Spirit is not afraid to give their opinion about the new rules on taxes and fees.
If you have been on Spirit Airline’s website recently, you might have seen a big warning taking over your screen. The warning shows Spirit’s disdain for the Department of Transportation’s new fees and tax regulation that require airlines to include fees and taxes in their advertised prices. The warning states, “New government regulations require us to HIDE taxes in your fares. This is not consumer friendly or in your best interest. It’s wrong and you shouldn’t stand for it.”
Senator Barbara Boxer, D-California, is not happy with Spirit’s actions and has asked the airline’s CEO, Ben Baldanza, to remove the warning message off the website. Spirit Airlines is disappointed by the letter and spokeswoman Misty Pinson told CNN, “We would normally expect Senators to encourage 1st Amendment protection.”
“We have always shown taxes before someone purchased. They now want them hidden. It is wrong and we will fight for consumers,” Pinson said. Spirit is concerned that the government will be able to raise taxes without customers knowing and blaming the airlines for higher overall costs.
Why is the government targeting airlines? In most places in the US, you see a list price and know you will have to pay more (ie taxes) when you check out. Let’s take buying a car for example. It might be advertised as a $19,999.00 vehicle, but after adding taxes, licenses, dealer fees, interest and others, that $20,000 car ends up costing you much more than advertised. Why does the government feel the need to regulate the airline business, but allow other areas to do business as usual?
These new rules might not be permanent. Yesterday, Representative Tom Graves, R-Georgia, introduced legislation to counter the new rules. “If the American people can’t see these costs clearly, I fear it will be easier for these fees and taxes to be raised without their knowledge,” Graves said.
Spirit Airlines Airbus A320.
I asked some of my Twitter followers what they thought about the new regulations and Spirit’s reaction and I want to share a few reactions:
“As if raising fees is done in secrecy. Spirit has lost my support. Final price is the way to go,” @gusnyc.
“Seeing as taxes make a bulk of tix price for flying, it should be shown,” @MichaelLacek.
“I’d love for stores to show prices with taxes included. Shopping in sales tax-free Oregon is strange yet awesome,” @quanterium.
“Two flights advertised as the same amount but which “ring up” differently is bad for consumers,” @iansltx.
“Super easy way to show it: Total Fare: $275. Fare: $200. Taxes/Fees: $75. Why is everything airlines do so damn hard?” @smtpboy.
“It’s about time! Stop whining Spirit!” @PiloTgod.
“@spiritairlines is just mad they can’t advertise $9 fares anymore,” @amolkold.
Ah, I think @amolkold might have hit the nail on the head. Spirit loves to talk about their $9 fare deals, which always end up costing more than $9 after all the fees and taxes. Having to add those fees and taxes up front wouldn’t allow the airline to advertise a flat $9 fare.
As a la carte pricing becomes more popular with airlines, it seems to cause additional anger with many passengers. Even with a growing dis-like for fees, passengers keep on paying them and flying on airlines, like Spirit, who are well known for their low prices and plenty of fees. If passengers truly hated the airline and their way of doing business, they would not be in business.
Of course, all this over-reaction could just be another publicity stunt for the airline. Spirit has been known to come up with crazy ads and stunts to get free publicity. Although I am sure that this new rule hurts the airline’s bottom line, it has also given them the opportunity to once again garner a bunch of free publicity (including from me).
No matter your thoughts on the new rule or Spirit’s actions, it is pretty interesting to see an airline that is so vocal about a law. Seems like this rule could still be over turned.
Spirit A320 Image by Justin Pistone
Low fares is Spirit’s business. They advertise $9 fares so I can understand why they are upset. Also, with the recent success of the SOPA/PIPA blackout, I can see Spirit is trying to ride that success. To me, it makes sense for Spirit to try to do this.
“Representative Tom Graves, R-Georgia, introduced legislation to counter the new rules. “If the American people can”t see these costs clearly, I fear it will be easier for these fees and taxes to be raised without their knowledge,” Graves said.”
Isn’t Graves a member of the body which is determines whether gov’t fees and taxes increase? Is he saying he this law is repealed he will have a tougher time raising taxes? Is this all it takes to stop Congress from increasing taxes?
I can definitely see their point. In a country where tax isn’t in the advertised price of anything why is the airline industry the only one forced to advertise the higher, inclusive price?
