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Spirit Airlines Gets Boost From Dynamic Pricing on Carry-Ons to Bottled Water | Skift

For the year, Spirit told investors it made more than $55 in per-passenger ancillary revenue for the first time since 2014. The fourth quarter was better, with non-ticket revenue increasing 5.2 percent, year-over-year, to $56.70.

The growth generally is not the result of new fees. Instead, Spirit executives said they have improved at managing how extra costs are assessed. Increasingly, Spirit is implementing dynamic pricing, setting fee rates based on demand, just as with airfare. The airline also reported it is making more money selling bundles, as passengers buy a group of extras.

This is not a new focus, but it has taken some time to get it right, chief commercial officer Matt Klein said. Airlines have been using dynamic pricing for fares for decades but charging different amounts for items like checked luggage, based on demand, is newer.

“You can’t just implement a new revenue management strategy and expect it to work overnight, especially for something, for us, that’s new, which is revenue managing ancillary products and services,” Klein said. “We’re going to continue to improve, continue to make that better, but a lot of the big plunge we think we captured late last year, so we’ll just continue to improve on it.”

Spirit executives told analysts to expect further growth this year. They said they expect to earn between $56 and $57 per passenger from sources other than airfare, ensuring the airline has roughly a 50-50 mix in revenue per passenger — about half from airfare and half from fees.

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Spirit Airlines Gets Boost From Dynamic Pricing on Carry-Ons to Bottled Water – Skift.

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