MONEY

America’s Cheapest Airline Looks to Make Flights Even Cheaper

Spirit Airlines
Spirit Airlines

Lower fuel costs helped Spirit Airlines' stock soar this week, and may even mean cheaper flights for travelers. Just don't expect Spirit's fees to disappear anytime soon, or ever.

A sizable chunk of travelers hate Spirit Airlines and its cramped-seat, a la carte, fee-crazed business model. In a new MONEY poll, voters prefer the option of flying with snakes on a plane over flying on a Spirit plane. Yet investors sure are loving the company’s third quarter results, which were made public on Wednesday. Spirit’s adjusted net income for the quarter is up 28% year-over-year, while total operating revenue was up 14%. The results bumped the price of Spirit stock up more than 7% on Wednesday, and Morgan Stanley just named Spirit its top growth airline pick for investors.

What’s particularly interesting is that Spirit’s performance and its plans for expansion are likely to benefit non-investors as well. The airline’s sales pitch to travelers is based almost exclusively on the low prices of its “Bare Fare” flights, and analysts see the stars aligning that will allow Spirit to cut base fares even lower. It’s possible that this turn of events could even help out travelers who would never fly with Spirit Airlines—because other carriers may feel forced to scale back fares, or at least slow the pace of fare hikes, in order to compete with Spirit’s cheaper flights.

Only three weeks ago, Spirit stock dipped significantly because of fears that higher company costs—including tax payments and the hiring and training of more pilots—would be headwinds getting in the way of higher profit margins. Yet a Motley Fool post pointed out this week:

Looking ahead to Q4 and 2015, these cost headwinds are likely to turn into tailwinds due to 1) lower jet fuel prices; 2) faster growth; and 3) a shift toward larger, more efficient aircraft.

Airlines typically spend about 30% of their revenue on fuel. So when gas prices drop like they have been lately, it’s a huge deal for the airline industry. For the most part, airlines will simply pocket the fuel-cost savings rather than pass any of it along to travelers in the form of cheaper flight prices.

But there’s reason to believe that Spirit Airlines is different. After all, the airline’s main (only?) selling point is that the base price of flights is cheap, so it will lower fares to attract more customers whenever a price cut can be justified. In addition to lower fuel costs, Spirit is expanding rapidly (28 new routes added between August 2014 and April 2015), and has been getting more productivity out of planes and employees. All of which helps the company lower costs—and enables it to make its product more attractive to customers by lowering prices.

In a conference call with investors yesterday, Spirit CEO Ben Baldanza said that’s essentially what the airline plans on doing. “The customers we seek to attract overwhelmingly ranked total price as the most important variable when choosing an airline,” Baldanza said. As Spirit manages to keep the costs of fuel and other expenses low, “that’s a great thing for our model, and that means even lower fares for customers and a good thing for investors.”

And who knows? Spirit’s expansion and low-fare strategy may very well compel the larger airlines to compete more on flight prices as well. Now that fuel prices are shrinking and airlines are enjoying record-high profits, it certainly wouldn’t kill them to do so.

MONEY Airlines

POLL: Are You Ready for Cellphone Calls on Airplanes?

Two different federal agencies are now considering revising the rules about inflight calls. What do you think?

MONEY Airlines

Get Ready for Cellphone Calls on Airplanes

Federal agencies consider new rules about inflight calls.

As if airplanes weren’t unpleasant enough, you might soon get an earful from your seatmate. Two different federal agencies are now considering revising the rules about inflight calls, and bureaucrats will meet Wednesday to debate the issue.

While the Federal Communications Commission currently bans inflight calls, last December the agency proposed a new rule that would allow passengers to use cell phones above 10,000 feet. Airlines could choose whether to install the necessary technology and allow calls on flights. The FCC has not made a final decision.

Meanwhile, the Department of Transportation announced that it was working on its own proposal — and the rumor is that DOT wants to institute a new ban on inflight calls. DOT has yet to release its proposed rule, but its advisory group, the Advisory Committee on Aviation Consumer Protection, is hosting Wednesday’s discussion.