Of course, it’s not the end of the world because everyone they compete with will have the same rules applied.
“Why is the government targeting airlines? ”
Because the airlines have consistently misled consumers over what their tickets cost? Why, yes.
And using car sales as your counter example is really not a good idea, unless you’re suggesting that the car industry is a bastion of good ideas for how to run consumer relations.
Total,
I don’t know how it can be considering misleading customers. Any educated consumer should be aware that there will be additional fees and taxes added on. Many of these fees and taxes that are mandated by the government anyhow.
I chose the car example, since it is the extreme. Really, it goes with just about anything. I just bought camping spots for the summer. On top of the advertised price was a $6.50 online fee plus taxes. Should the state be required to show that up front? Nah.
David
THEY ARE WRONG. The ruling states you have to include all taxes and fees in the price you show potential customers, it does not preclude also showing them a breakout of the total price. Try going to UA’s site to see example. The way Spirit did it on the one flight I booked with them was practically a bait and switch in combo to trying to join their “club”.
Spirit is in the business of overreacting.
Taxes are not optional, and therefore should be included in the price displayed. Perhaps they need to change their $9 club to the $37 club.
This is spot on. I think Spirit is totally overreacting … I think the new legislation is a good thing for many, but I didn’t mind the old way.
Consumers should educate themselves and realize that there are taxes and fees associated with purchases – just like at the grocery store or a myriad of other stores. The price you see on the tag isn’t necessarily the price you pay. It’s not airline deception – it’s just consumer miseducation.
I don’t know why many more aren’t in arms on these taxes and fees on airline tickets! Many of these taxes should be sunset long ago, but, I’d like to just share one comment from Ryanair CEO at recent European Entrepreneurship Summit:
Regarding the EU, Government and Bureaucracy, the mindset is:
1) If it moves tax it
2) If it keeps moving regulate it
3) If it stops moving, subsidize it
No one seems to be complaining about many of these taxes that should be sunset long ago. My small contribution to the discussion, but, yes agree they should be shown as one total to start.
David possibly you could analyze this in future blog, and correct me if wrong.
Well, the big issue I have with all of this is that the government is forcing the airlines to charge these taxes and fees. Now it is yelling at them for not displaying them right and now forcing them to show them.
David
The question is: What the hell are those fees exactly? If this is stuff like ATC fees and airport fees, then they are operational cost and should not be treated separately, much like any other business doesn’t have a utility fee separate from their advertised price. With taxes — okay, you guys have this annoying habit of not including them in the price. Fair enough. Although normally that’s just sales tax. What sort of taxes are hidden in that block?
Is it possible that the airlines have brought this onto themselves by moving more and more stuff off to the section “fees and taxes”?
They can always learn from the European airlines where we have had those rules for some time. They now have credit card fees. And insanely large ones too. And Spirit, just for you: Ryanair still has those five euro fares. They just wave the fees and taxes column.
What the airlines were doing (following your comparison to the grocery store) was to promote a carton of milk for $1.99 on the window. Of course you know you will pay taxes over that, but when you get to pay, the employee tells you that you have to actually pay $9, because the offer didn’t include their “cart fee”, and the “refrigeration fee”, and the “packing in your bag fee” and the “self checkout fee”. I bet you would get angry on that situation, because they ADVERTISED one price, disclosing only at the end all the other fees.
Knowing the taxes is not complicated. What the airlines promoted and what you actually had to pay was definitely “bait and switch”, and Spirit was the worst of all the airlines. The new regulations WON’T PREVENT the airline of showing you the breakout of the taxes and fees, like Rep. Tom Graves wants you to believe. He is deceiving his constituents, just like Spirit Airlines was deceiving its passengers with its practices. The DOT regulations are protecting the consumer, and I feel very grateful about the new rules.
But Gus, most of the fees and taxes that the airlines “hide” are mandated to be added by the government. Plus every customer is told what their total price will be before they pay. It isn’t like you give your credit card and find out later they charged $50 more.
David
I fully support the new DOT rules. We must remember Spirit is a for profit, publicly traded company – they’re not looking after the consumer, it is their bottom line and stockholders.
Airfare pricing has been misleading for too long. In the taxes and fees category there is often YQ – the petrol surcharge. It isn’t a govt tax or fee and with intl tix, it can be 200% to 300% the base airfare.
