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Ultra-low-cost airlines use 'a la carte' model with high fees to keep fares low

Ultra-low-cost airlines use 'a la carte' model with high fees to keep fares low

Carrier uses higher fees to keep airfares low

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Thanks to $50,000 in marketing money from Tulsa International Airport, low-fare carrier Allegiant Air has been blasting the local airwaves with a war on free airplane beverages.

And in it, Allegiant — which began offering nonstop flights from Tulsa to vacation destination Orlando two weeks ago — makes no excuses for its low-fare, high fees philosophy.

"The thing is there's really no such thing as a free soda," actor David Banks says in a commercial. "You're actually paying for it. It's in the cost of your ticket."

With Allegiant, Tulsa has been welcomed to new generation of low-cost carriers, a spunky group of companies such as Allegiant, Spirit Airlines, Frontier Airlines, JetBlue Airways and Virgin America. They are trying to take traffic from a dwindling number of legacy airlines in the United States.

A look at Allegiant's fares show just why the model is so attractive.

A flight to Orlando can run as low as $120 round trip. Similar flights on competing airlines are about $400, according to travel search websites, and are not direct flights.

In Europe ultra-low cost carriers have as much as a third of the marketshare, shuttling passengers across the continent on no-frills flights for less than historical leaders in the industry.

Without the massive route selections of leaders Delta, United, Southwest, American and US Airways, these low-fare airlines are still trying to turn the industry on its head.

In fact, if Tulsa International Airport wants more air carriers to service the airport with more direct flights, it will likely have to go through these low-cost carriers to get there.

"That's what we're hoping for," said Jeff Mulder, director of the Tulsa Airport Authority.

Tulsa Airport leaders have been blunt that their intentions are to get more direct flight destinations and hopefully lower the cost of flying.

But in recent years Tulsa has lost destinations — including Los Angeles in April and Memphis in September — and the airport now stands as one of the most expensive in the country with the 14th highest average airfares, according to a report this week from Bureau of Transportation Statistics.

The average fare out of Tulsa is $437, $30 more expensive than Oklahoma City's Will Rogers World Airport.

Allegiant gives Tulsa a rare, new direct flight. The company is flying twice a week roundtrip between Tulsa and Orlando for as low as $59 each way.

"These flights are great because they bring in new people and don't take passengers from other airlines," Mulder said.

'Unbundled the package'

Allegiant representatives say their ultra-low-cost financial model gives "a la carte" pricing to customers.

"We have created a model where our customers are empowered to chose what they want," said Jessica Wheeler, public relations manager for the Las Vegas-based airline. "We've unbundled the package. If you don't need two checked bags and a carry-on and a soda, you won't have to pay for it."

Airlines have been ramping up fees for checked baggage and other amenities for years, but ultra-low-cost carriers have taken the ancillary revenue to new levels.

Amenities that are usually free will cost you. A carry-on bag is $13, booking by phone costs $15, and it's $5 to pick out your seat in advance.

Wheeler said customers do tend to pack lighter for Allegiant flights, and that saves the company on fuel and baggage loading costs.

Allegiant, similar to other low-cost carriers, also picks route times that are the most popular and flies fewer routes to keep demand high.

In many of Allegiant's 101 destinations, the company offers just a flight or two a day, usually to a handful of leisure destinations near Orlando, Las Vegas, Hawaii and San Francisco. The company has signed deals with those airports for lower gate and landing fees in exchange for the extra business passengers will bring there.

All flights for a day start and end in one of those locations. That allows pilots, flight attendants and staff to go home at the end of the day, and the airline avoids paying to board employees in hotels overnight.

Allegiant also rarely competes with another airline on a direct route, meaning it's unlikely Tulsa International will get an Allegiant flight to Las Vegas as Southwest already flies there.

So far Allegiant has been pleased with the demand for its Tulsa flights, Wheeler said, and the company will post more routes at the end of November when it updates its schedule.

Allegiant flights also carry more passengers. The airline added 11 seats to its MD-80 fleet by taking out a galley and installing nonreclining seats.

Allegiant isn't alone in its ultra-low-cost model. Spirit and Frontier are moving closer to the no-frills type service. With Spirit, based in Miramar, Fla., a round-trip ticket between Dallas and Los Angeles in January runs about $10 cheaper than legacy carriers.

With Dallas to Los Angeles being one of the busiest routes in the country, some ultra-low-cost carriers have shown they can compete even with heavy competition.

But that comes with a $35 fee for a carry-on bag for standard passengers, $30 for one checked bag and $40 for a second. Mainline airlines don't charge anything for a carry-on bag, and the fees for checked bags are $5 less.

Finding a niche

Airfare expert Rick Seaney said the ultra-low-cost model is now a trend, especially in international markets.

"If you look at where all of Boeing's orders are going, it's to low-cost carriers in Asia," said Seaney, co-founder and CEO of FareCompare, a travel website.

He said ultra-low-cost carriers have gone after leisure and recreation travelers as legacy airlines have focused on lucrative business travelers.

"If you are willing to be flexible and fly when most people don't fly, it can be really cheap to get a flight," Seaney said. "Without the frequency of a big legacy airline, you probably aren't going to appeal to business travelers."

Seaney said JetBlue and Virgin America have entered the low-cost realm on the opposite end, buying newer aircraft that are cheaper to operate than older, less fuel-efficient planes at other carriers.

JetBlue has grown to the nation's seventh-largest airline by picking the nation's most heavily traveled routes, such as New York and Washington, D.C., and expanding.

Virgin America has become one of the most popular airlines with edgy design and a heavy emphasis on customer service.

"Again, they are no dummies, and they are not going to charge rates 20 percent below market," Seaney said. "They are going to find interesting routes that they can compete."

America's largest airlines

Rank Airline Model
1. Delta Air Lines* Mainline
2. United Airlines* Mainline
3. Southwest Airlines* Mainline
4. American Airlines* Mainline
5. US Airways Mainline
6. Skywest Regional
7. JetBlue Airways Low cost
8. Alaska Airlines Mainline
9. Republic Airways Regional
10. Spirit Airlines Ultra low cost
11. Frontier Airlines Low cost
12. Hawaiian Airlines Regional
13. Allegiant Air* Ultra low cost

* operates in Tulsa International Airport.

Source: Bureau of Transportation Statistics

Where are the fees?

  first checked bag second checked bags carry-on Soda/snacks Seat selection
American Yes Yes No No No
Delta Yes Yes No No No
United Yes Yes No No No
Southwest No No No No No
Allegiant Yes Yes Yes Yes Yes
Spirit Yes Yes Yes Yes Yes
Frontier Yes Yes Yes No Yes
JetBlue Yes No No No No

*Spirit, Frontier and JetBlue do not currently serve Tulsa International Airpor

Allegiant by the numbers

$59: The lowest one-way ticket to Orlando-Sanford International Airport

2: Flights a week between Tulsa and Orlando

$13: Fee for carry-on bags, each way

101: Destinations served by the airline

Kyle Arnold 918-581-8380


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