Allegiant Looks to Appeal to Gamblers with Option to Bet on Fuel Prices

Allegiant has quietly slipped a note into a federal filing that says it wants people to be able to pay for fuel price fluctuations after a plane ticket has already been bought. And I like it. I know, you think I’m insane for saying such a thing, but there are some very good reasons why I like this. It really is good for the gambler, er, traveler.

Allegiant Fare Fluctuate with Fuel Price

Let me start by saying that the idea that you can buy a ticket and then be forced to pay more if fuel goes up sounds awful in theory. I mean, people save up for their trips over time, and not having certainty around how much that would cost would really destroy a lot of plans. Had that really been Allegiant’s goal, then this probably would have earned a Cranky Jackass Award. But that’s not what they’re doing. Let me take a snippet from the filing with the DOT itself.

Allegiant is considering a new pricing option for use on its website: when making a purchase, consumers would be able to choose between a traditional “locked in” fare that would not fluctuate, and a lower fare that could change before the date of travel. That lower fare could be reduced further or could increase (up to a set maximum that would be clearly disclosed) depending on changes in fuel price between the booking and travel dates. This would be a non-compulsory alternative for consumers; it would provide them another option for potential substantial savings on their trip costs and would be clearly disclosed and explained prior to any purchase.

In other words, there would be two pricing options. Let’s just throw some numbers around for the heck of it. You could pay $100 for your flight to East Bumblef**k and never have to worry about the price changing. Or you could pay $90 and then have the price fluctuate with the price of oil after. So if oil goes down from when you bought, presumably the price would go down and you’d save money. If oil goes up, the price would go up and you’d lose money. This is perfect for an airline based in Vegas, because it’s a gambler’s dream. (I wonder if they’ll hand out those sad pamphlets about gambling addiction with the sun setting on the cover?)

So why is Allegiant talking about this in a federal filing? Well there’s a proposal that would make it illegal to have post-purchase price changes. Allegiant is arguing that it would be a good thing for consumers and that one of the alternative ways to deal with this issue that has been proposed should be accepted instead. That alternative would not just allow blanket price changes, but it would have three main requirements.

  1. The potential for the increase needs to be “conspicuously” disclosed to the buyer.
  2. The maximum potential amount of the increase must be shown.
  3. The customer would have to proactively agree to the arrangement before purchase.

Why does Allegiant want to do this? Because it allows the airline to sell a lower fare. And lower fares mean more people are willing to fly. As long as the disclosure is clear, then why not have this as an alternative? I can’t imagine myself ever wanting to take advantage of this option, but if others want to, then great. It lets Allegiant better match revenues with costs, and it gives customers the chance to decide if they want to play the game or not.

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31 Comments on "Allegiant Looks to Appeal to Gamblers with Option to Bet on Fuel Prices"

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Wonko Beeblebrox
Guest

> Well there’s a proposal that would make it illegal to have post-purchase
> price changes.

Would that proposal apply to Cruise Ships as well? If so, I _like_ that proposal….

Bret
Guest

Anyone who has gone through the experience of purchasing a ticket with allegiant will tell you that disclosure is not their strong suit. They pull every possible trick to force the consumer to add on unnecessary fees and make it difficult to find out how to pay the lowest fare. It’s downright sneaky. Customers don’t even realize they’ve added these fees. I wonder how this type of policy would factor in? I could potentially see lots of customers buy this type of ticket and be blindsided when the price goes up after ticket purchase.

Eric
Guest

I’ve always thought it would be interesting if airlines sold tickets in terms of gallon of gas. For example, LAS-BLI might be $50 + 10 gallons, sold at whatever price Jet A is on the day of purchase, with refund or extra fee on the day of travel. This is almost what Allegiant is doing.

iahphx
Member

While I like this idea in theory, I think it’s too complicated for consumers, and too complicated to administer. You just have to take your chances on fuel when you buy or sell an airline ticket. If Allegiant is concerned about what fuel will ultimately cost to fly its travellers, they can buy a fuel hedge from Wall Street.

Alex Hill
Member

My biggest concern is how I would know what fuel charge they’re using. If it’s based on the price the airline pays for fuel, that would be very difficult to verify independently, so consumers would have to trust the airline to be honest after the ticket is purchased. That’s a tough sell.

If it’s a transparent formula based on the price of a barrel of oil on a particular marketplace, that could work.

MeanMeosh
Guest
The problem, Cranky, is that regardless of how much merit the idea might have, the bottom line is, there are hordes of travelers who aren’t going to bother reading the T&Cs of the new fare, and then when they’re asked to pay more, complain to the press and the DOT about Allegiant’s “unfair and abusive sales practices”. Sad, but true. Personally, I think this is an interesting idea, but they need to be real careful in how this is marketed, lest they want a PR nightmare on their hands later. The other thing I wonder about is how Allegiant’s current… Read more »
David SF eastbay
Member

Must buying an airplane ticket now turn into playing the stock market? Will Ma and Pa Kettle now need to hire a broker just to buy a plane ticket?

“Should I buy now?”

