Spirit’s Baldanza: “The basis for this new fee was founded in improved customer service”

by Christopher Elliott on April 9, 2010

Earlier this week, Spirit Airlines announced it would begin charging for carry-on luggage. That drew criticism from the Secretary of Transportation, who I interviewed on Wednesday. I wanted to give Ben Baldanza, Spirit’s chief executive, an opportunity to respond — and to explain the rationale behind charging for carry-on bags. Here’s our interview:

Why did you decide to start charging for carry-on luggage?

Last fall, we identified excessive carry-on baggage as the number-one controllable reason that our planes were being delayed at the gate. We challenged ourselves to eliminate these delays without raising customer prices or Spirit’s costs, and to make the boarding process quicker and easier for our customers.

What are the benefits to the consumer of paying for carry-on luggage?

Our answer to the challenge came in the form of a three part solution:

Number one, add a carry-on bag fee, and reduce the checked-bag fee, to neutralize the current incentive to avoid checked baggage. But by all means keep personal items free.

Number two, lower base fares by the amount of the carry-on fee or more, so that customers who continue to carry-on still pay no more for their travel in total.

Number three, offer first boarding to customers with carry-on bags, to help ensure that they will find ample overhead bin space right above their seat.

This also ensures that the last people on the plane won’t delay things by looking for space for their bag, since by definition that will not have a bag that doesn’t fit under the seat in front of them.

So these are the benefits to the consumer. No one pays more, some pay less, and those with carry-on bags get to board first.

But $45 for a bag? Isn’t that a little high?

It sure is, and that’s why no one has to pay it! Our carry-on fee is $20 or $30, depending on if you’re a member of our “$9 Fare Club.”

The $45 fee will only be charged to customers who fail to buy their bag online, at a kiosk, or at the ticket counter. If choose not to pay for the bag at any of these earlier points, they force us to handle the transaction at the gate. Because gate delays are what we are trying to eliminate, we’ve priced it to discourage this behavior.

Spirit also said it would begin offering one cent fares. I can’t think of anyone who wouldn’t want to book a penny fare. But as you pointed out in your announcement, other fees will apply. How do you plan to disclose those fees?

We offered “Penny Plus” fares and clarified that to mean “One Cent plus Fuel, Taxes, and Fees”. Several months ago, Spirit started allowing customers to see how much of their ticket price was covering the fuel costs for their seat, something no other airline does today.

But no one has to buy a ticket without knowing the required fuel, tax, and fee components, as at the time they make the purchase decision these are all fully disclosed. In fact, we don’t even break out the fuel portion today, though we plan to do so in the future.

For example, if your fuel charge is $30 and you buy a $0.01 fare, the total fare you would see is $30.01.

But at what point in the booking process will you disclose the extra fees?

Today, any fees that you must pay are disclosed as part of the initial price and no one is asked for payment without these fully outlined.

Optional services that we offer for a fee are offered after this point, but again all of these services are optional. Later this summer, our Web site will change to a “shopping cart” idea where everything you’re buying shows up before you ever spend one penny.

Did you ask anyone in the government, specifically at the Transportation Department, about your plans to begin charging for carry-on luggage? If so, what were you told?

We ensured that the way we disclose this fee followed the same rules that we use for other optional fees. Spirit has used an a la carte pricing structure since 2007, and this new fee is another example of this rather than a new structure. And, when we move to the shopping cart later this year it will clarify things even further.

I asked Transportation Secretary Ray LaHood about your plans earlier this week. He suggested that Spirit doesn’t care about its customers. How do you respond to that?

I respect the Secretary greatly. However we believe that the facts don’t support his assertion, and I’m sure that the statement was made out of a general exasperation about more fees.

I’ll admit that while the basis for this new fee was founded in improved customer service, it has not been communicated this way through the media. Spirit has spent millions of dollars upgrading our reservations platform, responding more quickly to feedback, buying new airplanes, and more, and as a result over 99 percent of our customers say they love Spirit and will fly us again.

You know, in some ways this is such an odd question for me. I spent many years in the legacy airline business thinking of ways to charge customers more for their ticket. At Spirit, we spend all of our time trying to make travel affordable for everyone and to put the pricing power in consumers’ hands. Fundamentally, what could be more customer friendly? Gouging you on your fare but then giving you a “free” cola doesn’t seem quite as nice to me.

What is the role of government in the airline industry, in your opinion?

All customers should be able to expect that the airline they fly is safe, and that the air traffic control system is efficient and minimizes safety risks and delays. Further, customers should expect that they know what they are buying at the time they buy it.

Lastly, the country is better off when customers have choices for their travel, and competition makes that happen. In my opinion, the government has a role to ensure that all of this happens and on a level playing field.

Do you think government should have a role in ensuring that airlines do not engage in unfair and deceptive practices? If so, can you give me of an example of what you believe constitutes an unfair and deceptive practice?

