Federal Transparency Rules Are Bad For Travelers

Congress deregulated the airline industry in 1978, creating dramatically lower prices and diverse service options for consumers. As an airline made possible by deregulation, Spirit's goal is to offer the lowest base price and let customers choose other services they want.

Two new federal rules that ignore deregulation -- "tax-inclusive pricing" and "free 24-hour holds" -- target airlines and clearly hurt consumers as they mandate less transparency, hide taxes, and will cost millions that inevitably will be passed on to consumers.

The tax-inclusive, or so-called "full-fare" rule, requires airlines to quote fares including government-imposed taxes and fees. This upfront bundling hides how much goes to the government and how much to the airline, with taxes and fees able to be shown only "not prominently" in a separate location. Nobody ever bought at Spirit.com without knowing all taxes and total airfare before making a purchase. At Spirit, sometimes government taxes are more than the fare itself. Studies show hiding taxes make it easy for government to raise taxes further.

Media, echoing government representations, have misinformed the public by saying "the price you now see is the price you'll pay." This is simply not true for most travelers on any airline. Only government-mandated taxes and fees are now required to be shown in the upfront fare. All US airlines offer optional services for a fee for things like overweight baggage, seat assignments, pets, and unaccompanied minors. These optional services certainly change the final price from the first one seen.

On many trips, consumers also rent a car or stay in a hotel, which do not include taxes upfront. Why special rules just for airlines? If the government keeps this misguided rule, consumers can expect more taxes to be hidden in more things they buy, paving the way for still higher taxes.

The 24-hour hold rule appears consumer friendly, but comes at a big cost the government ignores. Airline seats "spoil" like a gallon of milk if not sold. Letting customers hold inventory without paying reduces seats available for sale to others. Customers can "churn," or temporarily hold a seat without paying for it, keeping it out of inventory even longer.

Some counter this by saying "but this rule doesn't apply within seven days of departure." But who commonly books trips inside seven days? Mainly large corporate business customers. Leaving primarily the middle-class and small business travelers who won't get seats or be forced to pay more to cover the added costs of this refund rule. Airlines will carry fewer customers overall, costs will be spread over fewer people, and everyone will pay more. Before DOT imposed this rule, some airlines permitted such cancellations. If this was important to a passenger, they could choose that airline - such choice was the goal of deregulation. But millions of passengers were happy to get a lower price on a non-refundable ticket.

Spirit believes in low fares. Our optional pricing structure has saved customers millions by allowing them to pay only for what they want. Many fly Spirit who could not afford to fly on other airlines -- and our "optional pricing" model creates this opportunity.

Spirit has lowered its base fares every time a service has been unbundled for an optional fee. The total price, fare plus fees, paid on Spirit today has grown at a significantly smaller rate than total prices on other airlines and far less than increases in fuel costs. Disclosure is about showing what you pay, which Spirit does very clearly and consistently. But disclosure should also be about showing what you can avoid paying for things you don't need. This happens a lot on other airlines, but not on Spirit.

Spirit has a good relationship with government officials and Congress -- many have complimented our innovations, low fares, and compliance. The DOT has good intentions for the public, but on these issues they simply misfired. Many who oppose our view have no real concern to keep fares low for ordinary consumers, but are looking out for large corporate interests. Their vision ensures individual consumers and small businesses will pay significantly more for air travel. It's shameful these special interest groups are attacking Spirit, a low-cost airline looking out for the little guy.

The airline industry is an important catalyst for economic activity. The consequences and costs of these rules, and others on the way, ripple through our Nation's economy and cost Americans jobs. Making air travel more expensive hurts the broader economy.

Spirit believes by ignoring Congressional intent to deregulate airline prices and services, today's government regulators are pushing us back to unnecessary and costly regulation in an effort to homogenize the industry. Consumers should vote with their feet and not be told by the government what product features they must accept at any cost. Let's reduce regulations that burden the economy and the public the industry serves.