Spirit Airlines CEO Defends Fees; Says Bags Are 'Not Essential' For Vacations Spirit Airlines CEO Ben Baldanza says fees help him keep tickets cheap.

July 14, 2010 -- The head of the nation's most fee-happy airline told Congress today that bringing luggage on vacation was "not essential" to travel and his airline was actually helping the poor fly by charging up to $45 to place a carry-on bag in the overhead bin.

"We are certain that Spirit's decision to unbundle services not essential to the transportation of passengers, has enabled more passengers to fly at lower cost," said Spirit Airlines CEO Ben Baldanza. "Indeed given our low fares, it has allowed many to travel who otherwise simply could not afford to do so."

And it's not just carry-on bags that Spirit charges for.

Want to pick your seat in advance? That will cost anywhere from $8 to $60 depending on the seat. Spirit charges extra even to reserve the much-dreaded middle seat.

Want a nice cold Coca-Cola, Sprite or even a cup of hot coffee? That will cost you an extra $2.

"Spirit's business model to provide maximum choice to passengers to purchase the specific services they want, while keeping fares as low as possible, is unique among U.S. airlines," Baldanza told Congress.

"Carrying more than one bag is not necessary for all travelers and we believe it is unfair to charge those customers for extra services they do not use -- indeed, it is the basis for Spirit's policy to unbundle services not essential to passenger transport," he added.

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In the past three years, airlines have started to charge for once-free services. It is now standard practice on most airlines to pay $25 to check a piece of luggage. But Spirit went one step further in April, announcing it would start on Aug. 1 charging passengers $20 to $45 to place a carry-on bag in the overhead bin. (Bags squeezed under the seat would still be free, but that would likely eliminate any leg room on the airline which already has the least amount of space between its seats.)

Forget Cheap Airfare, Expect Fees

Spirit already takes in a higher percentage of fees than any other airline in the United States.

The airline -- which is installing seats that don't recline on its new jets -- took in 21 percent of its revenue from fees at the end of 2009, according to the Department of Transportation. That's way above the industry average of 6.5 percent. The next closest airline was AirTran at 10.7 percent, followed by Allegiant at 10 percent, Delta at 9.1 percent, and US Airways at 8.5 percent.

And that's before Spirit starts imposing the new carry-on fee.

It was the announcement of that fee that might have been the final straw. The idea of paying for carry-on bags enraged many members of the public and Congress. In response, the Department of Transportation in June announced a new set of rules and regulations that would force the airlines to be more transparent about their fees and even allow passengers to get a refund within 24 hours of buying tickets. Congress is also considering subjecting the added fees to the 7.5 percent tax already levied on airline tickets.

Rep. James Oberstar, D-Minn., who led a House hearing today on the matter, told airlines that the public will push back "and then Congress will act" if the industry does not show restraint with the fees.

"That's not a threat," the congressman said. "That's history."

Defending his airline's fees today, Baldanza said that without them, he wouldn't be able to keep base airfare prices so low. He also said Spirit had such a high percentage because its fares were so much lower than the other airlines.

"The primary reason for the carry-on charge was to reduce the amount of baggage brought into the cabin," he added." Carry-on bags have become a nightmare for passenger boarding and deplaning. They create a safety risk for both passengers and flight attendants and lead to costly flight delays."

In March, the Association of Flight Attendants reported that 80 percent of flight attendants had been injured during the last year by moving carry-on bags in and out of overhead bins.

Baldanza said Spirit doesn't just help its passengers with low fares, but "provides an important public interest service" by keeping other airlines in check.

"Spirit's impact was clearly demonstrated when its pilots went on strike last month and other carriers, including low fare carriers, immediately raised prices," Baldanza said. "For example, JetBlue raised its roundtrip fare in the Fort Lauderdale-San Juan, Puerto Rico market from under $200 to over $600."

Checked-Bag Fees Are Here to Stay

Most airline experts don't see the fees going away anytime soon.

"Airlines have become addicted to fees in the same way that state government has become addicted to cigarette taxes," George Hobica, president of airfarewatchdog.com, recently told ABC News. "I don't see them going away anytime soon, if ever. They spell the difference between insolvency (as in ceasing to fly) and merely losing billions of dollars."

But what really alarms many is the rate at which those fees are climbing.

Last year, U.S. airlines took in more than $7.8 billion in fees from passengers, according to the DOT's Bureau of Transportation Statistics. But in the last three months of 2009, the airlines charged passengers $1.9 billion in extra fees, up a whopping 18.3 percent from the same period the prior year.

That is why the DOT, under the leadership of Transportation Secretary Ray LaHood, has taken a more active role and proposed the new rules.

The flying public often lacks a "clear and adequate disclosure of these fees by airlines" and are unable to determine the true cost of their ticket prior to purchase, the DOT's general counsel, Robert S. Rivkin, told Congress today.

The General Accounting Office released a 50-page report today on all of the fees. It includes a comprehensive list of all the fees imposed by airlines for optional services.

"While the general concept of unbundling airline services gives consumers the option to pay for only the components they want, at least in theory, many airlines have crossed the line when it comes to ancillary fees," Anne Banas, executive editor of travel Web site SmarterTravel told ABC News. "As a result, it has become extremely difficult for consumers to effectively compare prices and make informed choices when purchasing a fare, and airlines have been taking advantage of that fact, especially by not disclosing fees appropriately."

Southwest Airlines' No-Fee Philosophy

Not all airlines think fees are necessarily.

Dave Ridley, senior vice president of marketing and revenue management at Southwest Airlines, told the House Committee on Transportation and Infrastructure's Subcommittee on Aviation today that his airline refuses to "nickel and dime" passengers.

Southwest, which has grown to become the nation's largest domestic carrier, has a philosophy of not charging passengers "for things they have historically received for free."

That doesn't mean that Southwest is immune to the fee bonanza. It isn't. The airline, which doesn't have assigned seating, has imposed a $10 fee allowing passengers to cut the boarding line and pick their seats and overhead bin space first.

Ridley told Congress that the airline still doesn't charge for checking a first or second bag, "or to carry on a bag for that matter." There are no fees to make a reservation over the phone (something rare in the industry) and there are no surcharges for fuel or traveling on a peak day.

"And, as always, snacks, sodas, smiles and the occasional bad joke are all complimentary at Southwest Airlines," he said.

However, Southwest said that the decision to impose fees or not should be left up to the individual airlines, as long as they are clearly disclosed.

"Southwest made the conscious decision to limit our customers' fee exposure to what we view as unreasonable and annoying fees. That was our choice," Ridley said. "Other airlines have chosen a different business model and should have every right to do so."