I think it is unfair to hide a relevant term for a sale before the customer commits their money. “Relevant” would be anything they must pay. I also think it can be deceptive to make people pay for things they don’t need and not make that clear to them.

For example, I think it is deceptive for Southwest to advertise “Bags Fly Free”. I challenge you to take a bag to any Southwest counter and ask them to send it to Chicago for you. Bags do not fly free — they fly with a paying passenger who paid for the bag as part of their ticket price.

And further, they make every passenger pay for that even if that customer does not check bags. If they didn’t, they would give a discount to those that don’t check, which is essentially what Spirit does.

What would you say to the passengers who say Spirit has crossed a line, and that they’ll take their business elsewhere?

I would just ask them to compare our “all in” price with anyone else and pick the value they felt was best for them. If an airport lounge is important to you, you won’t fly Spirit. If TVs are important to you, you won’t fly Spirit. If price is most important, more often than not we will be the best value going because you never have to pay for what you don’t use.

For what it’s worth, long ago people would have thought that restaurants would “cross a line” if they asked customers to clean their own table. Yet millions of customers do this every day at McDonalds and other fast food places. It somehow became acceptable, proving that what people
expect changes all the time.

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  • Paul Treanor

    Mr. Baldanza nearly has me sold on his company and I can’t even fly Spirit. His point-of-view and business strategy sound like they are attempting to truly put cost of flying into the lap of the traveler. The only sticking point was the comment on Southwest Airlines – I think everyone understand “Bags Fly Free” is marketing and not a truism that bags can shipped around the county on Southwest free of charge. That is where I spotted some “spin”.

  • Mark Welch

    I’m believing this is a great strategy but a miserable launch! Now that I read this interview, I’m with it. Why would they be so smart and well thought out but such a incompetent launch?
    The media is making this sound like it’s the worst decision an airline has made in our lifetime and depressing every person who plans on flying.
    I hold ONLY Spirit responsible for this incompetent launch of a great plan.

  • DaveS

    What I challenge Consumer Travel to do is to check whether his promise to “lower base fares by the amount of the carry-on fee or more, so that customers who continue to carry-on still pay no more for their travel in total” is really kept. If so, he makes some valid points. But, I think many suspect that this is window dressing, and that the fee is really a price increase in disguise.

  • Lyn Greenhill

    “since by definition that[sic] will not have a bag that doesn’t fit under the seat in front of them.”

    OK, so the criteria for laying on the fee is whether or not everything I bring on board fits under the seat in front of me. What about bulkhead rows? If I bring something on board that does fit under the seat, and I choose to put it in the overhead, will I need to pay? What about coats and other personal items? Who makes these calls?

    This really is the truest definition of customer service double-speak I’ve ever read. What this guy is really saying is check your bags or we’ll make you pay. And I’m sure the FAs and gate agents are really enamored by now being in the middle of this mess.

    What this guy and every other airline executive are missing is that most people would rather not carry bags on a plane if they could reliably count on the luggage arriving at their destination in a few minutes after deplaning. If he really wants to talk customer service, why not guarantee bags will arrive on time or your entire ticket price will be refunded? That would be customer service!

    If Ray LaHood or anyone in the Transportation Department actually cared about the flying public they would immediately issue a rule that states EVERYTHING that is brought on board an airplane by each passenger must totally fit inside a standard template or be checked (for whatever fee the airline chooses). Every airline would have to use the same dimensions for the sizing template. They should also mandate that all airlines start using RFID technology to positively identify all checked baggage. Those steps would go a long way to solving the carryon and lost luggage problem.

  • Angela Powell Watson

    I’ve flown with Spirit 15-25 times a year since 2004. My last flight with them will be July 31, 2010. Reading this article did nothing to dissuade me from leaving Spirit for good.

    Baldanza’s right: Spirit flights ARE frequently delayed due to excessive baggage carry-on. The solution is simple: monitor the size of carry-on bags at the check-in counter and/or security gate. The fact that people drag large bags all through the airport for two hours and then are suddenly stopped a foot outside the door to the plane makes them belligerent, and the arguments hold up everyone behind them. This happens every single time I’ve boarded a Spirit flight. Even if passengers make it onto the plane with their bags, there’s no guarantee there will be room, and the whole aircraft sits and waits while people try in vain to cram their belongings in, and finally allow them to be tagged and checked. If reasonable carry-on size restrictions were established and enforced prior to boarding, the whole problem would be solved.

    Human beings are not animals. They cannot travel hundreds or thousands of miles and stay at a destination for days or weeks at a time with nothing but a ‘personal item’ that will fit under the seat in front of them. People have the right–yes, the right–to fly with a reasonably-sized carry-on that holds their basic necessities. The fact that this is even up for debate demonstrates exactly what Spirit thinks of its customers.

    This is a huge slap in the face when Spirit already has atrocious customer service, incomprehensibly small seating areas, high numbers of broken and cracked passenger seats, dirty and trash-strewn aircraft, and a $3 charge for a bottle of water. Listen to the conversations of Spirit travelers in the airport–flying with this airline is an experience to be dreaded. It’s degrading and uncomfortable from start to finish.