Given that experts agree there is now little technological reason to limit cellphone use on airplanes, the big question is: Are the American people really mature enough to make discreet personal calls, in a cramped space, without disturbing their fellow passengers?

Members of Congress say no — and there’s bipartisan agreement on that point.

“Arguments in an aircraft cabin already start over mundane issues, like seat selection, reclining seats, and overhead bin space,” Rep. David B. McKinley (R-W.Va.), Rep. Dan Lipinski (D-IL) and more than 73 other elected representatives wrote to the FCC. “The volume and pervasiveness of voice communications would only serve to exacerbate and escalate these disputes.” (Read their full letter.)

If you feel strongly, tune in to the webcast Wednesday morning, when representatives from the DOT, the FCC, the cellphone industry and the Association of Professional Flight Attendants will debate the issue.

Until then, tell us what you think:

 

MONEY Airlines

WOW Indeed! Budget Airline Launches $99 Flights to Europe

WOW Iceland airplane
WOW

A low-fare airline called WOW just introduced new routes between the U.S. and Europe, with fares that are cheaper than what passengers are used to paying just for taxes and fees on transatlantic flights.

WOW Air is a small, low-cost carrier based in Iceland that just made a power move that could disrupt the lucrative—some say absurdly overpriced—transatlantic flight market in a big way. This week, the airline’s U.S. site went live, advertising specials as low as $99 each way, taxes and fees included, on routes between the U.S. and Europe.

Initial transatlantic service connects capital city Reykjavik to Boston-Logan and Baltimore-Washington (BWI) airports. Flights to and from Boston launch in March 2015, and BWI follows in June. WOW offers service from Reykavik-Keflavik onward to London (Gatwick) and Copenhagen as well, so passengers aren’t limited to visiting Iceland.

As of Friday, the lowest fare advertised on the site was for flights from Boston to Reykjavik. Availability is limited at the cheapest prices, but we were able to (theoretically) book a round trip in April 2015 for $246 ($99 going, $147 on the return), all taxes and fees included. For the sake of comparison, a round trip on Icelandair with the same route and dates was running $675 at last check.

Earlier this week the travel blog Jaunted was able to secure an April flight on WOW from Boston to Copenhagen (by way of Reykjavik) for $99, but it looks like such insanely cheap fares are already sold out. Even so, without too much hassle we were able to find flights next spring on the route that are bargains compared to the competition. For instance, you could conceivably book a round trip Boston-Copenhagen flight in May for around $450—roughly half the price of what you’d find for the same itinerary at any major travel search engine.

WOW’s fares from Washington (BWI) to Reykjavik start at $146 each way, while flights from BWI to London are currently being advertised from $195. Even if the cheapest fares sell out quickly, the (higher-priced) seats on WOW that are still available are likely to be much less expensive than flights with major airlines.

As you’d guess, WOW customers don’t get many extras with the rock-bottom prices they’re paying. Passengers must pay for both checked and carryon luggage, and services like food, beverages, and extra legroom are available only to customers who pay above and beyond the base ticket price.

WOW’s venture into the transatlantic market comes a little over a year after another northern European upstart, Norwegian Air, emerged on the scene with sub-$500 flights between the U.S. and Europe. The world’s largest airlines seem to have successfully thwarted Norwegian Air’s plans to expand its transatlantic presence, but the carrier is still flying a handful of U.S.-Europe routes and is still advertising fares far cheaper than any of the industry’s big players—as low as $169 each way between New York-JFK and Oslo and $189 for nonstop flights all the way from Oakland, Calif., to Stockholm, Sweden.

Like WOW, Norwegian Air lists fares with all mandatory taxes and fees included. That—as well as the long-awaited rise of low-cost competitors on transatlantic flights in general—is music to budget travelers’ ears.

