Spirit CEO’s reaction to new airline rules misleads consumers

Spirit Airlines took a well-deserved public beating for its reaction to new federal rules that force airlines to be more transparent about their advertised prices and that give consumers more wiggle room to cancel flights without being punished. But in an interview with Consumers Digest today, it’s clear that Spirit CEO Ben Baldanza has no plans to back down from his misguided claims. He appears to have no clue about why these changes are best for consumers.

Baldanza’s newest flawed analogy relates to the $2 fare fee that Spirit added after the new guidelines by Department of Transportation took effect Jan. 26. On its website, Spirit calls the fee the “unintended consequences of DOT regulations.” Baldanza says the fee is necessary to compensate Spirit for the business that it will lose, because consumers now are allowed to hold a flight reservation for 24 hours without payment or cancellation penalty if they book a flight at least 1 week in advance.

In a telephone interview with Consumers Digest, Baldanza says there’s nothing to stop a consumer from reserving a seat continuously every 24 hours before he/she cancels the reservation 1 week before the flight. Baldanza referred to this practice as “churning.” And if that happens, he says, the airline has a more difficult time selling the seat on such short notice.  Bill Mosley, who is a spokesperson for DOT, says that while churning isn’t prohibited explicitly, “we believe that it is unlikely that we will see many customers” attempting to engage in churning.

Believe it or not, Baldanza even compares the 24-hour grace period to picking up milk at a supermarket. “If you go into a grocery store and they have this kind of law, you check out a gallon of milk and say, ‘I’ll tell you in 24 hours whether or not I really want this milk,’” Baldanza says. “The next day, you decide to bring the milk back after all, but now the milk is spoiled and the grocery store can’t sell the milk anymore. That is really the position the conditions of this rule has put on the airlines industry.”

In other words, Baldanza believes that consumers are eager to exploit the new rules. We believe that that’s a ridiculous charge for an airline to make, considering that airlines devote so much time coming up with new ways to throw more fees at travelers.

The new $2 fee that Spirit charges is a perfect example of that. When we asked Baldanza which factors were used to determine the fee amount, he said Spirit officials estimated that it would cost $1.50–$2.50 per ticket to make up for the loss that the airline predicts that it will absorb from consumers’ last-minute cancellations. But he provided no other details about how Spirit reached those figures, so we can’t help but believe that $2 is an arbitrary amount.

Of course, the chief executive’s comments to Consumers Digest are just the latest example of the outrageous reaction by Spirit since the new rules started. Transportation Secretary Ray LaHood told Reuters this week that Spirit’s actions “disrespect” passengers. And Sen. Barbara Boxer, D-Calif., scolded Baldanza in a letter last week for misleading consumers with the warning that’s on the Spirit website. The warning claims that the new rules “require us to HIDE taxes in your fares.”

That warning isn’t true, of course. Although airlines now are required to reveal all of their fees and taxes in the advertised airfare price, they still are allowed—as even Spirit does—to publish an itemized list of all of the fees and taxes that relate to the total cost of the flight. Previously, airlines weren’t obligated to disclose the total price in advertised prices, a loophole that some airlines, including Spirit, exploited. For instance, the federal government fined Spirit $50,000 in November for deceptively advertising $9 flights that actually cost about $150 once you added all of the baggage costs, fees and taxes.

The bottom line is that Baldanza is mad that the federal government created rules that help consumers to determine immediately how much that a flight will cost.

– K. Fanuko