    There’s only so much that people with put up with for a cheap flight, and I think this will be the final nail in the coffin for many loyal Spirit customers who’ve been hanging on as the experience worsens every year. I don’t believe for a second that Spirit is going to lower fares because of the new carry-on fees…they might delay an increase, perhaps, but will the base fares be noticeably lower? Not a chance.

    What Spirit execs are missing is this: requiring customers to pay extra for add-ons makes sense only when it’s actually an add-on. Spirit has been very successful with the “pay only for what you want” approach, because not everyone travels with multiple bags, and while snacks are nice, most of us can survive a few hours without one. But at least 90% of customers fly with a carry-on of some sort, most of the time (if the rates weren’t this high, we wouldn’t have such a problem with excessive baggage carry-ons, now would we?). This is not something that people will choose to opt-out of like a $5 bag of pretzels. Spirit knows that just about everyone has to travel with a change of clothes and toiletries, and they’re counting on the new fees as a way to rake in the bucks.

    Spirit has always pioneered the latest standards for air travel: they were one of the first to start changing for snacks…and beverages…and second checked bags…and first checked bags… The tragic thing is that as they lowers the bar, other airlines follow suit, and Spirit’s poor service becomes the new standard. Is this really the legacy that Baldanza wants for Spirit Airlines? Is money always the bottom line, at the expense of all else?

    For me, it is not. Which is why I will pay more to fly with an airline that gets that.

  • http://www.loganairportvaletparking.com Billy Bell

    I just dropped my annual membership to Spirit. Could not ever get a low fare. Now with the carryon fee It makes no sense for me to pay them $39 a year for nothing.

  • MVFlyer

    Chris–do you believe everything this guy told you? Sounds like a PR spin doctor to me…a little too slick for my tastes. And a fee is a fee…there’s no benefit to the consumer, strictly a money grab by the company. No value added activity here, and no work on the airline’s part.

    In a sense, the airline created the problem for themselves–charging for checked bags (which are handled by the airline, so there is some cost involved on their part) forced people to carry on more.

    And how will this be enforced? Is it just pushing the problem to the flight attendants, who will now have to police anyone who tries to put something in the overhead bin? Will this really save time? Or will it create confrontations on the plane? Will the FAs have to run credit cards for people who haven’t paid the fee in the airport? Sorry, I don’t see this as a time-saver.

  • M Gross

    I’d be much more convinced of his sincerity of “customer service” if they had waiting for the launch of their new “shopping cart” design before announcing this. It’s quite easy for him to discuss as options things that a traveler may feel are part of the experience. it will be quite a challenge to design their website to make it clear what is NOT included in the price that is showing. If they can do this in a usable way, a way that doesn’t add up to a bait-and-switch, then perhaps I can believe that they do this in order to create more choice rather than in order to nickel-and-dime their customers.

  • The Good Doctor

    Based on the pat answers from Mr. Baldanza, it sounds like it was an exchange of emails rather than a one-on-one conversation.

  • Jamie Jo

    Oddly enough the airlines caused the carry on problem when they began charging for checked luggage. The way to stop the carry on madness is obvious. STOP charing for checked luggage. This won’t happen so people are going to continue to carry on. Once greed steps in sanity leaves. Of course, if they would put a GPS tracker on each piece of checked luggage to track them, I wouldn’t mind paying for checking my bag. as long as I was guaranteed it would be at the same air port as I am once I land. I believe the CEO of Spirit is a greedy fool. Enhancing customer service BAH HUMBUG. perhaps he will be visited by 3 ghosts one night…

  • http://travel.booklocker.com/ Cheap Traveler

    Charging for ANY bag brought along on vacation is not unbundling or “customer choice.” It’s a mandatory fee separated from the base fare. The company knows it will make more money in the end by ripping people off like this and confusing this with multiple charges and fees. While he’s making restaurant references, does McDonald’s charge you extra for a bun and ketchup when you order a burger? Of course not—it’s a necessary part of the order. If you don’t want one, you shouldn’t get a discount either, which is what he is suggesting for Southwest. People love Southwest, they don’t love Spirit—look at any independent survey.

    If he thinks 99% of his customers are happy, he hasn’t been wandering around listening to what they say about the airline at check-in and after their flight. You hear the words “never again” a lot…

    I’d love to see a comprehensive fare comparison on their routes they share with Southwest and JetBlue. In the spot checks I’ve done—which isn’t easy with all those add-ons—there’s no total price advantage to enduring Spirit.

  • Joel Wechsler

    It’s hard to believe that he could say this with a straight face.

  • MVFlyer

    @Joel Wechsler said: “It’s hard to believe that he could say this with a straight face.”

    I bet that Baldanza is well practiced in keeping a straight face–he’s had to do that a lot.

  • Pingback: Video: Spirit Air’s CEO in overhead bin discusses carry-on bag fees

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