Sounds like they ran out of things to add a fee for so came up with this idea to make more money.

oldiesfan6479
Guest

We should also mention that Allegiant is cutting loose all of its ground staff (counter, ramp, etc.) at Vegas, and outsourcing their jobs. Oh yeah, they can re-apply for their own jobs with the new handler (roll eyes emoticon). Alaska at Seattle, anyone? Disclaimer: I am the farthest thing from a unionista, but this sucks!

jaybru
Member
Cranky, stuff like this makes it 110% certain you’ll never run out of material to write about. As to the issue, what did they do, hire someone from Alamo, whomever? “Would you like to prepay gas, at our very, very reasonable price per gallon, which today is 17.89/gallon, or buy gas on your own (of course, we think you’re not smart enough to do that) and bring the car back full?” Buy now and lock in that wonderful price! No thank you, Allegiant. I don’t trust you, what you might charge me down the road when I fly. Fuel issues,… Read more »
Jim
Guest

Why not just ask each customer to bring ten gallons of fuel? Those who fail to do so can purchase it at the airport.

But on a serious note, I like this idea. It simply gives more options. It’s like purchasing trip insurance vs. taking a risk of cancellation.

Joe
Guest

…because I can’t get 10 gallons of Jet A into 3oz bottles.

(also, as others have pointed out, who knows what they’re actually paying–airlines are never paying FBO prices for their fuel; they’d all go out of business if they had to pay $7.02 for Jet-A at LAX)

David M
Guest

Sure you can. You just need 427 of those 3oz bottles. The problem is getting them all into that one quart size ziploc bag.

David
Guest
Suppose the fixed fare is $100, but the variable fare is $90,with the possibility of increase or decrease as flight date nears. If I pay $90 now, and the fare goes down, I get a refund which is great. If the fare goes up, am I then obliged to hand over the extra cash, or is it a case of “If you don’t pay up then you can’t fly, but we won’t force you to pay up” ? If it’s the latter and the fare is a restricted fare, then it leads to a kind of cheap cancellation clause. If… Read more »
Nick Barnard
Member

Excellent point on the cancellation, although since it is a contract that you’ve agreed to they probably can put in that they’ve got the right to charge your credit card. (Just like the rental car companies have the right to make you purchase fuel if you didn’t fill up the tank.)

barowsky
Member

I see a new fee for the “convenience” of having a set fair.

Nick Barnard
Member
I think this is a great idea, and one I’ve been rallying for for a while. First, lets look at one of the other points to compare this against: driving. Most people pay for the fuel as they use it. That means that if you’ve committed to take a vacation (and made a hotel reservation, and tour reservations and bought theme park tickets.) you’re on the hook for the variation in fuel costs. Second, the model of you buy a ticket with every possible service under the sun except liquor and headsets for the movie is on its death bed… Read more »
gseual
Guest

prices should go down as they move the ground handling at vegas to a vendor ridding the company of pesky employees

kelty
Member

When fuel prices went down, I didn’t note any airlines lowering their fares. Is this a one-way street?

Nick Barnard
Member

Not amazingly. Although pricing this way makes it a two way street.

TAG032562
Member
Cranky, you have lost your mind and common sence! If you had any to start with? I say this because, you did not like Delta Airlines making Air Miles not dissapear and now you want people to gamble with their money on a cheap money hungry fee grabbing noncustomer service airline? Have you lost all common sence? I wonder if because you have such a vast airline miles collection plus, fly more than the common person in coach class that you may have forgot how it is to live on low income and pay check to paycheck? It seems Continential… Read more »
Nick Barnard
Member

I’m sorry, you’re living paycheck to paycheck, but also flying internationally on Turkish Airlines?

Something doesn’t line up here.

ptahcha
Guest

I guess Thomas is OK with flying American, Delta and Sun Country, possibly Virgin America.

shane
Guest
I am not an economist, but I think problem with the scheme is that this is a market-based solution without a true market. The flying public is the demand market but there is no supply market if only Allegiant is doing this. You can’t look at other carriers to compare fuel prices and markup. That means that Allegiant can manipulate the “cost” of fuel depending on their actal price and the number of flyers who purchase the flexible option: a lot of flyers purchasing flex this month, add an extra 10% to your markup. Fewer purchasing another month, cut your… Read more »
SEAN
Guest

If oil prices go up you pay more with this flex fare option & if oil prices go down?… The airline can still pocket a good amount of cash. I wouldn’t hold my breath on recieving any refunds do to the cost of sending them out.

Have you sene the cost of oil futures since the troubles in libia began? It broke $100 per barrel a few days ago & what will that do to airline fares?

Scott
Member
Oh please; this just means that we’ll end up with more situations where you’re paying a huge portion of the fuel yourself; it’s a false advertising, and for US airlines a convenient fiddle to get around having to pay the US air transport tax (which only applies to the base ticket). It’s actually possible on some airlines already to book a flight where your fuel surcharge exceeds the fuel cost (Surcharge > (miles * fuel-cost/ASM)) AC YHZ-LHR jumps to mind, and now that AC have silently re-added a fuel surcharge on transborder flights, I pretty much guarantee that for short… Read more »
Tomstrr
Guest
Eh? Trust an airline (especially Allegiant) to fairly and correctly administer a scheme that would allow them to charge you more money after you are committed, based on metrics that they fully control and can’t be independently verified? What could possibly go wrong? :) This proposal is, at BEST, an attempt to avoid the free market by obscuring the cost of flying on Allegiant. And hey, dump off their risk and mismanagement costs and pick up some coin on the vigorish! I guess its good that Cranky says he won’t actually buy those “historic” bridges, but getting his friends and… Read more »
Jon
Guest

Actually I think the guaranteed option is more like gambling. Using Cranky’s example numbers you are paying $10 to bet that the price of fuel will go up more than $10. If the price of fuel stays the same: you lose. If the price of fuel rises less than the $10 spread: you lose. If the price of fuel goes down: you lose. With the flexible option, you pay what it actually costs, no gambling at all.