Spirit’s Marketing Chief on Fees for Optional Items (Across the Aisle Interview, Part 2)

And we’re back with Spirit’s Chief Marketing Officer, Barry Biffle. Yesterday we dug in on the new routes out of Chicago and Vegas. Today, it’s time to talk fees. Many of you love to hate fees, but as long as they’re properly disclosed, then I see no problem at all with this kind of model. Here’s what Barry has to say. See a few of my comments at the end as well.

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Cranky: Now what about Vegas? People have long thought of Southwest as the low fare airline, and you’re coming into Vegas-West markets where Southwest has long ruled the roost. But you think that Southwest’s fares have risen to the point where there’s room for a lower fare operator?

Barry: Well, we added LA last month. You’ve still got Delta, US Airways, American, and United. There are plenty of Across the Aisle form Spirit Airlineshigh cost guys. But we do have lower costs than Southwest. We also offer a different product. Southwest would actually go out and tell you that everything is free. They tell you bags are free, but what they really ought to say is that you’re subsidizing people who want to check bags. It’s like when you go out to dinner with friends and someone orders a really expensive bottle of wine. When you split the bill, you’re paying for it whether you drank the wine or not.

In 2006 our total revenue per passenger was $109. We actually had less than $5 in non-ticket revenue. In 2010, our average total prce including options was $112. It was only up $3 but our non-ticket revenue was $35. We don’t nickel and dime. What we’ve done is allowed people options. Most people are figuring out that we’re a much more consumer-friendly model. But we also cater to a different clientele. If you’re the guy who always orders that wine, you like the Southwest model.

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Cranky: Let’s talk about one of the more controversial moves. You’ve started charging for people to bring carry-on bags.

Barry: We were averaging 17 gate-checked bags per departure at LaGuardia. The reason is because airlines lie to you, not Spirit, well, they don’t really lie but they’re allowing you two bags when there isn’t enough space above all the seats for everybody to jam a bag up there. If it’s a full flight, there’s a backup, nowhere to put the bag so its gets checked. It delays the flight and the customer gets mad. Will it be checked to my connection? Wait, I’ve got to get my medicine out. We don’t have those issues anymore. We’ve ended up with a better customer experience. Our total turn is down by 7 minutes because I’m not gate checking bags. Are we evil or are we actually the best option for consumers?

Cranky: Some people think that you’re being sneaky and trying to hide fees from them.

Barry: I want you to know what’s optional and what’s not and what’s included and what’s not. Part of the challenge is that there are so many requirements for disclosing this or that (not just in the airlines) and so people don’t pay attention. I don’t want to deceive anybody. I want people to feel good about the purchase that they bought. We just think the airline industry operated forever in a manner that didn’t give options. If you go way back, we assumed everyone wanted a meal.

At the end of the day, if you take a Haitian who lives in South Florida and they immigrated here 10 years ago and they’re living the American Dream and they want to go see their mother back in Haiti, who am I to say they need bags or they need a TV or they need food? We believe it’s our job to get them the cheapest possible way to go see their mother because otherwise they might not be able to afford it.

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Cranky: But disclosure is a lot tougher for sales that aren’t through Spirit directly. And you do sell through third parties.

Barry: I think there’s frustration with the third parties. If they sell the ticket they should be obligated to tell our policies. How many times have you gone to Expedia and then you get to the hotel and there’s a $15 a day resort fee and it’s mandatory. Wait, so this is required of me and you didn’t tell me this? But they should have just said it.

There is an issue with people who haven’t flown us and bought us through a third party. The third party causes the most challenge. We like that distribution partner, but we’re not in all of them. We’re comfortable with the partners we have and we see value in it. We’re just trying to isolate the specific issue you mention. We’re not going to go to them with a big mandate, but at some point we’re going to have to figure out a way for them to disclose better and better present the options to the customer.