Read next: The Secret to Getting a Ridiculously Cheap Thanksgiving Flight

MONEY Airlines

What You Really Need to Know About When to Buy Flights

shape of airplane over calendar
Amanda Rohde—Getty Images

Wait a second, now Sunday is the cheapest day to book airline tickets? Forgive us for being skeptical of this (and every previous) study naming one or another day of the week as the best for buying flights.

This week, the Airline Reporting Corporation (ARC) released a study analyzing roughly 130 million airline tickets booked in the U.S. from January 2013 to July 2014, with the hope of shedding some light on when prices are highest and lowest. Over the years, plenty of these kinds of studies have made the rounds, but the current report differs from the pack in a couple of key ways. It shows:

1) Flight prices are cheaper when booked further in advance. In the past, ARC data has indicated that the lowest domestic flight prices were for tickets purchased 42 days before departure, while other studies have advised travelers to book 49 days in advance for the cheapest fares. The new ARC study shows that, on average, booking 57 days out yields the best prices. What’s more, researchers found that average ticket prices were fairly flat during the window of time 50 to 100 days before departure. In other words, the best bet is to book 50 to 100 days beforehand: Tickets purchased during that period were $85 cheaper than the overall average for all domestic flight prices ($495.55).

2) Weekends are cheaper booking days than weekdays. This is the truly surprising takeaway from the study. According to ARC data, the average price of a domestic flight purchased on a Sunday was $432, and it was slightly higher on Saturday, at $437. For a long time, the consensus advice was that the lowest prices were to be found on flights booked on Tuesdays or Wednesdays (when airlines tend to roll out new flight sales), yet the new study shows the average paid on Tuesday was $497.

The smartest travelers seem to be those who booked flights on a Sunday 50 to 100 days before departure: They paid $110 less for their tickets compared to the average.

High Fares, Record Profits

Why is it that Saturday and Sunday seemingly have replaced Tuesday and Wednesday as the cheapest days for booking? The current mentality of the airline industry—which is less competitive and more profitable than it’s been in years—offers some explanation. As Scott McCartney of the Wall Street Journal noted regarding the shift to weekends: “Airline executives come into work Monday looking to raise fares, not discount them with sales to fill seats.”

Earlier this week, for instance, the country’s largest domestic carriers hiked airfares, a move that would seem to be not only unnecessary but downright greedy considering that fuel prices are plummeting. Given strong demand for air travel and American travelers’ apparent willingness to pay increasingly high prices for flights, airline executives are no longer worried about filling planes with passengers. They’ve moved on to worrying about surpassing their (already record high) profits, and they’re raising fares at every opportunity, for the same reason they’ve relentlessly been adding fees: Because they can.

In any event, the fact that airfares are rising would seem to give travelers even more reason to take notice of studies by the likes of ARC and adopt new booking routines, right? Well, maybe, maybe not. The problem with all of these studies is that they’re generalized and are based on averages from the past. The takeaways they offer may, in fact, not help you save on money your specific flight needs in the future.

Take holiday travel, for instance, when passengers are truly most in need of money-saving advice because prices tend to be so high. In the quest for cheap Thanksgiving airfare, the guidelines mentioned above don’t really apply. Several booking sites point to data indicating that the lowest prices for flights over Thanksgiving weekend are likely to be found two to four weeks before departure—that is, unless you absolutely need to fly on the peak-peak days of the Wednesday before or the Sunday after Thanksgiving. Flights on those days should be purchased far in advance, ideally several months beforehand. In other words, booking a Thanksgiving weekend flight 50 to 100 days ahead of time is probably a bad strategy, no matter what day of the week you’re searching for flights.

What’s more, all “when to buy” advice is based on past performance, as a recent Quartz post on Thanksgiving travel advice painstakingly made clear.

