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TheStreet Open House

Spirit Airlines to Charge for Carry-On Bags

Stocks in this article: LUV UAUA

DALLAS ( TheStreet) -- Spirit Airlines said it will become the first carrier to charge for carry-on bags, largely because it wants to reduce boarding delays.

The privately-held carrier's new bag policy was announced Tuesday in conjunction with a reduction in ticket prices, with Spirit's lowest fares falling by $40. Passengers can still carry on a first item free, as long as it fits under the seat. For example, a small gym bag, a computer bag, or a coat would be free, but carrying on a roller board would trigger a fee.

Effective for flights departing Aug. 1 and later, the basic fee is $30 per bag. The charge rises to $45 if a passenger pays at the gate, a time-consuming process the airline hopes to discourage. The charge falls to $20 if a passenger pays $9 to join its "$9 Fare Club," which provides access to the lowest priced tickets.

"We don't think anyone loses in this," said CEO Ben Baldanza, in an interview. "The fares are coming down by over $40. If you carry on a bag, you will pay for it, but you will pay less than you pay today. If you don't carry on a bag, you pay less for your ticket."

Baldanza said Spirit offers a far better deal than the Southwest (LUV - Get Report) "bags fly free" offer, which he termed "disingenuous." On Southwest, he said, "bags don't really fly free. If you don't check a bag, you are still paying for those who do. Southwest won't give me a discount if I don't check a bag."

The policy of charging for checked bags, first implemented by United (UAUA) in 2008, has generated billions of dollars in new revenues for airlines and enabled them to better weather the recession. But so far carriers have restrained themselves from charging for carry-on bags.

For Spirit, the principal benefit of the fee for carry-on bags would be to reduce boarding delays engendered by passengers carrying on more bags than can fit in the overhead bins.

"It's never the first 20 passengers who delay an airplane," Baldanza said. "It's the last 20, because of issues with bags. If we can eliminate that, we can shrink turn times (the time spent at the gate.) If we can pull five to seven minutes off every turn, with 29 airplanes making six turns a day, we can create more round trips per day."

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