But the third party is a separate issue. When we changed our model in 2007 in a big way, there were people who had flown Spirit before who were not familiar with the new model. I’m not aware of a complaint we’ve ever got from Haiti, but routes that we had flown before, there was a higher propensity. There definitely was a conditioning of previous customers on previous routes. Last year was a good example. When we announced carry-on fees, we had these huge banners, maybe we went overboard. If I’m going to carry 700,000 people a month, if I get 99 percent, if 1 percent of people don’t know, that’s still a large number of people. I don’t know how we get every last person conditioned, but I’m committed to trying to get there.

Cranky: You talk about places like Haiti, but those are markets where people usually do bring a lot of bags when they go back to their families. There hasn’t been any backlash?

Barry: What we normally do to illustrate it to people is explain that your fares are going to drop so much that you can afford to go back and forth. Before you were paying $700 and you wanted to make that trip count, so you would take a gazillion things back with you. But now they don’t need to bring as much stuff. We see checked bags drop the longer we’ve been in a market.

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And that was the end of the interview. I tend to agree with just about everything Spirit says, but there are a couple practices that I don’t like. First, Spirit charges an $8 passenger usage fee each way. This applies to everyone unless you buy at the ticket counter, so that’s how they get around it being considered optional. I’m fine with that, but I want a disclaimer that shows me that I can save $8 each way if I go to the airport. It’s not very clear.

The second issue is with opt-in versus opt-out. As Barry mentions, people do get overwhelmed with disclosures and end up missing things. So when, for example, travel insurance is already pre-checked for me and I have to opt out, that’s a little tricky in my mind. How many people fail to uncheck it even if they don’t want it? Of course, this will be going away with the recent DOT regulation change, so it won’t be an issue for much longer.

Other than, I like what Spirit does. I have no clue if they can make big city markets work, but hey, they think they can and the results have been promising in those cities with the trial balloons they’ve sent up so far.

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59 Comments on "Spirit’s Marketing Chief on Fees for Optional Items (Across the Aisle Interview, Part 2)"

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Stef
Guest
I’m all for free markets, but the airlines are one of the few industries where they take price structures and policies way beyond what I as a consumer find comprehensible and appropriate. But it’s true that it’s partly the vendors’ fault to make it intransparent. Probably it is all OUR fault as consumers, because we put up with it, and really do go for the $97 ticket instead of the $102 one. Another example is gasoline. Why does the price have to change every day? The world market price for wheat also changes by the minute, but we don’t see… Read more »
Milind
Guest

I seem to recall the DOT raising a stink about the proliferation in fees largely being an attempt to get around paying taxes; Did you get to ask Biffle about that?

For example, that “passenger usage fee” sounds like a tax avoidance tactic to me. I can’t really see any other reason for it, and the fig leaf to claim that it’s “optional” just makes it more blatant (since what other airline charges you less to get service at the airport?).

David M
Guest

Allegiant also charges a convenience fee for booking online or over the phone, but not at the ticket counter. By saying you can purchase at the airport they can claim the fee isn’t mandatory, but the way to not pay it also happens to be the least convenient way, one that few people will take advantage of. Ryanair does a similar thing with their purchase fee that is only waived if you use a specific type of relatively uncommon credit card to pay for your tickets.

tharanga
Guest

Wait – the only way to avoid paying that fee is to buy your ticket at the airport? Isn’t that more expensive for the airline to process than an online booking?

I can understand some of their other fees (so long as they’re disclosed in big letters), but the fee to buy a ticket seems indefensible.

Dan
Guest

I hate to say this… but IMHO, this interview actually makes spirit look good. First, he didn’t try to PR-spin his “fees are good” message with wordy mumbo-jumbo that makes it sound like a press release. Second, I was surprised to hear him say that they are trying to communicate their fees as much as possible. (And cranky didn’t call him on it, so I assume they actually are.)

Nick Barnard
Member

I just walked through booking a Spirit flight.

The baggage fees were very clearly explained.

The charge to select your specific seat? I thought for the longest time that was something I _had_ to pay to fly, theres a little 10 px font line stating that you can skip it and they’ll assign you a seat at the airport. (This is on a page dominated by 18 px font..) Beyond that and the passenger usage fee, thats the only thing that I didn’t think was fairly disclosed..

Bill Hough
Guest

Dan: “I hate to say this… but IMHO, this interview actually makes spirit look good.”