The Trouble With Simple Advice

The WSJ‘s McCartney pointed out that airlines are more inclined lately to discount flights booked on weekends because that’s when leisure travelers are likely to be casually noodling around online and may be enticed to make an impulsive flight purchase if the price is right. The vast majority of business travel, meanwhile, is booked on weekdays, and business travelers are less sensitive to pricing because the flights are deemed more essential. At the same time, however, airlines still do regularly introduce fresh flight sales on Tuesdays and Wednesdays to boost seat purchases on routes that aren’t filling up.

What all of these strategies have in common is that the airlines are reacting to traveler behavior and are lowering or raising prices to maximize revenues. If and when travelers change their behavior again—say, if a critical mass of business travelers suddenly starts booking flights on Sunday rather than Monday—the airlines will tweak their pricing tactics accordingly. All of which is a roundabout way of pointing out that there are far too many complications for simple advice like “book on Sunday” or “book on Tuesday” to be valid across the board. (We’re only talking domestic flights, mind you; booking advice for international flight is more complicated still.)

Probably the only solid time-tested guideline for finding inexpensive flights is this: Booking too early is generally bad, but booking too late is likely worse. The average domestic flight purchased 225 to 300 days before departure cost $500 to $550, per the ARC study, while the average for a ticket on the day of departure was around $650.

How do you find the sweet spot in the middle, when prices are lowest? It’s complicated, dependent on a range of factors including the destination, season, and day of the week you’re traveling; whether there’s a convention or major event where you’re going; and even larger forces like the state of the economy and yep, gas prices. Kayak and Hopper are among the flight search tools that use historical pricing data to try to predict whether fares on a given route will rise or fall, but again, past performance is no guarantee of future results—especially not in recent years, when airline executives have regularly rejiggered their pricing tactics, generally sending fares up, up, and up.

Despite the dizzying amount of tech at traveler’s fingertips, the question of when to book remains largely unanswerable. Yes, it’s wise to hunt during that window 50 to 100 days in advance, and sure, try to remember to poke around for flights especially over the weekends. But be on the lookout on Tuesdays and Wednesday too, because that’s when sales pop up. Consult historical pricing data and airfare price predicting tools, just don’t expect to pay the same bargain-basement fare you got a decade or even one year ago. Pay attention to airfare sale-tracking services like airfarewatchdog, but bear in mind the best deals are often for fluky routes and days and may not work for your travel needs. Perhaps wisest of all, use an airfare tracking service like that of Yapta, which will alert you if and when a flight on your route and dates has reached your desired price threshold. Just try to be realistic with the kind of fare you can expect nowadays.

TIME energy

Why Airfares Are Rising Despite Lower Fuel Costs

Delta Airlines Inc. Terminal Ahead Of Earnings Figures
A Delta Air Lines Inc. airplane departs Ronald Reagan National Airport in Washington, D.C., U.S., on Friday, July 18, 2014. Bloomberg—Bloomberg via Getty Images

Airlines stand to gain when gas costs fall

Airlines’ profits have been, yes, taking off this year, and the industry doesn’t seem inclined to change that flight path. The big carriers announced a $4 per ticket price increase Tuesday, even as falling jet fuel prices were delivering an unbudgeted bonus. Although it’s not unusual for a carrier’s announced price increase to get withdrawn when a competitor decides not to play ball, there doesn’t seem to be much resistance to Tuesday’s news.

Were you expecting the carriers to have mercy on you, given that flights are stuffed, there are upcharges for everything from baggage to overhead space to boarding early, and passengers are staging midair cage fights over knee room? Get real. As one airline consultant told me about a year ago, the semi-romantics who used to run the airlines are long gone. Instead, the folks in charge today play hardball. They are running a business, not their advertising agency’s image of air travel.

With seats in shorter supply domestically, that means pricing is going to remain tight. In Delta’s most recent quarter, for instance, its passenger yield — a measure of the average fare paid — increased 1.9%. The company’s results had Richard Anderson, Delta’s chief executive officer, crowing: “While we have more work ahead of us to achieve our long-term financial goals, we expect a record fourth quarter of 2014 with an operating margin of 10%-12%. For the full year, we expect a pre-tax profit in excess of $4 billion.” That’s following a record year last year.

