In the Spirit of Taxation
If you’re any kind of frequent traveler, you’re probably well aware of how prices in air travel have changed over the past few years. With airlines charging for checked bags, many people are beginning to pack multiple carry-ons in order to avoid these charges. But Spirit Airlines recently upped the ante by charging $20 for each bag that is put in the overhead compartment. Spirit is widely known for their cheap fares, making the new fees a point of conjecture for many Spirit customers.
Ben Baldanza, CEO of Spirit Airlines, recently appeared in front of the House Subcommittee on Aviation to discuss the implications behind the Government Accountability Office’s (GAO) plea for airlines to disclose more information regarding hidden fees associated with purchasing an airline’s ticket. The GAO feels that too many airlines do not make it clear as to where a customer’s money is going when they purchase a ticket.
Baldanza was present to explain Spirit’s idea of “unbundling” service charges, citing that an airfare should only apply to the cost of transporting a passenger. So while you pay less money for an airfare, any additional services (i.e. overhead/checked baggage, food, etc) that you desire must be paid for separately. The point is to help customers become more aware of what they’re paying for and to decide for themselves whether or not they need a service. {Budget Travel} Spirit’s service is similar to that of Europe’s RyanAir, a company heralded for it’s $12 fares. But customers understand that anything extra besides transport must be paid for.
Baldanza supports his company’s approach to charges by citing that Southwest, one of the only airlines to have actually turned a profit over recent years while still maintaining low fares, applies hidden charges for checked bags whether or not a customer decides to utilize the service. Mr. Baldanza seems to imply that hidden costs are simply a dishonest way of conducting business. {Reuters}
As part of the price transparency called for by the GAO, taxes on hidden charges may be extended as well. Baldanza supported the idea by saying that low-fare airlines, like Spirit, pay a greater tax percentage per ticket than other carriers because they are only charging customers for the essential transportation of the passenger. Other carriers with non-taxed surplus charges built into the ticket price have a monetary buffer with each ticket purchase, meaning that their tickets are not being taxed at the same percentage as the low-fare carriers. Of course, taxes on surplus charges would still apply to Spirit and their optional services, but at least things would be fair. {Smarter Travel}
Which business model do you think is better? Should extra services liked checked baggage fees, in-flight meals, and the sort be taxed to produce budgets for the FAA?