Sprit: “We don’t nickel and dime.”

Me: yeah, right. Bag fees, checked bag fees, “passenger usage” fee, default opt-ins on travel insurance, boarding pass print fee, etc.

It’s their airline, they can do what they want, but don’t insult my intelligence by saying “We don’t nickel and dime.”

Nick Barnard
Member

Well nickel and dime means hidden or unexpected fees. An Biffe sys he wants the fees to be disclosed and unexpected. Which for the most part they are.

Bill Hough
Guest

Nicholas Barnard: “Well nickel and dime means hidden or unexpected fees.”

The nickel-and-dime business model is still somewhat new in the airline industry. Prior to about 2008, you paid one fare and expected the basics, liked the right to bring along a suitcase for no extra charge, to be included. I argue that many people still expect to pay the posted price and not the nickel and dime fees. And there’s simply no excuse to have to opt-out of travel insurance.

Nick Barnard
Member
Bill Hough: “The nickel-and-dime business model is still somewhat new in the airline industry.” Agreed. “I argue that many people still expect to pay the posted price and not the nickel and dime fees.” – If they’re booking through Spirt’s site (the only one they control) they’re completely not paying attention. There is clear and fair disclosure. “And there’s simply no excuse to have to opt-out of travel insurance.” This really depends on their other policies. Many airlines include insurance like services via their normal policies. If I’m already covered under another policy, or wanting to take the risk myself… Read more »
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David SF eastbay
Member
What’s with Haiti that it was mentioned twice? So if LGA was having a lot of gate check bags, how were other cities in the system? Are people paying overhead compartment fees system wide because of one airport? If so all that does is give Spirit a reason to charge everyone at all cities. They and airlines like Ryanair are like a grocery store and people must remember that. You don’t walk into a grocery store and pay $100 and get to walk around the store and fill up your cart with whatever you want. You have to pay for… Read more »
MR. Tim
Guest
Beg your pardon, but if grocery stores operated like Spirit and Ryanair, you’d have to pay an access fee to get through the door, a cart rental fee, a convenience fee if you didn’t use the self-checkout and you’d have to bring your own bags or pay extra for each. The latter two are especially relevant to the entire baggage fee discussion. By the same argument that Mr. Biffle uses, those who expect store employees to ring up their purchases and have their groceries placed in bags are being subsidized by those who don’t. But those supermarkets who from time… Read more »
Nick Barnard
Member

So why shouldn’t I get a discount for using the self checkout at a grocery store? (Or Self checkin at an airline?) It saves me time, since mostly I purchase somewhere around fifteen items. I’ve gotta take them out of the cart, so running them over the scanner and putting them in the bag is worth it to me not to wait in line..

Just because its always been done one way doesn’t mean it should always be done that way, nor are other ways wrong..