Delta, like other carriers, is managing costs tighter and benefitting from the slide in oil prices. In its most recent quarter, Delta’s fuel cost declined by $23 million. According to the industry trade group A4A, a penny a gallon decrease over a year saves the carriers $190 million. Delta expects fuel to drop from $2.90 a gallon to between $2.69 and $2.74 a gallon in the current quarter.

Delta notes that there are three major drivers of airline economics: aircraft maintenance, ownership cost and fuel cost. The first two are fairly predictable costs that management has some control over. Fuel is a variable cost with a capital V. When oil was soaring, the airlines were losing billions and eventually were driven into bankruptcy. They have emerged, recapitalized and rationalized: they can make money even with much higher fuel costs. But they can make a lot more money with lower fuel costs as well as by raising prices. There is no reason not to do both. “Domestically, clearly we are in an environment where the carriers are rational, and financially motivated,” American Scott Kirby told analysts recently. ” In other words, don’t expect any free drinks any time soon.

TIME Aviation

Airlines Hike Prices on Domestic Flights

JetBlue initiated the $4 fare increase

The five biggest U.S. airlines all increased their base fare on domestic flights in the past week, despite declining fuel prices and apprehension over the potential spread of Ebola.

JetBlue initiated a $4 fare increase last Thursday, and United, Delta, American and Southwest followed suit, the Associated Press reports.

Though the airlines are trying to boost revenue with an across-the-board price increase, the effect it will have on the average consumer is less clear. Even with a base fare increase, airlines change prices frequently to adjust for evolving demand.

The move comes despite a slip in fuel prices (one of an airline’s largest expenses) and worldwide fear over Ebola. Both factors might seem to give airlines reasons to cut fares.

Wall Street seemed to reward the price increase with shares in the major airlines all gaining by at least 3%.

[AP]

TIME Infectious Disease

How to Get to Monrovia and Back

A Brussels Airlines plane bound for Monrovia at Brussels Airport in Brussels on Aug. 28, 2014.
A Brussels Airlines plane bound for Monrovia at Brussels Airport in Brussels on Aug. 28, 2014. Dominique Faget—AFP/Getty Images

People, and viruses like Ebola, can go anywhere these days

None of the passengers who flew with Ebola Patient Zero from Monrovia, Liberia to Dallas, Texas will have to worry about catching the deadly virus. The patient wasn’t contagious in-flight. Airlines may be called carriers, but airplanes themselves are not particularly good at spreading viral diseases such as Ebola.

What they are good at is transporting people infected with viral diseases from a seemingly far off and remote city such as Monrovia to a big American town such as Dallas. But the global economy has brought cities a lot closer together, and changed disease vectors accordingly.

Need to get to Monrovia? Easy. We can book a trip for you immediately if your passport is handy and you have the visa. There’s a flight leaving JFK in New York City at 5:55 p.m. on Thursday that gets you into Monrovia 21 hours and 25 minutes later. (Relax, Delta passengers; the airline serves Monrovia through Accra from New York, but suspended that connecting service on August 30.) The current itinerary is JFK to BRU to DKR to ROB, airline code for New York to Brussels, where you’ll change planes, then a stop at Dakar, Senegal, before heading to Monrovia’s Roberts International Airport. All that travel takes place aboard Brussels Airlines on wide body Airbus 330s. Indeed, the worst part of the trip may be flying to New York on a commuter jet from Dallas.

You have other options, too: the airline-listing site Kayak offers 1,673 combinations that will get you to Monrovia from New York. Or you can make 574 connections through Chicago. And Open Skies agreements that freed global airlines to fly point-to-point across continents have, as the State Department puts it, “vastly expanded international passenger and cargo flights to and from the United States.”

You can hop an A380 on Emirates Airlines from Dallas to Dubai, change there for a Qatar Air flight to Casablanca and then find a Royal Maroc 737-800 to Monrovia via Freetown. Or fly non-stop to London and then connect via Casablanca or Brussels to Monrovia.

