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

Spirit AirlinesTo say that airline fees are getting out of hand could be quite the understatement. Last year I chronicled 10 of the most outlandish fees that airlines charge, ranging from a $450 overweight international baggage fee for American Airlines, to Hawaiian Holdings, Inc. (NASDAQ:HA), which will charge $175 just to bring your pet on board.

The comforting fact about many of these charges, if there is one, is that they’re usually optional. You don’t have to buy a $3 bottle of water from Spirit Airlines Incorporated (NASDAQ:SAVE) or pay $17 to $25 for a pillow and blanket from Allegiant Travel Company (NASDAQ:ALGT) if you don’t want to — and they’re often confined to a single airline. However, one charge is slowly infiltrating the sector that may soon become commonplace and promises to be a game-changer — namely, the carry-on baggage fee.


Spirit Airlines Incorporated (NASDAQ:SAVE) began charging customers for carry-on bags in 2010 as part of its campaign to undercut regional and national carriers with ultra-low ticket prices and allow consumers to add optional items at their discretion (baggage, carry-on baggage, food and drinks, etc.) to drive its margins. Spirit Airlines Incorporated (NASDAQ:SAVE) learned quickly that these ancillary fees, which it typically discounts if they’re booked online, or in some cases even at the airport’s point-of-sale machines, rarely require a physical airline representative for collection purposes, making them beefy margin boosters. Spirit Airlines Incorporated (NASDAQ:SAVE) later upped its carry-on fee to as much as $100 for customers who wait to check their bag at the gate.

Allegiant Travel Company (NASDAQ:ALGT) followed suit in April of last year, announcing a plan to charge $30 for carry-on bags that were booked online, and also adding a surcharge for bags booked at the airport.

On Wednesday, Republic Airways Holdings Inc. (NASDAQ:RJET) -owned Frontier Airlines announced that it, too, plans to join the carry-on-bag-charging club. However, Frontier’s carry-on baggage charge, which will range from $25 to $100, is unique in that it doesn’t slap every customer with the charge as Spirit Airlines Incorporated (NASDAQ:SAVE) and Allegiant Travel Company (NASDAQ:ALGT) currently do. Instead, carry-on bags will remain free for customers who book their flights through Frontier, but an added charge will apply for customers who book their flight through third-party websites such as Expedia Inc (NASDAQ:EXPE) and Orbitz Worldwide, Inc. (NYSE:OWW) which typically offer cheaper flight prices than what you’ll find on airline companies’ websites.


“A whole different animal”
Frontier’s move is groundbreaking for two particular reasons.

First, it adds yet another airline to those charging for carry-on bags. Spirit Airlines Incorporated (NASDAQ:SAVE) and Allegiant Travel Company (NASDAQ:ALGT) are writing the book on utilizing high-margin optional fees to drive bottom-line growth, and other regional airlines appear likely to catch onto this growth-driver. Either that or they will simply be left behind.

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