David M
Guest
What Spirit, Ryanair and the legacy airlines have attempted is to alter the reasonable expectation of having one’s self and a limited amount of one’s belongings being transported to a destination for the price of an airline ticket. I think this is a key point here. With Spirit’s fees, I don’t think you can expect expect to be able to travel without paying a baggage fee on any trip much longer than a weekend trip. It would be interesting to see what percentage of Spirit’s passengers end up paying some sort of baggage fee (either checked or carry on). That… Read more »
smitty4240
Member
To Mr. Tim’s comparison of Spirit to a grocery store: Actually, there are similar concepts at work here. I don’t know where you shop, but I tend to go to a large-chain grocery that caters to the mainstream shopper. Recently, a Fresh Market opened very close to my house- but I’ve only taken advantage of it once. Why only once in several months? The staff is very friendly and abundant, the layout is appealing and inviting, the gourmet selections are enticing, it’s never very crowded, etc. So why am I not here every time I need a grocery item? Simple-… Read more »
smitty4240
Member
To shed a little light on the gate checks/carry-on fee program: As Barry said, the last-minute gate checks were killing Spirit on our turn performance in most of our markets, especially the domestic ones. The culprit is no secret; as a product of airlines’ checked baggage fees, people were attempting to carry more and more items onto the airplane. By the way, someone mentioned in another comment the airlines’ inability to police the passengers bags before they get to the gate- next to impossible. People were hiding them from the agents at check-in, having their kids carry them through, leaving… Read more »
Erik
Guest
Mr. Biffle uses a far-fetched analogy to justify fees for checked bags (or any bags). What does it really cost the airline to handle your bag — or for you to put it in the overhead bin? The nickel-and-diming isn’t the reason why I won’t fly Spirit, ever. It’s this — http://www.seatguru.com/airlines/Spirit_Airlines/Spirit_Airlines_Airbus_A320.php — 28 inch seat pitch. I would have loved to hear Mr. Biffle’s comments justifying the most-crammed planes to fly anywhere in the world. All that said, I do welcome Spirit on the Las Vegas – San Diego route. Currently Southwest has a monopoly on that route and… Read more »
Ryan
Guest
It costs more than you think to carry a bag. Assume it’s 30 pounds which is the standard weight of a non heavy bag in the industry. For every extra 7 pounds of weight on about an hour long flight on an average aircraft (737), it takes an extra gallon of fuel to fly. For a 30 pound bag you need an extra 4.3 gallons of fuel. At about $3.20 a gallon which seems to be about average for jet fuel right now, it costs you an extra $13.71 to fly that bag. Then you can factor in the costs… Read more »
smitty4240
Member
I’d say Mr. Biffle’s justification for that 28-inch pitched seat is a simple one: it’s enough seat for lots of people. Did he promise you a luxurious business-class seat, only to sell you the “bleacher special”? No. He promised you basic transportation, he provided you basic transportation. Now, if you’d prefer the extra room and seat pitch, Spirit offers a minimum of 4 “Big Front Seats” (a business-class seat without extra amenities) per aircraft as an upgrade…and I see many flights with these seats available right up until departure time (which, as a good business practice, Spirit attempts to sell… Read more »
DesertGhost
Guest

To me, disclosure is the key to the whole fee debate. Conceptually, I like Frontier’s model the best; but to me, the presence or lack of fees is far less important than knowing up front what is or isn’t included in the basic fare and how much each additional item or service costs.

Mark
Guest
I’ve got a real problem with his assessment of SWA’s subsidizing free bags.. while its no secret that WN doesn’t charge for the first two bags, its a bit of a leap to draw a conclusion about the differences between Spirit and WN over a “bottle of wine” bill-split. I’ll explain. Let’s book a flight from Dallas to Los Angeles on Spirit and Southwest. To take full time advantage of the trip, let’s book it in advance for a roundtrip on October 28th, returning on the 31st. For my itinerary on Spirit, I’d be departing DFW at 9:35a on flight… Read more »
James
Guest

Sure, that’s one data point. But many other times Spirit will indeed be lower than Southwest.

Also, you still are subsidising other people’s bags if you don’t bring any yourself by definition (dividing the total cost of handling all bags by all the passengers on the flight. The ‘value’ of a ticket without checked bags could be $250, but there’s no way to know).

john
Guest

so if they charge $5 for a boarding pass at the counter, but don’t charge you for buying ticket at counter, they’ve effectively they’re screwing you

James
Guest

Go buy a ticket at the counter, get out your laptop and check in online.
It is possible to get around these fees, but only if you are willing to put in the effort

tharanga
Guest

I agree with him that checked-bag fees cause problems in the cabin, with too many carry on bags, but I maintain that this problem would go away to some large extent if the airline staff did a better job of policing the number and size of carry-ons.

Megan
Guest

I have to admit, I like that the airline gives the passenger the choice to utilize the paid service. If you don’t want to pay the fee, don’t check the bag. Granted, I would rather check my bags without any fees but I respect the route the industry takes to maintain low cost ticket fares in a down economy. Gas prices have skyrocketed and I’d rather take the bag fee over the difference in fuel cost. Its just good business. People aren’t going to stop flying, the market will remain.

