Wednesday, 4 April 2012

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Allegiant's New Carry-On Fee

This isn't what I wanted to be writing about today, but I feel obligated. You see, a while ago, I used to be a big supporter of Allegiant Airlines. I used to tell all my Canadian friends what a great deal it was to hop the border and fly out of Bellingham on this little start-up airline based out of Las Vegas. I'm guessing that Lori and I flew to Vegas and back at least a dozen times on Allegiant, and although they've always had a pile of fees, their base price was usually low enough to offset any objections we may have had (as low as $7 at one point). I stopped recommending them a few years ago after a particularly bad customer service experience, but if I hadn't, it would be pretty hard to come to their defence after today's announcement that they're implementing a $35 fee for carry-on bags.

Now instead of just ranting against the fee, let me say that I understand the logic behind charging fees separately instead of just rolling the cost into the price. The U.S. government has actually found something that it doesn't feel the need to tax in these add-on fees, so if the airline can break something out into an optional component of booking a flight, it doesn't have to collect the 7.5% tax on that portion of the cost, which leads to a lower cost for the consumer. Think of it as if you're ordering a pizza. You pay tax on the crust, sauce, and cheese, but all of the toppings are tax free. Unless of course you order artichokes on your pizza. In that case you pay triple the tax and you get audited once you're finished.

This is not a pizza topping people!
Of course, lest you think that the airlines are being all noble in helping you keep your hard earned money away from the taxman, these fees are also not required to be included in the advertised "final price" since they are considered optional and not everybody needs things like clothes on their vacation. This becomes a bit of a loophole to allow the airlines to get around the "Must show total including all taxes and fees in advertised prices" legislation. You didn't think the airlines were all going to just passively go along with that did you?

So allowing for the role of fees in the budget carrier world, I'm curious as to how the carry-on fee is going to work out. If you pre-pay your carry-on, it's only $13 per segment. Is that high enough to convince people to pay the extra $7 to check their bag instead of carrying it on? Will it put an end to people wandering up and down the aisles before takeoff, trying to find a place to store their bags? I'd actually like to see the results of that experiment. If it lets the budget carriers, whose profit is largely tied to their turnaround time on the ground, get their planes back in the air faster, the results could be very interesting to watch.

Of course for those people who are a little less organized (and I fall in that category most of the time) and don't pre-pay for their bags, the choice is a lot more painful. $35 to add a carry-on bag at the airport is a tough pill to swallow, especially when you can check your bag for the same price. I suspect that's the entire point though. Checked bags don't slow down boarding, so if Allegiant can persuade you to check your bag instead of carrying it on, they can reduce their turnaround time. That makes them money. Of course so do the bag fees, but that should come as no surprise. If there's one thing Allegiant knows how to do, it's make money. 36 straight quarters of profitability so far, and I doubt that a little negative publicity over the initiation of carry-on fees is going to put much of a dent in that.

Would I pay a carry-on fee? I'm really more of a checked bag kind of guy, but more than that, I'm a bottom line person. If the total cost for what I needed, including fees, was still lower on an airline that charges for carry-on than anywhere else, then I'd pay the bag fee. Whether or not Allegiant's customers will continue to carry-on their entire life's possessions on each flight though, is a different question. If they do, I'll be kicking myself for not buying some Allegiant stock, even if I would have had to pay a brokerage fee.