Spirit is misleading consumers and getting them to do the dirty work of calling DC. The way I see it, transparency hurts their business model.
Steve,
But every company in the US is trying to make a profit right? I mean some complain that Spirit is mis-leading and not a great airline, yet people keep flying it?
If it was really that horrid, no one would fly them and they would go out of business right? They provide a product that people want — cheap airfares. Shouldn’t people choose with their pocket book versus with government interference?
David
This begs the question, are the DOT rules government interference?
When is the line crossed between government interference and consumer protection? I believe advertising the full fare, up front, is the way to go. That will make it easier for the consumer when shopping around.
Is it right to advertise a fare from the US to Europe for $250 plus taxes/fees, only to find out the full fare is $800 ($450 of it a fuel surcharge to the airline, which should be part of the base fare, IMHO) after going through the motions?
While many items attract sales tax, most of us know what to expect. That isn’t the case with airline tix.
Show the full fare and let passengers vote with their pocket book. If the full fare is competitive, passengers will go to Spirit.
If the government was interested in consumer protection, they’d stop spending our taxes like drunken sailors. Personally, I want every company to make it clear to every consumer how much of what they are paying is going to the government. I want them to know which dollars are going to the company and which are going to the government, and stop hiding it the way that fuel taxes have for the past great many years. The best way to let a government encroach upon your rights is to let them do it in secret, where you will either not notice or blame somebody else.
You can do that and still show the total price. Here, watch this:
Cost of flight: $500
Of which: $450 airline charge, $50 annoying fees and taxes.
Wow, that was easy.
That’s false. The cost of the flight is $450. The taxes cost you $50, the flight costs you $450. Lumping them together is a lie. Let the government do their own lying. They’re the professionals.
No, it’s not false. You pay $500. Unless I can get on the flight after paying $450, then $500 is the cost of taking that flight. How that cost breaks down is a different matter, and I’d have no problem putting in a disclaimer about that breakdown.
I don”t know how it can be considering misleading customers. Any educated consumer should be aware that there will be additional fees and taxes added on.
It can be considered misleading customers because the price they quote you is not the price that they are going to charge, sometimes by a substantial amount. What an “educated consumer” should or shouldn’t know is irrelevant to whether a business is being deceptive or not.
On top of the advertised price was a $6.50 online fee plus taxes. Should the state be required to show that up front? Nah.
Yah. Here’s a simple test: if the advertised price is *what you actually end up paying* then it’s not deceptive. Easy, simple to understand, prevents confusion.
Maybe I have a different perspective because here in Holland taxes are always already added to the price tag in the shop, but I like knowing what something will cost me when I see the price tag, and not only when the check-out counter is done. I’m not sure whether it’s legally mandated or not, but car-dealerships here usually also display the actual drive-away cost, if in smaller print.
If a fee is optional (e.g. a checked-bag fee, which I don’t have to pay if I don’t have any bags to check) leaving it out of the advertised price is fair enough (assuming you advertise your fares as ‘starting at $X’), but if it’s something where I don’t have a choice on whether or not to pay it should be included in the advertised price.
The problem with that approach is it hides the tax. Those who pay taxes should see them so they can know where their money is really going. I suppose I’d have a lot less problem with the taxes if they were spending the revenue responsibly, but we all know that’s not the case here in ‘Merica.
In America (at least to my perspective), the tax is just as hidden, because it’s some mysterious amount that gets added on somewhere between what’s on the price tag and what I actually end up having to pay (which I don’t find out about until I get to the counter). Just a different point of view and a matter of what you’re most used to I guess.
When I go to the shop in Holland the price tag tells me the total price I have to pay. If I want to know how much of that is tax, I go to the website of the tax service, which which will tell me the VAT rate. Most shops will also print a breakdown of purchase price vs. tax on the receipt. Unless I’m misunderstanding the ruling there’s nothing stopping Spirit from advertising: we’d fly you to X for only $9,- but because of tax you have to pay $20,-. Or, fly to Y for only $30,- $17,- of which is tax!
Since there is no way of getting out of paying the tax, there is no way it is actually possible to fly for only $9,- contrary to what their advert claims.
Forcing the airline to quote the actual minimum price I have to pay should not be a problem. There’s no rules saying the airline can’t tell me how much of that is tax.
