay for everything else.
I flew Spirit once......never again....I can do better rate wise AND service wise
and I do ship my baggage ahead via Fe Ex and it's waiting at my hotel...a tip to the concierge is way cheaper than the $$$$$$$$$$$$$$$$$ that airlines are charging...my carry on consists of my laptop and travel documents and that is it...
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
The solid report comes a month after the retailer closed all of its Canadian operations.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.