Is It Wrong For Airlines To Raise Baggage Fees Over The Holidays?

I don’t think there’s an airline which is more transparent and unapologetic about their fee structure than Spirit Airlines. And I mean that as a compliment. Are they for everyone? Nope. But they have really low fares and even with all their fees are typically still less expensive than the competition.

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Spirit & Frontier raising bag fees this holiday season

Spirit is raising bag fees this holiday season:

  • The price increase is valid for travel between December 16, 2015, and January 4, 2016
  • With this increase we’re seeing the price of checked bags go up by $2 this holiday season, regardless of whether you pay for your checked bags when booking the flight, at online check-in, or at the airport

Frontier is being a bit more drastic in raising their baggage fees, with larger increases and also a greater range of applicable dates:

  • The price increase is valid for travel between November 19, 2015, and January 5, 2016, between February 11 and April 4, 2016, and between June 9 and August 16, 2016
  • With this increase we’re seeing the price of carry-on bags go up by $5 at booking and up to 24 hours before departure, by $10 at web check-in, and by $5 at the airport
  • The price of checked bags is going up by $5 at booking and up to 24 hours before departure, and by $10 through all other means

In the case of Frontier I don’t even think it’s fair to call this holiday surge pricing, but rather just an all around increase in the price of bags. Should consumers be excited about low cost carriers raising baggage fees? Of course not.

But I also don’t think we can hold it against the airlines that they’re trying to maximize shareholder value. Based on supply and demand, I don’t see anything wrong with charging extra for checked bags over the holidays, just as the airlines charge extra for tickets over the holidays.

When politicians get involved

Interestingly Florida Senator Bill Nelson has taken it upon himself to write the airlines and “request” they rescind holiday surcharges:

  According to recent reports, at least two airlines plan to impose “holiday surcharges” that will increase baggage fees during the peak holiday travel period.  These increased surcharges fly in the face of declining fuel costs and appear focused on increasing profitability on the backs of American families.  That’s why I am seeking an assurance from your company that you will not impose a holiday surcharge on baggage fees.  Furthermore, if your company does plan to impose holiday surcharges, I request that you rescind those plans immediately.

This seems like an odd argument to make:

  • The cost of airfare has never reflected the cost of providing it. Just look at how convoluted airline pricing is, and that a ticket from San Diego to Los Angeles can cost more than a ticket from San Diego to New York. Consumers had no sympathy when the airlines were on the verge of liquidation several years back, even though fares were extremely low.
  • The Senator correctly notes that these changes seem focused on “increasing profitability.” Maybe I’m missing something, but in a capitalistic society with shareholders, isn’t that what a company is supposed to do?

Obviously Nelson is grandstanding, as politicians do, because it’s popular to hate on the airlines. I just think that if politicians are going to take it upon themselves to attack airline pricing they should be focusing on the real problem, which is the airline oligopoly they’ve created over the past several years with the “big three.” Issues like the slot swap between Delta and United at Newark, which is creating a near monopoly in the market.

The low cost carriers are the solution, and not the problem, even with increased fees. The more profitable they are, the bigger the incentive for new entrants to join the market, and the lower airfare will be long term.

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Bottom line

Don’t get me wrong, I don’t like to see airlines raise fees. But I also like to see airlines thrive, so that hopefully new entrants will join the market. The job of airlines is to maximize shareholder value, and in a free market that’s by charging what the market will sustain, which will hopefully encourage new entrants to join the market, and long term that will drive down fares.

But to somehow shame airlines for trying to maximize shareholder value seems a bit ludicrous. Politicians should be focused on the “big three” carriers and the monopolies they’re creating in certain markets, rather than the low cost carriers, who are just there to try and keep them in check.

What do you think? While no one likes higher fees, is it wrong for low cost carriers to increase baggage fees over the holidays? And is it something politicians should take a stand against?

Comments

  1. I’m confused (even/especially after looking at their websites) – are they imposing the extra fees on tickets that have already been purchased under the old fee scheme? If so, that would seem to be appropriate for a DOT complaint.

    If not, it’s no different than a fare increase during a busy period.

    Greg

  2. @Greg is spot on. If they just announced these changes (and are applying them to ALL previous bookings), that is absolutely shameful. I tend to make my Christmas travel plans at least 5-6 months in advance to try to avoid the dramatically inflated prices. Though I will likely never fly Spirit or Frontier, it seems quite sketchy to impose these fees on tickets already purchased.

  3. Part of how airlines sold us on bag fees was that it allowed them to save us all money on taxes. The airlines have to pay taxes on the fares that they charge, but by separating out the cost to transport bags they lowered tax liability which translated into potentially lower fares. With Spirit’s and Frontier’s latest move it appears they can no longer make this argument. It’s all about profit.

  4. Say what you will about Spirit (theyre a terrible airline, i flew them one and will never fly them again) but at least they’re upfront about their fees. The base fare is low and if you dont need much luggage and dont care where you sit the savings can be great. If you want 2 checked bags, a carry on, need the exit row and must be next to your partner then you’re better off on another airline.

    I’ll take Spirit and their easy to understand fees than the hotel that secretly tacks on a $29/day resort fee granting you local phone calls, gym access and a free welcome cocktail.

  5. Did you fail econ 101? Fares go up because the number of seats can’t change but demand is higher. No such things with bags: aircraft can generally carry far more bags than passengers can check in.

    Airlines said they were unbundling costs. The cost doesn’t change over the holidays. It’s nice to see a Congressperson holding airlines to what they say, although I am afraid that Corporativism night prevail.

    And maximizing shareholder value is not the best policy for society, and America was the first to understand this with Standard Oil. Cable companies are allowed to maximize profits, though!

  6. As a fan of Spirit I think it’s a mistake to raise the bag fees seasonally. They’d be better off just raising them period if it’s a revenue thing. I guess they look at it as free publicity. Hard to say. Frontier is such a moving target we never know what they are doing on a daily basis (except having every flight delayed out of DEN on a daily basis of course. Do they ever leave the gate on time?).

  7. Typical example of “you get what you paid for”. These airlines are not much different from a Greyhound bus. The only difference is that their “buses” fly.

  8. The airways are a limited resource that belongs to the people. So no, unfettered capitalism is not the correct operating model. There are only so many airplanes and airport slots to go around, so the Senator absolutely has a right to threaten to regulate the bag fees.

  9. I don’t mind the unbundling, but the prices seem to be totally disproportionate with reality. You know, the $10.00 to print a boarding pass on an airline that doesn’t even have a mobile app or a Passbook-compatible mobile site.

  10. Charging increased fees for baggage makes sense during the holidays, because it’s likely people will be carrying more stuff and that stuff takes up more space. It likely also helps round out the lean times the rest of the year. The only thing that drives me nuts are invented “surcharges” if I choose to fly during peak periods. Call a spade a spade, this is part of the fare.

  11. No, they are the grinch that stole Christmas. And they’re screwing the little people who fly them because they can.

  12. Of COURSE it’s fair. Ever heard of supply and demand? Don’t like the increased charges? Simple, fly a full-service airline instead. It is not a big deal. Jesus.

  13. Your arguments doesn’t explain why only bag fees should be regulated. With your logic, why shouldn’t ticket prices be regulated as well? Let’s reregulate the industry!

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