Sanjeev M
Guest
I’ve found that only U.S. passengers care so much about seat pitch and width, particularly for domestic flights. Granted our domestic stage lengths are longer than most. I feel that if the US Government had implemented unrestricted international transfers and reform visa policy to actually encourage tourists instead of taxing them, the legacies would have covered the $300-400 million that they were losing a few years ago and still have decent sandwiches and first bag free today. Granted our fares are some of the lowest for their stage lengths (adjusted for level of income) but air travel has reached a… Read more »
James
Guest
Sounds good, but most of those ideas won’t work too well in the US. Most domestic travel is not for foreign tourists (international flights are different) but rather for US tourism or business. The US government may be hurting airlines, but I feel that so much competition and capacity is the thing to blame. Even down to 4 legacies + Southwest + other carriers (Spirit, Frontier, Alaska, JetBlue etc) there is still enough competition that airlines cannot really raise prices unless they have a near-monopoly. Adding domestic widebodies can help a bit, but they are only suitable for flights where… Read more »
David SF eastbay
Member
Since Spirit will be coming to the bay area I may be able to see these ads I’ve heard about. I hear ‘tasteless’ mentioned but isn’t most things you see on TV these days tasteless? I’m sure there ads must be on youtube, but I’ve not been bored enough to ever look. Here’s a question for those that have flown Spirit. If you pay to put something in the overhead, how is it shown that you did? Smitty4240 said – “””””you can actually place your item in the overhead even if you didn’t pay for it…but you may need to… Read more »
smitty4240
Member

David- yes, if you purchase a carry-on, you are provided documentation showing that. And I agree- a savvy traveler should attempt to pack wisely on NK- if you do so, it can save some cash and make traveling on NK as economical as possible.

frank
Guest

Barry: Well, we added LA last month. You’ve still got Delta, US Airways, American, and United. There are plenty of high cost guys. But we do have lower costs than Southwest. We also offer a different product. Southwest would actually go out and tell you that everything is free.
=====================================================

And, why is your costs lower? Spirit has “at the bottom of the industry” pay scales. A first year pilot at Southwest makes MORE then a 15 YEAR pilot at Spirit.
His response was typical Management style PR. Passengers subsidize? Should of added YOUR EMPLOYEES as well.

frank
Guest

First year: CAPTAIN.

smitty4240
Member
You need to check your facts frank. I suggest airlinepilotcentral.com- look to the right of the page and you can check pilot-related information about individual airlines (including pay rates). Nowhere will you be able to spin a first-year pilot at WN making more than a 15-year pilot at NK– even if that 15-year pilot stayed a First Officer (highly unlikely). Also, please keep in mind that there is no such thing as a first-year Captain at any US legacy or LCC; we work under a seniority-based system and you simply don’t see it. While it is true that WN pays… Read more »
frank
Guest

http://www.airlinepilotcentral.com/airlines.html

we all RESOURCE the web to get our facts. Here’s MY source.

smitty4240
Member
Great! We’re on the same page as how to access pilot pay rates. Now, please share with us how you figured that a first year pilot at WN makes more than a 15 year pilot at NK. Here’s my take: 1st year WN ($56/hour at 78 average credit= $52,400/yr.) 15 year NK ($152/hour at 78 average credit= $142,200/yr.) **The first year rate at WN is an FO rate; there are no first year CAs at WN. Heck, there are no 5th year CAs at WN. **The 15 year rate at NK is a CA rate; there is only one 15th… Read more »
SWflyer
Guest

When a 7 year first officer upgrades to captain, they return to the bottom of the captain payscale making them a 1 yr captain, not a 7 year captain…

At SWA, a fresh upgrade starts the CA payscale at $185/trip (~55 minutes) while 15 year CA at Spirit apparently makes $152/hour… according to both of you guys source. Spirit’s CA’s payscale is almost even, step-to-step, with that of SWA’s first officers.

smitty4240
Member
Not true at most US carriers, including NK. When a 7-year first officer upgrades, that pilot is now paid as a 7-year captain. IOW, it defines one’s time with the company, not time in the seat. Virgin America went against the grain a few years ago and paid their pilots differently (the start-over method), but that was changed a couple of years ago- most likely to quell the unionization possibilities. My post here was never to claim that NK pilots do indeed make what WN pilots do- NK pilots still lag behind those rates (as do everyone else’s). But Frank’s… Read more »
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