Airfare unbundling and ancillary fees, coupled with capacity discipline, could lead for the first time to sustainable, profitable revenue streams for the airline industry, Kevin Mitchell, chairman of the Business Travel Coalition (BTC) said in a new analysis, "Spirit Airlines’ Unintended Consequences: Drawing The Wrath of Lawmakers and Regulators".
"Spirit Airlines has done more to draw negative attention from lawmakers and regulators in the past two weeks than the whole airline industry has since 2008 when airfares began to be aggressively unbundled," Mitchell says.
"Spirit is now the unrivaled poster child for government-relations and commercial psychosis," Mitchell says. "It’s delusional... to insult the intelligence of Members of Congress and question the integrity of the Secretary of the Department of Transportation (DOT) and expect such behavior to be beneficial for your airline or industry."
Spirit launched a Congress-facing grassroots campaign based on a "shameful lie", Mitchell says. Spirit's website says: “Spirit must now HIDE the government's taxes and fees in your fares.” The airline urged consumers to oppose the DOT's policy change on fare displays.
"The truth is that airlines must prominently display a 'total price,' which includes the base airfare and mandatory fees and taxes. However, airlines are allowed to break out these cost items on their websites and in print advertising in as much detail as they care to. Spirit knew this but chose to endeavor to manipulate its customers. Guess what? Disrespected customers voiced their overwhelming disgust with this ugly misrepresentation in the 'Comment' sections of major media outlets across the web," Mitchell argues.
In a letter to Spirit’s CEO Ben Baldanza, Senator Barbara Boxer (D-CA) called out the airline, Mitchell notes. "Days later, on an internationally syndicated radio program, as if to raise compulsive lying to a new level of art form, Mr. Baldanza stated: 'Barbara Boxer needs to understand the facts a little better,' and proceeded to mislead the radio audience yet again and without pause."
"Not satisfied to merely insult a leading consumer advocate in the Senate, Spirit then went on and instituted a 'Department of Transportation Unintended Consequences Fee' of $2.00 per segment to make up for what it says is lost revenue due to complying with a new rule allowing consumers to hold a fare for 24 hours without penalty. The Travel Insider took Spirit to the woodshed in its insightful piece, 'Spirit Raises its Middle Finger at All of Us – Says DoT Made It Do So,'" Mitchell says.
"As sick as it may be, and as The Travel Insider makes clear, Spirit is falsely setting up DOT as anti-consumer while the airline makes a deplorable money-grab from its customers based on another flat-out lie, i.e. that the rule will cost millions of dollars to comply with. What is likely motivating Spirit to attack DOT and this reasonable consumer-protection rule is lost revenue from onerous cancellation and change fees when consumers make honest mistakes in booking a flight," Mitchell says.
"Spirit’s management has declared war on the federal agency that regulates it. Hello! Anybody in the boardroom? DOT’s censure of Spirit was rare, swift and unequivocal. As USA TODAY reports: 'This is just another example of the disrespect with which too many airlines treat their passengers,' Transportation Secretary Ray LaHood says. 'Rather than coming up with new and unnecessary fees to charge their customers, airlines should focus on providing fair and transparent service — that's what our common-sense rules are designed to ensure.'"
Mitchell notes he has cautioned the industry on the need to respect consumers in the new ancillary fee environment or risk drawing the scrutiny of Congress and the DOT but notes, "rogue airline on a self-destructive mission was not one of the anticipated scenarios for concern. U.S. airlines should be alarmed over Spirit’s behavior that will likely rain down unintended consequences on all of them."
"Spirit’s offensiveness acts as a huge echo chamber reinforcing that some airlines have poorly handled the growing practice of product unbundling from a consumer point of view by refusing to provide travel agencies ancillary-fee information in a transparent, electronic and transactable format. Consumers have not been able to efficiently comparison shop for the all-in price (base airfares and fees) of air travel for 4 years, likely costing them billions of dollars as these fees remain undisciplined by the marketplace," Mitchell argues.
"Spirit has created no friends at DOT for itself or the airline industry with its misguided antics and will likely cause Members of Congress to enact significantly expanded airline consumer-protection legislation in the future," Mitchell says.
"There could be calls for re-bundling of the airline product if airlines continue to stonewall calls for the provision of ancillary fee data to travel agencies. (Airlines' stonewalling the tarmac-delay issue is instructive; it ultimately led to government intervention.) Finally, another Spirit-induced unintended consequence will likely be Congress moving to tax the billions of dollars in ancillary fees that airlines have cleverly moved outside the reach of aviation taxation laws – of course harming the cash balance in the Aviation Trust Fund in the process," Mitchell says in his analysis. So will Spirit’s strategies diminish or kill the promise of sustained profitability made possible through responsible deployment of the unbundled airline product model, Mitchell asks. "I am betting Spirit cannot help itself at this point and that board members will need to intervene and provide adult supervision in an attempt to avoid the worst potential unintended consequences of government intervention in a marketplace," he concludes.