This week, Spirit Airlines, mad about new airline disclosure rules, started adding a $4 “unintended consequences of DOT regulations” fee to ticket prices. It’s just the latest in a salvo of complaints by airlines over new fare disclosure rules they feel are unfair.
Spirit Airlines isn’t happy with the new rule requiring airlines to include all taxes and mandatory fees in the quoted airfare price and posted a big “Warning!” sign pop-up on the carrier’s website making that quite clear earlier this week. The pop-up is gone now but the information is still prominently displayed, urging consumers to contact their Congressional Representatives to complain.
In a direct attack on the new rules Spirit says “If the government can hide taxes in your airfares, then they can carry out their hidden agenda and quietly increase their taxes. (Yes, such talks are already underway.)” on their linked web site, keepmyfareslow.org.
Spirit believes that with the total price on display up front, it looks like airlines are raising their prices which could drive away consumers, something a low-cost airline can not afford.
“We’re against these new regulations because we actually think it reduces transparency,” Spirit Airlines CEO Ben Baldanza told Time this week. “We think it makes it harder for consumers to understand what they’re paying for.”
The new regulations of airline marketing also allow passengers to wait as long as 24 hours to pay for a reservation, a huge change from policies airlines have requiring immediate, nonrefundable payment for discount fares.
Here is where they might have a point: its a trade-off of sorts.
Airlines often struggle to fly full planes and need to have them full to make a profit. The airline gives a discount to attract buyers and expects that seat to stay sold in return.
Spirit CEO Ben Baldanza said in a statement that “the new rule takes seats out of circulation, albeit temporarily, limiting the inventory for people willing to pay on the spot. As a result, he said, the airline now has to spread costs over fewer passengers, and add the $4 fee” reported the Las Vegas Review-Journal.
Confusing? Looking at this from a different angle might provide some clarity. This is an issue that cruise lines, exempt from disclosure rules, have begun dealing with recently also.
Traditionally doing what DOT rules are having airlines do just now, travel agents or passengers booking directly could put a courtesy hold on a cruise cabin to lock in the price and availability for a given period of time. That took the cabin out of the available inventory for others to choose from, much like airlines are being forced to do now. Affecting available inventory and pricing even more, huge blocks of cabins on a given sailing could be held out of available inventory for a proposed group sailing, artificially inflating occupancy levels.
On the other end, cruise line cancellation policies were more generous in the past, allowing passengers to book up to a year or more in advance and cancel just before final payment with no penalty. Cancellation charges started on the day final payment was due and increased as the date of sailing came closer, to where if passengers canceled within 7 days of sailing the cancellation penalties would be as much as was paid for the booking. Now, that 100% penalty time is happening farther out from sailing, giving the cruise line more time to sell that cabin to someone else and further discouraging passengers from cancelling.
A good example of what the airlines are talking about can be found in new cruise fare options aimed at reducing those cabins that have been taken out of the available inventory but are not really sold yet.
Carnival Cruise Lines Early Saver Fare is a good example.
In world of seemingly unlimited deals and offers with pricing all over the board, Carnival guarantees the Early Saver Fare to be the lowest advertised fare and reduces the price if a legitimate lower price is found.
In return, the buyer agrees that the deposit is totally non-refundable, few changes can be made to a booking without incurring a $50 per change administrative fee, and standard cancellation penalties apply, much like reduced fare airline tickets were before the disclosure rules set in.
Airlines contend that they are being singled out as other travel products including hotel rooms and cruise vacations that commonly advertise tax-off pricing and are not affected by the rule. They are correct on that point.
Transportation Secretary Ray LaHood does not agree though, calling the regulations common sense in his own return attack.
“This is just another example of the disrespect with which too many airlines treat their passengers,” he said reports the Chicago Tribune.
On the other hand, if how discount air carriers do business keeps them in the air, at low prices, should we complain? Who really ends up losing here?
Flickr photo by redlegsfan21