Using the Overhead Compartment Is Now Going to Cost You

Airline nickel-and-diming has hit a new low: Frontier Airlines' has an outrageous scheme to get more money out of passengers.

May 4, 2014 at 10:31AM

You'd better sit down for this next story, because you're honestly not going to believe it. The next time you fly Frontier Airlines, they're going to charge you extra to put your bag in the overhead bin.

Yes, seriously.

At Frontier Airlines, it's not just the planes that are sky-high. Source: Frontier.

All the news that won't fit under the seat in front of you
You've probably noticed by now all the tricks that Delta Air Lines (NYSE:DAL), Southwest (NYSE:LUV), and United Continental (NYSE:UAL) have been coming up with lately to cut costs and raise revenue, right? Some have begun charging little (and not so little) fees on services that used to be included in the cost of a ticket. Others have pared planes from their fleets, aiming for fewer unfilled seats on the planes that remain. Nearly everyone has raised the price of a standard ticket.

Well, earlier this week, Denver-based Frontier announced a new twist in the game of turn customers upside down and shake out their pockets. In addition to the $1.99 fees Frontier began charging passengers in July for a bottle of water or a Coke, the airline is now adding fees for using the overhead bins to stow your carry-on bags. As the airline explains, passengers can still carry on a "personal item" -- a carry-on small enough to cram under the seat in front of you -- for free. Anything big enough that it needs an overhead bin to store it, however, will cost extra.

Figuring out exactly how much extra Frontier will ding you for your carry-on, however, isn't exactly easy. On its website, Frontier describes at least seven different options for how the fees might be levied, depending on such variables as whether you're a member of its "Discount Den" loyalty service, whether you check in online, by phone, or in person at the airport.

But the upshot is this: Try as you might to minimize the bite -- Frontier's probably going to ding you for at least $20 a bag, and maybe as much as $50. Checked bags, in contrast, cost Frontier fliers $15-$25. And by the way, these fees kick in on Monday.

And that's the good news.

I'm almost afraid to ask, but what's the bad news?
Frontier's decision to charge extra for basically bringing anything bigger than a purse on board their planes is the news grabbing headlines this week. But the company's other newly instituted fee is potentially even more annoying. As the airline advises, from now on, getting a specific seat assignment for your flight will cost $3 for online check-in, and $8 for checking in at the airport.

Don't want to pay the fee? You can roll the dice, show up for your flight and let the attendants put you wherever they can find space -- whether that's 12 rows away from the rest of your family, or only three.

In exchange for the new fees, Frontier says it will lower the "base fare" on its flights by 12%. So it's conceivable you can still find a way to pay less money under Frontier's new rate plan -- so long as you you've already got a change of clothes stashed wherever you're going. Perhaps this is what Frontier CEO David Siegel meant when boasting that the new policy is "really about customer choice and giving customers the opportunity that if they change their behavior, they're going to save a lot of money."

So you see, if you don't end up saving money from Frontier charging you all these new fees, it's really your own fault...

It's all about you
Again, seriously. All these new fees that Frontier has begun charging probably are your fault -- if by "you" we mean bargain-hunting flyers in general.

Think about it from Frontier's perspective. Last quarter, Delta grew its revenues only 5%, while "your bags fly free" Southwest Airlines grew 2%, and United Continental's business actually shrank. But over at Spirit Airlines (NASDAQ:SAVE), the nickel-and-dime business model is still working wonders. Sales shot up 26% year over year.

Seeing the stark difference in fortunes among the two business models, it's no wonder Frontier concluded that the smart thing to do is reduce upfront prices (that show up in web searches for cheap fares), and just up the difference in a la carte fees.

Turns out, all those nickels and dimes really do add up.

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Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

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