Bare-bones flying: Cheap fares ... and lots of extras
A few U.S. airlines are experimenting with ultra-low fares, but fees for drinks, snacks and checked baggage.
By Steve Huettel, Times Staff Writer
Published May 21, 2007
Ryanair grew into Europe's leading low-cost airline by selling seats for ridiculously low fares and charging for everything else.
The carrier's penny-pinching business model is taking hold in the United States. A handful of airlines charge for drinks and snacks, checked bags and reserving a seat in advance.
A start-up called Skybus starts flying Tuesday with a strategy that's closer to Ryanair's bare-bones model than anything this side of the Atlantic.
Skybus, which is based in Columbus, Ohio, sells the first 10 tickets on its 150-seat Airbus 319s for $10. Overall, fares are 50 percent less than what major airlines charge, says CEO Bill Diffenderffer.
Passengers will pay $2 for a Coke and $6 for a sandwich, $5 for each of the first two checked bags and $50 for the third. Skybus has introduced a few new twists to no-frills flying.
There's no customer-service phone number. You can't bring food and drinks on board. Fine print for vacation deals promoted on the Skybus Web site identifies the seller as a time-share company.
Flight attendants have good reason to sell onboard products aggressively: they get 10 percent of each sale to supplement their $9-an-hour salaries.
"We're a little out in front on this, " says Diffenderffer, a former IBM vice president and CEO of the travel reservation system SystemOne Corp.
Skybus will be the best test of whether Americans will embrace the stripped-down product pioneered by Ryanair, says Dan Petree, business college dean at Embry-Riddle Aeronautical University in Daytona Beach.
"The business model assumes air travel is a commodity and people will respond well to a very, very low-price and a very low level of service, " he says. "Nobody knows the answer."
Skybus will start with flights between Columbus and eight domestic cities, including Fort Lauderdale.
The Tampa Bay area isn't on the airline's radar, says Diffenderffer. Skybus is avoiding head-to-head competition with low-fare giant Southwest, which flies twice daily to Columbus from Tampa International Airport.
But two other carriers that adopted "a la carte" pricing fly from local airports. Spirit Airlines rebranded itself in March as an "ultra low-cost carrier, " cutting fares up to 40 percent charging for checked bags, drinks and snacks.
Allegiant Air sticks even closer to the Dublin-based Ryanair's blueprint. Declan Ryan, son of Ryanair founder Tony Ryan, is an Allegiant director and owns nearly 1-million shares of the airline.
Its Web site steers visitors to hotel and rental-car packages. Allegiant charges a $7.50 "convenience fee" for buying a ticket on the Internet or the company's toll number.
Reserved seats cost $11 each way. The first two checked bags cost $2 each and fee soars to $50 for the third. Flight attendants sell Pepsi and bottled water for $2, a snack box for $5, beer and wine for $6.
A brochure in the seat-back pocket pitches a dizzying selection of souvenirs, from $9 Kodak disposable cameras to Disney beach towels for $20 "doubles as a great airline blanket".
Such ancillary revenue is a big deal for Allegiant, headquartered in Las Vegas. Of the $105.53 spent by the average passenger on a flight in the first quarter of 2007, nearly $19 came from fees and sales besides air fare.
Customers flying from St. Petersburg to Chattanooga, Tenn., last week said the fees were no big deal. Instead of buying the $2 Pepsi, Esther Fernandez brings an empty water bottle, fills it near the gate and mixes in a drink powder.
She moved from Dunlap, Tenn., to be near a brother outside Tampa who's recovering from a heart transplant. Allegiant has the only nonstops to Chattanooga and with fares as low as $39, Fernandez gets back to see her husband and kids a couple times a month. "For what they charge, I couldn't drive to Atlanta, " she says.
Free sodas and checked bags aren't how customers define good service, says Skybus CEO Diffenderffer. The start-up has attracted $160-million in capital from investors that include Fidelity Investments and Morgan Stanley. Skybus has four new jets with 75 more on order.
"What's most important is low fares, aircraft that arrive on time and that your bag is there when you get there, " says Diffenderffer. "And people like a smile."
Big discounters are taking notice. Southwest is looking for ways to raise new revenue by selling new services like wireless Internet connections onboard. AirTran Airways sent a team to Europe last fall to fly Ryanair and easyJet, another discounter that doesn't include certain extras in its fares.
"We're watching it and seeing certain things consumers want in the price of a ticket, " says AirTran spokesman Tad Hutcheson. "Cokes and snacks, a bag of peanuts or pretzels. A pillow and blanket."
But Airtran does think some customers, like families traveling together, might be willing to pay for seat assignments more than 24 hours before their flight. The airline hasn't decided whether to offer that, he says.
Researcher John Martin contributed to this report. Steve Huettel can be reached at firstname.lastname@example.org or (813) 226-3384.
The new no frills
No phone number for customer contact (Skybus)
No free checked bags (Skybus, Allegiant, Spirit)
No free soft drink (Skybus, Allegiant, Spirit)
Pay for reserved seat (Skybus Allegiant)
Pay for Internet booking (Allegiant)
[Last modified May 18, 2007, 21:26:12]
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