The point is, you can get anywhere from here. And so can the germs.

MONEY Airlines

Holiday Travel Just Got More Annoying Thanks to New Airline Fee

A ground crew member loads baggage onto a Spirit Airlines Inc. plane at the San Diego International Airport in San Diego, California, U.S.
Sam Hodgson—Bloomberg via Getty Images

Spirit Airlines already charges more fees than any other domestic carrier. Now it's adding a surcharge for checked bags on flights around the holidays.

In an industry enraptured with airline fees, Spirit Airlines stands out as the most fee-crazed carrier of all in the U.S., with fees for things others still provides at no additional charge, including carryon luggage, water, and the printing of a boarding pass at the airport. (If you don’t print yours at home, you’re asked to cough up $10 at check-in.) Spirit is also known for being highly profitable, and for being outrageous to get attention—the latest example being the gimmick of giving away free miles to customers who send a message to the airline explaining why they hate it so much.

This past spring, Spirit relaunched its brand to better explain how exactly it does business—low upfront fares combined with a la carte fees for almost anything beyond basic transportation, dubbed the “bare fare”—in order to quell the hate. CEO Ben Baldanza has also gone on record saying that his company may stop adding fees because it’s become difficult to think up any more new ones.

Apparently, however, the creative folks at Spirit have put their heads together and come up yet another fee—or, rather, a fee on top of a fee it already charges. The Los Angeles Times reports that Spirit has quietly tacked on a $2 surcharge on top of its usual checked baggage fees for passengers traveling during the peak winter holiday period, December 18 to January 5. The standard price to check a bag during online check-in is $40 for the first piece of luggage, so if you’re flying during the holiday period, it’ll run $42.

“Winter is coming … and that means holidays. Which means more people than ever will be traveling with Spirit to visit their loved ones,” states a message from Spirit attempting to explain the holiday surcharge. “To make sure we have room for everyone’s bags, we’re encouraging customers to pack a bit lighter.”

It almost sounds as if without such a fee, and without customers packing less, Spirit might have difficulty finding space for all the luggage people want to bring. Which is preposterous. Clearly, the fee is intended to milk passengers for a couple more bucks here and there, at a time when they’re more likely to have to pay up because they’re flying with gifts and bulky winter clothing.

No matter how Spirit tries to spin this, the airline is yet again demonstrating that it’s in love with fees, that it can’t help but push the envelope with the annoying, outrageous, nickel-and-diming of its customers—and that, in all likelihood, it’ll maintain its status as a highly profitable operation regardless.

TIME Transportation

This Is the Busiest Airport in the World

A jet lands at Hartsfield-Jackson International airport in A
A jet lands at Hartsfield-Jackson International airport in Atlanta, Georgia, Thursday July 6, 2007. Chris Rank—Bloomberg / Getty Images

Not even Beijing, London or Tokyo could compete with Atlanta's 94 million passengers

Some 94 million passengers travelled through Hartsfield-Jackson Atlanta International Airport in 2013, making it the world’s most heavily trafficked airport, according to a new air traffic study released Wednesday.

The findings, released by Airports Council International, show that Altanta, even with a 1.1% dip in traffic, had a 10 million passenger lead ahead of Beijing Capital International Airport, the world’s second-busiest airport.

London Heathrow Airport, Tokyo International Airport and Chicago O’Hare International Airport rounded out third, fourth and fifth places respectively with traffic ranging from 67 to 72 million passengers in 2013.

“Despite this challenging operating climate, worldwide traffic surpassed the 6 billion passenger mark in 2013,” said Angela Gittens, ACI’s Director General. “This represents an enormous feat for the airport industry as we commemorate the 100th anniversary of commercial aviation in 2014.”

Asia-Pacific led regional growth with an 8.7% jump in passengers, followed by the Middle East, home to the world’s fastest-growing airport, Dubai International, with a galloping 15% growth in 2013.

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