See, here’s what’s wrong with that:
I want people to be actively pissed off about how much tax they are paying. I want them to get indignant and write their congressman demanding it be lowered. That won’t happen if you hide the tax the way you suggest. If people don’t realize they’re paying such a high tax, they won’t get up in arms about it. As voting citizens, we pretty much have an obligation to keep our government in check.
But how much tax I pay is not hidden. For example I have a receipt from the grocery store. It says that I paid €6,01 for that set of groceries. It also says that 6.0% of that was VAT (foodstuffs, so low tarif), and in fact it even tells me that the total amount of tax I paid was €0,34. Perfectly clear, and all I have to do is look on my receipt. At the same time, while I’m walking through the shop I can add up all the price tags and see that I will have to pay when I get to the counter.
Under the American model I would have added up the price tags to a total of €5,67, but then when I got to the check-out I would suddenly have to pay €6,01 since the tax wasn’t ‘hidden’ in the price tag.
Personally I prefer knowing up-front how much I will have to pay, with a clear breakdown of how much is going to the company and how much is going to the government.
Talking about hiding stuff, if you go to the taxes and fees page for Spirit you can find that there’s a total of $43.29 worth on a one-way domestic flight. Of that $3.80 is tax (Domestic Segment Tax to be precise). The remaining $39.39 is made up of Sept 11th Security Fee ($2.00), Passenger Facility Charges ($18, to be fair could be less and applies to the round trip price), Passenger Usage Fee ($16.99, over here we would call that a booking fee) and a ‘Unintended Consequences of DOT Regulation Fee’ ($2.00, apparently because under the new rules your are allowed to make changes without penalty within 24 hours of your booking).
In other words, under the old rules Spirit could hide the fact that $43.29 would be added to the stated price of your ticket. Not to mention the fact that you have to click through to the ‘optional baggage fees’ to find out that even taking a carry-on bag with you will set you back another $30,-
I think hardly anybody would take a plane flight without even so much as a carry-on, yet to find out that costs you money (and more money if you don’t pre-book it) you have to click through to the ‘optional’ baggage fees.
And after all that fuss you get a page which tells you:
Flight $700,-
Fees $ 70,- (Broken down per fee for that specific flight if you open the tab)
Total price: $770,-
Was that really so hard?
But aren’t some of the airlines playing search engine with misleadingly low fares?
If I want to go to the Philippines from the West coast, Philippine Airlines often comes up with the lowest fare — until you add in all the taxes, then they are often non-competitive in terms of fares.
If I am looking for the lowest cost flight from city a to city b, then I should not have to deal with the games of sees, surcharges and taxes. Tell me up front exactly how much it is going to cost me to get there.
That is a really good question Frank. I will have to look into that. It might be that any airline advertising fares via US websites, have to share the information. But no way we could regulate their own websites.
David
SPIRIT is being disingenuous. The DOT rule simply requires that the fare display the total cost, with taxes included. Spirit complains they are required to HIDE the taxes in the cost of the ticket. But, if you book a flight, SPIRIT doesn’t HIDE the taxes, it breaks them down for you at the end. Example from Spirit’s website on 2/11/2012:
FLIGHT $102.00
TAXES & FEES
Passenger Facility Fee $9.00
Passenger Usage Fee $33.98
Segment Fee $11.40
September 11th Security Fee $5.00
Unintended Consequences of
DOT regulations** $4.00
** Spirit charges each customer for alleged losses it sustains due to DOT regulations . . .????
Total Due $165.38
If SPIRIT really believed they are compelled to HIDE the the taxes, why do they display the taxes, broken out of the fee, just before you actually book the flight? I’ve lost a lot of respect for SPIRIT.
Spirit has a separate section for Taxes & Fees, implying that they are government fees.
However, the passenger usage fee, by far the biggest fee, is Spirit’s own charge. For what?? Who knows. IMO, they charge this simply so they don’t have to add it into their fare.
Same with the “unintended consequences” fee.
Why is Spirit so upset over hidden taxes, when all of their fees aren’t shown until after you finish booking?
They started the carry-on fee which many passengers find out about at the airport. The baggage fee? The booking fee? The best is the seat fee. No thank you, I’ll stand!
Taxes are part of life, and can easily be displayed by Spirit as does every other airline. It’s the hidden Spirit fees that I find disturbing.