Spirit Airlines Incorporated (SAVE), Allegiant Travel Company (ALGT): Is This Outlandish Airline Fee a Game-Changer?

Second, it could put third-party booking sites in a bind. The advantage of third-party sites such as Expedia and Orbitz Worldwide, Inc. (NYSE:OWW) is that they usually undercut airlines’ website ticket prices and allow users to bundle their flight with other items like a car and hotel to maximize their savings. However, if airlines suddenly begin penalizing passengers who purchase their ticket through these third-party websites by imposing carry-on baggage fees, if the math makes sense, they’ll simply make their purchase via the airlines’ website.

But before you panic …
If you’re suddenly frantic to click the “sell” button on third-party travel sites, consider this point: While airline tickets make up a big chunk of travel sites’ gross bookings, it’s hotels that provide the biggest margin boost. Since competition among airlines is fiercely competitive, and most airline websites are introducing travel prices that are somewhat competitive with Expedia Inc (NASDAQ:EXPE) and Orbitz Worldwide, Inc. (NYSE:OWW), margins tend to be low in airline bookings. Third-party travel sites make the bulk of their profits from hotel bookings, which are far less transparent to consumers, making it easier for them to charge a premium. This move may actually have less bearing on the third-party booking sector than you might think.

For airlines, though, it could have a big benefit. As I said, these fees are almost pure profit with little need to add representatives for collection purposes. Don’t be surprised if you see a wider adoption of carry-on baggage fees — at least in the sense of being directed at customers making purchases through third-party websites — by regional airlines in the coming year.

The article Is This Outlandish Airline Fee a Game-Changer? originally appeared on Fool.com and is written by Sean Williams.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of Spirit Airlines.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.